Project Finance, Overview

Islanded Grid Wind Power Conference March 6th, 2015

Gregory Price PNECorp.

C: 360-442-1937 O: 360-423-2245 F: 360-423-2272

gregp@pnecorp.com www.pnecorp.com

How Project Financing Works

Image Courtesy of NREL

Knowledge Lowers Risk!

Image Courtesy of NREL

Risk = Cost Perceived and Real: Both will increase expense The less you know, The more you’ll owe!

Considerations • Wind resource and bankability (V3)

• Tax credits (PTC, ITC, EDTC) • Federal, state, and utility incentives (taxed and untaxed) • Depreciation (NPO vs. FPO) • Loan guarantees • REC’s and Green Tags, reduced emissions • Utility interconnections (net metering) • Value of electricity vs. value of heat and other secondary loads • Redundancy, marketing, energy security, predictability

Financing Models and

Considerations •  Power Purchase Agreements (PPAs) •  Third party ownership •  Leasing: Capital vs. Operating •  Debt vs. equity financing •  Flip models •  Community and cooperative ownership •  Legalese •  O&M and lifetime cost of ownership of turbines and gen-sets •  Warranties •  Partnerships and accountability

Financial Metrics

•  Simple Payback •  Return on Investment (ROI) •  Internal Rate of Return (IRR) •  Levelized or Lifetime Cost of Energy •  Net Present Value •  Tons of CO2

•  Capacity Factor •  Cost/kW •  Hurdle Rate •  Discount Rate, opportunity and avoided costs •  WACC (Weighted Average Cost of Capital)

Islanded Grid Wind Power Conference

Thanks for coming, looking forward to your questions!

Gregory Price PNECorp.

C: 360-442-1937 O: 360-423-2245 F: 360-423-2272

gregp@pnecorp.com www.pnecorp.com