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Tax-advantaged Obligations General Characteristics Tax-exe exempt mpt New CREBs, s, QECBs, Bs, QZABs s and QSCBs Bs Governm rnmenta tal Issuer Yes Yes, with exceptions for New CREBs (discussed later) Governm rnmenta tal Not required for private activity bonds QZABs and QSCBs generally, but not required Owners rshi hip for all New CREBs and certain QECBs Yes (discussed later) Allocat ation on-Volum lume e Cap Yes, except not for governmental tax- exempt or 501(c)(3) IRS Filings At closing At closing, and to claim tax credit or direct payment Subsi sidy dy Tax-exempt interest, and private activity Taxable interest with bonds are subject to AMT tax credit or direct payment (except for QZABs with post 2010 allocation – credit only) Types es of New money, current and advance New money only; and certain refinancings of Transac acti tions refundings, except no-advance refundings bridge loans for certain private activity bonds McGuireWoods LLP | 14

Governmental Projects • Energy transactions: – Pre-pay transactions: proceeds of bonds are used to pre-purchase gas or electricity from the generator • Bond proceeds are used to purchase electricity or natural gas in advance of delivery • Purchase is made by or for a governmental utility for use in the utility’s service area – Output facilities: proceeds of bonds are used for capital expenditures for such facilities (discussed on next slide) – QECBs and New CREBs: for governmental projects, there are fewer restrictions (discussed later) • Energy efficiency transactions: – QECBs, QZABs for rehabilitation and equipment generally and QSCBs for new construction and equipment – Tax-exempt obligations McGuireWoods LLP | 15

Governmental Projects ( cont’d) • Output facilities (e.g., generating, distribution and transmission facilities) – $15 million limitation: generally, not more than $15 million of an issue for an output facility may be used for a private business use – Private business use is use directly or indirectly in a trade or business that is carried on by any person other than a governmental unit. Governmental use is any use other than a private business use. – Purchase pursuant to a contract by a non-governmental person of available output of an output facility may be taken into account under the private business tests – There are numerous special allocation rules McGuireWoods LLP | 16

Non-governmental Projects • Tax-exempt private activity bonds: solid waste, local furnishing of electricity or gas, local district heating or cooling, environmental enhancements of hyrdroelectric generation, green building and qualified 501(c)(3) • Tax credit obligations: New CREBs, QECBs, QZABs and QSCBs McGuireWoods LLP | 17

Private Activity Bonds • Solid waste: new treasury regulations eliminate “no value” test and allow for energy conversion projects subject to limitations – Limitations: first useful product rule or useful energy • Sewage facility bonds generally for secondary treatment of wastewater and sludge • Local furnishing of electricity or gas: 1997 “in operation” rule is limiting • Local district heating or cooling: limited to pipelines and networks providing hot water, chilled water or steam • Environmental enhancements of hyrdroelectric generation: fish ladders and related fish protective improvements • Green building: expired on October 1, 2012; eligible projects reduced traditional electricity consumption and SO2 emissions, expanded solar PV and used fuel cell energy • Qualified 501(c)(3): project must be owned by the 501(c)(3) entity McGuireWoods LLP | 18

Eligibility for New CREBs and QECBs - Basics • New CREBs – Projects: wind, solar, geothermal, closed and open loop biomass, landfill gas, trash combustion and hydro, plus functionally related and subordinate facilities – Borrowers: governmental and tribal bodies, mutual and cooperative electric companies and public power providers (“PPPs”) • PPPs are state utilities providing electric services – Issuers: qualified borrowers, certain “CREB lenders” ( e.g., CoBank and NRUCFC) and certain not-for-profit electric utilities • QECBs – Projects: qualified conservation purposes (see next slide) – Borrowers: qualified issuers and non-governmental entities subject to limitations • No more than 30% of the allocation may be used for non-governmental QECBs except that green community programs are exempt • If the QECB is a private activity bond, a QCP must be for capital expenditures – Issuers: same as tax-exempt issuers • Common Rules : the subsidy (credit) is lesser of interest coupon or 70% of credit rate and each is subject to Davis-Bacon Act’s prevailing wages McGuireWoods LLP | 19

