JUNE 11, 2013

INFRASTRUCTURE

PRE-SALE REPORT
Table of Contents:
RATING OUTLOOK BRIEF PROJECT DESCRIPTION DETAILED RATING CONSIDERATIONS APPENDICES MOODYS RELATED RESEARCH 2 3 4 13 18

Solar Star Funding, LLC

Solar Star Funding, LLC (Solar Star) is an indirect wholly-owned subsidiary of MidAmerican Energy Holdings Company (MidAmerican: Baa1 stable) formed to own 579 MWAC of photovoltaic solar generating facilities (the Project) currently under construction in Kern and Los Angeles Counties, California. MidAmerican acquired the Project from SunPower Corporation (not rated) in December 2012. Solar Stars Baa3 rating is driven by the predictable nature of its contracted cash flows though they are dependent on a variable solar resource; its importance as a renewable generating facility in the environmentally conscious California market, the experience and reputation of SunPower Corporation (SunPower) as the equipment provider, a relatively straightforward construction and operating risk profile, and a manageable debt profile. The rating is anchored by the experience and financial strength of MidAmerican as the Project sponsor. Predictable cash flow generated by long-term power sales agreements with an investment grade off-taker. The Projects cash flow stability is provided by long-term power purchase agreements (PPAs) with Southern California Edison Company (SCE: A3 stable). The PPAs provide Solar Star with a fixed, time-of-day adjusted, escalating price for every MWh of power it produces, beginning at a base price of about $80 MWh. The Project provides SCE with an important source of renewable energy. The technology employed by SunPower has a long history, and SunPower systems have demonstrated reliable performance. The solar panels produced by SunPower are made of monocrystalline silicon, a material that has been around for decades and for which there is approximately 25 years of data measuring performance in the field. SunPower modules have demonstrated their ability to be more efficient and to degrade less over time than most alternative types of modules. Volumes are dependent on a variable solar resource and expected system performance. Sunlight drives the volumes of the Project, so variability due to weather and the ability to accurately predict sunshine is a risk factor this is mitigated in part by the availability of site specific data. Production volume is estimated by combining solar forecasts with assumed plant performance - which has been estimated based on a combination of field and test data. Construction and operating risk is limited by the relatively simple nature of both processes along with solid contractual protections. Construction will be completed via fixed-price contracts with retainage and delay damage provisions along with guarantees from SunPower supported by letters of credit. Warranties are provided for panel performance, system availability and capacity. SunPowers liquidity and operational profiles are aided by its 65% ownership by Total, S.A. (Total: Aa1 negative), one of the worlds largest oil and gas companies.

Analyst Contacts:
NEW YORK +1.212.553.1653

Laura Schumacher +1.212.553.3853 Vice President - Senior Credit Officer laura.schumacher@moodys.com +1.212.553.7226 Richard Donner Vice President - Senior Credit Officer richard.donner@moodys.com A.J. Sabatelle +1.212.553.4136 Senior Vice President angelo.sabatelle@moodys.com Chee Mee Hu +1.212.553.3665 Managing Director - Project Finance cheemee.hu@moodys.com

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Additional support comes from MidAmericans commitment to contribute sufficient equity to complete the Project - up to the full amount of its currently estimated cost. Solar Stars initial Series A notes are expected to be approximately $700 million. MidAmericans equity commitment will equal the total budgeted cost of the Project of approximately $2.74 billion, minus the proceeds of the initial note offering. The equity commitment will be reduced by the amount of the second series of notes and any construction period cash flows that are applied to pay project costs. Financial projections are resilient to sensitivity testing. The anticipated final capital structure will be approximately 47% debt and 53% equity. Based on our projection assumptions, which include among other things a P-90 probability distribution for the solar resource, average cash flow coverage of debt service is over 1.40 times. Solar Stars base case projections, which include a P-50 probability distribution and 99% availability, result in an average debt service coverage of over 1.60 times.

Rating Outlook
The rating outlook is stable based on our assumption that the Project will be completed as planned on time and on budget, and that its operating and financial performance will be consistent with our base case expectations.

What Could Change the Rating Up?

The rating is not likely to be revised upward over the near-to-medium term. Longer term, should the Project demonstrate financial metrics that are consistently stronger than anticipated, there could be upward pressure on the rating.

What Could Change the Rating Down?

In the event there were to be surprises or delays during construction, the rating could be adjusted downward. Downward pressure would also develop in the event the operational or financial performance of the completed Project is materially different than expected, such that we could anticipate debt service coverage ratios remaining below 1.35 times on a sustained basis.

