Terra-Gen Power, LLC

California Renewables Portfolio Standards:

Challenges and Opportunities

CCPUC Annual Meeting

October 5, 2009

Presentation Overview

Terra-Gen Power LLC – Company Summary

RPS – Potential Benefits to CA

RPS – Challenges to Implementation

Conclusion

Questions

Company OverviewTerra-Gen Power LLC (“Terra-Gen”) is a privately held company focused on geothermal, wind and

solar generation– Owns or leases 831 MW (net ownership interest) of operating generating capacity through 21 renewable energy projects

located across the western US Geothermal: 387 MW Solar: 80 MW Wind: 364 MW

Terra-Gen is a unique renewable energy company– Terra-Gen is the only US based company that owns, operates and develops three different renewable technologies; wind,

geothermal and solar– Terra-Gen operates 13 of its 21 projects

Terra-Gen has an experienced management team– Terra-Gen is led by a team with a heavy focus on operations and development and decades of industry experience; leverages

substantial project-level expertise in its stewardship of the assets and in pursuit of high value growth opportunities

Terra-Gen has an experienced and committed sponsor– With over $6.8 billion under management, ArcLight is an experience private equity investor in over 6,000 MW of power assets– ArcLight has approximately $6.8 billion of equity commitments and invested capital under management across its four funds

Company Development EffortsWind

– Developing 1,500 MW in the Tehachapi area with a total potential of approximately of 3,000 MW– Pursing repowering opportunities at existing sites in CA– Developing an additional 1,500 MW of Wind in several states

Geothermal – Actively developing 180 MW in Nevada for direct delivery to the CA electrical grid– Exploring expansion of existing sites

Solar– Expanding Solar portfolio to potentially add more than 200 MW in Western States

Terra-Gen Power Footprint

Off ice Location Solar Thermal Project Geothermal Project Wind ProjectNote: MW shown reflect Terra-Gen’s net ownership interest.

New York, NY

San Diego, CA

Reno, NV

Western Wind109 MW

Denver, CO

SEGS VIII & IX80 MW

Beowawe18 MW

Dixie Valley67 MW

Coso302 MW

California Wind91 MW

Tehachapi Wind140 MW

CHiPs~3,000 MW

Alite24 MW

Northern Nevada

Geothermal Development

~180 MW

RPS – Potential Benefits to CA California’s 33% Renewable Portfolio Standard (“RPS”); the most robust in the nation

– CA is a leader in establishing its renewable goals– Motivates developers to continue doing business in CA; annual RFPs are helpful– Creates incentive for developers to utilize federal stimulus monies

CA’s natural resources will be utilized to its fullest potential– Critical to achieving GHG goals

Renewable generation; a hedge to natural gas volatility – Consumer pricing will be stabilized in the long run – Long term power purchase contracts at levelized prices will create pricing stability– Competitive program assures reasonable prices; REC market will be established around the CA program

Financing stability; financial institutions reevaluating CA investments– Long term power purchase agreements provide comfort for investors

Economic development ; local governments can enhance financial independence– Increased property taxes will benefit communities– Thousands of jobs will be created during construction and thereafter – Federal grants moneys will stimulate technology advancements and education

RPS – Implementation Challenges Transmission Capacity Constraints

– Insufficient capacity continues to create uncertainty for developers– Renewable generators must produce where the resources permit– CAISO and Utilities are diligently working toward developing transmission clusters; queue continues to remain sizeable– Timing to develop transmission does not meet the need; permitting continues to create challenges

Permit Approval Process– California permitting process is expensive and lengthy– Multiple agency interaction creates delays and uncertainty– Staffing is insufficient to handle the workload– Federal leasing applications and permitting requests are backlogged – Mitigation measures are not standardized and create further delays to the process

General Opposition to Development– Many environmental groups and local community members have a general dislike to any new development– Transmission and project development delays are frequent

RPS – Implementation Challenges (con’t)Project Viability

– Many PPAs which have been signed are struggling to come to market– Technology, permitting and pricing remain barriers– Credible developers struggle to compete with unreasonable pricing and development expectations

Financing– Capital markets have been tight as a result of recent and current economic conditions– Tax equity markets have shrunk making it more difficult to utilize production tax credits. – The new federal grant program addresses this problem, but reduce a drafting problem limits the access for companies with

private equity funding. A repair is now being crafted by Congressional Tax Committees.– Federal loan guarantee programs for commercial project s have been delayed and may not provide substantial savings to

proven technology

Regulatory Uncertainty – Market Price Referent pricing caps create caps which are not tied to true renewable development costs– Legislative changes cause pause while the process is being “baked”– Changes in CEQA and other permitting processes create hesitation on the part of developers– Federal land designation may make a significant portion of land “untouchable”– Cash grants, production tax credits, and investments tax credits durations are uncertain

ConclusionThe RPS will create a balanced portfolio while reducing GHG in the State

– CA continues to run ahead of the pack

Goals can be meet with modifications to the current systems– Transmission needs to be sited quickly; hubs will be key to the development of high resource potential areas– Siting projects must be expedited; a “one stop permitting shop” will streamline efforts– Outreach programs are necessary to educate legislators and communities on the benefits of renewable energy– Focus on the transmission needs and permitting of viable projects– Continue to enhance and stabilize federal stimulus programs

A team effort is needed to efficiently meet RPS targets– Federal, State and Local government needs further coordination– Federal RES must defer to stricter state program; and appropriately treat state RECs.– Developers, IOUs, Munis and the CAISO must work together to bring more renewables to the grid

Joe Grecojgreco@tgpnyc.com

Terra-genpower.com