QECBs – Qualified Conservation Purposes Capital l Expendit nditure ures for: Researc rch Other  Reducing energy consumption in publicly-owned Expenditures for research facilities and  Mass commuting facilities to reduce energy consumption buildings by at least 20% research grants to support research in:  Demonstration projects including commercialization of green building technology, agricultural biofuel conversion, advanced battery manufacturing technologies, technologies to reduce peak  Implementing green community programs, includes “the  Technologies for the capture & use of electricity or technologies for the capture & sequestration use of loans, grants, or other repayment mechanisms to sequestration of carbon dioxide produced of carbon dioxide emitted from combusting fossil fuels to implement such programs” through the use of fossil fuels produce electricity  Cellulosic ethanol & non-fossil fuel  Public education campaigns to promote energy efficiency  Rural development involving production of electricity development from renewable energy resources  Increasing in efficiency of existing technologies for producing non-fossil  New clean renewable energy bonds projects fuels  Automobile battery tech-nologies & other technologies to reduce fossil fuel consumption in transportation  Technologies to reduce energy use in buildings McGuireWoods LLP | 20

QECBs – QCP Recent IRS Guidance • 20 percent energy reduction in publicly-owned buildings – Financed improvement may be a unit of a publicly owned building – Units: single or multiple buildings, a system component (i.e., HVAC, water, lighting or plug load) or any such building and system • Green community programs – Purpose is to promote energy conservation, energy efficiency or environmental conservation initiatives – Relates to property is available for general public use or involves loan or grant program that is broadly available McGuireWoods LLP | 21

Traditional Municipal Structure For discussion Debt Investors purposes only; consult your tax advisor LT PPA Tax-exempt Proceeds Debt Payment MWh Power Purchaser Fuel Supplier Municipal $/MWh Fuel Owner McGuireWoods LLP | 22

Commercial PACE Structure Debt Governmental Entity Lender Pledge of Lien on Assessments For discussion purposes only; Proceeds consult your tax advisor Assessment LIen Payment ESCO Borrower Services McGuireWoods LLP | 23

Pre-Paid Power Purchase Agreement – “Flip” Developer Tax Equity Debt Investors Pre-Flip Post-Flip Pre-Flip Post-Flip 1% 95% 99% 5% Tax Exempt Proceeds MWh Muni Power Purchaser Project Prepayment Company For discussion purposes only; consult your tax advisor McGuireWoods LLP | 24

QECBs, NMTCs (Leveraged) and ITC Equity NMTC Tax Equity Lender Contribution Investment Investor Fund NMTCs ITC Investor QEI NMTCs Bond Proceeds Loan/Grant Ownership/ Capital Tax Credits CDE Contribution Bond Borrower QLICI Debt Debt Service Lessee True Lease of Energy PPA/Services QALICB Property Contractual Agreement Borrower Relationship Affiliate/ ( e.g ., by Sponsor Muni Sublease) McGuireWoods LLP | 25

Before Proceeding, Ask Yourself … • What type of project is being undertaken? • What is the purpose of the project? • Is the technology proven? • What is the credit of the obligor and its counterparties? • What role does the government want to play and what risks will it take (i.e., is there political will and community support)? • What are the sources of financing? • Will the project cash flow without subsidies? • Is the transaction structure simple relative to the size of transaction and the experience of the transaction parties? • Do you have the right team? McGuireWoods LLP | 26

Tax-advantaged Obligations mpt QSCBs 1, 2 QZABs 1,2, 3 New CREBs 1, 2 QECBs 1, 2 Feature tures Tax-exempt pose Purpos Governmentally owned Public School Facilities, Qualified School Electricity Produced Renewable Energy and and operated subject to including Construction Renovation, Related from Renewable Energy Energy Conservation Assets, exceptions for private and Renovation, plus Equipment, School Sources Programs and Research for use and private activity Land Acquisition and Personnel Training and Qualified Conservation bonds Equipment Course Material Purposes Development Autho thorize rized d Amou ount t Applicable for non- $11 B for 2009 and $1.4 B for 2009 and $2.4 B nationally $3.2 B nationally 501(c)(3) private activity $11B for 2010 (Total of 2010; $400 M for 2011 bonds $22B) ______________ 1 Pursuant to the Hiring Incentives to Restore Employment Act (enacted March 18, 2010), an issuer of QSCBs, QZABs (subject to limits), New CREBs and QECBs may elect that the subsidy be a direct payment from U.S. Treasury as opposed to a tax credit. 2 Generally, direct pay/tax credit obligations may not be used to refund prior debt. 3 Pursuant to the Tax Relief Act of 2010 (a/k/a extension of Bush tax cuts), QZABs issued under the 2011 allocation may not opt for the direct subsidy. McGuireWoods LLP | 27

