The document provides an overview of alternative energy in the United States, noting that tax incentives have been the main driver of growth in addition to concerns over energy security and the environment. It estimates that 123GW of additional capacity will be needed by 2030 to meet existing renewable portfolio standards. The major alternative energy technologies in the US include wind, solar, biomass, and geothermal, each with their own variations and highlights.

1. Alternative Energy In The United States
Presented to:
Disclaimer
This document is not an offer to sell limited partnership interests (LP interests). Meridian Investments, Inc. (MII) is not soliciting an offer to buy LP
interests, or any part thereof, in any state where such offer or sale is not permitted.

2. LP interests will only be sold pursuant to an offering document. The sponsor and MII will each make available to each prospective purchaser
the opportunity to ask questions and receive answers concerning the terms and conditions of an investment or any other relevant matters, and to
obtain any additional information that a prospective purchaser may request (to the extent that the sponsor or MII, as the case may be,
possesses such information or can acquire it without unreasonable effort or expense). A prospective purchaser having questions or desiring
information about the LP interests should contact MII. Prospective purchasers must rely on their own examination of the information provided
and are not to construe the contents of this document as investment, tax or legal advice. The nature of the investment should be reviewed by
each prospective purchaser’s investment advisor, accountant, regulatory advisor and/or legal counsel.
The Interests may be sold in a private placement only to persons who are (i) either "qualified institutional buyers" (each, a "Qualified
Institutional Buyer") as defined in Rule 144A under the Securities Act ("Rule 144A") or institutional "accredited investors" described in Rule
501(c)(1), (2), (3) or (7) of Regulation D under the Securities Act ("Regulation D") and (ii) Qualified Purchasers as defined in the Investment
Company Act of 1940.
This document contains a brief discussion of the alternative energy market. Such discussion is not complete, may be changed and therefore
should not be relied upon in any manner whatsoever.
MII makes no representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this document,
and nothing contained herein is or shall be relied upon as a promise or representation by MII as to the past or future.
Statements contained in this document that are not historical facts are forward-looking statements as defined in the Private Securities Litigation
Reform Act of 1995. Also, words such as “planned”, “projections” or similar expressions indicate forward-looking statements and are not
guaranteed. They are based on present beliefs, expectations and assumptions. Prospective purchasers should not place undue reliance on
these forward-looking statements. MII does not undertake any obligation to update or revise any forward-looking statements as a result of
new information, future events or otherwise.
SECURITIES PRODUCTS SOLD 0R DISTRIBUTED THROUGH MERIDIAN INVESTMENTS, INC.,
MEMBER FINRA & SIPC
2

3. Contents
Sections
Executive Summary 4
Alternative Energy Overview 9
Solar Photovoltaic 19
Wind 27
Tax Equity Market 34
Appendices
Tax Equity Financing Structures 39
Case Studies 44
Project Evaluation Check List 48
3

4. Section I
Executive Summary
4

5. Executive Summary
Meridian appreciates the opportunity to discuss the alternative energy space and
opportunities within this industry
Through…
 extensive experience in energy and structured finance
 a wide-ranging network of developers and technical resources
 unique and proven structuring capabilities
An ideal partner to…
 originate investment and financing opportunities
 source and place capital along all points of a project’s life cycle and its capital structure
 advise investors on optimal entry points, as well as efficient structures
5

6. Meridian Investments, Inc. MEMBER FINRA & SIPC
Established in 1981, Meridian Investments, Inc. (MII) is a FINRA registered Broker/Dealer
and member of SIPC, licensed to sell direct participation programs and other forms of
securities
Leader in placing tax-advantaged investments codified by the IRC with corporate
investors:
 Renewable Electricity (§45 & §48)
Tax Equity Placements
 Affordable Housing (§42)
 Alternative Fuels (§29)
 New Markets (§45D)
Total equity placements exceeding $15 billion since inception
Over 150 institutional clients including:
 Major money center banks
 Utility companies
 Global financial services firms
 National insurance companies
Energy (~$6B)
 Retail companies Housing (~$9B)
Other (~$600MM)
 Government sponsored enterprises
 Technology corporations
6

7. Meridian Asset Finance
Meridian Asset Finance (MAF) is the structuring arm within the Meridian family of
companies for alternative energy transactions and other asset classes
Together for over 14 years with over 55 years of combined experience
 over $12 billion in assets financed
 over $15 billion of restructurings
Specializes in asset-based solutions for capital intensive industries
 extensive expertise in structuring, finance, banking, leasing, accounting and tax
 financed a wide variety of assets, including power, transportation, manufacturing, infrastructure, real estate
and technology assets
Structured several “firsts” including
 first corporate level letter of credit facility used for individual wind projects
 first synthetic lease funded in the high-yield bond market
 first real estate synthetic lease in Mexico
Developed numerous innovative structures for tax-efficient monetization
7

