EXECUTIVE

SUMMARY

SIZE ESTIMATION AND GEOGRAPHIC PRIORITIZATION MARKET

Drivers of market attractiveness: Unique value proposition of the product Market indicators in natural gas power generation market: Mainly growth rates of natural gas generation and current installed distribution by region. The latter in turn has a critical linkage with the models value offering in terms of average turbine capacity(150 -190 MW). Key Statistics: The data on estimated growth rates of natural gas electricity generation show that the regions of Middle East, North America & Latin America are attractive with 10 year annual compounded growth rates of 4.7%, 4.5 % ,0.4% & 3.8 % respectively. The potential in these regions specifically emerges when this data is juxtaposed by the distribution of the current GT distribution in these regions. For instance, Asia has 16.1 % & 11.3 % of turbines with generation capacity in the range 120-180 MW and excess of 180 MW respectively. North America with 58.1 % of turbines having generation capacity in excess of 180 MW is significant not withstanding the low growth rate.

MARKET SIZE ESTIMATION AND GEOGRAPHIC PRIORITIZATION

Total num ber of natural gas based power plants in the world(as on 2 0.07 .2 013 ) (Source: www.globalenergyobservatory.org) Num ber of power plants in excess of 15 0 Mw Assum ing one turbine per plant,total num ber of turbines

25 5 7 14 7 5 14 7 5

Out of these number of turbines with generation capacity 120- 180 MW : 111 Turbines with capacity greater than 180 MW :1363 Using the geographic spread and market attractiveness, close to 84% of 111 turbines i.e. 93 And close to 89% of 1363 i.e. 1213 can be considered for market size evaluation. Hence the target market segment (no of turbines ) =1213+111=1324 Assuming that on an average each of these turbines produce 180 MW power , the number of cartridge synthetic filters = 180*10*1324 = 2383200 (Since one such filter is required for every 10 MW power generation). At a unit price of $330 the estimated revenue from the market would be 2383200*330 $ = $786 million Considering replacement rate of 2 years the projected annual steady cash flows per year from the installed base would be $343 million.
5 year projected revenues from new GT installations =786*(1.033)^5-786= $138.5 million

10 year projected revenues from new GT installations= *=786*(1.024)^10-786=$210.37million

UPSIDES: ECONOMIC TRENDS AFFECTING GAS TURBINE BUSINESS MACRO

Cap on CO2 and other GHG are being slashed to half and cost of emission allowances have been pushed further in several nations including USA boosting a switch from coal fired to gas fired turbines. Current regulation(Apr 13) by EPA(Environment Protection Agency) requires new power plant to meet emission standards of max 1000 Lb CO2/MWh against the current emission of 1768 Lb CO2/MWh of fossil fired plants. So operating them would be impossible in future without carbon capture and sequestration. The policy of energy diversity Producing more than 80 % of electricity from diverse set of clean energy sources including natural gas will reinforce incentive of GT power plants. Proposed Government regulation to impose carbon taxes would drive the growth of cleaner GT based plants. Chinese Govt (the most promising and emerging economy and potential growth leader) have confirmed that the carbon tax law is on its way( announced on 22nd Jul 13) Talks are on for standardizing floor prices for carbon trading and for market linked emission caps.

DOWNSIDES: Diffusion and wider acceptance of cap and trade policy has resulted in excess of allowances and triggered a drop in prices from 20 /tonne to 5/tonne of CO2 . for the trading to be effective the prices must be shored up to 50/tonne of CO2 and supply must be constrained by withdrawing allowances

UPSIDES: ECONOMIC TRENDS AFFECTING GAS TURBINE BUSINESS MICRO High real rates of return required by private/corporatized investors in electricity generation favor less capital intensive cycle GT plants over capital intensive coal plants Technology specific hurdle rate of return: Due to uncertainty about matching capacity and future consumption technologies with shorter lead cycle (cycle GT plants) and of a more modular nature have a greater advantage and allows decision to invest to be deferred to a time closer to expected commissioning date thus enabling more timely gathering of information about future levels of consumer demand & relative fuel prices. Prospects of more competitive gas markets and expanded gas supplies through a fully integrated network.

DOWNSIDES: The fuel price effects of microeconomic reforms are adverse to the prospect of natural gas Refurbishment of existing coal fired capacity as capital cost of refurbishment is typically lower Higher availability factor and longer lives for existing and new non conventional coal fired capacity plants.

LOW IMPACT

LOW IMPACT BARGAINING POWER OF BUYERS: 1.It is a highly innovative product and customers have no choices to match the price performance trade-off. 2. Threat of backward integration is negligible. 3.Buyers are not very price sensitive assuming that orders are generally in bulk and components are generally covered under comprehensive AMC.

ATTRACTIVENESS

BARGAINING POWER OF SUPPLIERS: 1.The raw materials required for manufacturing the cartridge air filters are fairly standard. 2. There is a high concentration of suppliers. 3.Suppliers have little incentive for forward integration. 4.Air filters are not highly differentiated..

