Wind Power Project Financing

Presentation at U of MCrookston

August 3, 2006

Patrick Pelstring, FounderOutland Renewable Energy,

LLCSeeking to support and partner Seeking to support and partner

with local landowners in with local landowners in developing wind energy developing wind energy

projectsprojects

Patrick Pelstring, PartnerWind Energy Developers, LLC

Developers Developers ““partneringpartnering”” with with local landowners and investors local landowners and investors

in the development of utility in the development of utility scale wind projectsscale wind projects

U Landowner ProjectsUnique Market Opportunity

• Landowners slowly starting to turn to “wind power” as the next cash crop….

• Similar position to where ethanol was only ten years ago.

U Landowner ProjectsUnique Market Opportunity

• Nationally, the country expects to have four times the amount of wind power in next ten years.

• Most landowners have started small….but we have proven that landowners can sponsor larger projects, more economically than larger developers….

Outland Renewable Energy, LLC

Fundamentals of local ownership in the Outland model

• Initial Capital and expertise provided by Outland Renewable Energy, LLC

• Predominant development capital will be raised from local residents and property owners.

• Local ownership will result in local control of the Board of Governors from local representation

• Key decisions and influence needs to have local influence and representation or the fundamentals of the model don’t get accomplished

How does Outland accomplish supporting landowners?

• Active investor/owner in landowner based utility scale (20MW+) projects

• Acts as technical advisor to landowners for smaller 1 & 2 turbine projects (feasibility, wind studies, engineering, transmission, and place project financing)

How does Outland accomplish supporting landowners?

• Is developing on-going management and finance of landowner developed wind farms.

• Includes building the capacity for turbine maintenance and service contracts.

Outland Renewable EnergyCapitalization of the Company

• Eight original founders have capitalized the company with approximately $240K in cash and services and is raising $1.5M to support growth.

• Outland has investments in three active wind development projects (180+ MWsunder contract and 190MWs in negotiation)

Outland Renewable Energy, LLCProject InvestmentsProject Investments

Jeffers Wind Energy CenterSummit Wind, LLC 180 MWs pending

• 10 MW’s approved by Central Minnesota Municipal Power Agency (March, 2006) 4 turbines

• Completed Negotiations with XcelEnergy for 50 MW’s (July, 2006) 20 2.5 MW turbines

• “Short List” with Great River Energy for up to 120 MW’s (2007 construction) 48 turbines

Outland –Project Investments

• Shetek Wind, LLC – Lyon and Murray Counties in MN – 32 square miles –additional $540K of local investment

• Emmet County Wind, LLC – Estherville, IA area – 21 Square miles – Founders investment of $200K – 80 MW PPA pending with public utility

Projects under Review• Martin County, Minnesota• Griggs-Steele Counties, ND• Central Montana, Near Livingston• Obrien County, Iowa• South Dakota, near Watertown

Wind Energy Developers, LLC

Act on Behalf of Act on Behalf of ““Project Project CompaniesCompanies”” as the Developer as the Developer

of the projectof the project

Wind PowerProject Financing

National wind speeds

•GE – 1.5 MW – most common nationally (US)•Clipper – 2.5 MW – new technology (US)•Vestas – 1.65MW and 1.8MW (Denmark)•Suzlon – 2.0MW (India)•Mitsubishi – 1.0 and 2.0 MW (Japan)•Gamesa – 1.8MW (Spain)

Turbines….US and Abroad

Key Windpower Financing components

•Wind speeds to generate the power• Transmission lines to take the power to the buyer• Buyer for the power (offtaker)• $$$$$$$-on average $1.75M per MW

Electrical Transmission

•Usually controlled or owned by Utilities•Access to transmission is controlled by an Interconnect agreement•Likely most difficult (and expensive) aspect of small power development•Utility interconnection is governed by Midwest Independent Service Organization (MISO)

“Offtaker” – usually a utility•“RPS standards motivate utilities•“intermittent” resource adds to cost•FERC rulings say they must buy at their “avoided cost”•Large power contracts usually bid in “Request for Proposals”•MN utilities motivated by “C-BED” statutes

Small Project Financing Components (1-5 MW’s)

•Development Financing (you!)•Equity Financing (Includes tax credits)•Debt Financing (secured term debt)

Development Financing“what are you responsible for?”

•Wind Studies….state resources or local met tower•Transmission Interconnection • Utility negotiations and Power Purchase Agreement•Project cost estimates…turbine control…and negotiate with contractor•Financial “Pro-Forma” that justifies project

Equity Investor•Usually will invest from 45-60% of project cost•Small power equity investor will want a yield of 12-15%•Will “own” 99% of project for a minimum of ten years•Investment yield will include receipt of federal (and state?) tax credits•Will allow a management and finance fee to property owner•After ten years investor will “flip” 80-100% of the equity back to owner

Debt Financing – Secured Lender

•First secured lender on all fixed assets and will take an assignment of the PPA.•Finance balance of project (30-50%)•Term debt usually 10-15 years•Interest rates generally 7-9% (today)•No personal guarantees

2006 Growth of Wind Energy

“The U.S. wind energy industry easily broke earlier annual installed capacity records in 2005, installing

nearly 2,500 megawatts (MW) or over $3 billion worth of new generating equipment in 22 states,

according to the Washington, D.C.-based American Wind Energy Association (AWEA). Instead of the

slow year that has previously followed boom years for the industry, 2006 is expected to be even bigger,

with installations topping 3,000 MW. “AWEA annual market report – January, 2006

Outland Renewable Energy and Wind Energy Developers, LLC

thanks you…

We appreciate your interest and look forward to sharing our

continued success