8. Representative Transactions
Meridian has consistently been active in the energy space, meeting sponsor and investor
objectives
1998 Syndicated the first §45k (formerly §29) coal to synthetic fuel transaction
Subsequently sponsored and raised equity for follow on §45k projects and was active in the
secondary marketplace
2004 Structured and Arranged Tax Equity on the first project based levered wind transaction
2005 Structured and Arranged Tax Equity on first multi-asset wind fund which featured cross-
collateralization of Power Purchase Agreements (PPA) to provide more favorable debt
financing terms to enhance the project returns of the tax equity and project developer/sponsor
2007 Closed first wind project in US market to utilize pre-paid PPA
2008 Closed first financing facility for distributed generation residential solar portfolio
2010 Closed first financing facility for distributed generation projects using commercial scale fuel cell
technology
2012 Engaged by Google to advise on renewable energy tax credit investment opportunities
8

9. Section I
Alternative Energy Overview
9

10. Overview Of Alternative Energy In The US
Commodity price volatility, environmental concerns, economic growth and a changing
political landscape have all contributed to the growing importance of alternative energy
in corporate and personal affairs
 Energy security and low-carbon based economic growth and job creation
 Tax incentives have been the main economic driver behind federal government incentives
 At the state level, Renewable Portfolio Standards (RPS) are the basic initiatives to further capacity
growth
Estimates show that some 123GW will be needed to meet existing RPS
 Will require 456 TWh by 2030
 With current capacity estimated at 68GW, an additional 60GW expected in next five years (including
capacity above and beyond RPS targets in some regions)
 Over next five years, about $139B to be spent on asset costs, R&D and corporate level investments
10

11. Alternative Energy Technologies In The US
Type Variation Highlights
Wind Onshore Basic technology; decent to good capacity factor (~35%); production
variability; declining capital costs
Offshore Transmission constraints; regulatory approvals; good capacity factor
(~40%); high capital costs
Solar Photovoltaic Basic technology; scalability; decent efficiency (~15%); little
production variability; high yet declining capital costs
Solar Thermal Slightly higher efficiency; large utility scale; high capital costs
Biomass Thermal Base load type facilities; long construction lead times; feedstock
Biochemical concerns
Waste-to-Energy Environmental impact
Geothermal Dry steam Drilling risk; high capacity factors; long development and construction
Flash steam lead times; geographically concentrated
Hydro Large/Dam Storage Environmental impact; regulatory issues
Small/Run-of-river Geographically concentrated; resource variability
Fuel Cell Distributed generation; base load technology; high capital costs
Next Generation Algae; Storage; Marine/Wave
11

12. Demand Side Incentives
To date there is no standard, uniform national policy intended to directly stimulate
demand for alternative energy usage
Instead, 29 states, as well as the District of Columbia and Puerto Rico, have established
RPS mandates in various forms, including carve-outs for specific technologies
Eight additional states have renewable portfolio goals
12

13. Supply Side Incentives
Federal government incentives have mainly come in the form of tax incentives aimed at
alleviating some of the financing burden for capital intensive technologies.
Incentive Highlights
Depreciation 5 year MACRS accelerated depreciation
Bonus depreciation (currently 50%)
Tax Credits §45 Investment Tax Credit §48 Production Tax Credit
30% of eligible project capital costs 2.2¢/kWh for 10 years from start of operations
15% reduction in basis Inflation based adjustment
Must be operational by 12/31/2016 Must be operational by 12/31/2012
Grant §1603 Grant in lieu of §45 Investment Tax Credit
Established by American Recovery and Reinvestment Act of 2009 (ARRA)
Must have qualified by 12/31/2011 AND must be operational by 12/31/2012
Loan Guarantee §1703 §1705 Financial Institution Partners
Program (FIPP)
“…innovative clean energy “…temporary program…for Public private partnership; DoE pays
technologies…unable to obtain certain renewable energy credit subsidy cost of guarantee and
conventional private financing” systems… provides guarantee for up to 80% of
loan
13

14. Tax Credit Overview
Tax credits are congressionally mandated subsidies that support a public purpose such as
affordable housing or alternative energy
Investment Tax Credit
 Allocated Tax Credit
 Credit eligibility is allocated to developers/sponsors by government agencies, and have national caps in total allowed amount
 Credit production based on amount of qualified investment and allocated over time as program remains in compliance
 Low-Income Housing Tax Credit (LIHTC) (§42)
 New Markets Tax Credit (New Markets or NMTC) (§45D)
 Non-Allocated Tax Credit
 There is no allocation process for these programs and, similarly, no national cap
 Tax Credit based on amount of qualified investment, but earned in the first year when project in placed in-service
 Rehabilitation Tax Credit (Historics) (§47)
 Energy Investment Tax Credit (ITC) (§48)
Production Tax Credit (PTC)
 Credits are earned from the production and sale of electricity from a qualified renewable energy
resource; no government allocations or national caps
 Wind, Geothermal, Biomass (“PTC’s”) (§45) – (ARRA allows for the election of either a PTC or ITC)
14