Tax- advantaged Obligations (cont’d) Features ures Tax-ex exem empt QSCBs Bs QZAB ABs New CREBs QECBs Bs Durat uration ion (term rm) of Issuan uance ce Tax-exempt bonds are subject to Maximum Term set by Maximum Term set by Maximum Term set by Maximum Term set by general “abuse” limitations regarding Treasury Monthly 4 Treasury Monthly 4 Treasury Monthly 4 Treasury Monthly 4 overburdening and overissuance. Private activity bonds’ are also subject to a test that the average maturity cannot exceed 120% of the economic life of financed assets. Expira iration ion of Authorizat orization ion Not applicable except for certain Must issue before end of Must have been issued Expired October 27, No expiration date. for Issuan uance ce defined private activity bonds. calendar year in which before 1/1/2012 unless 2012. States’ rules may vary. alocation received unless pursuant to carryforward There is guidance pursuant to carry forward. which is two calendar suggesting the IRS may years following year in reallocate unused which allocation arose. amounts. ______________ 4 Maximum maturities can be found at https://www.treasurydirect.gov/rates/rates-irstcb.htm. McGuireWoods LLP | 28

Tax- advantaged Obligations (cont’d) Features ures Tax-ex exem empt QSCBs Bs QZAB ABs New CREBs QECBs Bs Expen endit ditur ure of Procee eeds Subject to arbitrage limitation of 3 year Must Spend Available Must Spend APP Must Spend APP within Must Spend APP within 3 reasonable expectations test at issuance, Project Proceeds (“APP”) within 3 Years 3 Years Years within 3 Years 5 including binding commitment for at least 5% within 6 Months, plus Binding Commitment Binding Commitment for Binding Commitment for at applicable rebate matters if yield of Binding Commitment for for at least 10% at least 10% within 6 least 10% within 6 Months proceeds exceeds yield of obligations at least 10% within 6 within 6 Months Months and rebate exceptions are not satisfied Months Elig igib ible e Issuers uers State or Local Governments (i.e., Same as tax-exempt Same as tax-exempt State or Local Same as tax-exempt issuers political subdivisions and on-behalf of issuers issuers Governmental Entities, issuers, such as improvement and CREB Lenders (e.g. economic development authorities) CoBank or CFC) and Public Power Providers ______________ 5 IRC § 54A(d)(2) defines “available project proceeds” as sale proceeds less financed costs of issuance (not to exceed 2%) plus earni ngs thereon. McGuireWoods LLP | 29

Tax- advantaged Obligations (cont’d) Speci cial al Features ures for Tax Credit dit Bonds nds QSCBs Bs QZAB ABs New CREBs QECBs Bs Only ount 6 /Direc Tax Credit dit Amoun rect Pay Face Amount of Outstanding Face Amount of Outstanding Tax Credit - Face Amount of Tax Credit - Face Amount of Obligation X Tax Credit Rate Obligation X Tax Credit Rate Amou ount nt Outstanding Obligation X Tax Outstanding Obligation X Tax Credit Rate, Minus 30% Credit Rate, Minus 30% ____________ ____________ ____________ ____________ Lesser of Coupon Interest or Lesser of Coupon Interest or Interest Calculated at Tax Credit Interest Calculated at Tax Credit Direct Pay - Lesser of Coupon Direct Pay - Lesser of Coupon Rate Rate (Available for 2009 and Interest or 70% of Interest Interest or 70% of Interest 2010 Allocations Only) Calculated at Tax Credit Rate Calculated at Tax Credit Rate Set by Treasury Daily 7 Set by Treasury Daily 7 Set by Treasury Daily 7 Set by Treasury Daily 7 Tax Credit dit Rate Stripp ippab able e Credit dits 8 Yes Yes Yes Yes ________________________ 6 Calculated on each March 15, June 15, September 15 and December 15 and last day bonds are outstanding. The credit is included in gross income. Generally, the credit may be used to offset AMT liability 7 Rates can be found at http://www.treasurydirect.gov/govt/rates/rates-irstcb.htm. Per IRS Notice 2009-15, all rates are based on Treasury's estimate of the yields on outstanding bonds from market sectors selected by Treasury with a rating of between A and BBB for bonds of a similar maturity. 8 The IRS released stripping guidance on March 23, 2010 in IRS Notice 2010-28. McGuireWoods LLP | 30

