Welches, OR - May 4, 2010

Western Forest Economists - 45th Annual Meeting

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Wolfgang Ortloff Equator, LLC | cell (917) 969 0051

www.equatorllc.com

EQUATOR, LLC,

• Established in 2007 by several of the principals of Chatham Energy Partners, LLC, one of the largest natural gas brokerage firms in North America, now a subsidiary of InterContinental Exchange Inc (NYSEsubsidiary of InterContinental Exchange, Inc. (NYSE ticker: ICE)

• Integrated timberland and environmental asset management company focused on the convergence between timberland investments and environmentalbetween timberland investments and environmental markets

• US$ 500M+ committed capital for timberland investments in Brazil;

• Co-manager of US$ 100m The Eco Products Fund for investment in carbon, wetlands and biodiversity mitigation

• Focus on US regulated and un regulated markets

Equator, LLC (DE USA)

• Focus on US regulated and un-regulated markets

• Transacted in terrestrial carbon, biodiversity offsets, and wetland mitigation

• 20 professional staff 5 administrative staff

The Timber Group, LLC

Equator Environmental

Markets

20 professional staff, 5 administrative staff

• Headquartered in New York, NY, with offices in Seattle, WA, Sao Paulo (Brazil), and Minas Gerais (Brazil)

The Timber Group Investimentos

Florestais LTDA (Brazil)

The Eco Products Fund

THE ECO PRODUCTS FUND (EPF)( )

• C d b E t LLC d N F t I S d b d ti b l d tCo-managed by Equator, LLC and New Forests Inc., a Sydney-based timberland asset management firm

• US$ 100m private equity fund, launched in 2008

• Premised on long-term growth prospects for ecosystem service markets

• Investing in suite of environmental credit positions associated with carbon, biodiversity and water

• No interest in owning the underlying land asset

ANNUAL GLOBAL CO2 EMISSIONS CAUSED BY HUMANS2

SOURCES OF CO2 EMISSIONS

FORESTRY – ONE OF THE CHEAPER OPTIONS

Source: McKinsey

FORESTRY CARBON ONLY PARTIALLY RECOGNIZED

PROTECTION FOREST (Andermatt, Switzerland)( , )

PROTECTION FOREST (avalanche zoning, Davos, Switzerland)( g, , )

PROTECTION FOREST (avalanches)( )

PROTECTION FOREST (avalanches)( )

PROTECTION FOREST (rockfall)( )

SWISS RAIDROAD ACROSS THE ALPS

• Swiss railroad company owns and manages all forests which potentiallymanages all forests which potentially threaten operation of train tracks

• “Avoided business interruption”Avoided business interruption , several million $ per day

SHAREHOLDER PRESSURE TO ACT ON CLIMATE CHANGE

INSURED CATASTROPHE LOSSES 1970 - 2009

US FEDERAL CARBON POLICY OPTIONS

SENATE TIMELINE & POLICY UPDATES

Sept. 30, 2009

Senate bill introduced

December 2009

Copenhagen climate summit

Nov. 2, 2010

Senate midterm elections

May 31–June 4

Expected Senate Recess

Feb. 15-19

Expected Senate Recess

Mar. 30 – Apr. 9

Expected Senate Recess

July 5–July 9

Expected Senate Recess

Aug. 9– Sep. 10

Expected Senate Recess

2009 2010

Week of Early November

2009 2010

Key Committees ChairpersonLatest Policy News:• Nov. 4: Sen. Stabenow (D-MI) introduced the Clean Energy Partnership Act (S.

Week of Oct. 27, 2009

Senate hearings

Early November

Committee markups began

EPW Barbara Boxer

Foreign Relations John Kerry

Energy Jeff Bingaman

Commerce Jay Rockefeller

2729), which would create a domestic offsets program within a cap-and-trade bill• Nov. 5: Senator Barbara Boxer (D-CA) pushed the climate bill through the Senate

Environment and Public Works Committee.• Dec. 7: EPA announced Endangerment Finding, which stated that GHG

emissions threaten public threat. This finding obligates the EPA to regulate

16Note: Dates are subject to change

Finance Max Baucus

Agriculture Blanche Lincoln

emissions under the Clean Air Act.• Jan 21: Senator Lisa Murkowski (R-AK) introduced a joint “resolution of

disapproval” of EPA’s Endangerment Finding• Compromise committee is awaiting Senate bill.

