US Wind Power: Where is the Money? Where is the Risk?

1. US Wind Power: Where is the Money? Where is the Risk? September 17th, 2007 – Houston

2. Disclaimer The views presented herein are my own. They do not necessarily reflect the views of EDP, S.A., Horizon Wind Energy LLC, or any of their affiliates. Confidential

3. Who We Are • Horizon Wind Energy, formerly Zilkha Renewable Energy • Develop, construct, own and operate wind farms throughout the U.S. • Headquarters in Houston with regional offices in New York, Oregon, Illinois and California, and roughly 100 employees • Owned by EDP, purchased from Goldman Sachs in July 2007 • Will own ~1350 MW by the end of 2007 Confidential

4. What We’ve Done Maple Ridge Wind Farm 320 MW, Lewis County, NY Top of Iowa Wind Farm 80 MW Worth County, Iowa Tierras Morenas 24 MW, Costa Rica Blue Canyon Wind Farm 225 MW near Lawton, OK Mill Run Wind Farm 15 MW, Fayette County, PA Madison Windpower 12 MW, Madison County, NY Meyersdale Wind Power Project 30 MW, Casselman River Valley, PA Somerset Wind Power Project 9 MW Somerset County, PA Confidential

5. Wind Timeline in the Capital Markets Consolidation of Developers Wind Goes Public Wall Street Enters Slow Acceptance 2000 2002 2003 Jun 2005 July 2007 Oct 2007 EDP buys Horizon for $2,150+ mm USD Goldman Sachs buys Zilkha Renewable Energy; renames it “Horizon Wind” Zilkhas buy and rename International Wind Senior FPL portfolio bond deals rated BBB- GE buys Enron Wind for $328 mm Iberenova set to go public; raise expected to be ~$4,000 mm USD 2000 2002 2003 2004 2006 2007 US Installed GW 4 11 2 8 6 13 Confidential

6. Not so quixotic anymore… Confidential

7. Wind and the PTC • The Section 45 production tax credit allows owners of wind projects $20/MWh off their taxes for 10 years • Wind farm assets are also largely depreciated over 5 years for tax • Market share leader FPL made a business using the PTCs themselves • Now FPL is almost out of tax capacity, and foreign utilities and financial institutions are rivaling FPL in their annual construction programs • How does the market take advantage of the PTC? • What is its long-term future? Confidential

8. Institutional Equity Market • JP Morgan Chase was the first in the market, investing alongside developers to help them use the PTC and accelerated depreciation • GE has entered in a dramatic way and is now JP Morgan’s biggest competitor • IRS to issue “safe harbor” rules for partnership flip structure • Deal structure gives the institutional investor a preferred return—but tax equity prices at ~6.5% after-tax while debt prices closer to ~7% pre-tax • More demand for deals than there is supply Confidential

9. The Future of the PTC • Current extension through 12/31/2008, but developers already buying turbines for 2009 and 2010 • House Energy Bill has 4-year extension capped at 35% of project cost • Senate Energy Bill has no tax component • Increased taxes on oil companies would have caused filibuster • Couldn’t muster the 60 votes for super majority • Long-term extension has bipartisan support • Let’s hope for a compromise Confidential

10. Wind Derivatives • Chicago-based US Futures Exchange has launched financial wind indexes. • Based on deviations from 20-year wind speed averages • In NY and Texas regimes • Who will hold the floating leg? • Analogue to credit derivative swaps • Is CAPM really right? Confidential