Investing in the Future of Energy Newsletter March 2011

8/6/2019 Investing in the Future of Energy Newsletter March 2011

1/6

obal Fund Exchange is a global

set management business

hich invests across all areas of

e New Energy Revolution.

this issue:

AquaTerra Fund Launch

The Age ofAnthropocene

Nuclear Crisis in Japan

Tightened Global Grain Stocks

Demand for Rare Earth Elements

Abu Dhabi Desalination Initiative

ur investment focus:Clean Energy

Water

Agriculture

Traditional Energy

Natural Resources

Carbon & Emissions

Systematic Trading

Hedge Strategies

arn more:

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Energy Newslette

SPOTLIGHT ON: LAUNCH OF AQUATERRA FUND

New Investment Vehicle Dedicated to Agriculture, Water

& Natural Resources; Launches on World Water Day 201

Global Fund Exchange is pleased to announce the launch of the AquaTerra Fun

a new investment vehicle which invests in global opportunities in agricultur

water and natural resources.

The AquaTerra Fund is a carve-out of the existing agriculture, water and natur

resources strategies of the flagship Earth Wind & Fire Fund.

The AquaTerra Fund will be open to new investors on March 22, 2011, a dat

that coincides with World Water Day 2011 the day of global action devoted t

water, one of the cornerstones of the AquaTerra Funds investment strategy.

The sustainability and efficiency needs for our water and food resources are th

most critical must outcome for Planet Earth, said Global Fund Exchange CELauralouise Duffy. The AquaTerra Fund is a focused investment on these vit

assets.

We believe meeting increased demand for food, water and natural resources

the challenge of the century, and the statistics are staggering:

AGRICULTURE - With global population predicted to top 9 billion by 205

the UN Food and Agriculture Organization (FAO) says agricultural outp

will need to increase 70% to meet new demand.

WATER - By 2025, global demand for freshwater expected to excee

current freshwater resources by 25%.

NATURAL RESOURCES - Rapid economic growth in developing nation

continues to escalate resources supply and demand disparities.

The best investments are when necessity creates opportunity, said Global Fun

Exchange Chairman Anric Blatt. We are launching the AquaTerra Fund to off

our clients a focused, disciplined investment opportunity that capitalizes on thes

major global trends.

For more information, please visit: www.aquaterrafund.com

World Water Day website: www.worldwaterday2011.org

212 570 7970

obalfundexchange.com

GLOBAL FUND EXCHANGE LTDInvesting in the Future of Ener

March 2011
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2/6

The Age ofAnthropocene a special feature from CEO Lauralouise Duffy

ste & residue from harvesting of coal and oil results in destroying freshwater supply.

eling of the worlds forest changes the ecosystems and is a major cause of extinction for animal and plant life, erosion a

bal warming.

scientists debate what our planet looks like as a result of the Age of Man (now being coined the Age of Anthropocen

haps it is time for Mankind to write our own history.

gree that it is time to focus on the consequences of our collective action in the here and now. Human actions have

deniable impacts on our planets water, food and natural resource supplies all of which are essential for life on Earth.

y Lauralouise Duffy, CEO

of The King Abdullah City for Nuclear and Renewable Energy

To celebrate the launch of AquaTerra, we have dedicated this months newsletter to

Agriculture, Water and Natural Resources the funds fundamental investment strategies.

The Age of Anthropocene a new name for what some scientists call a geologic epoc

whereby Man is responsible for the catastrophic changes on the planet, particularly

agriculture and water.

According to a recent article in National Geographic, it is not the building of magnificecities or the innovative technologies of the last 25 years that scientists will rememb

thousands of years from now. Rather it is the massive impact that humans have on t

planet that will leave a sign for future geologists and scientists.

Human impact on the world has become a lot more obvious in the last 150 years in pa

because the population has quadrupled to nearly 7 billion people. Additionally, affluen

has clearly led to greater consumption of energy and other resources, while technolo

provides new tools for exploiting and consuming.

These factors have compounded since 1900. The threats are widespread

ean acidification is a global threat to sea life and coral,

resenting a major cause for extinction. As carbon dioxide

rms the planet, it also seeps into the oceans and acidifies

m. Bi-products of oil such as plastic and other chemicals

toxifying our oceans and creating dead zones where no sea

can survive.

inction of plants, animals and habitats is happening at a

e hundreds of times higher than during most of the past

f billion years, according to geologists. Three top reasons

animal extinction are: Deforestation, Destruction ofbitat & Global Warming.

icultural Waste: Nitrogen runoff from fertilized land causes

ad zones at the mouths of rivers and poisoning freshwater

ources worldwide.