Tax Credits for Certain Energy Resources Required Start Amount of PTC or PTC Period or ITC Energy Resource or Facility Reduction for Basis ITC 1 of Recapture Subsidized Reduction Construction Financing Date Wind Before 1/1/14. PTC equal to 1.5¢ For PTC, no PTC reduced if If ITC is per kwh of recapture and 10 the project is received, electricity sold year credit period financed with adjusted (adjusted annually begins on the grants, tax- basis of for inflation). PTC date the facility is exempt bonds or qualified is 2.3¢ per kwh of placed in service. subsidized energy property electricity sold in financing. must be 2013. reduced by For ITC, half of ITC proportional ITC is not reduced amount. ITC is equal to 30% amount of ITC is if tax-exempt of basis of recaptured if bonds or qualified property. property is subsidized energy disposed of or financing used. otherwise ceases to qualify within 5 years from placed in service date. ______________ 1 With respect to qualifying property, a taxpayer may elect to receive only one of ITC or PTC . McGuireWoods LLP | 31

Tax Credits for Certain Energy Resources (cont’d) Required Start Amount of PTC or PTC Period or ITC Energy Resource or Facility Reduction for Basis of ITC 1 Recapture Subsidized Reduction Construction Financing Date Closed-Loop Biomass Before 1/1/14. PTC equal to 1.5¢ For PTC, no PTC reduced if If ITC is per kwh of recapture and 10 the project is received, electricity sold year credit period financed with adjusted Closed-loop biomass (adjusted annually begins on the grants, tax- basis of facilities use organic for inflation). PTC date the facility is exempt bonds or qualified material from a plant which is 2.3¢ per kwh of placed in service. subsidized energy property is planted exclusively for electricity sold in financing. must be the purpose of being used 2013. reduced by at a qualified facility to For ITC, half of ITC produce electricity. proportional ITC is not reduced amount. ITC equal to 30% amount of ITC is if tax-exempt of basis of recaptured if bonds or qualified property. property is subsidized energy disposed of or financing used. otherwise ceases to qualify within 5 years from placed in service date. ______________ 1 With respect to qualifying property, a taxpayer may elect to receive only one of ITC or PTC. McGuireWoods LLP | 32

Tax Credits for Certain Energy Resources (cont’d) Required Amount of PTC or PTC Period or ITC Energy Resource or Facility Reduction for Basis Start of ITC 1 Recapture Subsidized Reduction Construction Financing Date Open-Loop Biomass Before PTC equal to half For PTC, no PTC reduced if If ITC 1/1/14. of 1.5¢ per kwh of recapture and 10 the project is received, electricity sold year credit period financed with adjusted Open-loop biomass (adjusted annually begins on the grants, tax- basis of facilities generate for inflation). PTC date the facility is exempt bonds or qualified electricity from the use of is 1.1¢ per kwh of placed in service. subsidized energy property (1) agricultural livestock electricity sold in financing. must be waste nutrients or (2) solid, 2013. reduced by nonhazardous, cellulosic For ITC , half of ITC waste material or any lignin proportional ITC is not reduced amount. material which is derived ITC equal to 30% amount of ITC is if tax-exempt from certain organic waste of basis of recaptured if bonds or resources. They do not qualified property. property is subsidized energy include facilities that burn disposed of or financing used. biomass in conjunction with otherwise ceases fossil fuel (cofiring) beyond to qualify within 5 such fossil fuel required for years from placed startup and flame in service date. stabilization. ______________ 1 With respect to qualifying property, a taxpayer may elect to receive only one of ITC or PTC. McGuireWoods LLP | 33

