Changewave Research: Energy and Transportation Changequakes

ChangeWave Research: Energy and Transportation ChangeQuakes October 21, 2005

ChangeWave Research Report: Energy & Transportation ChangeQuakes Major Transformational Changes in the Energy and Transportation Industries

Overview

During the summer, we surveyed Alliance members to unearth the biggest ChangeQuakes (i.e., major transformational changes) occurring in their industries and/or fields of expertise. The goal was to identify ChangeQuakes capable of triggering massive waves of growth (i.e., ChangeWaves) within new and existing industries and companies.

This report presents some of the most interesting Energy and Transportation ChangeQuakes that were identified, broken down by the following categories:

(A) Oil and Gas...... 2 (B) Regulatory ...... 4 (C) Utility/Power ...... 6 (D) LED Lighting ...... 7 (E) Other Energy ...... 7 (F) Transportation ...... 9

Along with a brief description of each ChangeQuake, respondents also discussed:

 Why It’s Important  The Type (Technological, Regulatory, Macroeconomic or Company-Specific)  The Estimated Magnitude (in terms of CAGR: Compound Annual Growth Rate -- How fast the ChangeWave emanating from this Quake can grow annually)  The Companies Best Positioned to take advantage of the ChangeWave emanating from this Quake

The ChangeWave Alliance is a group of 6,000 highly qualified business, technology, and medical professionals in leading companies of select industries—credentialed professionals who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary quantitative and qualitative reports.

Helping You Profit From A Rapidly Changing World ™ www.ChangeWave.com

This information is from ChangeWave Research, LLC and contains confidential business information. It may not be copied or distributed without permission. ©2005 ChangeWave Research, LLC. All rights reserved. ChangeWave Research: Energy and Transportation ChangeQuakes

This information is from ChangeWave Research, LLC and contains confidential business information. It may not be copied or distributed without permission. ©2005 ChangeWave Research, LLC. All rights reserved. 2 ChangeWave Research: Energy and Transportation ChangeQuakes

I. The Findings Introduction During the summer, we surveyed Alliance members to unearth the biggest ChangeQuakes (i.e., major transformational changes) occurring in their industries and/or fields of expertise. This report presents some of the most interesting Energy and Transportation ChangeQuakes identified, broken down by major category. (A) Oil and Gas 1. Real-time Oilfield Monitoring & Reservoir Simulation Modeling Description: TMO8116 writes, "Until recently, the dynamic behavior of most oil and gas reservoirs was not particularly well understood and relied on simple empirical analysis methods. If dynamic computer models were available, these models were limited by scarcity of data due to infrequent testing and measuring of important reservoir parameters such as flow rates, temperatures & pressures. The advent of new, low-cost downhole (= in the well) sensors allow continuous, real-time monitoring of reservoir variables, such as pressure and its relationship to production rate for each well, making it possible to construct far more accurate computer models, using specialized oilfield simulation programs. The resulting models are then used to optimize field development and predict field performance under a range of different operating scenarios and uncertainties. “This itself is not new, but the combination of continuous real-time downhole measurements with highly sophisticated reservoir simulation (using specialized proprietary oilfield computer modeling tools such as PETREL and ECLIPSE), in combination with the latest developments in continuous real-time downhole pressure monitoring will lead to a resurgence of interest in oil and gas field development optimization studies at a level not previously experienced.” Why it's Important: Rising oil & gas prices and declining oil reserves, means more careful monitoring, a better understanding of the dynamics of oilfield performance, and improved procedures for field development optimization – all of which are becoming increasingly important. This affects all oil and gas producing companies and specialist service companies that provide the hardware and software tools and consulting services. Type: Technological ChangeQuake Estimated Magnitude: 25% CAGR Best Positioned Companies: a) Schlumberger (SLB) is the leader in integrated, high-tech oilfield consulting services. b) Other companies (such as ABB) involved in the development of specialized sensors for downhole continuous monitoring of pressures & production rates. c) Other smaller companies (such as CMG) involved in development of specialist software for oil and gas field reservoir simulation and modeling.

2. Petroleum Refining Shift to Higher Sulfur Crude Description: GGG19122 writes, "Petroleum refiners are faced with two challenges: less available sweet crude oil and high utilization rates. Over the next 10 years, a shift toward heavy sour crude processing requiring massive investment for hydrotreating and bottoms upgrading (e.g., coking) will be needed to remain competitive. Additionally, increasing domestic demand for motor fuels will be met by increasing imports and incremental capacity increases at existing refineries. Capacity increases within the fence-line will also require large investment but avoid the not in my-backyard resistance that permitting of new plants poses.”