3/6

Global Energy Markets Experience Roller

Coaster Ride Due to Middle East, Japan

The unforeseen events of this month have been challenging f

the global energy and resources markets, as investors strug

to make sense of ongoing political tension in the Middle Ea

and now the natural disasters in Japan.

As a result of political unrest in the Middle East and supp

disruption in Libya, West Texas Intermediate (WTI) and oth

crude oil spots have risen nearly $15 per barrel according

data from the Energy Information Administration (EIA). T

jump has brought crude prices to their highest points sin

2008, prompting the EIA to raise its price forecast for 2011

to $105 per barrel, a full $14 dollars higher than previo

estimates.

Energy markets have also been impacted by the recent crisis

Japan. With nearly 20% of Japans power capacity shut o

analysts are expecting a drop in demand for crude oil coupl

with a potential spike in demand for refined products. Ma

foresee an uptick in demand for liquefied natural gas (LNG) a

fuel oil as replacements for lost nuclear power generation. Shrecently confirmed it had begun diverting shipments of LNG

Tokyo in the wake of the explosions. As a result, this may le

to higher prices in Europe.

Japan will change mid-term world energy scenario

acknowledged the United Nations top climate official Christi

Figueres in a response to the situation in Japan. Certainly t

risks surrounding nuclear power generation have be

magnified on the world stage, potentially derailing investme

into new plants. As a result, wind power and natural gas m

become more attractive power sources. We will be clos

watching the supply and demand patterns as they adapt to tcurrent situation, as these events could accelerate macro tren

in clean energy.

Japan Crisis May Impact Rare Earth Prices

The aftermath of the devastating earthquake and tsunami

Japan has resulted in a precipitous drop in demand from one

the worlds major users of rare earths. As a result, analy

report rare earth prices may ease temporarily.

Over the long term, however, the rare earth pricing trend

heading higher, as global demand trumps supply over t

coming years. Rare earths are essential components of devic

ranging from wind turbines to smart phones. China n

controls nearly 95% of rare earth production, however Chine

reserves account for only one-third of total global reserv

Over the long term, China may become a net rare ea

importer as its domestic demand increases.

In fact, a new refining operation in Malaysia currently und

construction by Australian mining company Lynas (LYC) m

give China a run for its money in the rare earth market. Up

completion, the new plant on the eastern coast of Malay

may be capable of processing about 11,000 tons of rare earoxides a year; potentially meeting one third of total global ra

earth demand in as little as two years.

ESOURCES NEWS

rthquake & Tsunami Spark Nuclear Crisis

Japan

tered by a severe earthquake and tsunami which caused

rific destruction and loss of life, Japan is now scrambling to

ntain damaged nuclear power plants, some of which have

dergone partial meltdown.

anese nuclear safety agencies have reported areas with

her than normal radioactivity due to explosions at nuclearwer plants. The market has reacted strongly with a

matic sell off of nearly all stocks related to nuclear energy

d uranium, leaving some investors wondering if the recent

naissance in nuclear energy will be reversed as a result of

s catastrophe.

e effects are being felt around the world. Nuclear power

plies nearly one-quarter of German electricity, but

owing the events in Japan German Chancellor Angela

rkel announced a minimum three month moratorium on

clear power plants built before 1980, shuttering them until

e at the earliest. These closures affect 7 out of the

ions 17 nuclear plants which provide approximately 8% of

rmanys electricity.

spite these developments, global opinion on the future ofclear energy is far from settled. Analysts at J.P. Morgan, for

mple, do not interpret the sudden slide in uranium as a

ersal of a longer-term trend. Helping uranium is the fact

t China barely has enough supply to meet half its current

eds, read a morning note.

eed, Chinese officials have stated that they will proceed as

nned with their nuclear energy expansion

gram. According to the International Energy Agency (IEA)

na has 11 active reactors, 20 in the construction pipeline,

d further plans to build 120 additional reactors. President

ama has also made statements to support nuclear energyd its continued expansion in the United States.

Map of Japanese nuclear power plants


4/6

U.N. Food & Agriculture Index Reaches All

Time High

Economists from the International Monetary Fund (IMF) wa

that the world may need to get used to higher food price

as a structural shift in demand contributes to higher pric

for food and agricultural commodities.

The UN Food and Agriculture Organization (FAO) index

global food prices increased for the 8th consecutive mont

reaching a record high in February. The FAO Food Price Ind

(FAOFOODI:IND) averaged 236 points in February, up 2.2

from January. This is the highest record in real and nomi

terms since the FAO began monitoring food prices in 1990.

