November 2010

Prepared by: Pyramyth Liu

Managing Director,
Fremont Peak Renewable, LLC
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Purpose and Goal
Building Solar PV Projects – Large
Commercial Projects vs. Utility Scale
Solar PV Value Chain
Solar PV Project Financing
Discussion - Question and Answer

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Building Solar PV Plant
Location – Solar Radiation (kWh/sqM/day)
Technology – PV, CPV, CSP, Thin Film: a-Si, CIGS
Initial Design – Performance, panel, mounting, tilt,
monitoring, and O&M considerations
Planning – Exemptions, Licenses, Special Permits,
Interconnection and environmental Studies
Construction Loan and Project Finance
Final Engineering Design and Construction
Commissioning, Operation and Maintenance
Paying for Solar Energy Field
Cash Purchase
Loan – Equity Loan
Capital Lease
Power Purchase Agreement (PPA)
Solar Project Finance – Monetizing
ITC, Cash Grant (30%) - Section 179 Tax Credits
Accelerated Depreciation
State Mandates: Performance Based Incentives (PBI), SRECs
Feed-in Tariffs, Tax abatements (waivers of sales/property
taxes
Benefits from Solar….
Customers whose pays high rate tiers
Customers who can avoidable demand charges
Customers who can benefit from Time-of-Use
(TOU) rates
Company’s with tax equity appetites
Company’s with good credit facilities
Company’s looking for more predictable operating
cost – electricity utility as over 30% of variable
operation cost

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Better Clients
Location
Net Metering
Time-Of-Use (TOU) rate Structure Users
Fed - Renewable Energy Credits
State
California Solar Initiative (CSI)
Arizona – Performance Base Incentive (PBI)
New Jersey _ Solar Renewable Energy Credits
(SRECs)
Performance Consideration
Component performance
Module efficiency (15-24%) degradation, mismatches
Invertors (94-98%)
Production Test Condition vs. Standard Test Condition
Manufacturer production tolerance (+x%, -y%)
System design factors (grading/penetration, wind,
seismic, tilt, orientation, shading, air flow ) – less
than 6” clearing could reduce 10% efficiency
Wire losses
Soiling
System uptime and reliability
US PV System Market
Size
2007 2008 2009 2010* 2011* 2012*
Commercial 110 210 260 390 503 900
Residential 70 125 145 200 308 502
Utility 9 16 25 110 500 1100
Federal 15 5 20 100 301 640
Total (MW) 204 356 450 800 1,512 3,142
% Growth 45% 75% 26% 78% 89% 73%

• Sources: Photo (Feb 2009) Deutsche Bank (Feb 2009)

• UBS March 2010

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  PV Value Chain   Components     Service    
Project
      Modules Mounting BOS Dev Financing Construction O&M  

Residence/Owner              

Bankers/Investment bankers              

Financial Intermediaries              

Project Developer              

System Integrator              

EPC Contractors              

Module Mfg's              

Mounting Mfg's              

Inverter Mfg's              

Independent Engineering Co's              

Roofers/Electricians/GC's              

Monitoring Co's/Technology              
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 Solar Tax Credits (ITC)
No outlay up front, does not own system Solar Asset Depreciation
Provide easement for developer, Sign 20-25year PPA 100% early stage revenue
Can purchase RECs 10-20% late stage revenue

Electricity Investment
Electricity Special Debt & Equity
Revenue
User Purpose
HOST INVESTOR
Vehicle (SPV)
PPA Contract
LLC Returns
O&M Equity
Installation, O&M contract Investment
on location service Fees and Returns

Solar EPC Investment Management Service

Contract Financial Fund Management Agreement
Integrators • Financial optimization
“Brokers” • State incentive rebate management
PV System Sales • Billing and administration
• Financial reporting
• Operation and Maintenance Contract
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 Solar PV Business Role
Value Added Service Provider Loan Agreement, Depositary Agreement, Security Agreement
Project Developer Financial 3rd Party
Debt & Equity
Intermediaries Financier
Financial (PPA Firms)
EPC
Modeling Attributes
Payment
Payment RECs
Design & monitoring
Engineering O&M Revenue Contract - Payment
SPV
Commissioning Payment

Electric IOU
User MOU
Component Electricity Bill
Vendor IPPs
Payment
Modules
Inverters Site Plan Review Financial and tax inceptive
Interconnect and
Mounting Special Use Permits Net metering
State
BOS standards
REC
Building Codes County
Influence PV City Federal Government Policies State Utility
System design Applications filled out, permits obtained ITC/RPS Commission
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 Solar PV Business Structure
Project
NDA, CDA
Site Options
Loan Agreement BANKS Debt & Equity ( 70/30 )
Depositary Agreement
Land Purchase Agreement AND Permanent
Developer Security Agreement
Rental/Lease Agreement INVESTORS Financing
EPC Agreement Construction
Financial Loan (SEF Owner)
EPC $$
Modeling Pay off $$$
Green Attributes
Vendors take
$$$$ Buy RECs
Ownership SEF
Design & monitoring Ownership
Interconnection Study
Engineering O&M
$$$ SPV
CommissioningCredit Purchase Agreement
$$
$
Power Purchase Agreement
O&M Agreement
IOU
Legal Electric MOU
Components
Modules Financial Rep. User IPPs
$
Inverters Intermedi
Mounting aries Incentive 20 yrs
Environmental Study Payment $$$$$ Set Interconnect &
BOS Site Plan Approval Net metering
Special Use Permits State
Provide Financial standards
Building Codes REC & tax inceptive
Influence PV County
System design
City Federal Government State Utility
Set Policies
Applications filled out ITC/RPS Commission
permits obtained
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 Project Developer Lawyers