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PRE-SALE REPORT: SOLAR STAR FUNDING, LLC

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Brief Project Description

Solar Star is a 579 MWAC (747 MWDC) photovoltaic generating facility currently under construction in the Mojave Desert about 55 miles north of Los Angeles in Kern and Los Angeles Counties, California. The Project is comprised of two separate facilities, the 309 MW Solar Star California XIX, LLC (SS1) and the 270 MW Solar Star California XX, LLC (SS2) both of which were initially developed by SunPower and acquired by MidAmerican in December 2012. Each facility will sell 100% of its output to SCE under escalating fixed-price 20-year PPAs. The Project facilities will be constructed and operated by SunPower Corporation Systems, (SunPower Systems) with corporate guarantees provided by SunPower. SunPower is 65% owned by Total.
CHART 1

Organization Structure
MidAmerican Energy Holdings Company, LLC (Sponsor)
*

$700 million, Series A Senior Secured Notes $320 million LC Facility $575 million, Series B Senior Secured Notes anticipated 2014

Solar Star Funding, LLC (Issuer)

Guarantors of the Notes and LC Facility

SSC XIX, LLC (SS1 Project Company Owner) Solar Star California XIX, LLC (SS1 Company) SS1 Project

SSC XX, LLC (SS2 Project Company Owner) Solar Star California XX, LLC (SS2 Company) SS2 Project

* Sponsor holds indirect, full ownership of Issuer, through MidAmerican Renewables, LLC, MidAmerican Solar, LLC, and Solar Star Projects Holding, LLC (Holdings)

Solar Star intends to issue about $1.275 billion of senior secured notes in two series; the initial series is expected to be approximately $700 million, the second series of approximately $575 million notes is currently planned to be issued in 2014. MidAmericans equity commitment will equal the total budgeted cost of the Project of approximately $2.74 billion, minus the proceeds of the initial note offering. The equity commitment will be reduced by the amount of the second series of notes and any construction period cash flows that are applied to pay project costs.

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PRE-SALE REPORT: SOLAR STAR FUNDING, LLC

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TABLE 1

Sources and Uses of Financing

Funded Sources $ (millions) % Total Funded Uses $ (millions) % Total

Bond Issuance - Series A Bond Issuance - Series B Total Funded Debt Pre-COD EBITDA Equity Total Equity Total Sources of Funds
Unfunded Sources

700.0 575.0 1,275.0 141.9 1,325.0 1,467.9 $2,741.9

$ (millions)

25.5% 21.0% 46.5% 5.2% 48.3% 53.5% 100.0%

% Total

Total EPC Costs Other Development Costs Contingency Financing Fees Interest and LC Fees During Construction Total Uses of Funds
Unfunded Uses

2,410.3 69.5 72.0 29.4 160.6 $2,741.9

$ (millions)

87.9% 2.6% 2.6% 1.1% 5.9% 100.0%

% Total

Letter of Credit

$320.0

100.0%

PPA Development LCs PPA Performance LCs LGIA LCs Restoration LCs DSRA LC O&M LC

18.0 195.0 2.4 13.6 80.0 11.0 $320.0

5.6% 60.9% 0.8% 4.2% 25.0% 3.4% 100%

Total Unfunded Sources

Source: Solar Star

$320.0

100.0%

Total Unfunded Uses

The financing structure includes a $320 million letter of credit facility that will be used for collateral posting and to provide debt service and operating reserves. The facility will rank pari-passu with the notes and have a term of construction plus seven years.

Detailed Rating Considerations

Experienced, High Quality Sponsor that Is Making a Significant Equity Commitment
MidAmerican is a privately-owned utility holding company based in Des Moines, Iowa and is engaged globally in generating, transmitting, storing, distributing, and supplying electricity and natural gas. MidAmerican is a consolidated subsidiary of Berkshire Hathaway Inc. (Aa2 Issuer Rating), and its investment in the Project is consistent with MidAmerican and Berkshires stated long term objectives of growing their base of high quality infrastructure assets including renewable power generation facilities. MidAmericans solar portfolio also includes the 550 MW Topaz Solar Farm currently under construction in San Louis Obispo County and a fifty percent interest in the 290 MW Agua Caliente Solar Project under construction (predominantly in-service) in Yuma County, Arizona. The financing is anchored by MidAmericans commitment to contribute sufficient equity to complete the Project up to approximately $2.74 billion, which is the currently estimated full amount of the Projects cost. Under the current financing plan, Solar Star will issue approximately $1.275 billion of amortizing senior secured notes in two series. The series will be sized depending on market conditions; however the amount of the first Series A Notes is currently expected to be about $700 million and the second pari-passu Series B Note offering is currently anticipated to be approximately $575 million. The Series B Notes are likely to be offered in 2014.