The IMF acknowledges some temporary factors, such as tweather, have impacted prices. Nevertheless, the agen

says, the main reasons for rising demand for food refle

structural changes in the global economy that will not

reversed. It may take years of additional supply growth

catch up with roaring demand.

The changing diet of citizens of emerging economies

particularly in Asia is the most important factor contribut

to rising food prices. The dietary shift towards meat and oth

livestock products, has resulted in greater demand for grain

a source of livestock feed.

The FAO predicts per capital consumption of livesto

products in East Asia will rise to 58.5 kg/year from 37

kg/year in 1999; the highest regional growth rate in the wor

This development is mainly due to the influence of China a

the changing dietary patterns of its large population.

Recent turmoil in the Middle East and the resultant rise in

prices does not bode well for global food prices. The FAO sa

rising oil prices could further exacerbate an alrea

precarious situation in food markets because fuel plays

important role in the entire agricultural production cycle.

GRICULTURE NEWS

orld Grain Stocks, Already Strained, May

ghten Further: Yara International

orld grain stocks, already squeezed, are in danger of

htening further in 2011-12, warns top global nitrogen

oducer Yara International. Pointing to poor winter crop

nditions and an incomplete rebound in fertilizer sales, the

rway-based giant says world grain production must rise 5% to

arly 2.3bn tons in order to meet demand.substantial harvest increase in the 2011-12 season is needed

rely to avoid a further decline in inventories, Yara said,

ich anticipates an approximate 2% rise in consumption.

wever, global wheat crops have suffered due to severe

ught in China and lower output from the United States, the

rlds largest producer.

mers are using less nitrogen than in 2007-2008, which Yara

s implies less support to yields. Season-to-date nitrogen

tilizer deliveries in Western Europe are 13% ahead of last

son, but still 4% behind the 2007-08 season, when farmers

o had strong incentives to increase fertilizer application. To

tch the 2007-08 season, deliveries in the second half of this

son would need to be 20% higher than last year. In the US,

rogen deliveries were 4% behind 2007-08 rates.

as assessment is in line with other preliminary estimates.

e Commonwealth Bank of Australia is forecasting a 15 million

deficit in world wheat production, after a 17 million ton

ortfall this season. Likewise, Macquarie foresees a 2 million

shortfall in world soybean and wheat production, but

icipates the global corn harvest will grow by nearly 5 million

s. For 2011-2012, Societe Generale predicts a 16 million tonrease in combined corn, soybean and wheat stocks due to an

ick in corn production. Levels of crop inventories are seen as

ey signal of price movements, particularly when compared

h consumption to calculate the stocks-to-use ratio.

obal Coffee Prices Reach New Highs; Up

5% in Past Yearbica coffee prices have risen to a 34-year high with the

ernational Coffee Organization in London predicting prices

uld remain high for the time being. Given the limited

ilability of Arabica coffee on the international market and strength of domestic consumption in Brazil, high levels of

duction in Brazil in crop year 2010-11 failed to have a

gative impact on prices, according to a monthly report.

bica prices are now rapidly approaching the $3/pound level

t seen in 2008. Coffee traders believe prices may break past

40 a pound, forcing roasters to raise retail prices once more.

ombia, a primary source of high-quality Arabica beans, had

fered a low crop for a third successive year. The Brazilian

p is also lower than previously expected.

e wholesale price of Arabica coffee has jumped nearly 125%ing the past year.

1yr chart 2/10 2./11 Source: Bloomberg


5/6

Scientists Warn of Serious Water Woe

Spending to Increase to $1 Trillion Annuall

Experts warn demand for water in agriculture and ene

production could spike in the coming decades wh

catastrophic floods and droughts strike more often.

At unpredictable times, too much water will arrive in som

places and too little in others, said Zafar Adeel, chair of UWater, a group which coordinates water-related efforts of

United Nations organizations and agencies.

In many countries, water demand is forecast to exceed sup

by an estimated 40%. In other parts of the world prone

flooding, catastrophic floods normally expected once a centu

could occur every 20 years instead.

Meanwhile, spending on technologies and services to discov

manage, filter, disinfect and desalinate water, impro

infrastructure and distribution, mitigate flood damage a

reduce water consumption by households, industry a

agriculture is expected to rise to a trillion dollars annually

2020.

Insurance claims resulting from extreme weather increas

20-fold in the past 30 years according to Canadian insuran

data, and flood-related claims now exceeding fire and wi

insurance claims every year.

Virtual water is also another hot topic issue. The term ref

to water that is inherently required in the manufacturing a

production of items as varied as hamburgers to wine to a p

of pants. The annual global trade in virtual water no

exceeds 800 billion tons, the equivalent of 10 Nile Rivers.

