m.connolly@highpassenergy

1. Dual Taxation in the Tribal Renewable Energy Economy15th Annual Indian Nations and Tribes Legislative DayJanuary 19 2010Phoenix, ArizonaMichael Connolly Miskwish

2. “When it comes to creating jobs, closing the opportunity gap, and leaving something better for our future generations, few areas hold as much promise as clean energy.” President Obama – November 5, 2009 Remarks , Opening of the Tribal Nations Conference m.connolly@highpassenergy.com

3. 160MW Wind Farm Campo Reservation, 45 miles East of San Diego Campo Kumeyaay Nation Joint Venture with SDG&E and Invenergy Tribal Government + Economic Development Corporation Will benefit from work of local contractors and crews, and purchase of critical equipment and services from the tribe Kumeyaay Wind II In Progress

4. Overview Campo Projects Current Markets MPR- California Past busts in renewables Transmission queues m.connolly@highpassenergy.com

5. Situational Analysis • Indian Country contains an estimated 10% of all energy resources in the United States • Tribal energy resource development can support local economies and Tribal sovereignty • ARRA provides incentives for tribal development • Traditional project finance model • Equipment supply/construction loans with term takeout by institutional tax equity investors • Tax equity investment market has contracted • Lenders have exited or have limited funding • Flight to safety, intensive due diligence, stringent underwriting • Many tribes lack access to transmission • Solution to fill gap and drive industry growth • New sources of capital • Government support • Tax credit flexibility

6. Public – Private Partnership Reliance upon public-private partnership between government & business indicative of political structure Tax system has been an effective vehicle to raise money for public use but also to entice behavior and growth Oil & Gas Affordable Housing Renewable Energy • Private Sector – Tax Credits • Public Sector – Bonds • DOE Bonds

7. α drivers

8. Tribe α is not a formula Strategic • Capacity Building • Independence • Diversification • Revenue • Risk Financial • Return on Investment • Net Present Value • ∞ • Land Value • Depletion

9. Profiting as investors • Loss of PTC & AD • Gain of Government revenues • Use of tribal grants/programs • Profiting as governments • Negotiating revenue sharing • Build and lease back of infrastructure • Legislation (State and/or Federal)

10. Power of Many Faces

11. State Income and Sales Tax

12. Scenario – Straight Royalty • 100 MW • PPA 75 MW-hr • Capacity Factor .35 • Construction 260 MM • Royalty 6% • Sales Tax 5.6% • Property Tax .75% • Federal Corp Tax 33% • State Corp Tax 7% • Possessory Interest Tax .75% • Net present value consideration

14. Campo Wind II • 20 MW tribal ownership option • ITC grant • Bonds • BIA loans • New Market Tax Credits • Break even at year 12 • 20 year option to buy out project • Campo still holds 100 MW future capacity

15. Creating Competitive Equity • Transferability of PTC & AD • Preferences for transmission construction and access • Negotiating revenue agreements with States • Change bond structure • Change federal law

16. Michael Connolly Miskwish, Principal m.connolly@highpassenergy.com (619) 307-0160 m.connolly@highpassenergy.com