15. Overview Of Tax Credit Programs
LIHTC ITC PTC
Program §42 Low-Income Housing §48 Renewable Energy Investment Tax §45 Renewable Energy Production
Tax Credit (“LIHTC”) Credit (“ITC”) Tax Credit (“PTC”)
Purpose Development of Installation of solar, wind, biomass and Production of renewable energy from
affordable rental housing fuel cell power generation equipment wind, geothermal, and biomass
Inception 1986 1980 (2005) 1992
Sunset Permanent 2016 (Solar) 2013 (Wind)
2013 (Wind, Geo & Biomass) 2014 (Geo, Biomass)
Note: §45 historically renewed in 1-2
year increments
AMT Use Yes Yes Yes – first 4 years
Carry 1 Year/20 years 1 Year/20 years 1 Year/20 years
Back/Forward
Credit Delivery 10 years 1 year 10 years
Period
Compliance 15 years 5 years None
Period
Credit Rate 4% or 9% of qualified 30% of cost of renewable equipment 2.2¢ / kwh of energy sold, indexed
development expenses for inflation (1.1¢ open-loop biomass)
Tax Basis No Yes – by 50% of credit amount No
Reduction
15

16. Overview Of Tax Credit Structures
Multi-Investor Fund Sale-Leaseback Partnership Flip
Tax Credit LIHTC ITC ITC, PTC
Fund Structure Limited Partnership- Investor is Typically a single asset LLC or LP Typically a single asset LLC or LP
limited partner in fund partnership
with the syndicator as the general
partner
Asset Level Limited Partnership- The upper tier Sale-Leaseback- Investor purchases the Limited Partnership- Investor is limited
Structure fund is the limited partner in the project from the developer and then partner in the project partnership, with the
property-level partnership, with leases it back to the developer; lessee cash equity investor as the general partner;
the developer as the general has the option to repurchase the asset at the cash equity investor could be the sponsor
partner the end of lease or a third party investor
Sponsor Syndicator Project Developer (typically has ongoing Project Developer (typically has ongoing
exposure to economics of the asset) exposure to economics of the asset)
Co-Investors Other tax credit driven equity Cash equity investor or sponsor, with Cash equity investor, with return subordinate
investors pari passu return subordinate to tax equity; possibly to tax equity; possibly other tax equity
other tax equity investors pari passu investors pari passu
Structure 15-17 years 15-20 years 15- 20 years
Timeframe (Typically matches term of PPA) (Typically matches term of PPA)
Early Termination Investor option to put units back to Sponsor-held early buyout option at fair Sponsor-held call option on tax equity at
Options syndicator after the tax credit market value, typically no sooner than pre-determined fair market value after flip
period completion of 5th year date
Exit Partnership dissolves or investor Lease terminates or sponsor exercises Sponsor exercises option or asset is sold
sells interest option after flip date
Residual Value Typically minimal Fair Market Value buyout Fair Market Value
Return Tax Credits Tax Credits Tax Credits
Components Depreciation Depreciation Depreciation
Rental payments under lease Cash flow from project
Residual Value/FMV Buyout Residual Value/FMV Buyout
Allocation of Pro rata share of tax credits and 100% of tax credits and depreciation Tax investor typically receives 99% of tax
Return depreciation based on ownership of asset plus cash and cash benefits until target yield is
Components flow from rent as negotiated under the achieved, at which point allocations flip with
terms of the lease tax investor typically receiving 5% of tax
and cash benefits
16

17. Risk Profile Of Federal Tax Credit Investments
LIHTC ITC PTC
Multi-Investor Fund Partnership-Flip, Sale-Leaseback Partnership-Flip
Construction & Lease Up Risk
Likelihood Medium None None
Impact Low None None
Timeframe 12-24 months 3-12 months 3-12 months
Drivers Uncertainty of completion and lease up Equity in post construction Equity in post
timing; cost overruns and D/S coverage construction
Mitigants Developer guarantees, reserves, equity N/A N/A
hold backs, adjusters
Compliance Risk
Likelihood Low Low None
Impact High High None
Timeframe 16-18 years 5 years None
Drivers Units not providing housing to qualified Project ceases to be a “qualified energy facility”; change in N/A
tenants ownership
Mitigants Compliance reviews at lease up and Default provisions, performance measures, coverage ratios, N/A
every 2 years after reserve accounts, forbearance and/or stand-till provisions
17

18. Risk Profile Of Federal Tax Credit Investments
LIHTC ITC PTC
Multi-Investor Fund Partnership-Flip, Sale-Leaseback Partnership-Flip
Tax Risk
Likelihood Medium Low Medium
Impact Low Low Low
Timeframe Lifetime of structure Lifetime of structure Lifetime of structure
Drivers Change in investor’s tax position Change in investor’s tax position Change in investor’s tax position
Change in tax law Change in tax law Change in tax law
Ownership structure Ownership structure Ownership structure
Mitigants 20 year carry forward on credits Private Letter 20 year carry forward on credits 20 year carry forward on credits
Rulings and revenue procedures from IRS, audit Upfront delivery of credit Private Letter Rulings & revenue
history, tax opinions Private Letter Rulings & revenue procedures from IRS, audit history, tax
procedures from IRS, audit history, tax opinions
opinions
Operating Risk
Likelihood Medium Low to high depending on technology Low to high depending on technology
and available resource and available resource
Impact Low Medium High
Timeframe 16-18 years full term Lease: 15-20 years full term 15-20 years full term
5-10 years with EBO exercised 10-15 years with call exercised
Partnership: 15-20 years full term
5-10 years with call exercised after
flip
Drivers Property management: vacancy, expenses, Equipment, resource performance, Equipment, resource performance,
maintenance, debt service coverage energy prices, credit of off-take, debt energy prices, credit of off-take, debt
service, operating expense service
Mitigants Reserves, developer guarantees, strong property O&M contract, manufacturer O&M contract, manufacturer
management, asset management by syndicator, guarantees, PPA from credit worthy guarantees, PPA from credit worthy
low/no hard debt, subsidies, advantage to market off-taker, hedging, third party off-taker, hedging, third party
rates insurance insurance
18

