Financing Solar Energy How to Finance Your Deal May 21, 2009

1. Financing Solar EnergyHow to Finance Your DealMay 21, 2009 Bruce M. Serchuk Nixon Peabody LLP 401 9th Street NW, Suite 900 Washington, DC 20004 (202) 585-8267 bserchuk@nixonpeabody.com

2. Financing Options • Clean Renewable Energy Bonds • New Clean Renewable Energy Bonds • Qualified Energy Conservation Bonds • Tax-Exempt Governmental Bonds • ARRA Options (BABs, Recovery Zone Bonds) • Bonds and New Markets Tax Credits

3. Clean Renewable Energy Bonds • Added in 2005 (Energy Policy Act of 2005) • Supplemented in 2006 (Tax Relief and Health Care Act of 2006) • Designed to provide an incentive for governmental bodies (including Indian tribes) and cooperative electric companies to produce renewable energy comparable to incentives available to the private sector • Eligible projects include generally Section 45 projects, including solar

4. Clean Renewable Energy Bonds • CREBs are “tax credit bonds” • Designed to provide the borrower with a 0% loan―the Federal tax credit received by bondholder intended to be comparable to interest on interest bearing loan • No private ownership, but no private use limits • Subject to tax-exempt bond arbitrage rules • Treasury sets tax credit rates daily • Treasury sets permitted maturity daily; level principal payments are required

5. Clean Renewable Energy Bonds • $1.2 billion of CREBs has been authorized, $750 million for governmental bodies, $450 million for coops • Eligible borrowers must apply for an allocation by providing information about the project and its financing • CREBs are allocated to applicants beginning with the project with the smallest amount requested and then the next-smallest amount, until the total is exhausted • Must be issued before January 1, 2010

6. New Clean Renewable Energy Bonds • Added in 2008 (Energy Improvement and Extension Act of 2008) • Supplemented in 2009 (American Recovery and Reinvestment Act) • $2.4 billion total volume • No termination date

7. New Clean Renewable Energy Bonds • Same types of projects as CREBs • 70% tax credit • Same final maturity, but no principal amortization • Modified arbitrage rules • Stripping of tax-credits • Allocations—1/3 to munis, 1/3 to public power, 1/3 to coops • Allocations—muni and coops (small to large), public power (pro rata)

8. Qualified Energy Conservation Bonds • Added in 2008 (Energy Improvement and Extension Act of 2008) • Supplemented in 2009 (American Recovery and Reinvestment Act) • $3.2 billion total volume • No termination date

9. Qualified Energy Conservation Bonds • Same basic structure as new CREBs • 70% credit • Laundry list of permitted projects, including solar • Up to 30% may be used for private activities, including private ownership • Allocations—to States and Large Local Governments (>100,000 population)

10. Tax Exempt Governmental Bonds • Property must be governmentally owned • Limited private use allowed • Property may be managed under a Qualified Management Agreements • Prepayments

11. ARRA Options • Build America Bonds • Same general rules as tax exempt governmental bonds • 35% tax credit to issuer or holder • Recovery Zone Bonds • Economic Development Bonds (45% tax credit) • Facility Bonds (private activity bonds)

12. Bonds and NMTCs • Leveraged NMTC Structure • Eligible Bonds • CREBs • New CREBs • QECBs (private activity bonds) • Recovery Zone Facility Bonds