Tax Credits for Certain Energy Resources (cont’d) Required Amount of PTC or PTC Period or ITC Energy Resource or Facility Reduction for Basis Start of ITC 1 Recapture Subsidized Reduction Construction Financing Date Landfill Gas Before PTC equal to half For PTC, no PTC reduced if If ITC is 1/1/14. of 1.5¢ per kwh of recapture and 10 the project is received, electricity sold year credit period financed with adjusted Landfill gas facilities (adjusted annually begins on the grants, tax- basis of produce electricity from gas for inflation). PTC date the facility is exempt bonds or qualified derived from the is 1.1¢ per kwh of placed in service. subsidized energy property biodegradation of electricity sold in financing. must be municipal solid waste. 2013. reduced by For ITC, half of ITC is proportional ITC is not reduced amount. ITC is equal to 30% amount of ITC is if tax-exempt of basis of recaptured if bonds or qualified property. property is subsidized energy disposed of or financing used. otherwise ceases to qualify within 5 years from placed in service date. ______________ 1 With respect to qualifying property, a taxpayer may elect to receive only one of ITC or PTC. McGuireWoods LLP | 34

Tax Credits for Certain Energy Resources (cont’d) Placed in Amount of PTC or PTC Period or ITC Energy Resource or Facility Reduction for Basis ITC 1 Service Date Recapture Subsidized Reduction Financing Solar Before 1/1/17. No PTC available. No PTC available. No PTC available. If ITC is received, adjusted Solar energy property ITC is equal to 30% For ITC, ITC is not reduced basis of includes equipment which of basis of proportional if tax-exempt qualified uses solar energy to qualified property. amount of ITC is bonds or property generate electricity, to heat recaptured if subsidized energy must be or cool (or provide hot property is financing used. reduced by water for use in) a disposed of or half of ITC is structure, to illuminate the otherwise ceases amount. inside of a structure using to qualify within 5 fiber-optic distributed years from placed sunlight, to provide solar in service date. process heat, except for property used to heat a swimming pool. ______________ 1 With respect to qualifying property, a taxpayer may elect to receive only one of ITC or PTC. McGuireWoods LLP | 35

Tax Credits for Certain Energy Resources (cont’d) Required Start Amount of PTC or PTC Period or ITC Energy Resource or Facility Reduction for Basis ITC 1 of Recapture Subsidized Reduction Construction Financing Date Trash Before 1/1/14. PTC equal to half For PTC, no PTC reduced if If ITC is of 1.5¢ per kwh of recapture and 10 the project is received, (Municipal Solid Waste) electricity sold year credit period financed with adjusted (adjusted annually begins on the grants, tax- basis of Trash facilities use for inflation). PTC date the facility is exempt bonds or qualified municipal solid waste to is 1.1¢ per kwh of placed in service. subsidized energy property produce electricity. electricity sold in financing. must be 2013. reduced by For ITC, half of ITC proportional ITC is not reduced amount. ITC is equal to 30% amount of ITC is if tax-exempt of basis of recaptured if bonds or qualified property. property is subsidized energy disposed of or financing used. otherwise ceases to qualify within 5 years from placed in service date. ______________ 1 With respect to qualifying property, a taxpayer may elect to receive only one of ITC or PTC. McGuireWoods LLP | 36

Questions, Resources and Contact Information http://ww ://www.e .eere ere.en .energy ergy.gov .gov http://ww ://www.e .epa.gov pa.gov http://ww ://www.dsire .dsireusa.org usa.org http://ww ://www.pa .pace cenow ow.or .org http://ww ://www.c .cdf dfif ifun und.gov d.gov http://ww ://www.a .ace ceee.or .org http://ww ://www.c .cdf dfa.ne .net Dougl glas as E. Lamb 804.775 .775.110 .1107 dlamb@ b@mcgui mcguirewoods.com oods.com www.mcgui guirewoods oods.com .com  2012 McGuireWoods LLP McGuireWoods LLP | 37