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PRE-SALE REPORT: SOLAR STAR FUNDING, LLC

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Total project debt will ultimately be sized to produce a minimum debt service coverage ratio of at least 1.40 times in a one year P-90 scenario; in addition, issuance of the Series B Notes will require a rating affirmation by all rating agencies then rating the debt. The balance of construction funds will come from MidAmericans equity commitment which will be reduced dollar for dollar by the amount of the proceeds of the note offerings and by project cash flow during construction that is applied to pay project costs. MidAmerican will also commit to contribute equity up to the remaining commitment amount, if necessary, to preserve debt service coverage ratios in the unexpected event that the full 579 MW project is not able to be completed and a debt pay-down is required. The final capital structure is currently expected to be comprised of about 47% debt and 53% equity. Equity will be funded during the later part of the construction process after utilization of the note proceeds; however, if there were to be an Event of Default permitting acceleration during construction, the lenders may request MidAmericans equity commitment be funded. In the event MidAmericans credit quality was to drop below investment grade (by two rating agencies), the company would be required to post cash collateral or a letter of credit for the remaining amount of its equity commitment. Moodys views this rating trigger as a negative to the transaction as a decline in credit quality to the trigger level could impact MidAmericans ability to obtain a letter of credit if required, but recognizes the low probability of this event occurring given the very stable earnings and cash flows across MidAmericans business platform along with the manageable three year expected timeframe for construction.

Long-Term, Fixed-Price Power Sales Agreement with an Investment Grade Off-Taker from a Strategic Renewable Asset
All of the Projects revenues will be generated in accordance with the terms of its PPAs with SCE. The contracts provide for the sale of electricity at a base price of approximately $80 per MWh in the first year, escalating at 2.5% thereafter; rates are adjusted for time-of-day which results in an average realized price approximately 30% greater than the base-price. During construction the Project will receive 75% of the first year values, or about $60 MWh. While these rates appear high when compared to current market prices for electricity, they seem competitive when compared to other, older renewable contracts and the Project provides SCE with an important source of renewable energy. California legislation requires the percentage of renewable resources that investor owned utilities must include in their deliver energy portfolio (renewable portfolio standards) to be 33% by 2020 with intermediate targets of 20% through 2015 and 25% by 2016. In 2012, SCE and the two other large investor owned utilities in California were each serving about 20% of their load via renewable resources. In addition, the percentage of such renewable power to be provided from resources directly connected to a California balancing authority must be 50% by December 2013, increasing to 65% in 2014 and 75% in 2017. As an in-state source of renewable power, Solar Star provides mutual benefits.

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TABLE 2

Renewables Portfolio Standards Procurement Progress

As of December 31, 2012
Utility % Renewables
1

Southern California Edison (SCE) Pacific Gas & Electric (PG&E) San Diego Gas & Electric (SDG&E) Weighted Average Compliance Period 2011-2013 Target Average Requirement
1 RPS-eligible renewable generation as % of total load served Source: California Public Utilities Commission

20.6% 19.0% 20.3% 19.8% 20.0%

In our opinion, the market environment in California, a state that imports a substantial portion of its power, has difficult permitting requirements, has prohibitions on coal-fired generation and stringent RPS legislation, should make Solar Star a long-term strategic renewable electric generation asset for SCE.

Revenue Is Dependent on a Variable Resource

Although the price the Project will receive for power is known, the amount of revenue it will receive is based on its ability to generate electricity, which is a function of the amount of sunshine it receives and the specific configuration and operating efficiency of its solar modules. The financial projections are based primarily on complex mathematical models that utilize observed solar data and known modular performance to extrapolate expected generation. The Solar Star site is located in the Western Mojave Desert, an arid climate characterized by low annual precipitation, (less than 10 inches of rainfall on average per year) which is generally heavier in winter months. Sub-freezing temperatures are uncommon during winter nights, and summer high temperatures average in the high 90 degrees Fahrenheit range. The solar resource projections for the project site are based on data collected at the project site for approximately 16 months and then correlated with about 15 years of hourly satellite data covering the area. To arrive at generation, radiation is adjusted for the Projects ability to yield energy after adjusting for factors such as tilt, tracking, reflection, shading, soiling, temperature loss, module quality, wire loss, inversion to AC current, transformer losses and auxiliary loads, etc. There is uncertainty surrounding both the ability to predict the sunshine, and the ability to predict the module performance. As a result of the variability and uncertainty inherent in the assumptions described above, the financial projections for solar projects are generated based on probability distributions. The Sponsors projections are based on a P-50 distribution, which means in any given year, there is 50% probability that actual generation will exceed the modeled amount (and by definition there is also a 50% probability it will be lower). A more conservative one-year P-90 scenario represents a case where in any given year, there is a 90% chance that actual production will exceed the modeled amount (a 10% chance it will be lower), and in a ten-year P-90 scenario the average annual energy production over a ten-year period has a 90% probability of exceeding projections. Moodys generally believes scenarios based on P-90 probabilities represent a more appropriate (less volatile) set of assumptions from which to evaluate the Projects ability to generate sufficient cash to service its debt obligations; however, our analysis incorporates a range of project specific cases and assumptions.

