Clean/Green: Show me the Money!

1. Clean/Green:Show me the Money!

2. Economic Backdrop: Is the World Recovering? • IMF’s “World Economic Outlook” forecasts 4.2% global growth vs -.6% in 2009 • China to grow at 10% • India to grow at 8.8% • U.S. growth at 3.1% implies continued unemployment rate of 10% or more • Europe and Japan are lagging • Economists still worry about double dip recession • PIGS credit crisis still threatens global economy • Sovereign risk could prolong the credit crisis • State and local government contraction will fuel further run up in U.S. unemployment

3. Is U.S. Economy Strengthening?

4. What’s Happening with State Finances?

5. Are States as Bad Off as it Seems? State Budget Deficits vs. Total Budgets

6. Translation for Financing • Economic paradox • Government spending is quickest, strongest stimulus we have • Sustainability of government balance sheets is the central crisis in the world • Interest rates should remain fairly low in coming 12-18 months though concerns on inflation and deflation remain • Investors will continue on worldwide flight to quality • Volatility will remain with us • Risks are being studied with fine tooth comb

7. Public Bonds are on Sale

8. Credit Spreads Narrowing

9. Government Funding Programs for Clean/Green Energy Federal Programs State and Local Programs

10. Roadmap to ARRA Clean-Green Economy

11. DOE Renewable Energy Loan Guarantees: Key Program Provisions EPAct Title XVII § 1705 authorizes guarantees for projects that commence construction by September 30, 2011 to include any of the following: Renewable energy systems, including incremental hydropower, that generate electricity or thermal energy, and facilities that manufacture related components; Electric power transmission systems; or Leading edge biofuel projects (pilot or demonstration scale) DOE program concept is that the state can commit DOE loan guarantee to a project in its state Proposals from states submitted early this year but nothing yet approved No real progress being seen yet Primary areas of DOE interest is: Ability of state agency to provide credit review and loan processing and management Requirement that the state have stake in the program, as through direct loan, guarantee, equity, etc.

12. DOE Loan Guarantee Considerations Financial Attributes • Third party supply or off-take agreements • EPC contracts with liquidated damages • Detailed construction contracts and bids • Permitting and environmental review • Intellectual property rights must be secure • Equity commitments need to be secured before applications • Project site control essential • Working financial models showing assumptions, reserves and sensitivity analysis • Favorable market and competition review Technical Attributes • Engineering reports • Technological advantages • Mitigation of technology risk

13. IFA Loan Guarantee Program Guidelines • SB 1906 and SB 390 together authorize up to $3 billion in moral obligation support for renewable, clean and efficient energy projects • General terms • Preference for 7 year term • Commercially available technology • Verifiable, quantifiable savings • 1.05x coverage • Up to 100% financing may be available • Process: Generally 1-2 months from application • Application and review • IFA Energy and Credit Committee review • Inducement resolution • Final resolution • Sample projects: • Efficient lighting, appliances, HVAC • Insulation • Efficient boilers and refrigeration • Occupancy sensors

14. Qualified Energy Conservation Bonds • $3.2 billion of QECBs authorized in Stimulus Bill • Eligible QECB uses include: • Energy efficiency capital expenditures in public buildings • Renewable energy production • Various research and development applications • Certain mass commuting facilities • Several types of energy related demo projects • Public energy efficiency education campaigns • Renewable energy 14

15. New Clean Renewable Energy Bonds • Additional $2.2 billion (in addition to $1.2 billion that has already been allocated) of new CREBs awarded to 805 projects in October 2009 • Eligible Purposes: To finance qualified renewable energy facilities that produce electricity – solar, wind, closed-loop biomass, open-loop biomass, geothermal, small irrigation, hydropower, landfill gas, marine renewable and trash combustion facilities • Allocation • 1/3 to state/local/tribal governments • 1/3 to public power projects • 1/3 for electric cooperatives 15

16. Energy Performance Contracting Still Growing • 20% annual growth from 1990 to 2000 • 3% annual growth from 2000 to 2004 • 22% annual growth from 2004 to 2008 • Factors attributing to diminished growth • from 2000 to 2004 include: • Collapse of Enron • Suspension of the federal ESPC • program • Uncertainty about the • deregulation of the electric • utility industry Source: Introduction to Energy Performance Contracting. Prepared by ICF International and National Association of Energy Services Companies, October 2007

17. EPC Market Characteristics • MUSH (municipals, universities, schools and hospitals) market and the federal market account for about 80% of the total EPC projects. Commercial building projects comprise about 9%, industrial projects about 6%, and residential and public housing projects the remainder Source: Introduction to Energy Performance Contracting. Prepared by ICF International and National Association of Energy Services Companies, October 2007

18. Property Assessed Clean Energy (PACE) • Berkeley led the way and now 16 states have some PACE efforts approved and 10 more evaluating it • Voluntarily impose special assessment on property tax bill that is used to finance selected clean energy and efficiency projects • Property tax remains with property, not owner and are therefore generally a prior claim to mortgage payments • Nonprofit banking organization emerging to fund the improvements against future incremental tax receipts • Large scale roll out will depend on ability of sponsoring government to enhance and homogenize the credit for investors (e.g. Boulder County moral ob backing their $10 million debt – 600 residential properties ) • Banks remain skeptical that the improvements translate to higher home values • Efforts underway for PACE legislation and programs around the country • How rest of nation responds remains to be seen How secure is the revenue stream supporting the debt? Will banks let this debt come ahead of their mortgage rights?