This information is from ChangeWave Research, LLC and contains confidential business information. It may not be copied or distributed without permission. ©2005 ChangeWave Research, LLC. All rights reserved. 3 ChangeWave Research: Energy and Transportation ChangeQuakes

Why it's Important: This may lead to further consolidation within the domestic refining industry as investments and costs rise. Scale economies will increasingly become more important for competitive advantage and to rein in costs from technology and catalyst suppliers through volume discount. Type: Technological ChangeQuake Estimated Magnitude: Don't Know Best Positioned Companies: Exxon Mobil, BP, Valero; Supplier companies such as UOP and oil companies with licensable technology for deep hydrotreating and bottoms upgrade will see increased activity. Catalyst vendors such as Criterion that specialize in hydrotreating are already seeing brisk business with the conversion to clean fuels slated for 2006.

3. Refinery Industry Expenditures Description: TEE2835 writes, "The refinery industry has been limping along for many years, failing to replace old processing equipment. Now, with new found wealth from the increase in fuel oil cost, plus the EPA and DOJ working out agreements with the major refiners over low sulphur oil and total refinery emissions, expenditures for equipment is mushrooming.” Why it's Important: Overall increased equipment orders in the engineering, steel, tubing, process heating equipment sectors – increasing overall refinery efficiency and increasing profitability. Type: Regulatory ChangeQuake Estimated Magnitude: 25% CAGR Best Positioned Companies: Exxon-Mobil, Valero, etc.

4. Excessive Sulphur Production Description: LUK6439 writes, "In the requirements for low sulphur diesel and gasoline there will be an excessive amount of sulphur produced by refineries. This situation will cause problems in Europe and North America as sulphur is extracted for transportation fuel. The sulphur extraction requires additional fuel cost on the front end but there will be cost added for disposal of this relatively low value, possibly hazardous material.” Why it's Important: This ChangeQuake will affect the cost of living for nearly all consumers where environmental laws are in effect. There will no longer be a need to mine sulphur for industrial and agricultural applications. The US can no longer consume all the sulphur being produced and there will have to be a way to increase its value for export. The growing agricultural markets of India and China will use the sulphur in fertilizer products for maybe the next decade. Eventually they will no longer import sulphur since environmental regulations will cause them to be in the same situation as Europe and North America. Ultimately the companies that own dry petroleum wells will make money for sulphur disposal. Type: Macroeconomic ChangeQuake Estimated Magnitude: Don't Know Best Positioned Companies: Fertilizer producers may initially benefit from this cheap sulphur. Eventually this commodity will not have much value for export when developing countries are able to produce there own fertilizers. In the end the companies that will benefit are those that can handle and dispose of the excess sulphur.

This information is from ChangeWave Research, LLC and contains confidential business information. It may not be copied or distributed without permission. ©2005 ChangeWave Research, LLC. All rights reserved. 4 ChangeWave Research: Energy and Transportation ChangeQuakes

(B) Regulatory 1. Energy Bill Impact Description: FRY28240 writes, "The Energy Bill will have a profound affect on how capital will be invested throughout the energy industry over the next three plus years. The bill and its incentives will affect a number of areas: 1. Where we can drill for oil & gas, which will affect national reserves; 2. The debate between methanol and ethanol and the affects on capital spending; 3. Production tax credits and the affect on the renewables industry (wind energy, wave and tidal energy, fuel crops, fuel cells etc.); 4. Incentives on hybrid autos that will slow demand growth for oil and change the production mix of refineries; 5. Environmental requirements for various fuels, such as oil and coal; 6. Acceleration of new LNG facilities and refineries in the USA. It could restart the nuclear energy industry.” Why it's Important: A well written Energy Bill would accelerate spending in LNG facilities, refinery retrofitting and expansion, wind energy, fuel cells, and production of hybrid vehicles. We could also see upgrades in electric transmission systems that allow movement of renewable energy from logical areas of production to large market centers. Renewables, excluding hydro, could provide up to 10% of this country's electric energy demand within 10 to 12 years. A nuclear rebirth could have a profound affect beyond that. On the negative side, these new technologies would eat into the demand for coal and natural gas. Hybrid vehicles could slow demand growth for oil and change the production requirements of refineries. Type: Regulatory ChangeQuake Estimated Magnitude: Don't Know Best Positioned Companies: Renewables – Fuelcell Energy Inc. (FCEL), General Electric (GE), FPL Group Inc (FPL), Siemans, Evergreen Solar (ESLR), Hydrogenics Corp (HYGS), Magnetek (MAG); Expanded US drilling - US domestic drilling industry (drillers, support, suppliers, Major E&P); Energy Conversion Devices (ENER) - leader in battery development for hybrids, Ultralife Batteries (ULBI), Valence Technology (VLNC), SL Industries (SLI), Chenier Energy Inc (LNG) - young developer of USA LNG facilities.