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In the case of Solar Star, the consultant provided estimates of various additional measurement uncertainties underlying in the probability distributions. The addition of these combined uncertainties was estimated to be equivalent to a haircut of about 2.4 % for the P-90 one-year case and 4.6% for the P-90 ten year projections. We have applied these additional haircuts to our projections so they may be more consistent with the approach taken at other recently rated solar projects where the measurement uncertainty was incorporated directly into the Pscenarios. We have also assumed availability factors that are modestly lower than the 99% expected by Solar Star.
CHART 2

Generation Project by Case

P-50, 1 Yr Case; 99% Availability; 0.5% Degradation P-90, 10 Yr, Adj for Uncertainty; 98.5% Availability (Yrs 1-10), 97% Availability (Yrs 11-20); 0.5% Degradation P-90, 1 Yr, Adj for Uncertainty; 98.5% Availability (Yrs 1-10), 97% Availability (Yrs 11-20); 0.5% Degradation Delivery Obligation Under PPA 1,800 1,700 1,600 1,500 1,400 1,300 1,200 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Year P-90, 10 Yr 99%; Availability; 0.5% Degradation P-90, 1 Yr; 99% Availability; 0.5% Degradation P-99, 1 Yr; 99% Availability; 0.5% Degradation

Source: Solar Star and Moodys

Although the solar resource is variable, it is inherently less volatile than some other renewable resources such as wind; as a result, projections across a range of probability distributions tend to be more similar than those observed for wind projects. For example, the generation output in the adjusted one-year P90 case is approximately 93% of the P-50 case (7% below), while in the P-99 case the estimate is about 85% (15% below) the P-50. These bands are almost identical to those observed for MidAmericans Topaz Solar Farms transaction, and considerably more narrow than those observed for wind projects where, as summarized in Moodys publication Breezing Past P50 the P-90 scenario was on average 85% of the P-50 assumption (15% below), and the P-95 scenario was on average 80% (20% below) the P-50 assumption. Under the terms of the PPAs SS1 and SS2 are required to deliver an amount of power equal to a minimum of 85% of the Projects annual contracted quantity measured over 2-year rolling periods. As depicted on Chart 1, the minimum requirement is substantially below the one-year P-99 production estimate.

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Generation (GWh)

PRE-SALE REPORT: SOLAR STAR FUNDING, LLC

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Experienced Equipment Provider with Demonstrated Technology

SunPower is an experienced and reputable producer of PV modules and one of the largest U.S. based manufacturers. The company was originally incorporated in 1985 and has continued the development and evolution of silicon all-back-contact solar cells begun by its founder at Stanford University in the 1970s. Over the past few decades SunPower has developed PV technology which consistently delivers high quality, high performance solar cells. The underlying material in SunPowers cells is monocrystalline silicone, which has been around for decades. According to a June 2012 report by National Renewable Energy Laboratory (NREL), there is over 40 years of testing data and about 25 years of field data demonstrating performance. Based on testing conducted by SunPower as well as third parties SunPowers cells are reported to be among the most efficient in the industry; they can also be expected to degrade less over time. SunPower believes that light-to-energy conversion efficiency of its modules (reported at over 20%) is the highest in the industry. The Independent Engineer for the financing has stated that the average ratio for conventional crystalline silicon is generally 15-16%. Degradation of the SunPower modules is also expected to be lower than average. Tests of its own systems with ages of two to five and a half years over periods averaging four years, a showed a degradation rate of under 0.5% per year. SunPower modules have also outperformed other modules in accelerated third party testing. According to the NREL data, the mean degradation rate of all PV technologies is 0.8% per year, with thin-film technologies (non-crystalline) being closer to a rate of 1% per year. Based on its review of the performance data presented by SunPower as well as third parties the Independent Engineer believes it is appropriate to assume an annual degradation rate of 0.5% for the Solar Star modules. This is lower than the 0.75% degradation rate typically assumed for crystalline silicon modules, but higher than the 0.25% of annual degradation expected by an extrapolation of the limited field data noted above.

Manageable Construction Risk

SS1 and SS2 will be constructed by SunPower Systems, a subsidiary of SunPower. Construction risk will be mitigated via fixed-price engineering procurement and construction (EPC) contracts, with liquidated damage payments for delay and/or performance shortfalls which will be supported by parent guarantees, letters of credit and a 10% retainage process. Construction of the Project has begun and is expected to take a little over two years. Civil work and pile installation has started and a 1MW first-build array has been mechanically installed to identify potential quality/or design issues. The facilities will each use SunPowers standard Oasis system 1.5 MW block design, which includes 4,320 PV modules rated at 435 WDC each. Each 1.5 MW array is constructed in the same manner utilizing SunPower standard wiring harnesses and combiner boxes, Oasis model trackers, factory assembled inverter skids, and an integrated tracker controls system. The fundamental design has been used for a number of years on SunPowers utility scale facilities. The process is very repetitive, allowing for significant process efficiency and learning. The 1.5MW arrays are then combined as Blocks of MWs that are to be completed in accordance with the schedule below and will begin earning revenues as they come on line.