Energy Efficiency & Renewable Energy Financing Best Practices Anita Molino President Bostonia Partners LLC Boston, MA Are you a CDFA Member? Members receive exclusive access to thousands of resources in the CDFA Online Resource Database. Join today at www.cdfa.net to set-up your unique login. CDFA: Advancing Development Finance Knowledge, Networks & Innovation www.cdfa.net

Energy Efficiency & Renewable Energy Financing Best Practices 2013 CDFA National Development Finance Summit Anita P. Molino, Bostonia Partners August 8, 2013 www.bostonia.com

Energy Efficiency & Renewable Energy Markets Energy Financing Basics • Energy financing is “project finance”  Cash flow driven Non-recourse debt  Financing & contracting options  Renewables provide additional tax advantages  • Projects are capital intensive (low cash flows vs. high project costs) with important requirements Investment grade developer and counterparty (e.g. PPA, ESPC)   Large projects required to justify tax equity structure / achieve economies of scale  Proven technologies • Capital stack typically consist of various sources Debt (supported by PPA revenue and contracted RECs)  Tax equity if renewable energy project  Sponsor equity  www.bostonia.com

Energy Efficiency & Renewable Energy Markets Energy Efficiency Challenges • Scale of projects can be very small, even compared to small scale solar • Underlying credits most often not investment grade • Loan covenant issues • Misaligned economic incentives in commercial real estate (i.e. tenant vs. landlord) Renewable Energy Challenges • State-by-State approach for renewable energy development • Relatively small size projects, especially in solar • Different incentives and programs for each State • Evolving sets of rules and regulations ongoing with less than clear results or predictable outcomes • Relatively immature markets needing time to develop and modify • NIMBY is an increasingly larger issue For success, any financing program or aggregation strategy must proceed on a state by state basis, finding the critical path within common boundaries. www.bostonia.com 3

Energy Efficiency & Renewable Energy Markets Critical Issues Associated with Aggregation • Sufficient size of asset pool • Need to attract experienced capital providers who will overlook the complexities of multiple smaller projects because of the attractive size of the financing • Need to drive economies of scale: difficult to achieve since each project is examined separately, but there are cost savings available • Sufficient scale so actual cash on cash returns justify the needed effort and investment horizon • Risk diversification among project team members • Equipment providers • EPC Contractors • O&M providers • Standardization • Credit quality of counterparties , particularly counter-parties providing revenue streams • Documentation: leases, assignments, PPA’s , REC contracts, O&M • Basic contractual terms (tenor, pricing, etc.) • Ability to simultaneously develop multiple projects in a timely fashion • Oftentimes need state or local utility support to bring projects to COD www.bostonia.com 4

Energy Efficiency & Renewable Energy Markets State of the Markets • Investment Grade (IG) Sponsors with projects of size can obtain cost-effective financing • Non-IG Sponsors with smaller projects are the challenge: residential, affordable housing, commercial & industrial, and MUSH • Cost effective solutions for Non-IG Sponsors are in process or development: o MUSH Pools o Property Assessed Clean Energy (PACE) Programs o State- or utility-backed programs o Warehousing followed by capital markets securitization o Alternative funding models (e.g., REITS/MLPs) o Residential loan secondary market sales www.bostonia.com 5

Energy Financing Options Investment Grade Non-Investment Grade • MUSH/Small C&I/Residential/ • Federal/MUSH/Large C&I Sectors Affordable Housing Sectors • Size/Credit allow for stand-alone Transactions • Size/Credit Requires Pools, Senior-Sub Structures and/or Reserves, and Higher • Lower coverage and reserves Coverage Tax-Exempt and Taxable Bank and Capital Tax-Exempt MUSH Pools Market Debt On-Balance Sheet Taxable Contract Securitizations Taxable PACE for Small C&I and Residential On- or Off-Balance Sheet Taxable PACE for Large C&I REITs & MLPs Taxable Private Placements for MUSH Community Bank Partners for and Equity Funds for Renewables Residential/Affordable Housing Pools www.bostonia.com

