Techfilt Spain Hydrating the Future Equipo Reto Instituto

Techfilt Spain Hydrating the Future Equipo Reto Instituto de Empresa Tesia Hostetler Chris Kozup Martin Paley Sami Shiro

90% of globally available freshwater will be in use by 2030

Only 50% of the Spanish population has access to modern sewerage treatment

Only 59% of Spain's wastewater conforms to EU regulations

Ultra Advanced Filtration Technology Membranes

The Hard Truth… Water pollution in Spain has reached critical levels

The Hard Truth… Water shortage wreaking havoc on agriculture and industry

The Hard Truth… 5 th May 2005 News Coverage

Who is Techfilt? S Techfilt is a leading supplier of filtration technologies and services – Singapore headquarters S Techfilt will establish a subsidiary in Barcelona, Spain S Initially targeting wastewater treatment

The Path Ahead Issue 1: Wastewater must be cleaned Issue 2: What solution can clean it? Issue 3: Why can Techfilt provide it? Issue 4: How does Techfilt succeed?

Need for Clean Water S Spain’s chronic water crisis – Frequent droughts – Subsidies cause wasteful consumption S Water system over burdened – Outdated water facilities – 10% population growth since 1995 – Tourism hotspots – seasonal overloads S Need for water treatment and reuse – Recycled water ideal for major water uses such as agriculture

Need for Clean Water S Inadequate treatment facilities (41%) S EU directive 91 -271 -EEC compliance by 2006 – Imposes treatment standards – Towns of 2000+ people must comply – Spain’s “Programa A. G. U. A. ” S Municipalities must react to improve water quality Wastewater Regulation Compliance

The Path Ahead Issue 1: Wastewater must be cleaned Issue 2: What solution can clean it? Issue 3: Why can Techfilt provide it? Issue 4: How does Techfilt succeed?

Treatment Solutions et ark uity! M tin on isc D Stagnation Pond Membrane Filtration

Treatment Solutions Legacy S S Outdated technology Low water quality Not scalable Water released to environment S Limited compliance to EU directives S Difficult to expand Filtration S S Emerging technology High quality output Scalable system Release to fresh water reservoirs S Surpass compliance requirements S Can integrate into existing facilities Minimal cost difference between the two technologies!

The Path Ahead Issue 1: Wastewater must be cleaned Issue 2: What solution can clean it? Issue 3: Why can Techfilt provide it? Issue 4: How does Techfilt succeed?

Why Techfilt? World-class R&D End to End Expertise Experts in our Field International Experience Leading Edge Products

Why Techfilt? Techfilt’s customer focus directs engineering and product innovation S Operating Water Companies control water supply S Turn-key contractors design, build, and implement S Techfilt partners with contractors and operating water companies Source: Techfilt Spain Competitive advantage through mutually beneficial long-term relationships

Why Techfilt? How Techfilt reaches its customers and builds long-term relationships S Aguas de Barcelona – Contract consultants to gain credibility – Network to expand industry contacts S Hire local sales expertise S Conduct promotional activities with the contractors and water operators – Social: Bullfights, Football Games – Industry: Seminars, Workshops

The Path Ahead Issue 1: Wastewater must be cleaned Issue 2: What solution can clean it? Issue 3: Why can Techfilt provide it? Issue 4: How does Techfilt succeed?

How to Succeed? Build market awareness and brand recognition S Educate water companies and government officials – Seminars on filter technology and regulation S Active in trade associations S Partner with environmental groups – Sponsor conferences, encourage lobbying activities

How to Succeed? Strategies for customer acquisition S Key customer reference – Establish credibility and gain market acceptance S “Water Treatment-in-a-Box” – End to end plant design showcasing Techfiltration technology S RFP optimization – Assist turn-key contractor in bid process with design ideas and price optimization

How to Succeed? Becoming a long-term solution provider S Compliance Guarantee – Offer customers 15 year regulatory compliance guarantee – Superior filtration technology ensures longterm solution S Evolve with the customer – Knowledge transfer of global best practices – Monitoring technology – Interpret regulatory compliance

How to Succeed? Bringing established operational excellence to the Spanish subsidiary S Team – combination of local talent and imported expertise S Postponement of final assembly to local fabricator S Import proprietary filters – outsource supply of non-critical components

How to Succeed? Financial Metrics for Success S Initial investment of S$2. 04 M S Break-even point in late 2009 S Net Present Value of S$4. 05 M S Average revenue growth of 48%, operating margin of 15. 5%

Competitive Threats Threat Response Established Relationships Gain access to existing industry networks via Aguas de Barcelona and local sales Low Complexity Supply Chain Focus on supply chain management Broad Product Offerings Deliberate focus on wastewater treatment products

A Risk Analysis Risk Cultural Differences Physical Distances Limited Adoption Reach EU Compliance Response Spanish staff trained in Singapore; Singapore staff given cultural training Supply chain quality control Expansion into other product lines: desalination; industrial applications Shift sales focus to maintenance and repair revenues

Growth Strategy Phase 1 Establish market presence S Build on Key Customer reference to obtain 30 projects within Spain Phase 2 Product Diversification S Reverse Osmosis Systems S Ultrafiltration Membranes Phase 3 Geographic Expansion S Eastern European countries S Mediterranean countries

We are Equipo Reto Instituto de Empresa Thank You! Questions?