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TABLE 3

Solar Star Block Turnover Schedule

Year EPC Guaranteed Block Completion Date 2013 Dec-31 Apr-01 May-01 2014 Jul-01 Oct-01 Dec-01 Feb-01 2015 May-01 Jun-01 Oct-01

SS1 Project SS2 Project Projects Total

MWAC Cumulative MWAC MWAC Cumulative MWAC MWAC Cumulative MWAC

37.90 37.90 18.90 18.90 56.80 56.80

62.70 100.60 50.80 69.70 113.50 170.30

14.60 115.20 69.70 14.60 184.90

115.20 58.10 127.80 58.10 243.00

56.80 172.00 127.80 56.80 299.80

172.00 53.70 181.50 53.70 353.50

52.50 224.50 181.50 52.50 406.00

224.50 46.50 228.00 46.50 452.50

52.50 277.00 228.00 52.50 505.00

32.10 309.10 42.10 270.10 74.20 579.20

Source: SAIC Report, EPC Contracts

Under the EPC agreements delay damages of $945 MW /day would be payable in the event substantial completion was delayed; this amount would be sufficient to offset estimated lost revenues of approximately $882 MW /day (based on a first year TOD revenue rate of $105 MWh and an assumed 35% capacity factor.) Prior to substantial completion, damages of $675 MW /day payable upon block delay would offset lost revenues that would be calculated at 75% of the first year rate. Substantial completion of the Project is expected to occur approximately eleven months prior to the expected PPA Commercial Operation deadline (34 months after initial synchronization) of October 1, 2016. The Project may extend the PPA Commercial Operation date for up to 200 days by paying 1% of the security amount, or a total of about $180,300 per day, if both SS1 and SS2 were delayed. In this scenario, if the entire 579 MWs were to be delayed beyond the Commercial Operation deadline (a highly unlikely scenario) we estimate the Project would have sufficient delay LD funds to cover about 80 days of PPA late payments before needing to access the posted security. SunPower Systems is currently also constructing the 250 MWAC California Valley Solar Ranch Project in San Louis Obispo and it is reported to be proceeding on-time and on-budget with a planned commercial operation date in December and approximately 235 MWAC installed as of the end of April. SunPower is about 65% owned by Total, a large French oil and gas company, Total is currently providing SunPower with intermediate term liquidity support as well as longer term operational support in the areas of research and development and business development. Solar Star is a key project for SunPower, with a contract size approximately equal to the companys 2012 revenue.

Operational Risks Are Also Modest

Operational risk for the Project is mitigated by the fairly simple and straightforward nature of the activities involved in the operation of the Project, the experience of SunPower as an operator, and by the terms of operating and management agreements. SunPower reports it has over eleven years of solar operating and maintenance experience in over 700 commercial scale (200 utility-scale over 1MW) projects worldwide. Operations and management of SS1 and SS2 will be conducted by SunPower Systems under a 20 year contract and covers the vast majority of activities and expenditures likely to occur at the Project, including washing of the panels, maintenance of the tracking system motors and continual monitoring

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and repair of the electrical arrays. Under the terms of the agreement, SunPower Systems is paid $15 kW DC per year (escalating with inflation) beginning in 2015, SunPower Systems will also receive payments for maintenance according to a fixed schedule. The agreement is very broad in that it covers the Projects step-up transformers in addition to its module, wiring systems, trackers and inverters. Panel performance is covered by warranties specifying maximum annual degradation and system availability. The SunPower modules have a 25 year warranty against defects in materials and workmanship. In addition, SunPower has guaranteed that its panels will have a power output of a least 95% of the minimum peak power rating for the first five years of the warranty period, and decline by no more than 0.4% per year for the following 20 years. SunPower has also guaranteed that for 20 years following substantial completion of each facility, actual time-of-day adjusted generation will be no less than 97% of the expected energy for such period (as adjusted for weather). They also guarantee that the measured capacity of the facility shall not be less than 97% of the expected capacity (net of 0.4% annual degradation. Based on eight years of available data, SunPower reports its average availability experience operating utility-scale power projects at over 99%. In our analysis, we have assumed availability will be slightly lower, starting at 98.5%. Inverters are covered under the SunPower operations and maintenance agreements. SunPower has chosen to use a combination of SMA 750 kW and PowerOne 1.5 MW inverters, the companies are both dominant participants in the industry, producing inverters since 1990 and 2006 respectively.