Cost of Funds Private Sector Transaction Public-Private Risk Sharing Public Sector Transaction Expected Rate of Return Project “Spread” Equity Tax Equity Taxable Debt Tax- Exempt Debt Risk to Investor 100% Recourse to Government www.bostonia.com 7

Cost of Capital Based on a $50 Million Renewable Biogas-to-Energy Cogeneration and Thermal Drying — Wastewater Treatment Facility (20 Year Term) Tax-Advantaged NAIC-1, NAIC-1, taxable private Muni Tax-Exempt A rated taxable private Cost of Electricity/Sludge Processing placement (35% tax rate) 100% leveraged placement (35% tax rate) Project Equity 20% 5% Project Equity 20% 30% yield yield Tax Equity – 30% ITC 25% Monetization Debt 13% yield 100% Debt 3.2% yield Debt 70% 3.8% Yield 70% 3.8% Yield • 1.35x DSCR • 1.6x DSCR • 1.0x DSCR • Private • Private Ownership • Public Ownership • 9.2 cents / KWh – Ownership • 8.5 cents / KWh – 3% escalation • 8.5 cents / 3% escalation KWh – 3% escalation NOTE: Example presents a capital cost comparison only and does not attempt to assign values to efficiencies, savings, and retained or transferred risks, which would be part of a complete cost benefit analysis. www.bostonia.com 8

Evaluating the Cost Effectiveness of PPPs • Common misperception is that PPPs are always a more expensive form of project delivery for Governments • As highlighted by the National Council for Public- Private Partnership’s (NCPPP) white paper, “Testing Tradition: Assessing the Added Value of Public - Private Partnership”, a thorough and proper evaluation involves several analyses: • Costs of deferred maintenance, repair, replacement • Project timing • Complete financial analysis using Value for Money assessment on Net Present Value basis • Establish Public Sector Comparator as baseline to compare to PPP or privatized options • Conduct full Life-Cycle cost and revenue analysis for each option • Value and assess transfer of risk more effectively Financing costs for projects may be higher for PPPs however FLC analysis often shows savings over time due to risk allocation, design, construction, and long-term O&M. www.bostonia.com 9

Citizens Energy, Massachusetts Solar Portfolio Project Overview • In its for-profit division, Citizens Energy focuses on the development and ownership of renewable energy, high voltage transmission assets, and energy service activities. • Recently began operating a portfolio of 5 separate solar facilities located in Central and Western Massachusetts with facility sizes ranging from 85 kW to 3.0 MW, totaling 9.2 MW. • Each solar facility has either net metering or power purchase agreements with investment grade parties. • Citizens was successful in aggregating such projects, driving attractive returns to them as owners, over a 20 year term. Financing Overview • Bostonia Partners acted as Financial Advisor and Placement Agent, raising $56,000,000 in construction loans, 1603 bridge financing, tax equity, and term financing for each project. • Each project was funded separately, not cross collateralized, but viewed as a collective pool utilizing similar terms and structure. • The financing structure fully utilized the term of each power off-take agreement and the 10 year term of the Mass SREC market. Challenges / Lessons Learned • Aggregating sufficient MWs with similar profiles to bring to market. • Having sufficient owner/development capital to cover the unexpected • Capping or minimizing third party expenses and project reserves • Establishing standardization in documents and procedures for next set of projects • Transferring best practices to other asset classes and states • Securing long-term SREC contract from investment grade counterparty www.bostonia.com 10

