U.S.

RENEWABLE ENERGY PROJECT FINANCE:

2010 - 2013 OVERVIEW & FUTURE OUTLOOK
Jordan Collins, Director of Government Relations Mark Riedy, Member Audrey Louison, Member

Moderator: Andrew Krulewitz, Solar Analyst GTM Research

AGENDA
INTRODUCTIONS
KEY FINDINGS PROJECT FINANCE OVERVIEW RETROSPECTIVE: 2010-2011 OUTLOOK: 2012-2013

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INTRODUCTIONS

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KEY FINDINGS

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MAJOR DEBT & EQUITY PROVIDERS: 2010

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SOLAR PROJECT FINANCE UPDATE: 2011

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THE BOOM YEARS: 2009 2011

Recovery Act incentives and financing programs catalyzed the greatest domestic investment in renewable power generation ever seen in the United States.
The 1603 Treasury Grant program supported over 5,195 projects representing over 15 GW in installed capacity and $35.9 billion in total investment. DOEs 1705 Program provided $16 billion in loan guarantees to 28 projects, representing over 4 GW of installed capacity and $22 billion in total project investment.

USDAs 9003 Biorefinery Loan Guarantee Program is supporting the first commercial U.S. advanced biofuels projects by allowing developers to tap the institutional investor market through credit-enhanced, project company bond offerings. State-level Renewable Portfolio Standards (RPS) provided demand drivers in more than 30 states.

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DEMAND & SUPPLY DIVERGENCE: 2012-2013

Demand for renewable energy project finance will continue on a growth trajectory with a compound annual growth rate (CAGR) of 16.2%. During 2012-2013, overall ~ 17-18 GW of renewable power generation assets are projected to seek financing. Projects using commercial technologies, sponsored by seasoned developers, and with creditworthy off-takers / feedstock suppliers / EPCs will continue to secure project financing. However, capital formation for renewable projects will become increasingly difficult due to:
Expiration of 1603 Grant Program + potentially other key tax incentives for renewables (PTC) / biofuels in a fickle regulatory environment
Recovery Act programs winding down European banks reducing exposure to U.S. markets as the sovereign debt crisis persists Power generation substitutes such as natural gas remain inexpensive, challenging renewable power State RPS uncertainty

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STATUS OF FEDERAL POLICY SUPPORT MECHANISMS TODAY

The near-term role of Federal support for clean energy deployment is evolving:
DOE Loan Guarantee Program: Although $170m in credit subsidy appropriations remain available under the 1703 Program, the program is effectively in a holding pattern. USDA Energy Programs (2008 Farm Bill | Title IX): Expires on September 30, 2012. Production Tax Credits (PTC): Wind expires on December 31, 2012, with remaining PTCeligible technologies (e.g. biopower) expiring in 2013. Department of Defense (DoD): Drop-in biofuel emphasis & significant use of existing authorities + Congressional mandates provide opportunities for utility-scale power generation.

A budget-conscious 112th Congress, the 2012 election year cycle, and the recent use of federal clean energy programs as political talking points makes constructive legislation difficult.
The Administration, industry advocates, and policymakers continue commitment to pursuing extensions of existing incentives through available legislative vehicles, leveraging existing authorities, as well as exploring innovative approaches to clean energy financing.

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PROJECT FINANCE OVERVIEW

CORPORATE STRUCTURES
COMMERCIAL TERMS: DEBT & EQUITY CAPITAL FORMATION FACTORS & BLENDS

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RENEWABLE PROJECT FINANCE STRUCTURING OVERVIEW

*Technology Risk Insurance

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*Credit-Enhanced Bonds
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COMMERCIAL TERMS: DEBT & EQUITY RATES

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RETROSPECTIVE: 2010 - 2011

SOLAR
WIND ADVANCED BIOFUELS

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U.S. SOLAR PROJECT FINANCE: 2010 - 2011

In 2011, 1,855 MW of PV was installed, up from 887 MW in 2010. Top 3 States in 2011: California, New Jersey and Arizona.

PV CAPEX continue to decline, improving project economics.

Recovery Act programs catalyzed over $23.8 billion in solar project financing:
1603 Cash Grant Program (as of Feb 21, 2012): 4,469 projects represented 85% of total grant recipients, including 75 MW Martin Next Solar, worlds largest PV plant. $1.98 billion represented 18.4% of receipts, inducing more than $6.6 billion in total investment. 1705 Loan Guarantee Program: 12 projects representing 3.4 GW of installed capacity including Ivanpah, worlds largest CSP plant. Stimulated $18.8 billion in total investment, with fully installed costs for CSP ranging from $3.55 $7.87 / W.

