Enhanced Use Lease Components, Terms and Conditions

1. Enhanced Use Lease Components, Terms and Conditions Mr. Allan Curlee SAF/GCN 29 Jun 11

2. Contents • Energy EUL Deal Structure • Project Types and Characteristics • Terms and Conditions • Air Force Real Estate Instruments • Real Estate Instruments – Lease versus Easement • Real Estate Execution Methodology • Energy EUL Projects • Summary

3. Energy EUL Deal Structure • Energy EULs • Assist in meeting AF asset management and energy goals • Diversify and optimize value of AF real property assets • Are long-term, 30 to 50 year, Public Private Partnerships (PPP) • Are driven by external market demand • State Renewable Portfolio Standards (RPS) • Unlike PPA, EUL project not limited to installation need; scalable to capture market demand • Are not Power Purchase Agreements (PPA) – commitment to procure energy • AF exploring development of Combined EUL / PPA; regulatory factors being addressed

4. Project Types and Characteristics • Solar Photovoltaic (PV) & Concentrated Solar Power (CSP), Wind, Geothermal, Biomass, Waste-to-Energy (WTE) are all acceptable based on resource availability • Utility-scale and distributed generation both acceptable • State Renewable Portfolio Standards drive project type • Project phasing acceptable and encouraged • Long-term development partnerships based on single Request for Qualifications (RFQ) • Project phasing allows for rapid Phase I implementation; speed to market and cash flow • Community partnerships for biomass and WTE often required • Development costs require scale to bring down cost of generation • AF installation resources often insufficient alone • Utility-scale energy storage (long-term planning) • High-resource installations in key markets require to fully exploit

5. Terms and Conditions

6. Air Force Real Estate Instruments • Project requirements can influence selected instrument (such as lenders and utility company requirements) • EULs are executed under 10 USC 2667 and require a lease • PPAs may use a lease or easement as required Energy Project Real Property Instrument Permit License Easement Lease Disposal (Fee) EUL or PPA AF requires no interest in property; excess to mission needs PPA Not excess but not needed by mission for term of lease; grantee has exclusive use and possession Not excess to mission needs; would not interfere with mission; grantee generally has non-exclusive use for specific purpose/use but no possessory rights No interest in real property conveyed; personal to the licensee, revocable at will Generally used for governmental tenants only; conveys no interest in real property

7. Real Estate InstrumentsLease versus Easement • Lease authorized under 10 USC 2667 • Provides exclusive use & possession of property for set term • Common for commercial real estate, energy, banks, schools, and grazing and includes EUL projects • AF use of the property is not permitted during term of lease, except as specifically negotiated and incorporated into lease • Easement authorized under 10 USC 2668 and 40 USC 1314 • Used to provide non-possessory, but potentially exclusive use of property for specific purpose and specific term • Common for roadways, rail lines, and utilities • AF or 3rd party use of property is permitted if non-exclusive but may not interfere with previously granted easements

8. Real Estate Execution Methodology • Potential renewable energy projects vetted to AF Renewable Energy Project Development (REPD) Subpanel for selection • Projects are structured to bring greatest benefit to AF and development partner • EUL projects designed to optimize value of non-excess real property • PPA projects designed to meet requirements for utility cost savings management of federal facilities • Selected projects follow real estate guiding principles • Identify project requirements for either EUL or PPA • Apply required real property interest needed consistent with requirements • Lease or easement

9. Energy EUL Projects • Edwards AFB Solar Photovoltaic (PV) Project, CA – Enhanced Use Lease • Provides renewable electricity to the California power grid • Located on 3,288 acres with anticipated 50 year lease term • Phase III - Lease under negotiations • Hill AFB Waste-to-Energy (WTE) Project, Utah – Enhanced Use Lease • Provides renewable electricity to the Utah power grid • Located on 13.7 acres with anticipated lease term of 50 years • Phase III - Lease under negotiations • Project Pipeline • Phase II (Project Acquisition) – 2 projects • Phase I (Project Definition) – 1 project • Phase 0 (Project Identification) – 3 opportunities (site visits conducted); 16 other opportunities being evaluated

10. Summary • AF interested in full spectrum of renewable energy project types to monetize non-excess assets, and in some cases to meet AF energy goals • Market demand determines EUL project scale and phased rollout of project • Flexibility is key to structuring deals; speed to market and cash flow being essential goals for the AF • AF has matured the EUL business model and commercial-like processes to implement deals • Current business development pipeline for energy EULs offers significant opportunity for the development community