www.HFPeurope.org

European Hydrogen and Fuel Cell Technology Platform

THIRD SEMINAR WITH INDUSTRIAL LEADERS OF TECHNOLOGY PLATFORMS

Brussels 16 December 2005

Phil Doranphil@coretecventures.com

Partner - Core Technology VenturesMember of Finance Group – HFP

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OUTLINE

Part 1 – Background of the Policy and Renewables Landscape The Ultimate Goal, Carbon Free Energy

Distribution of the European H2&FC Industry

Policy Overview

Part 2 - Sources of Finance

Public & Private Equity Markets

Public Debt Markets

Government Support I: Tax breaks, capital allowances

Government Support II: R&D Grants

3. Final remarks

We focus on how the various H2&FC developers, (industrials, micro companies and academe) are able to access the debt & equity markets and the flow of public funding. In this context we consider the objectives these funding sources satisfy and who benefits from these sources of funding within the context of the nascent European H2&FC industry.

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Background: The Ultimate Goal, Systems Integration

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Background: Spread of the European H2&FC Industry

*Source: CTV estimates. Data refer to number of European entities developing H2&FC related hardware but excludes well-capitalised & quoted companies

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Energy policy objectives Energy security Sustainable Supplies

Energy policy objectives Energy security Sustainable Supplies

Industrial policy objectives Economic growth/ Jobs R & D & innovation

Industrial policy objectives Economic growth/ Jobs R & D & innovation

Environment policy objectives Global Warming Clean Air

Environment policy objectives Global Warming Clean Air

Promotion of renewable energy

Innovation in DG energy technology

local jobs (regional policy)

Health and Safety

Promotion of clean conversion

devices

Background: Policy Overlap

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Finance and the European Fuel Cell Industry

Public Equity MarketsOrdinary Shares

Warrants …

H2&FC Developers Sources of Funds

Industrials

Public Debt MarketsBond MarketsBank Loans

Independent MicroCompanies

Government 2R&D Grants

Universities &Research Institutes

Government ITax Breaks

Capital Allowances

Private Equity Markets Ordinary Shares

Warrants …

Supplies of Funds

Private SectorPension funds

Individuals, Venture CapitalistsEuropean Investment Fund?

Public Sector National & Local Governments

Public SectorEuropean Union

Public SectorEuropean Investment Bank

Projects

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Closing Remarks      Debt & Equity:

Established companies can easily access the public debt and equity markets. In principle new companies have access to private equity supplied by venture capitalists and individuals. However, the European H2&FC industry struggles to attract such finance and is thus significantly disadvantaged.

Government Support: Comes in the form of tax breaks and capital allowances, which benefits companies with revenues to tax & balance sheets to invest. Another source of government support comes in the form of R&D grants, which for the private sector must be matched by company resources. Only those companies with sufficient capital resources can use such instruments.

European Investment Bank Support: The EIB’s presence on the Finance Panel has been highly constructive. We believe that the Bank’s approach will be extremely useful in aiding the deployment and validation of H2&FC technologies within the European Union & believe that these instruments will play an invaluable role in promoting the development and deployment of H2&FC technologies but also in the promotion, understanding and acquisition of the skill base necessary to the commercial introduction of such a group of novel technologies. The bank’s support can be expected to underpin & leverage the EU’s support.

Causes of ConcernWe feel that work needs to be done to address the specific needs of micro developers, who are starved of the necessary equity to develop their technologies. Further, the needs of those developers within Europe’s Research Institutes and Universities who would seek to monetise their technologies need to be addressed: On taking their inventions out of the academic environment, typically financing dries up.

Given the EIB cannot address these needs, other institutions within the EU, such as the European Investment Fund should be encouraged to fill the equity gap faced by Europe’s H2&FC developers & would be entrepreneurs. Only then would the independent micro sector be in a position to avail itself of R&D grants and ultimately public markets.

A unified approach that took account of the financial difficulties associated with the deployment and validation of H2&FC technologies and the financial difficulties associated with independent developers or would-be university entrepreneurs would go a long way to establishing Europe not only as a leading consumer of these technologies but also a leading provider of these technologies.