19. Section III
Solar Photovoltaic
19

20. Solar PV Technology Overview
Solar photovoltaic (PV) converts solar radiation directly into electricity using panels
consisting of solar cells made of various types of material
Crystalline Silicon Thin Film
Higher material cost Lower material cost
Higher efficiency Lighter weight
Longer track record More flexible and stronger
Area needed per kW = 7-8m2 Area needed per kW = 10-15m2
16 – 27% 14 – 20% 4 – 12% 10 – 17% 7 – 20%
Efficiency Efficiency Efficiency Efficiency Efficiency
Amorphous Silicon Cadmium telluride Copper indium (gallium) diselenide
Monocrystalline Polycrystalline Image: First Solar Image: HelioVolt
Image: SunPower Image: Sharp
Image: Kyocera
20

21. Solar PV Technology Overview
Solar PV costs have steadily declined and are expected to continue to do so
 The US benefits from an “experience curve” from European markets
 Commercial and residential projects benefit from scope and size, but costs are expected to converge
Average PV System Cost
Germany CA Commercial CA Residential Global Utility Global Commercial Global Residential
9
Reported & Actual Projected
8
7
6
5
$/W
4
3
2
1
0
2007 2008 2009 2010 2011 2012 2016 2020
Source:Bloomberg New Energy Finance
21

22. Solar PV Resource
22

23. Solar PV Capacity
Despite weaker PV solar resource, Germany has the highest installation rate…
Country 2010 Capacity (MW) % Of Global Capacity
1 Germany 17,320 44%
2 Spain 3,892 10%
3 Japan 3,617 9%
4 Italy 3,502 9%
5 United States 2,519 6%
6 Czech Republic 1,953 5%
7 France 1,025 3%
8 China 893 2%
9 Belgium 803 2%
10 South Korea 573 1%
…but future installations are expected to be more equally distributed with the US gaining
Annual Installed PV Capacity
Germany Italy Japan USA China Spain
8,000
7,000
6,000
5,000
MW
4,000
3,000
2,000
1,000
-
2007 2008 2009 2010 2011 2012 2013 2014
Source: Bloomberg New Energy Finance
23

24. US State-level Solar Incentives
Several states have an RPS with solar and/or distributed generation provisions, including
carve-out, multiplier and double/triple credit elements
 Renewable Portfolio Standard  Renewable Portfolio Goal
DC
Source: Database of State Incentives for Renewables & Efficiency
24

25. Projected Solar Expansion In The US
Commercial and utility scale PV are expected to dominate the expansion of solar
throughout the US in the coming years
50 Solar Thermal Commercial & Utility PV > 10kW Residential PV <= 10kW
45
40
35
30
25
GW
20
15
10
5
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Bloomberg New Energy Finance
25

26. Solar Opportunities
Despite recent activity and events, the solar market remains fragmented, while demand
will largely be driven by RPS solar carve outs
Best positioned developers
 Multi-regional or national presence to adapt to changing state policies and fluid markets
 Strong marketing and origination
 Flexible with regard to market segment (commercial and utility)
 Engineering, Procurement & Construction (EPC) capabilities
Other considerations
Vertically Integrated Manufacturers
Independent Power Producers
 Pretenders vs. Contenders
 Panel manufacturers
 Ability to absorb market volatility
Utilities
 Waiting for 2012 to crystalize Pure Play Solar Developers
Residential
?
Corporates Joint Ventures
26

27. Section III
Wind
27

28. Wind Technology Overview
Wind technology converts wind into electricity using a relatively simple generation method
In the past decade, the average turbine size (in MW) has increased by over 100%
Average Turbine Size (US)
2.00
1.80
1.60
1.40
1.20
1.00
MW
0.80
0.60
0.40
0.20
0.00
1998-99 200-01 2002-03 2004-05 2006 2007 2008 2009 2010
Average Turbine Size (MW) 0.71 0.88 1.21 1.43 1.6 1.65 1.66 1.74 1.79
# of Turbines 1,425 1,987 1,757 1,960 1,532 3,190 5,029 5,733 2,855
Annual Capacity (MW) 1,016 1,758 2,125 2,803 2,454 5,249 8,350 9,993 5,113
Source: American Wind Energy Association
28

