The Quantum Leap Company Limited

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The Quantum Leap Company Limited building value
in energy efficiency
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CANADIAN ELECTRICITY ASSOCIATION and NATURAL
RESOURCES CANADA   Diversifying the Mix A
Workshop on Alternatives to Conventional
Generation Technology   25 November
2002 Approaches to Advancing Alternative
Technologies A Capital Markets
Approach Financing Non Conventional Generation
Technology
The Quantum Leap Company Limited building value
in energy efficiency
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the alternative energy sector

• Shell estimates that 10 to 15 new sources of
  energy supply will command up to 50 of the
  primary energy markets by 2050.
• The surge in alternative energy demand will be
  driven by regulatory change in the 350 billion
  North American energy industry and the resulting
  growth in distributed generation.

TECHNOLOGIES
FUELS
CONVERGENCE
E
Active
Active
Communications
N
Fuel Cells
Hydrogen
Networking
C
Dual Fuel
Ethanol
Customer Premise
E
Micro Turbines Clean Coal
Methanol
Products Services
U
R
Biomass
Aggregation of
Coal
Services Products
S
G
Natural Gas
Metering monitoring
T
Propane
Performance
Y
Passive
Passive
O
Water
Micro Hydro
L E A D I N G e d g e a l t e r n a t I v e
p o w e r
S
Wind
Wind Turbines
M
O
Sun
Solar Thermal
Earth Energy
PhotoVoltaic
Cells
E
U
Geothermal
R
GeoExchange
R
S
C
INTERFACING APPLICATIONS SYSTEMS INTEGRATION
E
- Information Technology
- Universal Power Supply
and Systems Integration
- Asset Utilization and Efficiency
S
- Cogeneration
- Storage and Load Management
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the alternative energy drivers

• energy demand
• energy depletion

• emission regulation
• industry deregulation

favourable market conditions
innovation
increasingly favourable government legislation
L E A D I N G e d g e a l t e r n a t I v e
p o w e r
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financing the economics basic theme AE/DG
must pay for itself
Construction Risk
Construction Phase
Savings Shortfall Performance Risk
Payback or Contract Term
L E A D I N G e d g e a l t e r n a t I v e
p o w e r
The reality of the business opportunity is
that the viability of each alternative is a
function of electrical efficiency, economics and
competition from existing upgradeable
infrastructure.
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financing the science electrical efficiencies
of various technologies

• Source
• The Quantum Leap Company Limited, Nov. 2002
• Fuel Cell Technology, Kingston, Nov 2002

SOFC Tubular
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TECHNOLOGIES
Active
Fuel Cells
Dual Fuel
Diesel GenSet
36
Conventional Generator
34
Micro Turbines Clean Coal
PEM Fuel Cells
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Passive
Micro Hydro
Wind Turbines
Micro Generation
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L E A D I N G e d g e a l t e r n a t I v e
p o w e r
Solar Thermal
PhotoVoltaic
Cells
Geothermal
GeoExchange
The reality of the business opportunity is
that the viability of each alternative is a
function of electrical efficiency, economics and
competition from existing upgradeable
infrastructure.
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• Source
• The Quantum Leap Company Limited, Nov. 2002
• Fuel Cell Technology, Kingston, Nov 2002

financing the economics an example - SOFC
basic SOFC economics very compelling
SOFC VS Grid operating Cost Comparison Electricity
unit cost (/kWh) 011 Natural gas unit cost
(/m3) 033
SAMPLE U.S. New England Home
Home w/ Furnace Grid Connect
Home w/ Tubular SOFC
MONTHLY COSTS Cost of grid provided
electricity 185 0 Cost of Natural
Gas For heat 69 29 for
electricity 0 109 Total Monthly
Cost 254 138 MONTHLY Savings 116
savings using SOFC 46
L E A D I N G e d g e a l t e r n a t I v e
p o w e r
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• Source
• The Quantum Leap Company Limited, Nov. 2002
• Fuel Cell Technology, Kingston, Nov 2002

financing the science an example - SOFC
equity investment will drive cost down
Research Remote Application
High Electricity Costs Areas Early
Adopters
Residential Small Commercial Application

/5kw Unit - 140k - 120k - 100k - 80k -
60k - 40k - 20k
Units Sold 5,000 4,500 4,000 3,500 3,000 2,500 2,0
00 1,500 1,000 500 0
L E A D I N G e d g e a l t e r n a t I v e
p o w e r
3 yr payback
2 yr payback
1 yr payback
2003 2004 2005 2006 2007
An estimated 600,000 unit SOFC niche market
exists in Canada at 20,000/unit with a one year
payback. That wont exist until 2006 and mass
market penetration remains elusive for the next
10 years at gt 1,500/unit.
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financing the innovation chain
Stages of Technology Development
L E A D I N G e d g e a l t e r n a t I v e
p o w e r