Interconnection and Curtailment

SS1 and SS2 will each deliver power to SCE for scheduling with the California Independent System Operator (CAL ISO) at the Whirlwind substation. SS1 will be connected though the SS1A substation via a 3.2 mile gen-tie line; SS2 will deliver power via two substations, SS2A and SS2B which are connected to each other and then to Whirlwind via a 3.5 mile gen-tie. SCE is responsible for completing upgrades to its facilities necessary to support the Project. The estimated in-service date for the interconnection facilities is early December 2013 - prior to the December 31, 2013 EPC guaranteed initial delivery date (57 MW). The Project will deliver power to the point of interconnection at Whirlwind and SCE bears the risk of deliverability/congestion beyond that point; however, the Project is subject to economic curtailment without compensation up to 50 hours per year (during non-peak hours if prices are negative at the facility node and it has not been scheduled in the day ahead market). The facility also is not reimbursed for curtailments caused by force majeure events and curtailments instructed by the CAL ISO. Based on a transmission assessment prepared by the Independent Engineer, Solar Stars projections assume the Project will be curtailed about 500 MWh annually as a result of potential maintenance or other issues relating to its gen-ties, and about 7,000 MWh annually as a result of system emergencies. A review of historical pricing at or near the Project node showed only minimal hours when price were below zero, and under ten hours per year when pricing was below negative $35 - a level felt to be an approximation of a level a renewable project could be economically curtailed after consideration of other benefits such as renewable energy credits or production tax benefits. Based on this assessment, Solar Star has assumed no economic curtailment in its base case. In our analysis, we assumed the Project would be curtailed for half of the allowed 50 hours per year.

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Project Finance Structure

The note holders will be protected by a traditional project finance structure incorporating security that includes substantially all assets, rights under contracts, and accounts of the issuer and subsidiary guarantors (projects). Security for the note holders will be shared pari-passu with a $320 million secured letter of credit facility with a term of construction plus seven years. The structure includes a trustee administered cash-flow waterfall, and six-month debt service and operations and maintenance reserves. We note however that both these reserves are to be provided via the $320 million project level secured letter of credit facility, and if drawn, they must be repaid in two years. We view this arrangement as weaker than cash funded reserves, or letter of credit from third party sponsors or letter of credit loans with longer repayment periods. Financing terms also include limitations on additional indebtedness, amendments to project documents and other traditional covenants. Dividends are subject to twelve month forward and backward looking 1.20 times debt service coverage tests. Issuance of the Series B notes will be subject to, among other things, a minimum projected debt service coverage ratio of 1.40 times in the one-year P-90 scenario, and a rating affirmation.

Relatively Conservative Financing Structure that Stands Up Well to Sensitivity Testing

We anticipate the final capital structure for the Project to incorporate approximately 47% debt and 53% equity. Based on our assumptions, which include a P-90 probability distribution for the solar resource and availability assumptions consistent with the Topaz project, average cash flow coverage of debt service is over 1.40 times. Solar Stars base case projections, which include a P-50 probability distribution and 99% availability, result in an average debt service coverage of over 1.60 times. As shown below, in sensitivities examined by Moodys which incorporate scenarios with substantially higher operating and maintenance expenses, significantly lower availability factors, and higher degradation levels through the term of the debt indicate that Solar Star should be a operationally resilient project when completed.

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TABLE 4

Sensitivity Results
Resilient coverage in tested downside cases
Moody's Base Case with Expense Inflation at 3%

Mgmt Case

Moody's Base Case

10 Yr - P90 with 4.6% Forecast Haircut

Moody's Base Case with Higher O&M

Lower Availability of 95%

Higher Panel Degradation of 1%

1st 10 Years Breakeven Case*

Combined Case

Probability of Exceedance Availability (1st 10 Years) Availability (After Year 10) Degradation (1st 10 Years) Degradation (After Year 10) Curtailment - AVSP I (% of PPA Curtailment Cap) Curtailment - AVSP II (% of PPA Curtailment Cap) Production/ Forecast Uncertainty Haircut O&M Increase Inflation Min DSCR 10 Year Average DSCR Term Average DSCR Min FFO/Debt 10 Year Average FFO/Debt Term Average FFO/Debt
*True Breakeven occurs at project tail