29. Wind Technology Overview
Technological improvements have offset seasonal weather patterns and recent curtailment
Average Cumulative Sample Capacity Factors
35%
30%
Capacity Factor
25%
20%
15%
10%
5%
0%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Projects 6 12 41 85 98 118 144 169 212 256 358 338
MW 549 1,005 1,545 3,285 3,826 5,182 5,894 8,726 10,712 15,686 24,403 31,986
Source: National Renewable Energy Laboratory
Manufacturers with large, diversified balance sheets and reliable track records dominate
Manufacturer 2005 2006 2007 2008 2009 2010
1 GE 1,433 1,146 2,342 3,585 3,995 2,543
2 Siemens 0 573 863 791 1,162 828
3 Gamesa 50 50 494 616 600 564
4 Mitsubishi 190 128 356 516 814 350
5 Suzlon 25 92 197 736 702 312
6 Vestas 700 463 948 1,120 1,488 221
7 Acciona 0 0 0 410 204 99
8 Clipper 3 0 48 470 605 70
9 REPower 0 0 0 94 330 68
10 Nordex 0 0 3 0 63 20
Source: American Wind Energy Association
29

30. Wind Resource
30

31. Wind Capacity
After leading the world in wind capacity, the US is now second behind China, but firmly so
Country MW Capacity (2010) % of Global
1 China 44,781 22%
2 US 40,267 20%
3 Germany 27,364 14%
4 Spain 20,300 10%
5 India 12,966 6%
6 France 5,961 3%
7 UK 5,862 3%
8 Italy 5,793 3%
9 Canada 4,011 2%
10 Portugal 3,837 2%
Source: National Renewable Energy Laboratory
Within the US, Texas is still at the top, despite congestion issues
State 2010 Annual State 2010 Cumulative
1 Texas 680 Texas 10,089
2 Illinois 498 Iowa 3,675
3 California 455 California 3,253
4 South Dakota 396 Minnesota 2,205
5 Minnesota 396 Washington 2,104
6 Oklahoma 352 Oregon 2,104
7 Wyoming 311 Illinois 2,045
8 Indiana 303 Oklahoma 1,482
9 Oregon 283 North Dakota 1,424
10 North Dakota 221 Wyoming 1,412
Source: American Wind Energy Association
31

32. Projected Wind Capacity In The US
Historically, wind in the US has tracked very closely to PTC availability
12
Estimated
10
8
GW
6
4
PTC Expiration
2
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Annual Built Capacity No PTC Extension 3-Year Extension (2012) 3-Year Extension (2013)
Source: Department of Energy, American Wind Energy Association, Bloomberg New Energy Finance
32

33. Wind Opportunities
Converging December 31st, 2012 deadline for both 1603 Grant projects and PTC
qualification should lead to heightened activity in 2012; especially first half of year
Best positioned developers
 Strong development track record
 Well capitalized
 Financing alternatives and network
 Deep and flexible pipeline
 Ample power offtake alternatives
Other considerations
 Pretenders vs. Contenders
 Turbine manufacturers
 Merchant power
 Political, legislative, regulatory and policy issues
33

34. Section V
Tax Equity Market
34

35. Tax Equity Trends
Many tax investors have either exited the market or have disappeared during the
financial collapse
 Total investor pool dropped from 25+ to as low as 5-10; today at about 15
Despite tax investor exit and decreased demand, After-Tax tax equity returns started to
trend down by 2009
 Unlike LIHTC yields which continued to increase through end of 2010
Grant option effectively allowed developers to use debt financing instead of tax equity
 Some statistics show that as much as 65% of developers have chosen that route
The decreased demand by tax equity was met with a decreased supply of tax credits
Sunset of 1603 grant expected to mimic trend seen in LIHTC yields from 2008 to 2010
 2012 yields for PTC/ITC projects are expected to increase substantially
35

36. Tax Equity Yield Trends
Yield Comparison1
LIHTC Wind UST BB BBB
20%
18%
Lehman
16% Bankruptcy
14%
12% ARRA Expected
Enacted Trend
10%
8%
6%
4%
2%
0%
2007 2008 2009 2010 2011 2012
1 UST, BB & BBB yields for ten (10) year term; LIHTC & Wind yields are pre-tax equivalents assuming 35% tax rate
36

37. Tax Equity Participants
Project Finance Groups There are currently about 25 active tax
 Focus on pre-tax yields with a higher percentage of benefits coming from
cash benefits
investors in alternative energy, including…
 Prefer longer investment durations to keep cash at work
 Prefer to limit debt and cash equity in capital stack, resulting in higher
investment as percent of project cost
 Usually have in-house expertise to fully underwrite the transaction
independently
Pure Tax Equity (Passive Tax Equity)
 Focus on tax benefits and limiting project exposure with a higher
percentage of benefits coming from tax benefits
 Prefer shorter duration with quick recovery of principal
 Rely on third parties for due diligence and underwriting
Strategic Investors
 Look to fully own and operate projects
As renewables yields rise and LIHTC yields keep dropping, many insurance companies that have entered the tax
equity market are expected to start looking at renewables Representative insurance companies
Investment considerations for insurance companies include… include…
 Most LIHTC investments are done through multi-investor funds
 Often consider outside investment guidelines to invest more than 25% of
project’s equity
 Look to avoid consolidation for accounting purposes
37