2. Repeal of Public Utility Holding Company Act Description: SPG7564 writes, "The new energy bill is likely to repeal PUHCA.” Why it's Important: This will lead to widespread consolidation in the electric utility industry. Type: Regulatory ChangeQuake Estimated Magnitude: Don't Know Best Positioned Companies: MidAmerican Energy, AEP, Duke, and Southern will be the big acquiring smaller regional utilities.

This information is from ChangeWave Research, LLC and contains confidential business information. It may not be copied or distributed without permission. ©2005 ChangeWave Research, LLC. All rights reserved. 5 ChangeWave Research: Energy and Transportation ChangeQuakes

3. Building Energy Savings - ASRAE 90.1 Code and LEED Compliance Description: JAS6982 writes, "With ASHRAE 90.1 and LEED adopted by state and local governments, compliance will require greater initial install costs with quite large maintenance budget payback for energy saving products such as automatic lighting controls, motion sensors, daylight harvesting sensors, motor controls, energy efficient lamps, etc.” Why it's Important: Two major impacts: Energy efficient motors and motor controls, and lighting controls/higher efficiency lighting products - affecting all buildings over 5,000 sq. ft. The initial ChangeQuake arises from legislation and adoption of energy saving codes. As more local governments mandate Green Buildings (due to high energy costs to operate the buildings and popular environmental friendly products) public/municipal buildings and later private buildings will grow and sustain the ChangeWave. Type: Regulatory ChangeQuake Estimated Magnitude: Don't Know Best Positioned Companies: Wattstopper - motion sensors, Leviton - lighting controls, Cree - LED lamping, Commodity - copper for motor windings, Yaskawa - VFD's (variable frequency drives) as well as other manufacturers - motor controls. While some of these products have been gaining sales in certain areas of the country, other areas are just beginning adoption.

4. Deregulation and Privatization of Public Utilities Description: 1116247 writes, "Governments have been lobbied by utilities to deregulate and privatize because their facilities are aging and the government can't afford the capital costs of modernization. As a result of deregulation, utilities that we deal with have abandoned vertical integration models in favor of specialization based on economic models to maximize profit. This introduces more companies between the consumer and the utility source. Since each company now includes a profit margin, the multiplication of profit margins significantly increases the cost to the consumer. “In our case, we have energy producers (electricity generators, gas and oil producers), energy deliverers (grid and pipeline companies, etc.), consumption meter reading companies and energy billing companies, resulting in utility costs rising 15 - 25% per year. Each of these companies is using globalization as a growth model. Because of economies of scale, many older, less efficient systems are being phased out and not replaced because of excessive capital costs. Reduction in supply translates to increased consumer costs, which are then used to convince the government to provide subsidies to support costs of new infrastructure capitalization, therefore resulting in additional increased costs to the consumer.” Why it's Important: Everyone is affected. Unfortunately this model demonstrates abdication of any structural organization within our society capable of dealing with the energy wall we’re approaching. If anything we are accelerating toward it. Rapid depletion of the world's non- renewable energy poses massive catastrophic problems. Our only feasible solution is atomic (preferably fusion) energy, requiring massive investment in research and extensive lead time. Type: Regulatory ChangeQuake Estimated Magnitude: 25% CAGR Best Positioned Companies: Energy suppliers and resource companies.

