financing: models and opportunities

Financing:

Models and Opportunities Moderator: James Duffy, Nixon Peabody

Speakers: Tony Grappone, Novogradac & Company LLP Accounting and Financial Modeling

Chris Diaz, Seminole Financial Lending and Debt

Tal Mamo, United Wind Distributed Scale Leasing

National boutique leader providing financing for commercial renewable energy projects from $2 million to $30 million

Underwriting and servicing team with more than 50 years of experience in financing debt and tax credit equity transactions

Funded $300+ million worth of Wind and Solar Renewable Energy projects since 2009 (95 MW)

Focus on financing renewable energy systems that supply electricity to municipalities, school districts, and credit worthy commercial off-takers through Power Purchase Agreements

Seminole Financial Services

PROJECT AGGREGATION STRUCTURE Financing Smaller Transactions

ABC Project Owner

Project 1 Project 2 Project 3 Project 4 Project 5 Project 6

Master PPA with XYZ Offtaker (Corporation, Municipality, …)

Wind Project Phases

Phase I

• Site Selection

• Technology Selection

• Financial Model

• PPA

• Leases

• State Incentives

• Integrator Design

• System Design

• Scheduling

• Financing

• Permitting

• Physical Site

• Equipment

• Delivery and Installation

• Utility Review

• Permitting Authority Inspection

• Testing

• Maintenance

• Monitoring

• Repair

Site Review and Technology Selection

Phase II

Design and Planning

Installation Completing and Commissioning

Ongoing Operations

Phase III Phase IV Phase V Phase I

Underwriting Considerations Economic Viability / Financial Model:

o Source & Use

o Proforma

o Tax Credits / ITC Grant

Developer: o Track record

o Credibility

o Credit / Risk profile

Sponsorship: o Structure / Commitments

o Track record

o Risk profile

Contracts: o PPA / Lease

o Interconnection

o EPC turnkey contract

o O & M

Construction: o EPC Contractor experience

o Permitting / Zoning

o FAA Approval

o Air Quality Permits

Renewable Energy Resources: o Data / Verification

o Uncertainty

o Location

Technology: o Suppliers / track record

o Bankability

o Warranty

o Availability / Delivery timing

Revenue: o PPA structure (i.e., Security of revenue

Stream)

o Valuation: Appraisal / Cost Certification

o Renewable Energy Certificate (RECs)

Loan Security Interests / Title: o Assignments

o Ingress / Egress – Easements

o ALTA Survey

O&M / Asset Management: o Contractor / track record

o Spare parts

o Transmission

o Term

Financial Structure: Economic Viability

• Sources and Uses

• Loan Guarantees / Tax Equity Investors

• ProForma / Cash Flow

o Sale of Power (PPA)

o State Renewable Energy Certificates (REC’s)

• Programs (Construction and Perm Debt)

o 12 months Construction / 5 – 20 year long term debt

o Market Interest Rates

o LTV: 80% +/-

o Wind DSC: P99 = 1.00 dsc / P50 = 1.45 dsc

(*P= Probability Factor)

Financial Structure: Components

Key Assumptions:

• Construction loan

o up to 90% Loan to Cost

o 8 - 12% interest rate

o 1 - 2 points origination fee

• Permanent loan

o up to 80% LTV

o 6 - 10% interest rate

o 1 - 2 points origination fee

o Wind DSC: P99 = 1.00 dsc / P50 = 1.45 dsc

• Tax Equity Investor terms

o Tax credit pricing of 1.25 +/-

o 10% after tax hurdle

o 2.0% priority return

o Exit after recapture period

Organization Structure

Limited Partner (Tax Equity Investor)

General Partner

Your Wind Project

- Owns and operates facility Developer

99%

12 Month Construction Loan Mini Perm Loan

1%

100%

Tax paying entities

Partnerships for federal income tax purposes

Denotes an ownership interest

Cash flows from non owners

SFS - Closed Wind Transaction

Coastal Energy Wind

• 4 - 1.5 MW GE turbines (6MW

wind system) in Grays Harbor,

Washington

• $5,162,500 construction loan

• PPA with Grays Harbor PUD

• Coastal Community Action Plan –

Developer

• US Bank – Syndicator

• State Grant – No Perm Debt

• New Market Tax Credits (NMTC)

SFS - Closed Wind Transaction

Safeway Wind

• 2 - 1 MW Mitsubishi wind turbines

(2 MW System) in Tracey,

California

• $5.08 million construction loan

• PPA with Safeway Grocery Chain

(Distributed Wind)

• Foundation Windpower –

Developer

• US Bank – Syndicator

• State Grant – No Perm Debt

SFS - Closed Wind Transaction

Lime Wind • 6 – 500 kW Nordtank 500 rebuilt

wind turbines (3 MW System) in Lime,

Oregon

• $5+ million construction loan

• Bureau of Land Management (BLM)