1-Year P50 99.0% 99.0% 0.50% 0.50% 0% 0%

1-Yr P90 98.5% 97.0% 0.50% 0.75% 50% 50%

10-Yr P90 98.5% 97.0% 0.50% 0.75% 50% 50%

1-Yr P90 98.5% 97.0% 0.50% 0.75% 50% 50%

1-Yr P90 98.5% 97.0% 0.50% 0.75% 50% 50%

1-Yr P90 95.0% 95.0% 0.50% 0.75% 50% 50%

1-Yr P90 98.5% 97.0% 1.00% 1.00% 50% 50%

1-Yr P99 97.0% 97.0% 1.80% 1.80% 50% 50%

1-Yr P90 95.0% 95.0% 1.00% 1.00% 50% 50%

0.0% 0% 2.30% 1.55x 1.57x 1.63x 7.4% 10.8% 19.1%

2.4% 0% 2.30% 1.40x 1.42x 1.44x 6.2% 9.1% 16.2%

4.6% 0% 2.30% 1.41x 1.44x 1.46x 6.3% 9.3% 16.5%

2.4% 20% 2.30% 1.37x 1.39x 1.40x 6.0% 8.8% 15.7%

2.4% 0% 3.00% 1.40x 1.41x 1.42x 6.2% 9.0% 16.0%

2.4% 0% 2.30% 1.34x 1.36x 1.39x 5.7% 8.5% 15.5%

2.4% 0% 2.30% 1.33x 1.36x 1.35x 6.1% 8.6% 14.8%

2.4% 30% 3.00% 0.80x 1.07x 0.98x 4.3% 5.5% 9.2%

2.4% 20% 3.00% 1.21x 1.26x 1.25x 5.3% 7.5% 13.3%

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Appendices
Project Location

Solar Star Projects

Source: Google Maps

The Project will be located in Californias Antelope Valley approximately 17 miles northwest of Lancaster and 55 miles north of Los Angeles. The site will cover about 4,030 acres of land in Kern and Los Angeles counties. Arrays for the two facilities will cover a total of around 1,500 acres. The site was previously used as farmland.

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Project Participants

Equity Contribution Agreement EPC, O&M, and Performance Guarantee Independent Engineer

Power Purchase Agreement

Large Generator Interconnection Agreements

All contracts listed above except Equity Contribution Agreement have been entered into directly with Project Companies under Solar Star Funding, LLC. Equity Contribution Agreement will be entered into with Issuer and the Subsidiary Guarantors.

MidAmerican Energy Holding Company

MidAmerican is a privately-owned holding company, founded in 1971 as CalEnergy and currently 89.85% owned by a subsidiary of Berkshire Hathaway. The company holds electrical and natural gas hard assets, including generation, transmission, storage and distribution, primarily through regulated utilities in the US and UK. The portfolio is also comprised of renewables including wind, solar, and geothermal in the US and a hydroelectric project in the Philippines. The companys 2012 revenue surpassed $11.5 billion, with wholly-owned subsidiary PacifiCorp accounting for 42.1% of revenue. Moodys calculates 2012 cash flows from operations as $4.6 billion. Solar Star is indirectly held by the Sponsor through MidAmerican Renewables, which has interests in 22 US-based independent renewable power projects. As of December 2012, the segment reported 1,552 MW of available net owned capacity and 1,155 MW of capacity under construction. For more information see the Moodys Company Profile on MidAmerican Energy Holdings Company published June 7th, 2013 as well as the most recent Credit Opinion which can be found on moodys.com.
Southern California Edison

SCE is an integrated regulated electric utility supplying electricity to nearly 14 million people in central, coastal and southern California. It is wholly-owned by Edison International (Baa2 stable). At year-end 2012, SCE's assets of around $44.0 billion represented about 99.2% of Edison International's consolidated assets. The utilitys generation resources include a variety of owned and contracted resources. As of December 31, 2012, SCEs owned renewable energy portfolio included 1,176 MW of hydroelectric capacity and 63 MW of solar capacity. SCE currently has 53 renewable energy contracts approved by the California Public Utilities Commission with expirations between 2013 and 2035 to help meet its Renewables Portfolio Standard targets.

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SunPower

SunPower is an international solar energy solutions provider based in San Jose, CA. The company, founded in 1985, is the second largest US manufacturer of solar PV modules according to the Renewable Energy Policy Network for the 21st Centurys Renewables 2012 Global Status Report. SunPower develops, manufactures, installs and operates a range of products, leveraging patented photovoltaic (PV), monocrystalline silicon cell technology, which provides an industry-leading efficiency ratio. It is currently 65% owned by Total and has an approximate market cap of $2.3 billion. The company sells its suite of products across four continents. The company targets distributed solar customers (residential, large commercial, government and industrial) and utility scale projects through three regional business segments, offering unique products and services for each customer-type. SunPower markets itself as being the leading provider of residential solar solutions in the U.S. It is also one of few US-based companies that are actively developing large-scale utility projects. SunPower reports an accumulated 26 years of R&D research, with successive generations of solar panels leading to one of its current offerings, the E20 / 435 WDC monocrystalline silicon module, which will be used in the Solar Star project and demonstrates an efficiency ratio over 20%. The panel also provides higher reliability through the use of back-side electrical contacts and thick-plated copper conductors. The solar panels are a component of SunPowers integrated 1.5 MW Oasis System. The complete system block includes multiple panels mounted on a single-axis tracker, an inverter, and a step-up transformer. The SS1 Project and SS2 Project sites will host 212 and 186 Oasis systems, respectively. The entire system will be controlled by SunPowers supervisory control and data acquisition (SCADA) software system. SunPower employs a global manufacturing process certified to the International Organization for Standardizations quality management and environmental management standards. Solar cells are manufactured in Malaysia and the Philippines. Modules are primarily manufactured in the Philippines and Mexico. SunPower provides module warranties guaranteeing 95% of stated capacity for the first five years and no more than 0.4% of degradation for the following 20 years. The independent engineers generally assume a 0.75% annual degradation rate for conventional crystalline silicon modules. They opine SunPowers degradation rate to be considerably lower than many other module manufacturers. Additionally, SunPower reports having only 0.0024% of modules returned for warranty claims. Currently, SunPower is completing construction of the 250 MW, California Valley Solar Ranch project in San Luis Obispo, California, on-time and on-budget. Solar Star is utilizing a tracker system that is based on the T0 tracker system at the California Valley Solar Ranch. SunPowers 2012 annual revenues surpassed $2.4 billion, though operating income was -$287 million. Operating cash flow approached $29 million, while funds from operations remained negative at -$58 million. Overall, the companys credit metrics remain in the low non-investment grade range. However, the company benefits from additional liquidity provided by its majority stakeholder, Total S.A.