• Source
• Sustainable Development Technology Canada, Nov.
  2002

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financing current funding gaps
Fundamental Research
Prototype Development (Bench Scale)
Product Demonstration (Full Scale)
Product Commercialization Market Development
Market Entry
Market Ready Product
Funding Intensity
Pre IPO Gap
Governments
Pre VC Gap
Banks
Venture Capital
Industry
L E A D I N G e d g e a l t e r n a t I v e
p o w e r
Angel Investors
of Energy and Environment Deals by Stage
7
101
12

• Source
• Sustainable Development Technology Canada, Nov.
  2002
• MacDonald Associates, Oct., 2002

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financing players actually in the funding
gaps
Fundamental Research
Prototype Development (Bench Scale)
Product Demonstration (Full Scale)
Product Commercialization Market Development
Market Entry
Market Ready Product
Funding Intensity
Governments..
SDTC .. .. ..
..
Banks .

• Venture Capital
• Traditional .
  .
• Specialty (Strategics) ..
  
• Tax Driven (LSIF 30) ..
  ..
• Specialty Tax Driven (ROIF 35)
  ...

L E A D I N G e d g e a l t e r n a t I v e
p o w e r
Industry (non VC)

Angel Investors
.
US Angels

• Source
• The Quantum Leap Company Limited, Nov. 2002
• Sustainable Development Technology Canada, Nov.
  2002
• MacDonald Associates, Oct., 2002

Tax driven VC is gt 50 of the Canadian market and
4-5 in the US.
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financing utility players addressing the
funding gaps
In-House
Commitment To Venture Investing
Fund of Funds Investment Strategy
Full Funded Venture Capital Subsidiary (Round 1)
Full Funded Venture Capital Subsidiary (Round 2
)
Estimate of Commitment

• BCHydro
• TransAlta.
• EPCOR.
• CU.
• SaskPower..
• Manitoba Hydro.
• OPG.
• Hydro Quebec
• Nova Scotia Power..
• Fortis..

Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Yes - tbd No Yes No No No Yes Yes No Yes
tbd Yes Yes No No No SAM, Nth SAM, Nth, EnE EnT No
tbd na No No na na Yes Yes na Yes
na na na na na na Yes Yes na Yes
5-10mln - Soft 10mln Soft us10mln hard -
60mln soft na na na 100mln hard 340mln hard
() 1mln hard na
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alternative energy Canadian advantage

• Total present value market potential of
  energy technology estimated at 1 trillion
• Volatility in the sector is resulting in
  opportunity
• Many market leaders are Canadian
• Recent Private, Primary Secondary Activity
• in North America
• Ballard Power US345,000.000 C
• Global ThermoElectric US45,000,000 C
• Stuart Energy US120,000,000 C
• Next Phase US45,000,000 C
• Hydrogenics US50,000,000 C
• Xantrex US58,000,000 C
• Fuelcell Energy US60,000,000 US
• H-Power US100,000,000 US
• Millennium US45,000,000 US
• US868,000,000
• C Canadian
• US United States
• Source Warburgs Europe

Alternative Energy Value
Computers
The Internet
Penetration of Market
Alternative Energy Early Stage
L E A D I N G e d g e a l t e r n a t I v e
p o w e r
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Quantum Leap
our benefits
our approach

• First Mover advantage
• Dedicated industry focus
• Experienced management
• Favourable market conditions
• Active involvement with investee companies
• Strong network and deal flow

• LEAP invests in private alternative energy
  companies for aggressive capital appreciation
• LEAP capitalizes on disparities between
  economic value and market opportunity
• LEAP focuses on financing 1 - 2 steps prior to
  the public market financing stage, targeting a
  higher reward profile for maximum equity leverage
• Successful investing in early- stage ventures is
  our area of expertise

L E A D I N G e d g e a l t e r n a t I v e
p o w e r
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Quantum Leap a model portfolio
balance in partners
balance in portfolio
A Model LEAP Portfolio (10 yrs )
L E A D I N G e d g e a l t e r n a t I v e
p o w e r
Weighting Selected by Investor Appetite
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Quantum Leap current portfolio
180 Ontario Based Companies Reviewed in 9
Months 6 investment closed by December 1st,
2002 Up to 2 more by year end . . . The same for
2003
Energy
Efficiency
L E A D I N G e d g e a l t e r n a t I v e
p o w e r
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moving DG forward

• Drivers that will advance the market, if enabled
  properly
• Industry
• Formal commitment of capital
• Corporate Leadership with demonstrable projects
• Commercial successes for existing generators
• Progressive partnerships
• More support for Motivated Entrepreneurs
• Government
• Positive tax drivers
• Reconstituted 43.1
• Broadened definition for flow through
• Enable Government to benefit from equity
  interests with proceeds used for re-investment

L E A D I N G e d g e a l t e r n a t I v e
p o w e r
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for information
The Quantum Leap Company Limited The Canadian
Pacific Building Suite 711, 69 Yonge
Street Toronto, Ontario Canada
www.quantumleapco.com
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The Quantum Leap Company Limited building value
in energy efficiency www.quantumleapco.com