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U.S. SOLAR PROJECT FINANCE: 2010 - 2011

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U.S. WIND PROJECT FINANCE: 2010 - 2011

In 2010, 4.9 GW of onshore wind was installed and over ~ 6.7 GW in 2011: 37% Annual Increase.
Onshore Wind: Top 3 States in 2011: California, Illinois & Iowa. Europe Stagnant. Growth in India + China.

Offshore Wind: 0 MW in U.S., while European and Asian markets grow.

Recovery Act programs catalyzed over $26.9 billion in onshore wind project financing:
Treasury 1603 Cash Grant Program: 251 projects represented only 4.8% of total cash grant recipients, but sector was largest funding recipient. $8.1 billion represented 75% of receipts, inducing over $26.9 billion in total investment.

DOE 1705 Loan Guarantee Program: 4 projects representing 1GW of installed capacity including largest wind farm in the world (Shepherds Flat) Stimulated $2.8 billion in total investment, with installed costs ranging from $2.28 $4.93 / W.

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ADVANCED BIOFUELS PROJECT FINANCE: 2010 - 2011

DOE & USDA Programs supported significant capital investments in advanced biofuel projects. USDA 9003 Biorefinery Assistance Program:
New rules blessing innovative bond financing structures increased program uptake since 2010.
USDA has closed or conditionally committed guarantees for $855 million in project debt to eight (8) advanced biorefineries representing $1.3 billion in total investment, and production of 100 million gallons / year (mgy) cellulosic ethanol.

DOE 1705 Loan Guarantee Program:

Abengoas $132.4 million loan guarantee will support 23.8 mgy cellulosic ethanol plant in Kansas.
Diamond Green Diesel (Valero + Darling International JV) declined $241 million loan guarantee for a 137 mgy Louisiana renewable diesel project, instead on Valero's balance sheet. POET declined $105 million loan guarantee for Emmetsburg, IA cellulosic plant in January 2012 project, instead on Royal DSM N.V.s balance sheet.

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CAPITAL FORMATION: FACTORS & VARIABLES

Securing Power Purchase Agreements (PPA) & Financeable Terms for Renewable Power Projects. Securing Long Term Feedstock and Off-take Contracts for Advanced Biofuels Projects. Project Size & Technology Maturity Pilots and Demonstration Units can be a must. Financial Strength of Project Sponsor. Ability of Creditworthy EPC to Provide Performance Guarantees.

Scope of Participation by Other Capital Providers Project Sponsors, Strategic Equity, O&Ms, EPCs, etc.
Tax Appetite of Financial Institutions and Development of New Tax Equity Markets. Gearing Ratios (Project Leverage) Equity's Role Becomes More Prominent In DebtEquity Ratios.

Availability of Federal & State Incentives.

Favorable Environmental Attribute Markets (RECs and RINs).

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PROSPECTIVE SCENARIOS: 2012 - 2013

SUPPLY & DEMAND FORECASTS
POLICY OUTLOOK

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SUPPLY & DEMAND FORECAST: 2012-2013 DEMAND SUPPLY

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U.S. SUPPLY & DEMAND FORECAST: OBSERVATIONS & ASSUMPTIONS Impact of 1603 Grant Program Expiration:
50% reduction in available financing due to return of tax equity structures. (USPREF)

If extended: 2 3.6 GW in additional solar installations over baseline. (SEIA)

Production Tax Credit (PTC) Uncertainty:

GTM assumes extended through 2013 occurs in lame duck session. No extension: Wind investment drops 66%. > 75% decrease in new installations. (AWEA)

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U.S. POLICY OUTLOOK: 2012-2013

Tax Landscape : 1603 Grant Program & Wind PTC: 1-year extension in Stabenow (D-MI) amendments to Highway Reauthorization Bill (S.1813) failed on 49-49 vote. Lame duck still possible. PTC / ITC Alignment: Potential 2013 initiative to unify credits through 2016. Advanced Biofuels: Industry proposal for 5-year extension of tax credits and cellulosic biofuels plant depreciation allowance. Trade Landscape: Solarworld AG AD/CVD Case: U.S. imposition of tariffs and subsequent retaliatory action by Chinese government could drive up module prices. Latest: Department of Commerce is expected to issue preliminary countervailing duty determination by March 19th, and preliminary antidumping duties on May 12th . Advanced Biofuels: Defense Production Act (DPA): Potentially $510m for Drop-in Jet Fuels. Farm Bill : Reauthorization? Repurposing? Amending Existing Programs? Reopening of RFS2: Potential Adverse Impact on RIN Market.
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U.S. POLICY OUTLOOK: THINKING OUTSIDE OF THE BOX