Financial
EPC
Modeling
4-5 Milestone SEF
Design & monitoring Payments $$$$$

Engineering O&M NDA, CDA

Site Options Electric
$$ Land Purchase Agreement
Rental/Lease Agreement User IOU
EPC Agreement OWNER MOU
Components IPPs
Modules
Inverters Incentive 20 yrs
Site Plan Review Payment $$$$$
Mounting Interconnect and
Special Use Permits Net metering
BOS State
standards
REC
Building Codes County
Influence PV City Federal Government Policies State Utility
System design Applications filled out, permits obtained ITC/RPS Commission
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 2010 Sept. Rocky Mountain Institute
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 Notice Commercial PROJECT VALUE
Of Operations
Release Date (COD) Permanent Finance Structure

• Site Control • Design and Engineering • Project Finance and Syndication

• Land/Lease • Independent Review • Investment Tax Credit (ITC) / Cash Grant
Agreement • Construction • Tax Equity, Equity and Debt
• Environmental • Project Management • PBI, SREC, and TREC
& • Commissioning • Depreciation
Interconnection • Construction Debt
Study & Queue • Operation and Maintenance
• License & • Legal and Accounting
Permits
• Site/Build Plan

Developers’ Equity
Developers’
Equity
Project Construction Operation and Maintenance Phase
Development Phase

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 Special Purpose Vehicle
Syndicated 20 year Financed Solar PV Project
Return on Tax Equity – 6-12%
Construction Loan 8-12% Return on Equity – 10-12%
Long Term Debt Interest – 4-8%
Business Process
$0.6/W
$ 3/W
$3.25-
$4.50/W 15-20-extendable to 30 years
Solar Energy Field Ownership Sales

Future Considerations
Exchanges for REC
Carbon tax
State Feed-In-Tariff
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The Sources of Financing
Taxable Entity:
Balance Sheet
Operating Lease
PPA
Tax-Exempt Entity
Balance Sheet
Municipal Bonds
Clean Renewable Energy Bond
Tax-Exempt Lease
Service Contract
Pre-Paid Service Contract

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Consider PV Financing
Value of Tax Equity
Lease vs. Partnership
Value vs. Risk Exposure

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 Individual Investors, Angels (projects < 1MW - $3-
5Million)
Regional Banks – Union Bank of California
National Banks – West Fargo, Bank of America
Sovereign Wealth Fund – China
VC, Buyout, Hedge Fund, Mess Fund, Infrastructure
Fund, Public Pension, Sovereign Wealth Fund

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Commercial Solar PV Projects
Finance vs. Purchase
Benefit and Challenges Finance Purchase

Solar Project Knowhow Not Required Important

Transaction Fee High Lower
Immediate Cash Outlay Not Required High
SEF Responsibility and Total None
Liability
Maximize Solar Production Yes Maybe
Ownership changes Possible None
O&M Expenditure, Others None $8-10 dollar per MWh
REC Claims No Yes
Future Energy Saving No Yes
Total Cost of Ownership
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 Five Phase of Large Scale Solar PV
Project Development (MW)
Site Control - Rooftop lease, Land Option or purchase
Agreements ($3-24k per acre-6 acre per MW)
Permitting, Environmental and Interconnection
Queue 6-18 months – ($60 to $250k)
Construction and Commissioning 4-6 weeks per MW
– (Construction Loan 4.5-8-10% interest)
Syndication/Permanent Financing – Special Purpose
Entity (legal and Syndication Fee $200k-800k <10MW)
Asset Management - O&M $8-20 per MWh (20 years,
option, plus EBO 6th and or 15th year)
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Key Successful Factor
Shorten Project Development Cycle – Creditable
Project Pipeline
Access to Flexible Project Financing for Permanent
Financing – Right Structure for the Off-Taker
Tax equity participant
Low cost long term debt
Access to Construction Loan Facilities – Equipment
Bankable and Available
Development Back by Strong Balance Sheet
Good Credit Rating Off Taker
Strong SREC or PBI Incentives
Turnkey Design and Project Management
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Definition
 Tax Equity—Source of capital that seeks returns from tax benefits
generated by tax credits and deductions.
 Leases—Tax Investor owns leased assets. Sponsor buys back assets either
by fixed price early buy-out option (EBO) or at fair market value at lease end.
Sponsor retains profits in excess of rent.
 Partnerships—Sponsor and Tax Investor jointly own assets. Sponsor buys
back Tax Investor post-flip minority share at fair market value of the share.
Profits shared.
 Cash Grant—Option to receive cash in lieu of 30% Investor Tax Credit
(ITC).

Key Variable – In-Service Timing, Leverage; Financing Choice

(Lease/Partnership); Buy Out timing; Flip Timing; Cash Grant (Lessee/Lesser;
Sponsor/Tax Investor)

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 Pyramyth Liu
408 823-9068
pyramythliu@idsoftcapital.com
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 PPA Financing Contacts
 Solar Power Partners, MMA Renewable Ventures, Tioga Energy,
Recurrent Energy, Soltage, MP2
 Investment Bank
 Goldman Sach/Coengtrix – Dan Bautch
 Barclays Capital – Carl Weatherly
 Piper Jaffrey, JP Morgan,
 Banks
 NORD/LB – Vinod Mukani
 Union Bank of California – Lance Markowitz
 HSH-Nordbank – Apolka Totth
 US Bank – Darren Vanthof
 Corporation
 GE Com Finance – Maria Klutey
 Honey well – William Johnston
 Boeing – Ronald Patterson
 Insurance Company
 John Hancock Financial Service – Gavin Danaher
 Met Life - Jeetindra L Balchandani
 Lease - fixed price during lease term and FMV of system at the end of lease
term
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