38. Tax Equity Capacity
After a steep drop, the availability of tax equity has picked up again
Historic Tax Equity Investments
$7
$6.10
$6
Amount (in billions)
$5
$4 $3.70
$3.20 $3.40
$3
$2 $1.20
$1
$0
2006 2007 2008 2009 2010
Source: Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
But the funding gap for needed capital is expected to increase
Gap In Project Financing
Project Financing Demand Project Financing Supply
$60
Investments (in billions)
$50
$40 $14.80
$10.92
$30 $6.40
$48.90
$20 $41.20
$31.10 $30.28 $34.10
$10 $24.70
$0
2011 2012 2013 Source: Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
38

39. Appendix I
Tax Equity Financing Structures
39

40. Partnership Flip
 Tax Investor must possess sufficient taxable income to monetize project’s tax benefits
 Tax Investor contributes equity and typically receives 99% of tax and cash benefits
 Once Tax Investor’s After-Tax IRR (Flip Yield) is achieved, allocations flip down with Tax Investor
typically receiving 5% of tax and cash benefits
 Allows for significantly reduced Fair Market Value (FMV) of residual benefits and efficient Tax Investor
exit
 Post-Flip FMV Sponsor call option on tax equity (5-year restriction); no Tax Investor put option to
Sponsor
 Target flip date normally corresponds to the end of tax credit period for PTC (10 years) or end of tax
credit compliance period for ITC (5 years)
 PayGo variation
 Can be used with or without project debt
Tax
Sponsor
Investor
Special Allocation
Of Tax & Cash
US
ITC/Grant Treasury
Or PTCs
Offtake or Sale Of Project
Power Market Power Company
Debt
Project
Lender 40

41. Partnership Flip
Tax Investor Considerations
 Wind Safe Harbor – (Rev. Proc. 2007-65 as revised)
 Specific to wind/PTC transactions, but widely accepted for other renewable transactions, as well as, with ITC transactions
 20% minimum unconditional investment with 75% of: (i) fixed capital contributions plus (ii) reasonably anticipated contingent capital
contributions, fixed and determinable obligations that are not contingent in amount or certainty of payment.
 Maximum 99%/1% allocations
 No guarantees of PTCs or of wind resource (except weather derivate contract) and no Sponsor loans
 By following ruling, structure benefits from protection from audit
 Investment has fairly short average life due to front-end tax benefits and reflects tax credit delivery or
recapture periods (5-10 years); hold period shorter than Lease structure where Tax Investor typically
holds the project for the term of the lease (usually 20 years).
 Preferred return feature (Flip) can protect Tax Investors from the intermittency or potential volatility
inherent in wind projects, credit risk in distributed generation solar, fuel supply deficiency in biomass, etc.
 Tax Investor has higher probability of achieving targeted return; if project underperforms, reducing
corresponding tax credits or cash benefits, Pre-Flip allocations remain until Tax Investor meets Flip Yield
 Hypothetical Liquidation at Book Value (HLBV) accounting
 Assumes project company is liquidated at book value and records change in such amount (plus distributions, less contributions) as income
from investment since the date previously measured
 Negative consequence of producing After‐Tax losses in periods where no tax credit is available, but depreciation is available
 Not an issue for PTC transactions since tax credit is available in 10 year period Pre-Flip producing positive after‐tax earnings
 ITC transactions have only one year with the tax credit producing positive return; with remaining years potentially producing losses
 Special allocation of proceeds to Tax Investor upon early liquidation can alleviate problem; designed to decrease by anticipated flip
date resulting in participation in liquidation proceeds as originally contemplated
41

42. Lease
 Tax Investor must possess sufficient taxable income to monetize project’s tax benefits
 Lessor (Tax Investor) purchases project for current FMV and leases back to Lessee (Sponsor) pursuant to
long term lease - typically equal to project’s life (20 years)
 Lessor, as owner of the project, is entitled to 100% of tax benefits including credits and depreciation
 Through lease, Lessee retains operating control and “quiet enjoyment” over the leased asset
 Lessee has purchase or renewal rights at Lease end; can have predetermined early buy-out option
(EBO)
 Lessee receives any project cash flow in excess of rent
 Does not work for PTC (can only be utilized with ITC/Grant)
 Can be used with or without project debt
Tax US
Sponsor
Investor Treasury
ITC/Grant
Sale Leaseback
Offtake or Sale Of Lessee Lessor
(Project (Special
Power Market Power
Company) Purpose Entity)
Debt
Project
Rent
Lender
42