New Markets:
Department of Defense: Federal RPS 25% by 2025 International: USG (Ex-Im / OPIC), Multilaterals (IADB / World Bank), National Funds (UK / AUS / CAN)

New Tax Strategies:

New Market Tax Credits (NMTCs): Treasury awarded $3.6 billion to 70 entities (February 2012) Expanding Tax Equity Participants & Strategic Investors Foundations: Program-Related Investments (PRIs)

New Financial Instruments:

Insurance Products to Wrap Technology Risk Credit Enhanced Bond Financing State Economic Development Entities and Bond Authorities (Residential PACE)

New Corporate Structures:

Real Estate Investment Trusts (REITs) Master Limited Partnerships (MLPs)

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THANK YOU - Q&A

JORDAN M. COLLINS
Director of Government Relations | ML Strategies

MARK J. RIEDY
Member | Mintz Levin

AUDREY LOUISON
Member | Mintz Levin

JMCollins@mlstrategies.com (202) 434-7462

MJRiedy@mintz.com (202) 434-7474

ALouison@mintz.com (202) 434-7380

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JORDAN M. COLLINS
Director of Government Relations | ML Strategies
Served as in-house consultant advising both previous and current Administration officials at U.S. Department of Energy from 2007-2011 in both:
Office of Energy Efficiency & Renewable Energy Office of Policy & International Affairs

Portfolio includes clean energy financing mechanisms, tax policy, federal procurement, market transformation, international trade, legislative analysis, and technology commercialization

Extensive knowledge of existing and proposed clean energy programs, authorities, and initiatives at Federal & State levels
Licensed attorney admitted to bar in District of Columbia and State of Texas

JMCollins@mlstrategies.com (202) 434-7462

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MARK J. RIEDY
Member | Mintz Levin
Represent renewable power generation and biofuel clients in domestic and international matters, including: Project development, debt and equity financing contracts, mergers and acquisitions, technology outsourcing, investment fund structuring, venture capital structuring, and regulatory and legislative issues Founder and/or General Counsel to several significant renewable energy organizations over 35 years including the American Council On Renewable Energy. Admitted to practice in the District of Columbia, and before the D.C. Court of Appeals; the U.S. Court of Appeals, D.C. Circuit; U.S. District Court, District of Columbia; U.S. Court of Appeals, Federal Circuit; the U.S. Court of International Trade; the U.S. Court of Claims; and the U.S. Tax Court. J.D. Georgetown University Law Center ,B.A., summa cum laude University of Michigan

MJRiedy@Mintz.com (202) 434-7474

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AUDREY LOUISON
Member | Mintz Levin
Power sector project development and finance attorney specializing in all aspects of renewable power generation, including:
Complex Commercial Transactions Mergers & Acquisitions Private Equity Investments Sales & Acquisitions

Client portfolio includes clean energy developers, investors, owners, lenders, utilities, supply companies, trading companies, and manufacturers. J.D. from Boston College, B.S. in Foreign Service from Georgetown University. Admitted to practice in the DC, Virginia, and Massachusetts.

ALouison@Mintz.com (202) 434-7380

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THOMAS R. BURTON, III

Member | Chair, Energy & Clean Technology Practice | Mintz Levin
Founded in 2004, and currently chairs, the firms Energy & Clean Technology Practice, which serves more than 300 clients Regularly represents emerging growth energy and clean technology and life sciences companies, as well as larger established public companies Involved in the formation, financing, and sale of numerous energy and clean technology companies in markets such as solar and wind, smart grid and energy efficiency, water technologies, waste treatment, biofuels, electric vehicles, and green buildings. J.D., magna cum laude, Boston College Law School, B.A. magna cum laude Boston College.

TRBurton@mintz.com (617) 348-3097 WWW.MINTZ.COM

SAHIR SURMELI
Member | Co-chair Energy & Clean Technology Practice | Mintz Levin
Represents emerging growth and established energy and clean technology, life sciences, and information technology companies in public offerings and private financings, as well as, underwriters and issuer clients in traditional energy fields, including oil and gas, pipeline and exploration financings, and mergers and acquisitions. Provides counsel on complex financing structures in a broad range of sectors, including energy and clean technology, telecommunications, information technology, satellite, biotech, aerospace and semiconductor. Admitted to practice in Massachusetts and New York. J.D. University of Chicago Law School , M.B.A., University of Chicago Graduate School of Business

SSurmeli@mintz.com (617) 348-3013

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