This information is from ChangeWave Research, LLC and contains confidential business information. It may not be copied or distributed without permission. ©2005 ChangeWave Research, LLC. All rights reserved. 6 ChangeWave Research: Energy and Transportation ChangeQuakes

(C) Utility/Power 1. SCADA Description: SAN3764 writes, "SCADA (Supervisory Control and Data Acquisition System) will automate the real time monitoring and control of all utility system processes, such as the control of power flow into the various grids that entwine utility company transmission and distribution systems.” Why it's Important: SCADA will create massive investment opportunities for those who get in on the ground floor. Everyone is affected because we all use power in one way or another. Reliable power is a key to success in any major economy. With development of a growing middle class in China and India, consumption of power can only go up. New power plants and increased reliability of power demands the use of advanced real time technology such as SCADA to monitor and control the flow of power and industrial processes in real time. Type: Technological ChangeQuake Estimated Magnitude: Greater Than 100% CAGR Best Positioned Companies: ABB and GE are two companies on the leading edge of this developing technology. They have the smarts and financial backing to make this a success.

2. Hygriding Description: EUR3621 writes, "Massive growth in renewable local power that is connected to the grid - driven by private home owners, small to medium businesses and local government facilities. When you've got your smart-home all wired up and your media server center installed, what's your next electronic home improvement ...your own power generator.” Why it's Important: The transference to local renewable energy sources will put pressure on traditional utilities and provide growth opportunities for new players. Currently solar power production plants can not keep up with demand for new cells... Type: Macroeconomic ChangeQuake Estimated Magnitude: 50% CAGR Best Positioned Companies: Clean Energy Fund (CLE –UN on the Toronto exchange), has a good portfolio of renewable energy sources and currently pays over 10% yield. International Automated Systems Inc. (IAUS) may become the first solar to compete with gas. Low-cost energy produced by IAUS' new patented and patent-pending solar technology can be used to generate electricity or produce clean fuels such as hydrogen and green methanol (gasoline replacements) at a competitive price. IAUS' unique thin-film solar panels can be produced at a fraction of the cost of today's photovoltaic solar panels. IAUS is on schedule to begin mass production of its solar panels by September 2005. Once in production, they will be able to turn out nearly 200 megawatts of solar panels yearly, nearly 10 times greater capacity than a $100 million photovoltaic fabrication plant. Dyesol, an Australian solar energy technology company listed on the Australian Stock Exchange, has a revolutionary dye solar cell technology. Just as chlorophyll in a leaf absorbs energy from the sun for the needs of a plant, the dye in Dyesol solar cells absorbs light to generate renewable electricity in a process known as artificial photosynthesis. Dyesol cells can be used as walls or roofs of buildings, providing renewable power even on overcast days.

This information is from ChangeWave Research, LLC and contains confidential business information. It may not be copied or distributed without permission. ©2005 ChangeWave Research, LLC. All rights reserved. 7 ChangeWave Research: Energy and Transportation ChangeQuakes

(D) Light Emitting Diode (LED) Lighting 1. LED Lighting Replacing Incandescants Description: NER7880 writes, "LED lights will cost more, but save tons of money in electricity and replacement costs.” Why it's Important: Cheaper lighting is huge for lowering energy consumption and dependence on oil in the long run. Type: Technological ChangeQuake Estimated Magnitude: Greater Than 100% CAGR Best Positioned Companies: CREE (LED lights)

2. LED Lighting Description: AXE9509 writes, "Light Emitting Diode lighting is advancing very quickly to replace conventional lighting sources, specifically in locations where long life (low maintenance) is important. Color and efficiencies are getting better.” Why it's Important: Long life, very low power consumption/high efficiency results in power savings. For example traffic lights are going nearly 100% LED, resulting in more reliable service with impressive power and maintenance savings. Low power draw makes it feasible to run them from UPS systems and or solar. Type: Technological ChangeQuake Estimated Magnitude: 25% CAGR Best Positioned Companies: Any with high research & development budgets.