NORTH AMERICAN REGIONAL CLIMATE INITIATIVES

Global Carbon Market Size 2004-2009

Kyoto goes into effect February

2005

18Source: “Global Carbon Quarterly Q2 2009,” New Energy Finance

Global Carbon Markets BreakdownCompliance Markets

$119.5 billion4,090 MtCO2e

Voluntary Markets$704.8 million123 MtCO2e

Other$292 million61 MtCO2e Voluntary OTC

$396 million

Other$1.3 million0.2 MtCO2e

EU ETS$95.0 billion

2,982 MtCO2e

CCX

$396 million54 MtCO2e

CDM/JI$24.2 billion

1,046 MtCO2e

CCX$306 million69 MtCO2e

19Source: “State of the Voluntary Carbon Markets 2009,” New Energy Finance

FORESTRY OFFSET MARKETS STILL VERY SMALL

Various standards in the voluntary forest carbon markety

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Risk Versus Reward for Early Offset CreditsyPost-2008 vintages have speculative value with CAR maintaining the lead from a risk-reward standpoint. Pre-2009 vintages have limited upside potential given restrictions on these older offsets.

22Source: “Pre-compliance update for Waxman-Markey,” New Energy Finance

CAR Protocol’s Common Practice zones – US wide

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CAR Protocol’s Common Practice zones - Northwest

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Forestry Offset Projectionsy j

Domestic Offset Supply Livestock Fugitive

Domestic Offset Supply 2020

Agriculture Livestock 8%

Fugitive 12%

Forest

Domestic Offset Supply 2012 

Livestock3%

Fugitive2%

Forest Management(no till or

Landfill 36%

27%

Forest Management

12%

Afforestation6%

Forestry 18%

Agriculture

42%

Management35%

Afforestation18%

Forestry52%

(no till orreduced till)

reduced till)

• Forestry offsets account for 18% of total U.S. supply at the start of Federal compliance and grow to 52% by the year 2020

• Predicted growth in the market share of forestry offsets is supported by federal climate change legislation excluding natural gas and developing national landfill and coal mine methane performance standards, eliminating these sectors as eligible offset project types

25Source: New Energy Finance, 2009; Equator analysis

POINTS FOR DISCUSSION

• Voluntary transactions help pave the way for compliance marketsBUT l lBUT: low volume

• Lack of other markets than carbonDon’t overburden carbonDon t overburden carbon

• Regulation needed to create demand and liquid marketq

• Early action

• Emerging investment vehicles –money is available. Now.

WHY PARTNER WITH EQUATOR

• We are not a broker but principal investor• Our deal structures ensure alignment of interestg• Through deep involvement in carbon and energy markets we maximize value of carbon assets

• We manage and finance entire process of carbon asset creationg p• We offer full carbon cycle development • We already work with some of the largest landowners in the US• We have investment capitalWe have investment capital

Conclusion

• Global carbon markets will continue to experience robust growth, augmented by materialization of a U S cap and trade systemaugmented by materialization of a U.S. cap and trade system

• Forestry offsets projects are an effective and economical way of mitigating GHG emissions making them vital in lowering the costmitigating GHG emissions, making them vital in lowering the cost of abatement

Forestry is expected to be the fastest growth sector in the offset• Forestry is expected to be the fastest growth sector in the offset industry, outstripping the combined growth of other offset types

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Wolfgang Ortloffwolfgang.ortloff@equatorllc.comg g @ qcell (917) 969 0051

Corporate Headquarters250 Park Avenue South, New York, NY 10003, ,

Oregon office1305 SW 9th Street, Dundee, OR 97115

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