Peter Adriaens, PhD, BCEEMProfessor of Environmental Engineering, Finance,

and EntrepreneurshipCenter for Venture Capital and Private Equity, The

Ross School of Business

Director, Center for Smart Infrastructure Finance, College

of EngineeringThe University of Michigan, Ann Arbor

adriaens@umich.edu(734)709-0065

Investment Strategies in the Forestry Value

System: A Great Lakes Regional

Perspective

Benchmarking Great Lakes Forest Investment

Data sources: Bloomberg, Michigan Forestry Industry

1. Impetus for study: The Finnish Experience

2. Emerging Forestry Ecosystem

3. Traditional investment in paper mills

4. Equity and P3 investments for forest bioeconomy industries

5. A snapshot of the Great Lakes forest investment ecosystem

6. Project Finance: Bankable projects for

Forest Bioeconomy Strategy: A Finnish Story

Data sources: Finnish Forestry Industries, Ministry of Economic Affairs and Employment

• By 2005, competition on cost for the same product was impacting Finnish forestry companies, resulting in layoffs and poorfinancial performance

• A government policy strategy to promote the bioeconomy started taking hold in the first decade of the 21st century

• By 2016, the bioeconomy represents 16% of the national economy, whereby 40% is derived from forestry

• The target by 2030 is to increase the bioeconomy to $109 bn and increase forest products to 70%.

Tactics: Setting the Strategy in Motion

Criteria for public procurement and incorporation of bio-based products in urban sustainable development

Fund structures for pilot and full-scale demonstration projects using public-private partnerships

Education of consumers and industries to promote demand of forest biobased products and services

Development of standardization and certification processes of bioeconomy products

Retraining and re-education programs to ensure workforce development and availability

Blue Ocean Strategy:Forests as Biorefineries for Green Chemistries

Brands

Potential Investment Universe

1. Textiles: 141 deals; $1.6 bn.2. Plastics: 461 deals; $3.5 bn. 3. Pharmaceuticals: 63 deals; $0.7 bn.4. Cosmetics: 92 deals; $2.1 bn.

Source: Finnish Forestry Industries

Traditional Investment in Mill Operations

Data sources: Bloomberg, Michigan Forestry Industry

Investing in Emerging Forestry Value Chain

Data sources: Bloomberg, CleanTech Group, Pitchbook

Private equityVenture capitalCorporate venture, strategic, M&A

Corporate strategic, M&A, sales-driven reinvestment

Private Investment Risk and Expectations

Type of Financing

Bus/TechStage

What’s Happening

Gov’tGrant

or Angel

Concept

Research

Seed

BusPlan

TechDev

EarlyStage

VC

Proto-type

MarketDev

Expan-sion

Capital

Pilot

EarlySales

GrowthCapital

Commer-cial

Product

RecurringRevenue

Venture/MezzDebt

MarketAdoption

PositiveEBITDA

Proj FinDebt,

Equity,Tax Equity

MarketAccept-

ance

Securable Assets

IPO/Acq

MarketAccept-

ance

RevenueGrowth

CorpDebt

Mature

StableRevenues

PIPE(private

investment in public

equity)

Mature

StrategicPartner

Buy Out

Rebirth

Un-coveringHiddenValue

VC (money in) ‘Exit’ (money out)

Venture Capital Investment:A Regional Perspective of Great Lakes States and Provinces

0.0001%

Technology:2%

Forestry Investor Universe in the Great Lakes Region

Source. CleanTech Group i3 Platform

Exemplar VC Investments

Source. CleanTech Group i3 Platform

Specialty chemicals (e.g. Vertichem, Ontario; $4 M.). Green specialty chemical company. Investors are Dundee Venture Capital and Bank GutenbergCommodity chemicals (e.g. Renmatix, Pennsylvania; $132M). Production of cellulosic intermediaries for biochemicals and biofuelsInvestors include Kleiner Perkins, Waste Management, Total, Bill GatesFiber (e.g. Fiber Byproducts Corp, Indiana). Recycler and reprocessor of wood waste for consumable products. Investors include BeringeaBiofuels (e.g. Woodland Biofuels, Ontario; $20M.). Cellulosic conversion to biofuels. Investors include InvestecoCapital, Arctern Ventures, Middleland CapitalCarbon (e.g. Finite Carbon; Pennsylvania; $2 M). Carbon aggregation platform. Investors include TL VenturesDrones/software (e.g. DroneSeed, Washington; $5 M.). Reseeding technology for forests. Investors include Techstars and Social Capital SyndicateAdvanced Materials (e.g. Spinnova, Finland; $3.2 M.). Producer of novel fiber products from wood-based biomaterial. Investors: Lenzing AG, VTT Ventures Ltd, Besodos Investors Ltd and Finnish PE.

Venture Capital Investment:Exit Valuations Relative to Other Sectors

Project Finance (Debt + Private Equity): Investing in Bankable Technologies and Products

Structure

*SPV, Special Purpose Vehicle No Great Lakes forestry companies involved in project finance!

Execution

Developing a Blue Ocean Investment Strategy: Scaling Value-Added Great Lakes Industries