43. Lease
Tax Investor Considerations
 IRS Guidelines for Advance Ruling Purposes – (Rev. Proc. 2001-28, 2001-19 I.R.B. 1156)
 Minimum equity investment of 20% equity investment at inception and throughout lease term
 Maximum lease term of 80% of asset’s expected remaining useful life
 No Lessee loans or guarantees of Lessor’s debt
 No Lessor put option to Lessee
 No bargain purchase options; any purchase option in favor of Lessee must be FMV-based
 No limited use property – use of asset by Lessor or person other than Lessee must be commercially feasible
 Leveraged lease accounting (if applicable)
 Absent Lessee exercise of EBO, Tax Investor typically holds investment for entire Lease term/life of
project, but due to front-end tax benefits, investment has shorter average life
 Cash component of overall Tax Investor return (as a percentage of total benefits) can be higher than in
Partnership Flip structure
 To claim PTCs, must be owner, operator and producer of electricity; therefore, Lease structure does not
work for PTCs
 Tax equity often represents a larger percentage of overall project capitalization than Partnership Flip
 90 day post in-service date window to execute sale and lease back
 Structure has a long history and has been successfully utilized in non-renewables related applications
43

44. Appendix II
Case Studies
44

45. Tax Equity Return Analysis - Case Study
Solar Transaction XYZ
 2MW in California; 25 year PPA with Investment Grade Offtake
 $4.5/W Cost = ~$9MM Total Capex
 100% of Total Capex is Grant eligible
 July 1st, 2012 in-service date
Lease
 10% After-Tax IRR
 50% Bonus Depreciation
 1.2X Rent Coverage
 0% Residual
Partnership
 10% After-Tax IRR Flip Target
 Pre-Flip Cash & Tax Allocations: 99%/1%
 Post-Flip Cash & Tax Allocations: 5%/95%
 50% Bonus Depreciation
 Flip After Year 6
45

46. Partnership Scenario
Tax Investor Partnership Accounting
Tax Effect
Pre-Tax Of Grant
Year Beginning Ending Change in Book Provision And Basis Allocated After-Tax
Ending Pre-Tax Cash HLBV HLBV HLBV Income For Taxes Reduction Tax Credit Book Income
Dec-12 -2,880,480 0 2,700,845 2,700,845 -179,635 62,872 0 0 -116,763
Dec-13 483,737 2,700,845 2,286,408 -414,437 69,300 -24,255 92,496 0 137,541
Dec-14 521,698 2,286,408 2,031,317 -255,091 266,607 -93,313 92,496 0 265,791
Dec-15 538,437 2,031,317 1,693,287 -338,030 200,406 -70,142 92,496 0 222,760
Dec-16 555,845 1,693,287 1,304,380 -388,907 166,938 -58,428 92,496 0 201,005
Dec-17 573,948 1,304,380 838,492 -465,888 108,060 -37,821 92,496 0 162,735
Dec-18 593,212 838,492 341,158 -497,334 95,878 -33,557 0 0 62,320
Dec-19 30,970 341,158 325,895 -15,263 15,707 -5,498 0 0 10,210
Dec-20 32,019 325,895 306,692 -19,202 12,817 -4,486 0 0 8,331
Dec-21 33,108 306,692 285,075 -21,617 11,491 -4,022 0 0 7,469
Dec-22 34,238 285,075 260,761 -24,314 9,924 -3,473 0 0 6,451
Dec-23 35,412 260,761 233,437 -27,324 8,088 -2,831 0 0 5,257
Dec-24 36,631 233,437 202,757 -30,680 5,951 -2,083 0 0 3,868
Dec-25 37,896 202,757 168,340 -34,417 3,479 -1,218 0 0 2,261
Dec-26 39,210 168,340 129,763 -38,577 634 -222 0 0 412
Dec-27 40,575 129,763 95,109 -34,654 5,921 -2,072 0 0 3,849
Dec-28 41,992 95,109 89,257 -5,852 36,139 -12,649 0 0 23,491
Dec-29 43,463 89,257 83,040 -6,217 37,246 -13,036 0 0 24,210
Dec-30 44,991 83,040 75,561 -7,479 37,512 -13,129 0 0 24,383
Dec-31 46,578 75,561 64,086 -11,475 35,103 -12,286 0 0 22,817
Dec-32 48,225 64,086 51,701 -12,385 35,841 -12,544 0 0 23,296
Dec-33 49,936 51,701 39,271 -12,430 37,506 -13,127 0 0 24,379
Dec-34 51,713 39,271 26,836 -12,435 39,278 -13,747 0 0 25,531
Dec-35 53,558 26,836 14,403 -12,433 41,124 -14,394 0 0 26,731
Dec-36 55,473 14,403 1,971 -12,432 43,042 -15,065 0 0 27,977
Dec-37 57,463 1,971 0 -1,971 55,491 -19,422 0 0 36,069
Totals 1,199,847 0 1,199,847 -419,946 462,480 0 1,242,380
46

