March 20th, 2008

1. March 20th, 2008 PARETO ENERGY LtdGreen Energy Development and InfrastructureAn Electric Power Solutionwhen there is no more business as usual Contact: John T ‘Tim’ Tyler Director and COO Pareto Energy Ltd Washington, DC 202-625-4388 Ttyler@paretoenergy.com

2. 2 3 December 2007 Maryland PSC Report “The issues discussed…are framed by a factual premise about which there is no ambiguity or room for serious dispute: unless steps are taken now, the State of Maryland faces a critical shortage of electricity capacity that could force mandatory usage restrictions, such as rolling black-outs, by 2011 or 2012. We face this crisis because Maryland sits in a highly congested portion of the regional electric transmission system (which makes it difficult to bring more power in) and because we use more electricity than is generated here. We can respond essentially in two ways: we can add more capacity, either through new generation or transmission, or we can reduce the amount of electricity we use. At the end of the day, we will need to do some of both.”

3. 4 Pareto is Making Things Happen • After some hard work, got law passed on 22 June in Connecticut and that kicked off a flurry of projects • Project pipe-line of over 50 projects in the US and the UK…mostly at initial stages • On-going design stage at Stamford Government Center…this will probably be the first ‘iron in the ground’ • The initial assessment for the Ansonia EID was presented on Valentines Day; Oxford CT and Stafford Park NJ have also signed • Pareto’s EID approach is a political movement in Connecticut; we are getting calls & positive editorials every day • The legal, financial & legislative team is in place • Pareto’s design team (CDS LLC) is standing by and can work with engineering firms like URS, RTKL and others • Many Mayors are putting us in charge of developing solutions to their electrical power problems…we are working with governors too

4. 5 Pareto Energy Ltd Who we are: • Developers of Energy Independence District ™ (EID) concept and framework • Enable, organize and finance Energy Independence Districts ™ that optimally deploy energy saving technologies, renewables, on-site power and micro grids. • US Conference of Mayors – Platinum Partner Our focus: • Development of Energy Independence Districts™ (EIDs) • Start with an anchor tenant or a cornerstone project • Respond to the customer’s needs • Reliable & sustainable / green energy infrastructure • Efficient finance with: tax-exempt bonds & incentives and grants

5. 6 What is an EID? An EID is a locally monitored, managed and controlled electric power and thermal energy distribution system utilizing local generation resources backed up by utility-supplied electricity (grid power.) An EID always has a legal identity and local involvement and participation. An EID is affordable, reliable and sustainable.

6. 7 EID – Local Microgrid Approach Transmission Lines Central Plant Step-Up Transformer Energy Improvement District Recip Engine Micro- turbine Commercial Wind Landfill Gas Fuel Cells Onsite Generation Storage Technologies Geothermal Traditional CHP Renewables

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8. 9 The Energy Independence District (EID) Concept > Multiple Benefits • EID = Affordable Energy • EID = Reliable Energy • EID = Clean Energy • EID = Competitive Economic Advantage • EID = Flexible Solution • EID = Modular implementation

9. 10 Effect of an EID Approach on Reliability Insulates operations from ‘grid stress’ through local, on-site power generation Central grid back-up More reliable and stable power supply Improved power quality for critical energy applications Local users in control of their own energy resources Ideal for large data centers and other businesses, hospitals, universities, homeland security

10. 11 EIDs utilize a new interconnection approach Microgid Interconnection is essential – pure “islanded” operation is more expensive and less reliable Current solutions are inadequate – IEEE 1547 and other standards only work consistently for smaller projects (<2MW)‏ For larger projects, extensive customization and negotiations with utility required – highly vulnerable to delays and “gold-plating” Current solutions cannot combine multiple small generators on a set of private wires (“microgrid”) – instability and equipment damage will result But there is a solution…

