Tax Credits Vs. Cash GrantsIn Renewable Energy Deals

• Speakers• Anita Molino – Bostonia Partners LLC• Tony Grappone – Novogradac & Company LLP

• Moderator• Ted Risher – Basile Baumann Prost Cole & Associates LLC

• Comments on Expiration of Section 1603 Cash Grant Program – Market Impacts

• Renewable Energy Finance Going Forward• Q&A

Tax Credits and Deductions

• Federal Tax Credits• Production Tax Credits• Investment Tax Credits

• Grants/Rebates• Tax Deductions

Basic Partnership Flip Structure

Project Entity

-Owns and operates facility

General Partner (YOU!!!)

Limited Partner (Tax Equity Investor)

DeveloperDeferred

Developer Fee

Tax paying entities

Partnerships for federal income tax purposes

Denotes an ownership interest

Cash flows from non owners

100%

99% Pre Flip5% Post Flip

1% Pre Flip95% Post Flip

EPC

HOST/POWER BUYER

Basic Lease Pass-Through Structure

Landlord

“Depreciation Entity”

Tenant

“Tax Credit Entity”

General Partner (YOU!!!)

Limited Partner (Tax Equity Investor)

Developer

Deferred Developer Fee

Tax paying entities

Partnerships for federal income tax purposes

Denotes an ownership interest

Cash flows from non owners

Master Lease

100%

99% Pre Flip5% Post Flip

1% Pre Flip95% Post Flip

70%

30%

Pass-through ITCs

Sale Leaseback Structure

Investor

Single Member LLC (Lessee )

Single Member LLC (Lessor)

Project 1

$

Lea

se A

gree

men

t

Lea

se P

aym

ents

Host

Power

PPA

/Lea

se P

aym

ents

Lease AgreementDeveloper(YOU!)

$

100% interest

100% interest

Con

stru

cted

Pro

ject

Pur

chas

e &

Sal

e A

gree

men

t

Contact Information

Tony GrapponeNovogradac & Company LLP

101 Arch Street, 10th FloorBoston, MA 02110Tel:   617.449.3030Fax:  617.330.1922

 Tony.Grappone@novoco.com

www.novoco.com

Agenda

1. Capital Stack Across the Stages of Development

2. Operating Returns of a Typical Project

3. Project and Modeling Assumptions

Capital Stack Across Stages of Development

• Project Stages - Development to Operations:– Early Development ($200,000): Development cash needed for permitting, front-end design, legal costs for PPA and permitting, securing land,

etc. Time-frame is approximately 1 year.– Construction Stage ($26,250,000): Construction financing, early tax equity investment (1-5%), development equity needed for balance of

development costs to COD. Time-frame is 6 months to 1 year.– Operational Stage ($28,700,000): Long term debt, tax equity, and long term project equity deployed to pay construction loan and various

legal, financing and engineering fees due at COD. Operation is 20 – 25 years.

Early Development (Cash) Construction Stage (Cash) Placed in Service (Cash) $-

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

Project Equity $200,000

Project Equity $4,251,224

Project Equity $2,860,064

Construction Loan $21,887,500

Tax Equity $117,194

Tax Equity $11,719,393

Term Debt $14,091,612 85% of EPC

Cost

$200,000 $26,250,000 $28,700,000

Development Stages of a Typical 10MW Project Shovel Ready COD

Operating Returns of the Project Owner

Sponsor Tax Benefit

Allocation

Sponsor Cash Investment/ Refundings

Sponsor Project Cash

Total Sponsor Share

Sponsor Running

IRR

1% (2,860,064) - (2,860,064) 0.0%

1% - 425,368 425,368 -85.1%1% - 467,119 467,119 -51.5%1% - 464,144 464,144 -29.4%1% - 461,168 461,168 -15.8%1% (1,171,939) 458,190 (713,749) 0.0%

100% - 689,598 689,598 -13.8%100% - 686,614 686,614 -3.4%100% - 683,624 683,624 2.1%100% - 680,628 680,628 5.7%100% - 230,568 230,568 6.6%100% - 890,760 890,760 9.2%100% - 892,046 892,046 11.0%100% - 893,185 893,185 12.3%100% - 894,172 894,172 13.3%100% - 895,001 895,001 14.1%100% - 895,666 895,666 14.7%100% - 896,161 896,161 15.1%100% - 896,480 896,480 15.5%100% - 896,617 896,617 15.8%100% - 921,564 921,564 16.1%

Owner's Economics

Assumptions

• Development Assumptions:– Project Size: 10MW– EPC Cost per Watt: $2.50– Additional Development Costs: Interconnection, Site Work, Legal Fees, Financing Fees, Construction

Interest, Independent Engineer– PPA Price: $0.10/KwH– SREC Price: $150/MwH x 9 years– Operations Expenses: O&M, Insurance, Property Tax, Administration

• Financing Assumptions:– 85% Construction Loan to EPC Cost– 10 Year Senior Loan, LIBOR swap + 350bps at a 1.35x Debt Service Coverage Ratio (48% of

Capital Stack)– 10 Year Debt Service and O&M working capital facility– Tax Equity investment for 99% of benefits (ITC + MACRS Depreciation) and 2% preferred cash

return over 5 years (40% of Capital Stack). Buyout is sized to approximately 10% of initial investment.

– Long Term Equity 20 year hurdle rate of 15% IRR (12% of Capital Stack)

Contact Information

Anita MolinoBostonia Partners LLC

699 Boylston Street, 7th FloorBoston, MA 02116Tel:   617.437.0150Fax:  617.437.7080

 amolino@bostonia.com

www.bostonia.com