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Utilities & O&M Service

Tesco/EES Energy Joint Venture (Service & Payment Flows). EES. TESCO. Dividends. Dividends. Operational Optimization. Utilities & O&M Baselines (£). Utilities. Utilities (£). Utilities & O&M Service. Commissioned Projects. EES. TESCO. Project Cost Less Residual Value (£).

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Utilities & O&M Service

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  1. Tesco/EES Energy Joint Venture (Service & Payment Flows) EES TESCO Dividends Dividends Operational Optimization Utilities & O&M Baselines (£) Utilities Utilities (£) Utilities & O&M Service Commissioned Projects EES TESCO Project Cost Less Residual Value (£) Fair Value for Assets (End of Lease Terms) Asset Purchase Option (End of Lease Terms) SPV Project Funding at Commissioning (£) £ Banks Maintenance Contractors Commitment Fees (£) O&M Contractors Banks O&M Services Lease Payments (£)

  2. Tesco/EES Energy Joint Venture (Agreements) SPV Agreement TESCO EES • Equal Ownership/Control • Defined Distribution of Economic Value • 10 Year Term • Joint Resource Dedication • Clear Investment Criteria • Project Exclusivity at Specified Facilities • Defined Exclusivity Term Utilities Agreement Utilities Agreement TESCO EES O&M Agreement SPV Individual Project Development Agreements Lease Agreements • New Energy Assets • Lease Obligations • Project Development Resources Master Agreement (Lease Line) O&M Contractors O&M Agreements Banks Lease Agreements

  3. Energy Outsourcing Partnership Structure Utilities Agreement Energy Services Agreement Lease Agreements (at project completion) Utilities Payment (£) Syndication (once asset pool funded) Savings Payment* (£) Tesco EES Funding (£) Banks Lease Payments (£) Lease Payments (£) Project Development Resources and Expertise Ongoing O&M Cost Optimisation Completed Projects Asset Purchase Option (end of lease term) * % of Difference Between Baseline Utilities/O&M Cost and Actual Utilities/O&M Cost

  4. Energy Outsourcing Partnership Significant Terms • 10 Year Term • Identification of Project Sponsors (both parties) • Commitment of Project Development Resources (both parties) • Shared Savings • Scope of Facilities & Equipment Types Clearly Defined • Project Exclusivity for Energy Infrastructure • Clear Investment Criteria & Project Approval Process • Timeline & Objectives Regarding Levels of Investment/Savings • Level of Lease Funding Commitment • Commitment of EES O&M Cost Optimisation Expertise • Energy Asset Maintenance Standards (if Tesco retains control of maintenance function)

  5. Energy Outsourcing Partnership Benefits • Innovative Energy Partnership with Leading Global Energy Company • Reduction in Life Cycle Energy Costs • Aligned Incentives Through Shared Risk & Savings • Ability for Tesco to Maintain Control of Maintenance Function if Desired • Commitment of EES Asset Management Expertise • Energy Design & Engineering • Project Management • On-going Operational Cost Optimisation • Commitment of EES Risk Management Expertise • Utilities Cost • Project Cost • Maintenance Cost (planned & unplanned) • Funding During Construction • Residual Asset Value

  6. Spectrum of Energy Outsourcing Structures Shared Savings/Risk Guaranteed Savings/Risk Mitigation Agreements Agreements Monthly Utilities Pmts. Monthly Utilities Pmts. Guaranteed % Discount Off Baseline Utilities/Maintenance Cost Shared Savings Pmts. From Projects* Joint Identification & Development of Projects Right to Implement Energy Capital Projects EES EES Tesco Tesco Right to Procure Utilities Right to Procure Utilities Right to Procure Maintenance Right to Procure Maintenance Completed Projects Completed Projects Advantages Disadvantages Advantages Disadvantages • Reduced Life Cycle Energy Costs • Guaranteed Savings Immediately & Each Year of Contract Term • Reduced Life Cycle Energy Costs • Aligned Incentives - Shared Savings & Risk Over Contract Term • Greater Risk - No Guaranteed Savings • Savings Above Guarantee Flow to EES • Significant Organizational Approvals May Be Required To Provide EES Project Implementation Rights * % of Difference Between Baseline Utilities/O&M Cost and Actual Utilities/O&M Cost

  7. Tesco/EES Energy Outsourcing Partnership Utilities Agreement Utilities Payment (£) Energy Asset Mgmt. Agreement Savings Payment* (£) Master Agreement (Lease Line) Lease Agreements Lease Agreements Tesco EES Commitment Fees (£) Banks Commitment Fees (£) Lease Payments (£) Lease Payments (£) Operational Optimisation Commissioned Projects Maintenance Standards Asset Purchase Option (End of Lease Term) * % of Difference Between Utilities and O&M Baseline and Actual Utilities and O&M Cost

  8. Tesco/EES Energy Joint Venture (Income Statement)

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