11. 12 Proprietary Technical Approach Solves Interconnection & MicrogridProblems Removes previous synchronization and stability problems of connecting multiple generators to each other and to the utility grid – entirely “non-synchronous” solution Removes safety and fault current problems for larger installations – DC inverters physically limit potential power flows Removes power quality issues for private wires or deteriorated utility grids – software controllers combine sources into “perfect” AC signal, using 5µs switching times for power transistors Stabilizes utility grid – can sell VAR, current, and frequency stabilization services back to utility

12. 13 The Grid View of Pareto’s Interconnection Solution Micorgrid power distribution (“private wires”) side-by-side with utility grid Microgrid combines on-site and nearby off-site power sources Dual feed to every user No synchronization with utility grid required Allocation among sources adjusts second-by-second based on economics and availability

13. 14 The User's View of Pareto’s Inter-connection Solution All sources – utility, microgrid, on-site – combine into single “perfect” signal on building's internal power bus If one source fails, others increase Small amount of energy storage smooths out transitions and interruptions Engines can be tuned to peak efficiency without needing 60Hz output 13

14. 15 Short Outages Matter Length of Typical Outages Facility down-times after 1-sec outage

15. 16 “n+3 Reliability”: 5 minutes / yr • “Five-9s” reliability • Each generator meets “mission critical” loads, ensures continuous operations • 3 reserve generators, plus UPS, plus the grid as back-up 99.999% up-time = 5 min average downtime / yr Typically five to twenty years between outages

16. 17 EID = Clean/Green Energy Improvement to Regional Air Quality and reduction of Greenhouse Gas Cost effective, renewable, low emission, clean technologies Demand Management ; Renewable Energy such as Solar, Fuel Cells, Landfill Gas, Wind, Geothermal, Biomass, ‘Water Treatment’ plants, Photo-voltaic Combined Heat and Power (CHP)…Trigeneration Smart Energy Grids and Thermal Storage 30Mw of CHP has the equivalent positive environmental impact of a142Mw of Solar or about 100Mw Wind Power facility

17. 18 100% 100% energy input energy input –60% –25% heat loss heat loss 33% 35% –7% 0% usableelectric usableelectric t&d loss t&d loss 40% 0% usable heat usable heat Clean and Affordable Energy Supply Conventional Generation (1/3 Fuel Use) Local Power CHP (3/4 Fuel Use) Local Power (Trigeneration) EID Stressed Transmission & Distribution System

18. 19 Trigeneration = “Efficient Power”

19. 20 An EID is Sustainable

20. 21 EID = Affordable Energy Recycle of excess thermal energy for cooling and heating to minimize operating costs Utilization of low cost funding sources that include State and Federal Grants Energy Independence District Bonds Real Estate Investment Trust Equity Syndication of and Federal Tax credits Avoids utility distribution cost upgrades and focuses on where power is needed Modular and can be implemented quickly as needed

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22. 25 What are the tools we have? • Technology flexibility • Access to ‘cutting-edge’ interconnection technology …that enables interconnection at the distribution level • Geographical flexibility • Legal and legislative expertise

23. 26 EID –Integrates Multiple Energy Options and Solutions

24. 31 Pareto Energy EID:Third Party Reactions “In Stamford last August, Connecticut Light & Power cut electricity to the business district to prevent a wider blackout after underground power cables failed during a heat wave. In Ansonia, rate increases by United Illuminating are expected to add $200,000 to its municipal electric bill. Both cities may have found a solution to the power problem, one that ensures reliable power that may come with a cost savings. They are the first Connecticut cities to take advantage of a new state law that allows them to set up energy improvement districts with the authority to issue bonds to pay for the establishment of an independent electrical grid with its own power plants … The independent grid’s value rises in areas of concentrated development where heat recaptured from electricity generation can warm and cool buildings. The Stamford grid could potentially cut by an estimated $300 million the federal congestion fee imposed on Connecticut because of the lack of adequate power lines. The promise of these micro electricity grids has yet to be realized. But the need for them is clear.” – New Haven Register Editorial, January 4, 2008