Land

• USDA REAP Grant

• 1603 US Treasury Grant (ITC)

• Oregon Department of Energy –

State Energy Loan Program

• Oregon BETC

• New Market Tax Credits

SFS - Closed Wind Transaction

Anheuser Busch Wind

• 1.65 GE single turbine 1.6 MW

wind system in Fairfield, CA

• $3.5 million construction loan

• PPA with Anheuser Busch

(Distributed Wind)

• Foundation Windpower –

Developer

• US Bank – Syndicator

• State Grant – No Perm Debt

• Combined with Solar Array

SFS - Closed Wind Transaction

Ipswich Wind

• Hyundai 2.0 MW turbine in

Ipswich, MA

• $4.26 million construction loan

• $2.87 million permanent loan

• PPA with Ipswich Municipal

Light Department

• Aquinergy LLC – Developer

• 1603 US Treasury Grant (ITC)

• Massachusetts Wind Renewable

Energy Certificate (REC)

Questions

Chris Diaz

Principal

Seminole Financial Services

Email -

cdiaz@seminolefinancialservices.com

Cell - (727) 460-0578

Distributed Wind Expo Presentation June 2013

“Consumers are realizing they don’t need the power industry at all” David Crane, CEO NRG Energy

Our Vision Lease A Wind Turbine To Every Suitable Property

- 2 -

(3,500,000+ US properties can benefit from DG wind)

June 2013

Who We Are

- 3 - June 2013

Team With Deep Domain Expertise

RUSSELL TENCER Founder & CEO

TAL MAMO Founder & President

CULLEN KASUNIC VP, TECHNOLOGY

JOSEPH HESS VP, BUSINESS DEV.

- 4 -

• Founder, CEO, Wind Analytics • Over 1,000 wind projects modeled • Former equity fund manager, ETG Trade

• Founder, President, Talco • Built leading US wind turbine distributor • Board Member: DWEA, SWCC

• VP, Product Manager, Wind Analytics • Led software development • Led financial model development

Over 20 Years of Distributed Wind Energy Experience

• Senior Sales Manager, Solar City • Sold $30 million in Leases/PPA’s • Managed channel sales through Tesla

BRENT KROHN VP, PROJECT DEV.

• VP, Project Manager, Talco • Managed >150 wind energy projects • Managed Talco dealer network

JUNE 2013

For Turbines 100kW and Under

- 5 -

Build Project Provide System O&M

Property Owner

(Lessee)

Dealer Installer

United Wind

(Lessor)

The United Solution

JUNE 2013

We operate under the ITC, which is in effect until 2016

Total Savings: $30,952*

No Upfront Cost, Immediate Savings

WindLease™ Lowers Electricity Costs

Old Electric Bill

New Electric Bill

WindLease Payment

$750/month

$525/month

Typical Farm WindLease *Savings over 10 year WindLease term

Mo

nth

ly E

lect

ric

Bill

$200

$400

$600

$800

$0

- 6 - JUNE 2013

Why is WindLease Important?

$0

$25

$50

$75

$100

$125

$150

2005 2006 2007 2008 2009 2010 2011

Wind Turbine Sales

Mar

ket

Size

(in

mill

ion

s)

- 7 -

Turbine Sales Have Hit Their Peak¹

?

¹2011 U.S. Small Wind Turbine Market Report, http://www.awea.org/learnabout/smallwind/upload/AWEA_SmallWindReport-YE-2011.pdf

Sale

s P

eak

JUNE 2013

Solar Followed This Exact Trend

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2005 2006 2007 2008 2009 2010 2011 2012 2013(P)

Solar Leasing

Solar Purchases

US

Res

iden

tial

So

lar

Mar

ket

(in

Mill

ion

s)

And Would Have Gone Dark if Leasing Hadn’t Re-Energized The Market¹

- 8 -

¹Forbes: How CA is Democratizing Solar for the 99%, http://www.forbes.com/sites/toddwoody/2012/07/03/how-california-is-democratizing-solar-for-the-99/

Sale

s P

eak

JUNE 2013

Market is Here

- 9 -

Our Leasing Options Are RE-Energizing Distributed Wind

A $50 Billion Opportunity Is There, Just Waiting For Us¹

$1 billion

¹Internally generated market potential based on land resources, wind resources, policies, and proportional interest in renewables based on a discount on solar adoption

JUNE 2013

Lets Power Tomorrow

- 10 -

You submit your online customer application form.

We send you a custom WindQuote TM.

You tell us the customer loved the WindQuote.

We send you the full detailed WindLease TM for customer signing.

JUNE 2013