Pennsylvania Keystone Home Energy Loan Program (HELP) Program Overview • Low interest rate consumer loan program for Energy Star and other energy savings home improvements; Pennsylvania Treasury Department owned the Keystone HELP loans as an investment. • Keystone HELP has originated more than 10,000 loans totaling $75 million since Program inception in 1986 using a contractor driven model managed by AFC First Corp, one of three FNMA approved underwriters in the nation. • Unsecured credit instruments with high FICO/low DTI borrowers has produced a low charge off rate (<5%). Financing Overview • Bostonia structured and executed a secondary market sale by Treasury of more than 4,600 consumer loans with anticipated cash flows of more than $35,500,000. • Bostonia-Keystone HELP I LLC, a special purpose corporation owned and managed by Bostonia Partners, purchased the loan pool from Treasury. • The loan pool supports a $20,000,000 senior secured seven-year term loan from three community bank lenders led by Fox Chase Bank, with Treasury retaining a residual interest in the loan pool in addition to its cash sale proceeds received at closing. • Attractive yield given senior-sub structure and short WAL. Challenges / Lessons Learned • Strengths: Treasury sponsorship and “equity” contribution; FNMA underwriting standards; and AFC First program management. • Weaknesses: low dollar unsecured consumer credit instruments; relatively short program history; high initial transaction due diligence and transaction costs; and credit rating not practical. • Expect lower funding costs for follow-on transactions; a modified approach to Keystone HELP can work for new money programs. www.bostonia.com 11

White Sands Missile Range, Solar ESPC Project Overview • $17,500,000 ESPC for US Army in White Sands, New Mexico • Largest solar installation on a US Army installation ESPC includes 5 MW Solar PV array (ground mount and carport) and an Energy • Management Control System Solar array produces 10.4 million kWh and contributes approximately 10% of total • energy consumption at the installation Project will create total cost savings of approximately $44 million over the 25-year • contract term based on escalation of electricity rates Financing Overview • Unlike a traditional ESPC, private ownership of the energy assets allowed the project to monetize federal tax credits • Long-term Energy Services Agreement (ESA) allows Government to acquire solar power without upfront capital or a buy down of project capital cost • Title to non-solar ECMs will vest with the Government at acceptance • Government will pay same utility rate it currently pays, but with a lower escalator, and will own the RECs Challenges / Lessons Learned • Long term PPA with investment grade off-taker essential to successful financing • Cost savings from energy efficiency made solar array more economical • Commitment and teamwork among the Army, Siemens, and Bostonia was a key to success www.bostonia.com 12

U.S. FDA White Oak Federal Research Center, Silver Spring, Maryland Project Overview • Public-Private Partnership to construct heat and power central utility plant and islanded microgrid for the 3.9 million SF, $1.5 billion office and laboratory compound for the FDA. • The project features a 26MW combined heat and power plant (expansion capability up to 55MW) that reliably produces electricity for the critical laboratory needs of FDA and uses waste heat to produce building heating and cooling. • In addition to the combined heat and power plant, the project includes upgrades to the heating, ventilation, and air conditioning systems, improvements to lighting — including the latest LED technology — and building envelope modifications. Financing Overview • The majority of the project was financed utilizing a $207+ million securitization of the cash flow structure from energy cost savings derived from energy conservation measures implemented at the campus. • The utilization of the PPP and ESPC is estimated to create more than $25 million alone in the first year of operation through energy savings and avoided operations and maintenance costs, and approximately $200 million in government savings over 20 years, according to a Public Service Comparator analysis. Highlights • The White Oak PPP between GSA and Honeywell represents the largest federal ESPC project awarded under the Department of Energy’s ESPC program. • Helps achieve significant progress in energy security at FDA White Oak and towards federal energy objectives outlined in Executive Order 13514 for the reduction of energy consumption and greenhouse gas emissions. • The micorgrid at FDA White Oak allowed the campus maintained power and was able to continue its operations during Hurricane Sandy in 2012 while the surrounding area was without power. www.bostonia.com

U.S. Virgin Islands Energy Alliance Program Program Overview • Innovative, island-wide energy efficiency and clean energy initiative for all utility rate classes • Government had little internal expertise-outsourced this expertise through private sector “Implementation Agent ” to design and implement program • Approximately $50MM in energy efficiency projects; first projects are underway Implementation and Financing Overview • Identify project opportunities and programs to reduce utility costs; • Present an overall assessment of the Virgin Islands marketplace for utility demand reduction services; • Procure Energy Services Companies (ESCOs) for the Virgin Islands; • Devise the implementation strategy for the Government, Business and Residential Markets; • Negotiate contract terms and pricing with ESCOs • Arrange financing for energy and water efficiency and renewable energy generation to be installed throughout the Territory . Challenges / Lessons Learned Use Government facilities to start the program – the government is the highest single energy consumer in the territory • