1. Funding the Internet of Things Roger Bickerstaff – 15 March 2016

2. Funding the Internet of Things Page 2 © Bird & Bird LLP 2015 Agenda: Current funding arrangements for the IoT Applying funding techniques from energy renewables projects Specific financing models Concluding thoughts

3. Current IoT Funding Arrangements

4. Funding the Internet of Things Page 1 © Bird & Bird LLP 2015 Current funding arrangements - Internet of Things ●Funding available for Tech development Funding for Tech development tends to be smaller-scale than for roll-out IoT implementation costs – very high: generally involves implementation of sensors/networking etc ●Across Europe – public authority funding is being focused on core services: less funding available for IoT projects ●Some IoT projects funded through a combination of private funding and various public sector grants ●Other IoT projects funded through larger companies investing in smaller technology companies – NB. 5G – who pays?

5. Funding Examples from the Cleantech World

6. Funding the Internet of Things Page 6 © Bird & Bird LLP 2015 Funding for IoT Implementation is at a similar state of development as funding for Cleantech implementation 7 or 8 years ago.

7. Over £12bn debt funded solar deals in the UK Early debt-funded solar deals £36m Formation of EIS solar funds Listed YieldCos 201120122013201420152010 Forward funding Durrants Farm, Isle of Wight (Dec 2011) – "one of the first PV plants in the UK to receive project finance for the UK Feed in Tariff scheme" Funding the Internet of Things Page 2 © Bird & Bird LLP 2015 x 25 construction financing for solar parks in the UK $50m financing for two of the first 55 MW solar parks in Jordan Evolution of funding techniques – lessons learnt from renewables sector MONTH 1 Long-dated debt arrangements WORK IN PROGRESS £53.25m bridging financing for the construction of the UK's largest solar plant No. 1

8. SPV Asset financeEquity Grid connection Planning permission Landlord LANDLORD/ FEEDSTOCK SUPPLIER/FARMER (Often the same entity but may be different) O&M CONTRACTOR OFFTAKER FiTs/ROCs/RHi Shareholder loans O&M Contract Feedstock supply Agreement and Operations Contract PPA EPC Contract Evolution of funding techniques – lessons learnt from anaerobic digestion plants EPC CONTRACTOR Heat supply arrangement Lease Funding the Internet of Things Page 3 © Bird & Bird LLP 2015

9. Funding for the IoT

10. Funding the Internet of Things Page 10 © Bird & Bird LLP 2015 Types of Funding for IoT Implementation: Corporate equity Nb. Tech "giants" have big reserves Possibility of venture capital investment Expensive – potential for high growth or high rate of return is required Public Sector It is happening on a limited scale: Finland and Korea Public resources generally limited – saving based schemes are possible – but need private finance Third Party Funding Likely to be needed "in the mix"

11. IoT Performance Contract for provision/management of IoT services IoT Services Sub- Contract IoT payments (based on share of savings? Key Contract Payment Payment under potential arrangement FINANCE PROVIDER Payment for services which may include design and build, operation and maintenance and other services in relation to the IoT Saving Measures Financing Arrangement Investment Contribution? Receivables (whole or fixed portion) otherwise due from the Customer to IoTCo under the IoT Performance Contract are redirected under Financing Arrangement Potential IoT third party financing structure IoT PROJECT CO IoT CONTRACTOR Customer

12. Key issues associated with Financing for IoT Implementation Security of revenue stream Dependent on private sector/consumer customer demand take-up? Cf. Feed-in tariff for clean-tech: effectively guaranteed demand – is there an IoT equivalent Strength 0f Customer covenant Public sector underwritten projects Smart-meters: regulatory compulsion Common platform Multiple solutions, not customer specific Finding the Internet of Things Page 12 © Bird & Bird LLP 2015

13. Sources of Third Party Finance Venture Debt Early stage debt Mixture of debt and equity Growth Stage Funding – Fund investment Cf Cleantech/Solar – Bluefield; Foresight Does beneficial tax environment extend to IoT? EIS schemes Finding the Internet of Things Page 13 © Bird & Bird LLP 2015

14. Concluding Thoughts

15. Innovation needed to unlock the potential of the IoT Many IoT solutions are available or are relative quick to develop – the roll-out of these solutions is being hindered by lack of funding The IoT is in a similar position to Cleantech 5-10 years ago Perception of lack of viabilility Difficulties in obtaining funding Cleantech has developed funding arrangements which are now mainstream and viable Can the IoT develop along similar lines? Finding the Internet of Things Page 15 © Bird & Bird LLP 2015

16. Roger Bickerstaff roger.bickerstaff@twobirds.com Telephone : +44 (0)20 7415 6160 Bird & Bird is an international legal practice comprising Bird & Bird LLP and its affiliated and associated businesses. Bird & Bird LLP is a limited liability partnership, registered in England and Wales with registered number OC340318 and is authorised and regulated by the Solicitors Regulation Authority. Its registered office and principal place of business is at 15 Fetter Lane, London EC4A 1JP. A list of members of Bird & Bird LLP and of any non-members who are designated as partners, and of their respective professional qualifications, is open to inspection at that address. twobirds.com Thank you