(E) Other Energy 1. Renewable Hydrogen Based Economy Description: LEN4466 writes, "A worldwide hydrogen economy would use renewable energy sources (hydroelectric power, geothermal power, wind power, and solar energy) to manufacture hydrogen fuels from water. The hydrogen fuel is then used in fuel-cells to generate large amounts of electricity on demand for cars, trucks, buses, boats and for small and large electric generation plants. Hydrogen fuels, when used in fuel cells, discharge only moderate heat and pure water, both of which can easily be applied to other needs. In stand- alone generating systems, both the heat and water can be recycled to improve efficiency.” Why it's Important: No toxic fumes, no pollution or greenhouse gases. No reliance on expensive imported petroleum products. Hydrogen economies offer the world, a new kind of energy freedom. Everyone world-wide is affected. Type: Macroeconomic ChangeQuake Estimated Magnitude: Greater Than 100% CAGR Best Positioned Companies: Fuel Cell Manufacturers: Ballard Power Systems (BLDP), Fuelcell Energy (FCEL), Plug Power (PLUG); Industrial Gas Producers: Air Products and Chemicals (APD), Praxair (PX); Energy Producers: Exxon Mobile (XOM), BP Inc (BP), Chevron Corp (CVX); Pipeline Distribution Companies: Atlas Pipeline Partners (APL), Duke Energy (DUK), Enbridge Inc. (ENB), BG Group (BRG); Auto Manufacturers: Ford (F), General Motors (GM), Honda (HMC), Toyota (TM). All these companies have demonstrated leadership in promoting a hydrogen based economy, and have committed resources toward research.

This information is from ChangeWave Research, LLC and contains confidential business information. It may not be copied or distributed without permission. ©2005 ChangeWave Research, LLC. All rights reserved. 8 ChangeWave Research: Energy and Transportation ChangeQuakes

2. Biodiesel Description: WIN22317 writes, "Research, acceptance and adoption of biodiesel fuels will continue to accelerate in the years to come, as tax incentives, political motivation and pure economics drive the move to end our reliance on fossil fuels. This could take place on a small scale level of a 20% biodiesel mix to full 100% biodiesel – but growth is inevitable.” Why it's Important: It affects our agriculture economy as we see a need for growth of more vegetable products. It will impact growth of small business as entrepreneurs move to provide manufacturing and distribution of these fuels. Reliance on foreign fossil fuels has and will continue to hurt our economy. Growth of an American made fuel will help the economy. Type: Macroeconomic ChangeQuake Estimated Magnitude: Greater Than 100% CAGR Best Positioned Companies: Too early to predict at this point.

3. Mining/Nuclear Power Description: STE7991 writes, "Based on calculated peak oil and increasing global demand for energy, development of nuclear power is likely to come back into fashion. This affects a number of satellite industries… One industry likely to be strongly affected is uranium mining/ processing. Many existing uranium mining companies have been running on fumes for a long time… Anticipate a significant ramp-up in exploration and production in the medium term.” Why it's Important: See above description. Type: Regulatory ChangeQuake Estimated Magnitude: 50% CAGR Best Positioned Companies: Cameco, USEC (USU), Intl U. Co. - already established, experienced mature companies. Juniors are highly speculative, as you already know.

4. Renewable Energy Resources Description: BAR18798 writes, "States are mandating that utilities make a minimum percentage of renewables, namely wind, solar, and clean fuel cells, as part of their generating portfolio. Since many utilities are going to be scrambling to secure the limited amounts of renewable resources available right now, demand will outstrip supply. Makers of wind turbines and makers of solar panels are going to increase prices. Basic materials to make solar panels are going to be in high demand. Those who already own private wind farms will name their price.” Why it's Important: Environmentalist have successfully convinced people that wind power subsidies are in their best interest, so people pay a 1-2% premium on their rates to get it. What is not explained is that this resource is not reliable and cannot be considered part of the base resource calculation. For every wind megawatt there has to be a coal or gas generated megawatt on standby. This oversupply will increase both short and long term total costs. Type: Regulatory ChangeQuake Estimated Magnitude: 25% CAGR Best Positioned Companies: Turbine manufacturers.

This information is from ChangeWave Research, LLC and contains confidential business information. It may not be copied or distributed without permission. ©2005 ChangeWave Research, LLC. All rights reserved. 9 ChangeWave Research: Energy and Transportation ChangeQuakes

(F) Transportation 1. Impact of Very Light Jets on Traditional Airlines Description: RJR0997 writes, "The so called 'Very Light Jet' could reshape the entire structure of domestic airlines in this country. These aircraft are less than 10,000 pounds gross weight and generally carrying four passengers and a crew of two. While it's too early to substantially analyze the economics, the area has attracted new design from traditional manufacturers (Cessna, Raytheon - Beechcraft), start-ups (Eclipse and Adam) and strong renegades from other industrial areas (Honda).” Why it's Important: A number of operators of current on-demand charter operations are projecting that four passengers can be carried for close to current first-class fares on legacy airlines. Further, the VLJs will operate into small outlying airports, avoiding the hassle of security checks, checking luggage, changing airlines and renting cars for the trip from a major hub airport to the real destination. One charter company has already announced an order of 250 VLJs to operate such an on-demand charter service.