47. Lease Scenario
FASB 13 – Statement Of Earnings
Lessor's Net Pre-Tax Cash Pre-Tax Income Pre-Tax Tax Effect
Year Investment At Total Cash Flow Allocated Allocated At Income Amortized Of Pre-Tax Investment After-Tax
Ending End Of Year Flow To Investment 9.91% Without Fee Fee Income Tax Credit Income
Dec-12 4,856,947 -4,629,308 1,728,407 227,639 228,474 -836 -71,397 0 156,241
Dec-13 4,936,581 407,186 -79,634 486,820 487,988 -1,168 -152,688 0 334,132
Dec-14 4,991,182 439,140 -54,601 493,741 495,146 -1,405 -154,859 0 338,882
Dec-15 5,036,766 453,230 -45,584 498,814 500,450 -1,636 -156,450 0 342,364
Dec-16 5,071,811 467,883 -35,045 502,928 504,804 -1,876 -157,740 0 345,188
Dec-17 5,094,614 483,121 -22,803 505,924 508,048 -2,123 -158,680 0 347,244
Dec-18 5,102,886 499,336 -8,273 507,609 509,984 -2,375 -159,208 0 348,401
Dec-19 5,094,476 516,171 8,410 507,761 510,389 -2,628 -159,256 0 348,505
Dec-20 5,066,982 533,648 27,494 506,154 509,034 -2,880 -158,752 0 347,402
Dec-21 5,017,726 551,795 49,255 502,540 505,664 -3,125 -157,618 0 344,921
Dec-22 4,943,728 570,636 73,998 496,638 499,996 -3,358 -155,767 0 340,871
Dec-23 4,841,668 590,200 102,060 488,139 491,713 -3,574 -153,102 0 335,037
Dec-24 4,707,852 610,513 133,815 476,697 480,462 -3,764 -149,513 0 327,184
Dec-25 4,538,175 631,605 169,677 461,928 465,849 -3,921 -144,881 0 317,047
Dec-26 4,328,073 653,507 210,103 443,404 447,436 -4,032 -139,071 0 304,333
Dec-27 4,072,474 676,249 255,598 420,651 424,737 -4,086 -131,934 0 288,716
Dec-28 3,765,750 699,865 306,724 393,140 397,209 -4,068 -123,306 0 269,834
Dec-29 3,401,650 724,387 364,100 360,287 364,249 -3,962 -113,002 0 247,285
Dec-30 2,973,241 749,852 428,409 321,442 325,188 -3,746 -100,818 0 220,624
Dec-31 2,472,830 776,294 500,411 275,884 279,281 -3,397 -86,529 0 189,354
Dec-32 1,891,889 803,753 580,941 222,812 225,702 -2,890 -69,884 0 152,928
Dec-33 1,220,962 832,267 670,926 161,341 163,532 -2,191 -50,604 0 110,737
Dec-34 449,573 861,877 771,389 90,488 91,754 -1,266 -28,381 0 62,107
Dec-35 286,782 200,995 162,791 38,204 38,738 -533 -11,983 0 26,222
Dec-36 74,360 232,417 212,422 19,995 20,288 -293 -6,271 0 13,724
Dec-37 0 78,768 74,360 4,408 4,474 -66 -1,382 0 3,025
Totals 9,415,387 6,585,354 9,415,387 9,480,588 -65,202 -2,953,077 0 6,462,309
47

48. Appendix III
Project Evaluation Check List
48

49. Project Evaluation Check List
Review of Overall Project Concept Review of Sponsor/Developer, Offtakers and
Technology Providers
Project Viability Track Record in Renewable Energy
Specific Renewable Sector List of Prior Projects / Installed MW
Renewable Energy Resource Financial Strength
Technology Ownership Structure
Location Business Model
Feedstock Asset Management Capabilities
Offtake & Power Purchase Agreement (PPA) Future Direction of Company
Interconnection and Transmission
Alignment with Investor’s Investment Objectives
Review of Financing Structure Review of Pro Forma
Description of Financial Structure Overall Reasonableness of Project Assumptions
Benefits and Risks of Structure List of Prior Projects / Installed MW
Tax Assumptions Availability & Level of Federal & State Incentives
Impact of Debt Equity Pay-In Assumptions
Equity Levels (Investor and Sponsor) Debt – Sizing / Coverage / Rates / Fees
Cash Flow and Residual Splits Reserves –Target Levels and Funding Schedules
Optimization for Monetizing Investment Tax Credits Level and Distribution of Development and
(ITCs) / Production Tax Credits (PTCs) / Depreciation / Management Fees
Renewable Energy Certificates (REC) & Solar
Renewable Energy Certificates (SREC) / State Rebates
Residual Value Assumptions
Sensitivity Analysis
49

50. Project Evaluation Check List
Deal Pricing Review of Project Development
Review Investor and Sponsor Benefit Projections EPC and Construction/General Contractor
Utilize Proprietary or Third-Party Software Pricing Construction Schedule
Models as necessary
Analyze Investor and Sponsor Economics Construction Review & Disbursements Process
Comparative Review Permits
Environmental Regulation
Technology Providers
Site Preparation and Interconnection
Balance of Plant (BOP)
Review of Project Operations and Risks Review with Associated Professionals
Operations & Maintenance (O&M) Provider Engineering and EPC Contract
Operations Plan Permitting Review
O&M Reporting Environmental Impact Statements
Technology Risk Resource and/or Feedstock Agreements
Market Risk Offtake Agreements / PPA
Construction Risk Equipment Warranty and Insurance
Tax and Legislative Risk Lease and Land Agreements
Resource Risk Appraisal and Valuation
Operating Risk Interconnection and Transmission Agreements
Reputational Risk Financing/Structure Documents
Other Risks Legal and Tax Opinions
50