Rainwater, Inc ET CitySmart Smart Irrigation for the Future [Karen Cheng] [Eddy Fong] [Paras Gandhi] [Julia Pashin]

Background – Water Conservation  Austin Key Measures  Total Usage/Peak Day  Outdoor summer water use  Water Conservation Task force  Conservation initiatives  Goal: 1% water use reduction  Grant  $500,000  Solution for outdoor water use STRATEGYSOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND

Background - Rainwater, Inc  4 th : irrigation industry  Products: sprinkler/drip irrigation systems, basic controllers  Develops, manufactures and markets  Goal: product differentiation  Pursue enhanced technology  Utilize strategic conservation strategy  Grant competition as launching pad  Assume  Existing research/production facilities STRATEGYSOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBOTTOM LINE BACKGROUND

Strategy The Genesis Way Current Technology Competitive Environment SOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND STRATEGY

Overall Strategy – The Genesis Way Rainwater City of Austin Consumers Grant & Partnership Utility Savings Rebates SOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND STRATEGY

Overall Strategy: Current Tech  Basic controllers – timer feature  ET ‘smart’ controllers:  Calculate optimal water need creates watering schedule  Methods to adjust original schedules  Solar/rain/soil moisture sensors  Real-time weather data  Proven successful  SWAT testing  Experimentation SOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND STRATEGY

Overall Strategy – Competitive Environment Company Aqua Conserve Weather matic WeatherSet Company AccuWater ET Water Systems HydroPoint Data Systems Irrisoft, Inc. Data Source Sensors Weather Stations Communication Broadband/ Satellite Phone Line Cost Initial $99-459$349$ $ $299$480$485 After Rebate $0-359 $249 $ $ $199 $380 $385 Annual Subscription ---$180$48 $ SOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND STRATEGY

Our Solution The ET CitySmart Competitive Environment STRATEGYSOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND

Our Solution – The ET CitySmart  Expand into the smart controller market  Best available technology  Differentiate:  Utilize LCRA water usage data  Emphasize low cost to customers  Bigger rebates  Using phone line  Using minimal sensors STRATEGYSOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND

Our Solution – Competitive Environment Company Aqua Conserve Weather matic WeatherSet Company AccuWater ET Water Systems HydroPoint Data Systems Irrisoft, Inc. Rainwater, Inc Data Source Sensors Weather Stations City Water Info Communication Broadband/ Satellite Phone Line Cost Initial $99-459$349$ $ $299$480$485$249 After Rebate $0-359 $249 $ $ $199 $380 $385 $49 Annual Subscription ---$180$48 $ $36 STRATEGYTECHNOLOGYIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND SOLUTION

Technology ET Healthy Range How It Works Database NRE Costs STRATEGYSOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND

 Current ET algorithms combine  Sensors  Weather forecasts  Landscape information  Calculates optimal level of water needed Technology - ET STRATEGYSOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND

Customize your Water Zone Rainware ET CitySmart STRATEGYSOLUTIONIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND TECHNOLOGY

Solar Sensor Homeowner Profile Rainwater Servers City Water Data Weather Forecast 1. Data is collected at home STRATEGYSOLUTIONIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND TECHNOLOGY

Data is collected at home 2. ET CitySmart sends data to servers STRATEGYSOLUTIONIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND TECHNOLOGY Solar Sensor Homeowner Profile Rainwater Servers City Water Data Weather Forecast

Data is collected at home 2. ET CitySmart sends data to servers 3. Rainwater servers are updated hourly STRATEGYSOLUTIONIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND TECHNOLOGY Solar Sensor Homeowner Profile Rainwater Servers City Water Data Weather Forecast

Data is collected at home 2. ET CitySmart sends data to servers 3. Rainwater servers are updated hourly 4. Rainwater sends customized water schedule to household STRATEGYSOLUTIONIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND TECHNOLOGY Solar Sensor Homeowner Profile Rainwater Servers City Water Data Weather Forecast

Technology: Database STRATEGYSOLUTIONIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND TECHNOLOGY

STRATEGYSOLUTIONIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND TECHNOLOGY

STRATEGYSOLUTIONIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND TECHNOLOGY

 Software engineering:  Algorithm revisions $115,000  Web interface $65,000  Mechanical engineering:  Engineering/Circuit Development $85,000  Prototype Development $35,000  Testing: $37,500  IBM Server: $17,500  LCRA Link: $25,000  Training: $112,500 Technology - NRE Costs STRATEGYSOLUTIONIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND TECHNOLOGY Total NRE: $492,500

Implementation Timeline Partnerships Marketing/Distribution Sustainability Scalability STRATEGYSOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND

Implementation - Timeline Partner with LCRA/Austin R&D: Design, Build and Test Prototype Manufacture Controllers Sell Controllers Target High-Water Users Widespread Advertising Months Year 1Year 2Year 3 STRATEGYSOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND

Implementation – Partnerships  Partner with the City of Austin  City provides:  $200 rebates  Utilities bill mailings  Access to usage database  Rainwater provides:  Water consumption decrease of over 1% by 2011  Partner with Home Builders/Landscapers/Irrigators  Target new homes STRATEGYSOLUTIONTECHNOLOGYRISKBOTTOM LINEBACKGROUND IMPLEMENTATION