Backup Slide Index Backup Slides

Market Size S Number of plants needed – Currently 1200 compliant plants – Estimated total need is 2030 plants – Demand is projected to grow with increased population and climatic pressures S Projected demand for filters – Average price of € 300, 000 for filters per plant – Total market opportunity approx. € 250 M

Market Analysis S Increasing government spending towards compliance – Spent € 12 M in 1991 on a national plan for water treatment – Over 40% of polluted water is not properly treated S Increasing environmental awareness – Environmental agencies are increasing pressure for a solution

Launch Strategy S Entry strategy: Initial focus on wastewater treatment – Products: submerged membranes and membranes bioreactors S Expand through other markets (consumer or industrial treatment) – Products: ultrafiltration membranes and reverse osmosis systems

Customer Taxonomy S S S Filtration Manufacturers Turn-key contractors Water Operating Co’s Independent Consultants European Regulatory Bodies Filtration Technology Manufacturers Turn-Key Contractors Independent Environmental Consultants Operating Water Companies European Union Water Treatment Regulations

Customer Buying Process

Marketing - Phase 1 Building credibility and establishing relationships with the turn-key Contractors RFP Optimization S Lowest cost S Templates S Knowledge transfer S Clarity of design “Water Treatment In-a. Box” S Broad framework S Allows for quick development of treatment plant S Shows Techfilt’s expertise Future Compliance Guarantee S Enduring relationship S Promise compliance S Knowledge resource

Marketing - Phase 2 Build awareness of the benefits of membrane filtration among operating water companies Educational Seminars S Build awareness of water crisis S Explain the EU regulations S Show benefit of filtration technologies Techfilt DIRECT S Monthly newsletter S Distributed to all industry players S Non-sales S Builds credibility S Creates awareness

Marketing - Phase 3 Spur action in government for water treatment Create political pressure for quality water treatment Conferences S Sponsor events on water management S Increase dialog on the problem in hopes of finding a resolution Lobbying S Working with enviornmental agencies to pressure political action S Helps force compliance Grassroots Networking S Become involved in political activism S Sponsor awareness creating events (e. g. rallies)

Why Buy from Us? S Leverage Aguas de Barcelona to build relationships with government and contractors S Secure a flagship customer; use reference to build credibility and win contracts S Help contractors win RFP bids by improving their RFP bidding process S Offer design concepts such as the “Wastewater Treatment in-a-Box” framework S Build trust with 15 year compliance guarantee S Educate environmental agencies on Filtration

Competitors Spain UF Sub merged Bio reactors RO HQ ü û û ü Regional Office ü ü Kubota Local Agent û ü û û Zenon û ü ü US Filter û ü ü Regional Office ü ü û ü Company Auxiaqua GE Osmonics Veolia

Supply Chain

Personnel S Department Recruitment Policy Spaniard Techfilt Expert Critical Interface with Customers S - Intelligence & Concientiousness Extensive industry relationships Knowledge of HQ Culture Flagship References

Investment Required Break-even point 2005 2006 2007 2008 2009 • Techfilt’s expansion in the Spanish market requires SGD 2. 04 M • Cash flow positive in 2007. Break-even point reached late 2009 Debt financing at rate of 7. 9%. Benefit from tax shield effect of debt of approx. SGD 554, 000 from 2006 - 2008

Cash Requirements

Statement of CSF

Balance Sheet

Income Statement • Revenue drivers: Filter sales (€ 100 k» € 2 M» € 4 M» € 5 M by 2008) • Projections based on average project value of € 300 k • Cost drivers: COGS (46%), salaries & mktg (37%), depreciation (22%) • Margins have upward trend, reaching 15. 9% in 2008

IS – Techfilt Singapore

Sensitivity Analysis • To assess the risks to profitability, a sensitivity analysis was conducted • Revenue varied +/-15%; Costs, exchange rate varied +/-10% Ranges of profit:

Growth for Techfilt • Positive impact on profits from 2006 and beyond • Net profit increase of SGD 1. 7 M through 2008

Financial Pros / Cons

Future Growth Numerous Opportunities for Growth: • Move to upstream water processing • Leverage client base, introduce reverse osmosis products • Expand into industrial treatment market • Leverage technical design expertise • Expand into North Africa and the rest of Europe • Leverage desalinization expertise and knowledge of EU regulations