25. 32 Pareto Energy EID:Third Party Reactions A new financing tool may accelerate the growth of microgrids and distributed generation. Along the way, it may make it much easier for customers to divorce themselves from the grid. Under a Connecticut law passed in June, municipalities may now form “energy improvement districts” (EIDs). We warned you a year ago that microgrids were an important and potentially disruptive trend. Now we're back to suggest that this financing mechanism could accelerate their growth. EIDs give businesses a new way to create their own power. Dr. Shalom Flank, Pareto Energy’s CTO, makes the point that an EID allows users to operate parallel to the existing grid. The EID can draw power from the existing grid or use its own. Using a transaction model based on cost, reliability and service, it will choose the best power source and delivery options for its customers. Dr. Flank believes that it is a "win-win" situation for strapped utilities and frustrated customers … Given the development of this financing tool, SGN believes a growing number of real estate developers and systems integrators will set themselves up to, in essence, compete with regulated utilities. They will seek to sell and operate turnkey microgrids for high-end housing developments, office parks, military bases and high-rises. That's why forward-thinking utilities … should be testing microgrid concepts, as is happening now at AEP, Sandia and Chula Vista. And they should begin a dialog with regulators … EIDs are as much an opportunity as a danger. If regulators will allow it, building and/or operating microgrids could become a new revenue stream for utilities, on their own or in joint ventures with systems integrators. – Smart Grid News, Nov 13, 2007

26. 33 Pareto Energy EID:Third Party Reactions The Town’s EID would function as a electrical load aggregator, providing highly reliable, high quality power to the industrial zone and airport facilities. Power would be sold by GE Towantic/Northeast Utilities at rates between the wholesale rate(rate needed to profitably operate the merchant plant) but less than the retail rate charged to the distribution companies through the market mechanism. Waste heat from generation activities would be provided to the WHIP, Waterbury-Oxford Airport, Technology Park and properties south on Christian Street (Omega’s large tracts plus the Garden Homes and Mastrianni Properties on Airport Access Road) Small Peaking Plants including a fuel cell application would be used to provision the local load during the period when the main Towantic plant was not generating. Operating the peaking plant to serve the industrial zone and airport loads plus recovering and distributing waste heat from both plants would accelerate capital recovery for the peaking facilities. This would accelerate peaking plant capital cost recovery relieving ratepayers of some of the additional costs. DPUC would view this favorably in permitting processes. Benefits to Oxford Discounted industrial power and waste heat for cooling would differentiate Oxford and provide a competitive advantage to attract larger, energy intensive industries. Oxford could accelerate the build out of Technology Park in both Oxford and Middlebury Power and Waste Heat provisioning could become a new Oxford Revenue Stream through the EID organization. The peaking plant that serves the local load could be fuel cell based, which would allow operation with absolute minimum emissions and qualify the entire project for Clean Air Fund subsidies. The peaking facilities would remain available to serve peak loads during hot and cold weather as required providing Oxford industries with the highest quality uninterruptible power supply Town government and educational facilities would experience reduced energy costs – Herman Schuler, Economic Development Director to Oxford Board of Selectmen, January 8, 2008

27. 34 Pareto Energy EID:Third Party Reactions “The city has taken a step toward changing the way it generates and purchases power, thanks to efforts by Pareto Energy of Washington, D.C. Over the past two months, Pareto has identified the best local options for improving the city’s energy usage, by stabilizing rates and reducing energy waste and the city’s carbon footprint … At the sites where businesses depend on extremely reliable power to operate, Warner envisions the companies using primarily their own microgrids for energy, and switching to the grid only for backup. Warner suggested a fun side project for the city: an Ansonia Energy Museum and Learning Center, which could attract area schoolchildren and give the town an economic boost. In the 19th century, Ansonia was home to William Wallace, inventor of the electric dynamo. In 1878, Thomas Edison traveled to Ansonia to visit Wallace’s shops, where what Edison saw accelerated his invention of the incandescent lamp.” – New Haven Register, Feb 15, 2008

28. 37 1.6MW engine with trigeneration Fuel Cell Thermal Aquifer Solar

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