If this concept were to take hold the effect on traditional airlines is obvious. Secondary effects might also be felt in the rental car and hotel business, as these aircraft make it possible to set up a 9:00 meeting halfway across the country and be home for an early dinner … The major challenge will be how these small aircraft effect the FAA's Air Traffic Control which runs at near capacity east of the Mississippi River. The mitigating aspect of the VLJs is that they will be operating many flights off the major airways to non-hub destinations. Type: Macroeconomic ChangeQuake Estimated Magnitude: 25% CAGR Best Positioned Companies: Aircraft Manufacturers: Eclipse Aviation, Cessna Aircraft, Beech Aircraft (Raytheon), Adam Aircraft, Bombardier Aircraft (Canada); Engine Manufacturers: Pratt & Whitney Canada, Williams, AirResearch (Honeywell); New Air Taxi Operators: Dayjet, POGO (CEO Donald Burr, founder of People Express and Chairman Robert Crandall, former CEO of American Airlines), Bombardier Skyjets. These organizations either have airplanes in the air slated for FAA Certification in 2006, engines certified and in production, and/or long experience in running airline operations.

2. Batteries for Hybrid Cars Description: ROC0900 writes, "With the price of oil increasing over Mid-East tension and higher demand from China and the Sub-Continent, coupled with global focus on pollutants, hybrid cars and trucks will become more prevalent and more affordable. The Japanese are already retooling plants to accommodate a more robust line of cars in this niche and U.S. auto manufacturers are following suit.” Why it's Important: Economies that have an ever-increasing demand for oil will look for ways to reduce their dependence on oil as an energy source and hybrids reduce oil use. Type: Technological ChangeQuake Estimated Magnitude: Don't Know Best Positioned Companies: Valence Technology, Inc (VLNC) has commercialized a phosphate-based, lithium-ion technology (Saphion technology). Saphion technology uses phosphate-based cathode material. It is being developed for use in laptop computers, cell phones, Segways, hybrid cars and military vehicles.

This information is from ChangeWave Research, LLC and contains confidential business information. It may not be copied or distributed without permission. ©2005 ChangeWave Research, LLC. All rights reserved. 10 ChangeWave Research: Energy and Transportation ChangeQuakes

3. Hydrogen Fuel Cell Vehicles Description: EBW20724 writes, "Hydrogen fuel cell vehicles may take off if certain hurdles can be overcome: Onboard hydrogen storage - the challenge is to pack 300 miles worth of range into a reasonable space, Cost - Fuel cell materials and other system components must come down very significantly in price. Right now a mass-produced car would still cost at least $200,000! In all likelihood, this is still at least 10 years away.” Why it's Important: Hydrogen fuel cell vehicles offer the possibility of creating transportation which no longer relies on oil, and can run on any available energy source. Oil/energy companies, auto companies, and consumers - pretty much everyone, would be affected. Type: Technological ChangeQuake Estimated Magnitude: Don't Know Best Positioned Companies:

4. Fuel Efficient Vehicles with Enhanced Performance Description: ALM7502 writes, "Unlike the first energy crunch in the late 70s, consumers today want improved fuel economy without performance or function compromise (but at reasonable cost). Examples include high-power hybrids, turbo-diesels, Borg Warner's dual- shaft autoshift manual transmission, crossover (car-based) SUVs, aluminum, magnesium and carbon-fiber body and chassis structure, and low rolling-resistance runflat tires... The trend is global, of course, but European and Japanese based companies are far ahead in product development and capacity for change.” Why it's Important: The auto-related industry is still a major part of the US economy (and that of most developed countries). Auto OEMs and key suppliers with proven technology and speed to exploit change will benefit. Most OEMs and traditional suppliers will struggle to keep up with the changes (and massive investments) required. Type: Macroeconomic ChangeQuake Estimated Magnitude: Don't Know Best Positioned Companies: Toyota, Borg Warner, Alcan, possibly Zoltek, Energy Conversion Devices (ENER), Siemens, Michelin, Bridgestone…

