WARBURG PINCUS Private Equity

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WARBURG PINCUSPrivate Equity

• IPAA Private Capital Conference
• Peter R. Kagan Managing Director

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Who Is Warburg Pincus

• Among the largest and oldest private equity
  investors in the world
• Diverse portfolio of early stage, developing
  company, and special situations
• Market value of holdings 9 billion
• Incremental 5 billion of equity available for
  new investments

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Investment Philosophy

• Partner with exceptional management teams
• Finance attractive business plans
• Parallel interests with management teams, LPs,
  and WP partners
• Long-term orientation (5-7 years)
• Active Investor

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Investment Approach

• Contrarian (often)
• Equity investments of 25-500 million
• Public and private companies
• Focus on growth (earnings/cash flow)
• Diverse portfolio by stage of life, geography,
  and industry
• Significant ownership positions

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Resources

• Professional staff gt 100
• Offices 2 U.S. 2 Europe 6 Asia
• Prior Investments gt 480 in 29 different countries
• Extensive network of contacts and relationships
  around the world

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Sectors Of Expertise

• Financial Services and Technology
• Healthcare
• Energy
• Industrial and Leveraged Transactions
• Media and Business Services
• Information and Communication Technology
• Real Estate

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Warburg Pincus Energy Practice

• Core investing practice
• Over 1.5 billion committed to energy
• Major investor in EP business
• Long history in the power business
• Recent entry into midstream area

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Warburg Pincus Energy Investment Areas

• Conventional EP
• Non-conventional EP (e.g. tight gas, oil sands)
• Midstream opportunities
• Electricity generation
• Alternative energy solutions

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Warburg Pincus EP Portfolio

• Warburg Pincus has committed over 1.2 billion to
  12 EP companies since 1990
• Average ownership position of approximately 60
• Ten of these companies are still in portfolio
• All but one of these were start-up or early stage
  investments

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How We Think About EP Investing

• Venture returns require risk dollars
• Volume growth, not commodity prices, drive value
  creation
• Price changes effect opportunity set and tactics
• Better to have strong prices than weak ones
• Corporate model is very important
• Capture going concern arbitrage
• Allows equity leverage in public capital
  markets

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Upstream Strategies - What We Look For

• Experienced and lucky management team
• Demonstrated ability to invest capital wisely
• Execution is more important than strategy
• Focus increases the odds of success
• Return on investment is more important than
  growth
• Not particularly interested in speculating on
  prices

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Upstream Strategies - Sources of Value

• Ownership of reserves, per se, is not important
• They dont appreciate in value each year
• Indeed, they tend to go away
• Production is merely the source of cash flow for
  reinvestment
• Successful re-investment of cash flow is key to
  creating value
• Its about the dollars, not about the barrels

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Current EP Investments
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How We Think About Midstream Investing

• Similar considerations to EP (Management, and
  Focus)
• Seeking reward commensurate with risk
• Unregulated assets - reinvestment opportunities
• Regulated assets - expansion opportunities
• Durable cash flows
• Supply dynamics critical EP experience
• Asset quality
• Bias towards fee-based business
• Sensible unit economics

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• www.warburgpincus.com