The stimulus package included provisions aimed at easing capital constraints and incentivizing renewable energy deployment. While initial impact was muted, the long-term forecast remains promising. Key programs include cash grants of 30% of project costs and expanded loan guarantee programs, both of which are now accepting applications. Concerns include delays in program launch and complexity of requirements, but expectations are that the stimulus measures will significantly boost renewable energy deployment over the long run.

1. How green is the stimulus package? - Renewable Energy Provisions Cai Steger, Energy Policy Analyst NRDC Center for Market Innovation August 27, 2009

2. Key messages Sections of the Stimulus Act (ARRA) related to renewables were passed to both ease capital constraints and provide an array of incentives to drive renewable deployment So far, early impact of Stimulus on renewables investment has been more muted than anticipated Long-term forecast for renewables is still very promising, with Stimulus provisions expected to boost deployment significantly For developers, primary current focus is on cash grants and loan guarantees programs. Both programs are launching now, and have a variety of complex requirements and guidelines

3. Capital investment available for renewables has vanished In 2008, tax equity investment and other sources of financing dried up due to economic downturn, eliminating primary source of funding for renewable projects From $5.4 billion in transaction volume in 2007 among 20 investors, the current tax equity universe now has only a few investors. Source: “Additional Observations About the Impact of Stimulus Action on Energy and Environmental Policy” Hudson Clean Energy Partners, L.P, http://www.seia.org/galleries/pdf/Need_for_Refundability.pdf

4. Stimulus Act should improve access to capital while providing new incentives to drive renewable investment and deployment Source: “Renewable Energy Project Financing: Impacts of the Financial Crisis and Federal Legislation” http://www.nrel.gov/docs/fy09osti/44930.pdf Topics of Discussion Today Provides 30% cash grants in lieu of renewable energy tax credits Expands and improves existing clean energy loan guarantee program significantly Additional Provisions in Stimulus that Will Benefit Renewables (and Efficiency) Provides PTC-qualified facilities option to elect the ITC instead of the PTC Extends the PTC through 2012 for wind, and through 2013 for other eligible technologies. Removes subsidized energy financing penalty that reduced value of ITC Extends 50% bonus depreciation to qualified renewable energy projects in 2009. Removes ITC dollar cap on residential small wind, solar hot water, and geothermal heat pump and on commercial small wind. Adds $1.6 billion in new Clean Renewable Energy Bonds Adds $2.4 billion in Energy Conservation Bonds to state, local, and tribal programs to finance clean energy projects Adds $3.1 billion for the State Energy Program: Adds $4.5 billion for new RD&D investment in efficiency and renewables. Establishes a 30% ITC for clean tech manufacturing

5. So far, near-term impact of stimulus measures on renewables has been muted, but expectations for the future are still promising Stimulus Objective Early Concerns Future Expectations Overcome existing financial barriers Monetization of depreciation tax benefits still a concern Government funding delays (per above) Improved project economics should drive new investment • Provide for rapid, large-scale investment in shovel-ready clean energy projects • Crafting guidelines and staffing up to administer grants and guarantees has taken longer than hoped • Investment has further slowed while waiting for government guidelines DOE announced solicitation for $30 billion in loan guarantees on July 29 DOE began taking grants application on August 1 Help early stage, higher-risk projects access funding For emerging technology projects, concern that loan guarantees may only cover modest portion of capital structure Additionally, if there is a bottleneck for funding, large-scale, capital intensive projects could receive more attention Solicitations announced for loan guarantee program should support emerging technologies No eligibility limits in grants program Expand investor pool Learning curve for new investors Continued absence of past players (debt/tax equity) Some concern over rules regarding tax-exempt investors in private equity funds New grants allow for leasing structures (PTC did not) Utilities increasing investment Enhanced project economics should draw more investors

6. Long term impact of Stimulus is expected to boost renewables deployment well above current EIA B.A.U. Source: “Renewable Energy Project Financing: Impacts of the Financial Crisis and Federal Legislation” http://www.nrel.gov/docs/fy09osti/44930.pdf

7. Cash grants should provide needed capital and will be available soon Treasury Department Grants in Lieu of Renewable Energy Credits: Overview: Allows renewable energy project developers (or associated parties) to receive a upfront cash grant of 30% of project costs in place of current production or investment tax credits. Designed to mimic the investment tax credit (ITC) with only a few exceptions. Government expecting 5,000 projects to apply and to distribute $3 billion. Now accepting applications at http://www.treas.gov/recovery/1603.shtml . The application is a fairly simple form, but extensive supporting documentation will be required Submission Deadline: Submission deadline is September 30, 2011. Different requirements for projects in service, and projects still under construction before end of 2010 Other: Almost all renewable technologies eligible, although some qualify only for a 10% grant. Government and tax-exempt entities cannot access grants (nor pass-through entities that include either entity) Grant must be paid within 60 days of receipt of application, once project in service. Grants can be assigned to other entities Multiple units of production (e.g. wind turbines) can be treated as a single unit for application purposes Recapture possible on multiple occasions, including if entity sold or disposed to ineligible entity or if property ceases to qualify

8. Loan Guarantee process complicated but should provide cheaper debt Loan Guarantee Program Overview: EPACT 2005 established an loan guarantee program for innovative GHG-abating projects. For a number of reasons, no loan guarantees have been provided until this year. The hoped-for result of the Stimulus Act is to provide more loan guarantees at a lower cost for more projects On July 29, DOE issued 2 new project solicitations First supports up to $30 billion in guarantees for efficiency, renewables and advanced transmission projects. Renewables, transmissions or biofuels projects will qualify to have credit subsidy cost funded by government. Other select projects can still qualify for loan guarantees but must pay credit subsidy cost, among other requirements Second supports $7.5 - $15 billion in guarantees for transmission infrastructure Recent “Cash for Clunkers” extension has reduced loan guarantee availability for commercial technology projects, but this is expected to be addressed in future Application Process: Two parts to application. Part I gives basic project overview; DOE will determine if project merits further consideration. If so, more complex Part II application needs to be submitted Several rounds of applications – the deadline for Part I applications in Round 1 is September 16, 2009. Applications reviewed on a first come, first serve basis. Additional fees in the application Numerous other eligibility requirements related to technology, GHG-abatement, equity contribution Evaluation criteria for both solicitations will include credit worthiness, construction plan, legal/regulatory risk, technical attributes, environmental benefits Interest rate is expected to be low – 25 to 50 bps above comparable US Treasuries

9. Additional Information Sources NREL/LBNL “ Renewable Energy Project Financing: Impacts of the Financial Crisis and Federal Legislation” http://www.nrel.gov/docs/fy09osti/44930.pdf “ PTC, ITC, or Cash Grant? An Analysis of the Choice Facing Renewable Power Projects in the United States,” http://www.nrel.gov/docs/fy09osti/45359.pdf Government Websites Loan Guarantees - http://www.lgprogram.energy.gov/ Grants - http://www.treas.gov/recovery/1603.shtml Stimulus - http://www.treas.gov/recovery/ Law Firms Milbank: http://www.milbank.com/en/NewsEvents/ClientAlerts/Project+Finance+Client+Alerts+and+Newsletters.htm Orrick: http://www.orrick.com/publications/practice_home.asp?practice=Energy+and+Project+Finance&practiceid=13 Skadden: http://www.skadden.com/Index.cfm?contentID=6&viewType=2# Chadbourne: http://www.chadbourne.com/publications/list.aspx?KeywordPhrase=energy&criteriaText=energy Van Ness Feldman: http://www.vnf.com/news-area-43.html