5. Improvements in Automobile and Motorcycle Tires Description: WAT1273 writes, "One of the challenges facing the tire industry is how to make a tire that does not contain air and would not increase the potential for an explosion if a car is rear ended. This tire has been developed, passed all DOT tests and is currently being promoted to several major auto manufacturers. “Amerityre (AMTY) has developed a polyurethane material that can be used to make auto and motorcycle tires. The material has been tested to DOT standards that all tires will be required to pass by the year 2007. Tires have been made and tested (for aging, ozone resistance and ultimately to assure blow outs do not occur) and can operate up to 100 miles without air. Rubber tire companies are currently trying to develop a rubber tire to meet the new DOT specifications and to operate without air if necessary but to this point they have not been successful. Amerityre has also developed a spare tire from this material that will not require air. My understanding is the response from auto manufacturers has been very favorable and these could be in production within the year... One other key advantage of this material is that it can be recycled. As we all know, rubber tires are not easily recycled and the EPA considers this a major problem.”

This information is from ChangeWave Research, LLC and contains confidential business information. It may not be copied or distributed without permission. ©2005 ChangeWave Research, LLC. All rights reserved. 11 ChangeWave Research: Energy and Transportation ChangeQuakes

Why it's Important: Anyone who drives an automobile and or motorcycle is affected. How many of us have been stranded on the road due to a flat tire or blow-out. Even if the tire is punctured, it is designed to operate for up to 100 miles so you can get back to a city and get the tire changed. Race car tires had holes put in them and the car then went around the track at high speeds without going flat. Type: Company-Specific ChangeQuake Estimated Magnitude: Greater Than 100% CAGR Best Positioned Companies: Amerityre, (AMTY) is the only company I know that is in the position to provide the patented material to make this type of tire.

This information is from ChangeWave Research, LLC and contains confidential business information. It may not be copied or distributed without permission. ©2005 ChangeWave Research, LLC. All rights reserved. 12 ChangeWave Research: Energy and Transportation ChangeQuakes

II. ChangeWave Research Methodology

This report presents Energy and Transportation findings from a recent ChangeWave Alliance survey focusing on identification of ChangeQuakes (i.e., major transformational change). The survey was conducted between July 26 – August 1, 2005. A total of 625 Alliance members participated.

The Alliance’s proprietary research and business intelligence gathering system is based upon the systematic gathering of valuable business and investment information directly over the Internet from accredited members.

ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, interprets and reconciles the information in a cohesive manner and converts the information into valuable quantitative and qualitative reports.

The Alliance has assembled its membership team from senior technology and business executives in leading companies of select industries. Nearly 3 out of every 5 members (58%) have advanced degrees (e.g., Master’s or Ph.D.) and 94% have at least a four-year bachelor’s degree.

The business and investment intelligence provided by the Alliance provides a real-time view of companies, technologies and business trends in key market sectors, along with an in- depth perspective of the macro economy – well in advance of other available sources.

This information is from ChangeWave Research, LLC and contains confidential business information. It may not be copied or distributed without permission. ©2005 ChangeWave Research, LLC. All rights reserved. 13 ChangeWave Research: Energy and Transportation ChangeQuakes

III. About ChangeWave Research

ChangeWave Research, a subsidiary of Phillips Investment Resources, LLC, identifies and quantifies "change" in industries and companies through surveying a network of thousands of business executives and professionals working in more than 20 industries.

ChangeWave has a very unique asset in its 6,000-member Alliance. We have assembled our membership team from a broad cross section of more than 20 vertical markets such as telecom, semiconductors, data storage, and biotechnology, along with a wide range of professional disciplines including CIOs, IT managers and programmers, executive management, scientists, engineers and sales personnel.

The ChangeWave Alliance is composed of senior technology and business executives in leading companies - credentialed professionals who spend their everyday lives working on the frontline of technological change.

This proprietary research and business intelligence gathering system provides a real-time view of companies, technologies and business trends in key market sectors along with an in- depth perspective of the macro economy - well in advance of other available sources. ChangeWave surveys its 6,000 Alliance members on a wide range of investment research topics and converts the findings into valuable investment and business intelligence reports. ChangeWave delivers its products and services on the Web at www.ChangeWave.com.

ChangeWave Research does not make any warranties, express or implied, as to results to be obtained from using the information in this report. Investors should obtain individual financial advice based on their own particular circumstances before making any investment decisions based upon information in this report.

For More Information:

ChangeWave Research Telephone: 301-279-4200 9420 Key West Avenue Fax: 301-610-5206 Rockville, MD 20850 www.ChangeWave.com USA [email protected]

Helping You Profit From A Rapidly Changing World ™ www.ChangeWave.com