Implementation - Marketing  Marketing  High vs. General users  High users consume over 25,000 gallons a month  Target High users initially  Extend advertising to general public after 2 years  Pricing  Controller: $249  After rebate: $49  Annual subscription fee: $36 STRATEGYSOLUTIONTECHNOLOGYRISKBOTTOM LINEBACKGROUND IMPLEMENTATION

Implementation - Distribution  Sales Channels  Hardware stores  Website  Landscapers  Irrigation Installers STRATEGYSOLUTIONTECHNOLOGYRISKBOTTOM LINEBACKGROUND IMPLEMENTATION

Implementation - Sustainability STRATEGYSOLUTIONTECHNOLOGYRISKBOTTOM LINEBACKGROUND IMPLEMENTATION  Short-Term  Low price  Quickly and aggressively penetrate market  Long-Term  New Homes: Maintain home builders partnership  Communication: Include broadband/wireless

Implementation - Scalability STRATEGYSOLUTIONTECHNOLOGYRISKBOTTOM LINEBACKGROUND IMPLEMENTATION  Expand into other cities  Las Virgenes, CA (76.2% outdoor)  Scottsdale/Tempe, AZ (66.5%)  Walnut, CA (63.9%)  San Diego, CA (62.8%)  Denver, CO (59.7%)  Phoenix, AZ (58.7%)

Risk Analysis City of Austin Partnership LCRA Partnership Price Match STRATEGYSOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND

Risk Analysis  No City of Austin Partnership  Unlikely because Rainwater saves water and money for Austin  Marketing  Rebates  Contingency (No Partnership)  Higher Prices = Lower Market Share (3%)  2008: 151% ROI  2011: 254% ROI STRATEGYSOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND

Risk Analysis  No LCRA Partnership - minimal risk  LCRA statistics are a core component  Publicly available  Competitors Price-Match  Low price is competitive advantage  City Partnership: Cost below Manufacture  No Partnership: Cost still below Manufacture STRATEGYSOLUTIONTECHNOLOGYIMPLEMENTATIONBOTTOM LINEBACKGROUND RISK

Bottom Line Rainwater City of Austin Consumers STRATEGYSOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND

Net Income 2011: $2,000,000 Cash Flows 2011: $1,300,000 Bottom Line: Rainwater STRATEGYSOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND YearROI % % % %

Bottom Line: City of Austin STRATEGYSOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBACKGROUND YearTotal Water Saved % % % % BOTTOM LINE

Bottom Line: Consumers STRATEGYSOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBACKGROUND ConsumerYears to Break Even High1.01 General1.55 BOTTOM LINE

The Genesis Result Rainwater City of Austin Consumers STRATEGYSOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND

The Genesis Result Rainwater City of Austin Consumers Grant & Partnership Utility Savings Rebates STRATEGYSOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBACKGROUND BOTTOM LINE

The Genesis Result 2011 ROI: 410% City of Austin Consumers Utility Savings Rebates STRATEGYSOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBACKGROUND Grant & Partnership BOTTOM LINE

The Genesis Result 2011 ROI: 410% 1.11% by 2011 Consumers Utility Savings Rebates STRATEGYSOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBACKGROUND Grant & Partnership BOTTOM LINE

The Genesis Result 2011 ROI: 410% 1.11% by years to break even Utility Savings Rebates STRATEGYSOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBACKGROUND Grant & Partnership BOTTOM LINE

Thank you.

Appendices STRATEGYSOLUTIONTECHNOLOGYIMPLEMENTATIONRISKBOTTOM LINEBACKGROUND

Appendix: Rainwater Projected Financials

Appendix: Water Conservation and Costs

Appendix: Consumer Costs and Savings

Appendix – Water Assumptions  -Percent Households – High Water vs. General: normalized distribution graph of water use by frequency (16,000 household sample); sample from Austin Green Building Program Database March  - Average Water Use –180 gallons per day (TWDB Water Use Survey X 3 ppl per household (US Census data) X % High Use/General  water use growth rate equal to household growth rate  -58% Outdoor Water Use – given in case  -12% Outdoor Water Saved - Study

Appendix – Market Assumptions  Number of Austin households: City of Austin data for 2005 and 2010, annualized for growth rate)  Market penetration estimates  General: 5%, 9, 10, 11, 12; growth rate in teens  High: 5%, 9, 10, 11, 12, 15; growth rate in teens

Appendix – Product Cost/Price Assumptions  Product cost: $165  cost comparison of competitor products (based on 80% mark-ups)  closest product from ET Water  save about $30 from using only a phone line (no broadband) for internet access  Selling price: $249; 50% markup of cost

Appendix – City Cost Assumptions  Amount of rebate: $200: existing rebate is $100 for replacing residential controllers with smart controller equivalents  Justification: cost analysis to city of Austin: percent of water conservation budget that will go toward rebates net of savings in water bought (under 10% after 2007)  cost of gallon by acre-foot: $57.50 (LCRA website – rate for pre-bought water)  1 acre foot ~ 281K gallons  Austin water conservation budget:  Austin Statesman article: With conservation, city could delay $330 million water plant, 2/12/2007

Appendix: Rainwater Assumptions  Rainwater has existing, and the new product will make use of:  Research facilities  Production facilities  Labor  Website

Sources  Irrigation Controller Report for Orange County  US Department of the Interior – Bureau of Reclamation  Water Conservation Task Force – City of Austin  2007 Water Conservation Strategies Summary, rebate info.   Texas Water Development Board  Water Use Survey 2004, Water for Texas 2007   Smart controller company websites:      Irrigation Association – conservation and SWAT industry info 