TRAVELERS CAPITAL CORPORATION CLEAN ENERGY BC WORKSHOP Financing - PowerPoint PPT Presentation

TRAVELERS CAPITAL CORPORATION CLEAN ENERGY BC WORKSHOP Financing Clean Energy Development: Where do you find Private Debt Capital? NOVEMBER 29, 2017

Disclaimer & Confidentiality This document does not constitute an offer to sell or a solicitation of any offer to buy any securities of, or to enter into any transaction with, Travelers Capital Corporation. Travelers Capital Corporation does not warrant the accuracy or completeness of the information contained in this document. Travelers Capital Corporation has relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources. Travelers Capital Corporation does not provide accounting, tax or legal advice. Any tax statements made in this document are not intended or written to be used, and cannot be used, for the purpose of avoiding penalties imposed on the relevant tax payer for non- compliance of Canadian federal tax laws. You should obtain your own independent accounting, tax and legal advice based on your own circumstances. The information contained in this presentation is confidential information of Travelers Capital Corporation (the “Company”) and may not be used, reproduced, disclosed or distributed to others at any time without the express prior written consent of the Company. The recipient of this presentation will, upon the request of the Company, promptly return all material received from the Company or its affiliates, directors, shareholders, employees or advisors without retaining any copies thereof, will destroy or erase all documents and other material and all copies thereof made from such material and all information made available, and will ensure its agents and advisors do likewise.

Agenda  Travelers Capital Profile  Project Development  Project Financing  Deal Execution  Sources of Private Debt Capital

TCC Profile  Founded in 2010, Travelers Capital is a Vancouver based specialized financial services firm focused on delivering structured project finance solutions and financial advisory services for customers in the alternative energy sectors including renewable energy, energy efficiency and energy storage  TCC is a unit of Travelers Financial Group which has been active in the equipment and auto financing business for over 30 years. TCC is controlled by its principals, who collectively own 100% of the firm  Target mid-market transactions requiring financing in the range of $5 - 100+MM  Experienced project finance team with a combined industry experience of more than 50 years and longstanding relationships with developers and lenders in North America  Mandated on over $500MM of transactions since inception

TCC Team Mark Bohn (Managing Partner)  Co-Founder of TCC in 2010  Head of business development and strategic partnerships  Ex GE Energy Financial Services, BMO, ABN AMRO, UBS, Citibank  30 years of experience in structured/project finance  Debt placements since 1988: $7 billion  BSc (Physics) & MBA – University of British Columbia Marie-Claude Gagnon (Vice President)  Joined TCC in 2011  Head of underwriting and loan administration  Ex Intrawest , Director of Project Finance  Consulting engineer, telecom.  B. Eng. (Electrical) - McGill, MBA - HEC, CFA  17 years in corporate & project finance Dmitri Kotliarov (Assistant Vice President)  Joined TCC in 2013  Responsible for deal origination and financial analysis  Ex Sea Breeze, Finance Manager  11 years in renewable energy project development/financing  B. Comm - UBC, CFA Brendan O’Sullivan (Associate - Analyst)  Joined TCC in 2016  Responsible for loan administration and financial analysis  B. Comm – University of Western Ontario

Hydro Project Financing Experience  Advising SRE Hydro Canada on raising approximately $150 million of project financing for 42MW portfolio of hydro assets in B.C.  4.5MW hydroelectric project in British Columbia. Negotiated and arranged C$16 million construction and long term fixed rate term financing for project with a 40 year SOP contract with BC Hydro  16MW hydroelectric project in British Columbia. Negotiated and arranged C$61 million of non-recourse construction and long term fixed rate financing for project with a 40 year EPA with BC Hydro  8MW hydroelectric project in British Columbia. Negotiated and arranged C$20 million long term acquisition financing for operating hydro project with 25 year EPA with BC Hydro  12MW hydroelectric projects in Oregon & Montana. Negotiated and arranged US$26 million non-recourse credit facility for projects with 20 year PPA’s with Pacificorp and IDA Power  196MW hydroelectric project in British Columbia. Negotiated and arranged construction and long term debt and equity for C$660 million hydro project with a 35 year EPA with BC Hydro

TCC Value Proposition  Sector Specific Focus – project/structured finance and financial advisory services with a specialization in renewable energy, energy efficiency and energy storage projects.  Negotiate best rate and most favourable structure for clients with relationships with all key project finance lenders in Canada and select US lenders. TCC is lender agnostic.  Access to senior secured construction & term debt/subordinated & holdco debt through multiple funding sources  Relationships with all major consultants and CDN law firms ensuring top quality service at most competitive rates  Deal Origination – relationships with mid-sized developers that either require an equity partner or are sellers of operating projects  Deal Execution – TCC oversees due diligence, financial modeling, loan documentation, closing and funding reducing work load of sponsor  Loan Administration - minimizes administrative duties for sponsor and lenders with TCC acting as loan agent as required

Project Development

Project Financing

Project Financing

Project Financing

Project Financing Key things lenders look for  Project economically viable – need bankable financial model  PPA in place along with all necessary permits, licenses, approvals, IBA  Does developer have the necessary experience to build and operate the project  Does developer have the financial capacity to fund cost overruns during construction or unexpected capital expenditures during operation  Do the contractors have the proper qualifications to build the project and are they bondable  Multiple contracts ok as long as there are no scope gaps  Independent engineer to review the technical and financial aspects of the project including the construction plans, budget and scheduling 3 rd party O&M provider needs to have the required level of experience   Developers legal counsel should have experience in project financing

Project Financing Deal Metrics/Considerations A: Debt sizing based on the following metrics: (i) min Debt Service Coverage Ratio dependent upon technology (ii) max [80-85]% leverage B. Loan Spreads impacted by the following: (i) Deal size (smaller projects have higher spreads) (ii) Sponsor Experience/Creditworthiness (iii) Creditworthiness of off-taker (iv) Construction arrangements (i.e. fixed price lump sum vs. multiple contracts) (v) Corporate bond spreads (unsecured BBB corporate bonds used as a proxy) C. Loan Amortization/Payments (i) Maturity of loan matches tenor of Power Purchase Agreement (ii) Quarterly debt payments are sculpted to accommodate seasonality D. Reserve Accounts (i) Debt Service Reserve Account typically includes 6 months P+I funded upfront with cash (ii) Major Maintenance Reserve Amount determined during due diligence and will typically be funded out of operating cash flows

Deal Execution for Financing Deal Execution Road Map

Project Financing Sources of Private Debt Capital Depends on Deal Size $10-$20 Million • Select Regional Banks / small lifeco’s $20- 50 million • Mid- sized Lifeco’s / Select PF Banks / Institutional lenders > $50 Million • Major banks / Large Lifeco’s

Project Financing Sources of Private Debt Capital Bank vs. Lifeco Solution – Pros & Cons Bank Lifeco Construction Flexible Limited Flexibility Term Shorter Longer Interest Rate Lower Higher Prepayment Flexible Not flexible Upfront Fees Higher Lower Refinancing Risk Yes No

Questions?

Contact Mark Bohn Managing Partner Travelers Capital Corporation 400 – 4180 Lougheed Highway Burnaby, BC, V5C 6A7 T: 604-637-7989 C: 778-986-7989 Email: mbohn@travelerscapital.com