As citizen wealth grows in developing countries, ove

demand for food and energy will increase, which both requ

a lot of water to produce. Agriculture is the biggest water us

by far at 71 percent worldwide. We have to be prepared

the security challenges that will arise from this, Adeel said.

bu Dhabi to Build Worlds Largest

nderground Reservoir

the Persian Gulf region, only water can be more precious

n oil. Governments are taking no chances in protecting

ir valuable water resources and funneling significant

estments into the water sector.

October, Abu Dhabi, the wealthiest emirate of the United

b Emirates federation, launched a pilot for the worlds

gest underground reservoir designed to hold 26 million

bic meters of desalinated water. Desalinated water supplies

becoming more important to Gulf nations as natural

undwater reserves are depleted. Based on current

nsumption rates, the UAE risks depleting its groundwater

erves within 50 years.

u Dhabi has quadrupled its desalination capacity over the

t decade. It is estimated that if desalination water plants

re damaged, Abu Dhabi and the other emirates would onlyve a four day supply of water. Desalination plants face risks

m natural disasters and oil spills in the Strait of Hormuz,

ere 40% of the worlds seaborne oil passes through.

urity is also a major concern. A desalination plant is a

ge factory sitting on the coast, something that you could

ily blow up with a bomb or a missile. You could bring the

untry to its knees, said Hady Amr of the Brookings Doha

nter.

u Dhabis massive aquifer project is buried beneath the

rching sands of the Empty Quarter, a desert stretching

m the UAE to Saudi Arabia. Upon completion, the reservoir store 90 days of rationed water for its citizens. Influenced

Abu Dhabis initiative, Qatar, Kuwait, Saudi Arabia and

an have all expressed new interest in building aquifers.

an and Iraq have rivers. We [other Gulf states] dont. So in

future, they have the upper hand, said Sami al-Faraj of

Kuwait Centre for Strategic Studies. We need strategic

rage against any type of emergency, agreed Mohammed

woud, head of Water Resources at Abu Dhabis

vironment Agency.

e severe water scarcity in the Gulf has been called the

ions Achilles heel. At one point, Saudi Arabia evennsidered transporting icebergs from the South Pole for

ter. Lack of water resources has a direct effect on the

ions economy. We cant plan (Abu Dhabis) Ferrari World

d not think about water supply, or a World Cup in Qatar and

water, noted Faraj.

ey dont have any alternative to desalination plants, said

ce Riedel of the Brookings Institution in Washington. Of

ir many vulnerabilities, this one is their most acute.

WATER NEWS

Water scarcity and drought is a global issue


6/6

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Please visit our Future of Energy blog for more news updates.

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SOURCES

We regularly gather information from the following reputable sources, including but not limited to:

Bloomberg New Energy Finance RenewableEnergyWorld.com

Financial Times EnergyandCapital.com

Forbes.com: Energy News The Wall Street Journal

Green. The New York Times Streetwise Reports: The Energy Report

New Energy World Network Thomson Reuters

Scientific American REChargeNews.com

SustainableBusiness.com Climate Change Business Journal

U.S. Energy Information Administration (EIA) Commodity Futures Trading Commission

GLOBAL FUND EXCHANGE LTD.

Saudi Arabias Solar-Powered Desalination

Plant to Begin Operations in 2013

Saudi Arabia expects to start its first solar-powered sea wate

desalination plant by 2013, said Mohammed Alsuwaiyel, presiden

of King Abdullah City for Science and Technology (KACST) in recen

remarks at a conference in Yanbu, Saudi Arabia.

The plant in al-Khafji, near the Saudi border with Kuwait, will b

the worlds largest of its kind. The plant will produce 30,000 cubi

meters of water for the 100,000 people living in al-Khafji, accordin

to data from KACST.

Desalination is now the main provider of freshwater in the Gu

region, but the technology is still quite costly.

u Dhabi and other UAE regions have begun to seriously consider waste water recycling and other treatment alternatives

alination as a way of meeting domestic water needs. They are also looking to reduce the associated costs of desalination.

orporating solar may provide some answers. Abu Dhabis Environment Agency is testing a new solar energy desalinati

tem that is much more environmentally friendly, as well as less costly, than conventional desalination plants. The process

d to be a zero-carbon process which helps reduce cost of water treatment, especially in desert areas where dust and h

mperatures impair the efficiency of solar panels used in the existing desalination system.

For more information on the AquaTerra Fund, please visit www.aquaterrafund.com

alination technologies are crucial in the Gulf region
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Investing in the Future of Energy Newsletter March 2011