MODERATE IMPACT
COMPETITIVE RIVALRY: 1.The exit barriers are high. 2.Despite the existence of multiple players the dimensions of competition are limited. LOW IMPACT THREAT OF SUBSTITUTES: 1.Switching costs are moderate. 2.It is a highly innovative product and hence has no substitute(it has a unique property of self cleaning and Wide range of operation).

MODERATE IMPACT
THREAT OF NEW ENTRANTS: 1.It requires substantial R&D expenditure and industry is moderately capital intensive. 2. There is a threat of retaliation from existing players. 3.Regulatory and statutory norms keep changing frequently. 4.In the B2B scenario the existing players have well established relationship with channel partners. 5.Incumbency advantage of proprietary technology and established brand equity. 6. The switching costs are moderate. 7. Attaining economies of scale and economies of scope is crucial.

ANALYSIS

FOR MARKET

BOTTOM LINE: ALTHOUGH IT IS A COMPETITIVE MARKET ABC SHOULD ENTER THE MARKET AS THE INCENTIVES FOR PROFIT ARE VERY HIGH AND IT HAS A PRODUCT WITH HIGH USP

VALUE

PROPOSITION

COMPETITIVE ADVANTAGE AND SUSTAINABILITY

GO TO MARKET STRATEGY & RECOMMENDATIONS

APPENDIX 1 ( COUNTRYWISE DISTRIBUTION OF GT POWER PLANTS)

C APAC ITY L E S S THAN 1 2 0 MW 1 1 3 9 2 4 1 1 4 5 1 1 4 3 1 0 1 2 0 -1 8 0 MW

C APAC ITY G R E ATE R G ra nd THAN 1 8 0 Tota l MW 1 6 2 2 1 3 0 4 3 3 1 3 1 0 1 1 3 1 5 9 1 3 2 5 3 6 2 2 3 7 2 1 2 4 0 1 1 2 5 1 7 5 1 3 3 3 1 4 4 1 1 5 1 1 1 5 1 1 8 1 3 6 3 8 4 1 2 3 3 8 7 3 3 5 1 1 6 1 0 2 1 1 3 2 6 1 1 1 3 2 6 3 7 2 3 6 7 3 1 6 4 0 5 1 2 8 1 8 1 8 2 5 5 3 1 4 4 9 3 1 3 7 6 1 5 1 2 8 2 5 5 7

C OUNTR Y Afg ha nistan Albania Alg eria Ang ola Arg entina Arm enia Australia Azerba ija n B ahra in B ang ladesh B ela rus B elg ium B olivia B otswa na B ra zil C ana da C hile C hina C olom bia C ong o C ote D Ivoire C zech R epublic D enm ark E g ypt E stonia Finla nd Fra nce G eorg ia G erm any G hana G reece Hong Kong

2 1 6 7 1 2 3 2

2 1 1 1 7

2 1 1 1 1 1

Hung a ry India Indonesia Ira q Ireland Islam ic Republic of Iran Isra el Ita ly Japa n Jorda n Kenya Kuwait L a tvia L eba non

6 1 4

3 1 1

4 2 2 7 1

1 1 1 8 1 1

1 2 2

1 1

G R E ATE R L E S S 1 2 0 -1 8 0 TH AN 1 8 0 G ra nd Total TH AN 1 2 0 MW MW MW C OUNTR Y 1 L iberia 1 L ibya n Ara b 1 Jam ahiriya 2 1 2 1 7 L ithua nia 2 1 Ma la wi 1 2 5 4 0 Ma la ysia 1 1 2 2 Mexico 7 1 3 0 6 1 Morocc o 2 1 2 3 Myanm ar 1 2 5 7 Netherlands 7 1 3 New Z ea land 2 9 1 7 Nicarag ua 1 1 2 1 4 Nig eria 3 1 2 Om an 1 Pakista n 4 6 2 0 2 0 Pana m a 1 2 4 7 7 Philippines 1 1 Pola nd 1 2 5 2 5 Portug a l 1 7 9 Qa tar 1 1 R epublic of C hina 1 2 Ta iwa n 2 3 R epublic of Korea 1 1 1 R om a nia 2 3 R ussian Federa tion 7 3 1 7 2 7 S a udi Ara bia 1 1 2 1 1 S ing a pore 1 1 S lova kia 1 6 8 S lovenia 3 4 S outh Africa 2 2 1 8 1 9 S pa in 3 4 S ri L a nka 2 2 1 1 1 3 S uda n 4 4 S weden S yria n Ara b 5 1 4 R epublic 2 1 3 9 6 4 Tha iland 1 6 6 Tog o 1 1 1 Tunisia 3 8 1 3 Turkey 5 7 2 7 3 0 Turkm enista n 2 1 0 1 3 Ukra ine United Arab 4 4 5 9 E m ira tes 1 5 1 7 United King dom 3 5 United Republic of 4 5 Ta nza nia 2 United S ta tes of 1 Am erica 7 5 4 1 1 1 8 1 1 Urug ua y 1 2 Uzbekista n 2 4 Venezuela 1 Viet Na m G rand Tota l 9 6 6 2 2 8

APPENDIX 2 (EMISSION NORMS USA)

PREVALENT

IN