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Construction and Operating Risk Mitigation

The EPC contracts with SunPower include standard liquidated damage provisions for delays and performance. The contracts include milestones and block turnover schedules for each project with reimbursements in the event these are not achieved. Notice to proceed occurred on March 28th, 2013 for SS1 Project and December 28th, 2013 for SS2 Project. The substantial completion date for both projects is set for October 31st, 2015, with final completion occurring on June 30th, 2016. The EPC contract specifies block turnover schedules presented earlier in this report. Payments under the EPC contract are subject to 10% retainage until Substantial Completion.

Delay LDs
Delay liquidated damages are determined based on the block turnover schedule and substantial completion date. Block delay LDs are owed if a block does not meet its minimum capacity by its completion date and is calculated at $675 per MWAC per day. Substantial completion LDs for the aggregate Project equal to $945 per MWAC per day and are payable if substantial completion (defined to include the ability to generate at least 95% of guaranteed capacity)is delayed.

Capacity LDs
The contract specifies capacity LDs for completed blocks and the aggregate Project. Completed blocks are subject to minimum and guaranteed capacity requirements. Should a block meet the minimum capacity, but not the guaranteed capacity, capacity LDs are calculated at $675 per MWAC per day. For the aggregate Project, final capacity LDs are calculated as the product of the percentage shortfall of guaranteed capacity multiplied by the EPC contract price along with any capacity LD payments payable by the Project to SCE under the PPA. Should SS1 Project and SS2 Projects aggregate capacity surpass a 95% threshold, but still not achieve the guaranteed capacity, SunPower may attempt to cure the shortfall or pay performance LDs.

LD Caps
Delay and block capacity LDs in aggregate are limited to 15% of the EPC contract price. Facility capacity LDs are limited to 20%. Total LDs are limited to 25% of the contract, with cumulative maximum liability limited to 100% of contract price prior to COD and 35% afterwards.

Security
By financial close, SunPower will have posted $100 million in letters of credit supporting its obligations under the EPC agreements. This amount will increase to $200 million by January 1, 2014.

Performance Guarantees
Generation Guarantee

SunPower is providing a performance guarantee for 20 years assuring total time-of-day adjusted generation will not be less than 97% of the expected energy - taking into account uncontrollable, meteorological conditions. Should performance fail to meet the standard, LDs will be paid equal to the lesser of either the lost revenue relative to the Performance Guarantee Agreement or the generation deficit multiplied by the PPAs $/kWh rate.

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Capacity Guarantee

Additionally, SunPower guarantees measured capacity will not be less than 97% of expected capacity accounting for 0.4% annual degradation for 20 years from substantial completion. Should measured capacity fall below the guarantee, SunPower can take corrective action or pay LDs equal to 50% of shortfall revenues since the prior date of compliance and 100% of anticipated revenues through the end of the quarter.
Module Warranty

SunPower also provides a module warranty against defects and meeting accurate design standards under the EPC agreement. Through the separate module performance guarantee, the company also warrants module power output achieving 95% of peak power rating for the first five years, a maximum of 0.4% annual degradation for the following 20 years, and output after 25 years achieving at least 87% of the modules initial minimum peak power rating. Inverters come with three to five year warranties.

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Moodys Related Research

Industry Outlook:

Low Gas, Low Demand Growth to Keep Margins Suppressed in 2013 , February 2013 (149974) Renewable generation in the U.S: Sunny skies or storm clouds ahead? April 2011 (132140) PV Solar Power Generation Projects. June 2010 (125811) Breezing Past P50, September 2010 (127810) Renewable Energy Projects Not Immune from Endangered Species Protection Costs, March 2012 (140584) Power Generation Projects, December 2012 (147991) Global Manufacturing Industry, December 2010 (129387) Topaz Solar Farms, LLC, February 2012 (139706) Andromeda Finance S.r.l., October 2010 (127949) MidAmerican Energy Holdings Co., June 2013 (154895) MidAmerican Energy Holdings Co.

Special Comments:

Rating Methodologies:

Pre-Sale Reports:

Company Profile: Credit Opinion:

To access any of these reports, click on the entry above. Note that these references are current as of the date of publication of this report and that more recent reports may be available. All research may not be available to all clients.

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Report Number: 154989

Authors Laura Schumacher Parag Patel, CFA

Senior Production Associate Ginger Kipps

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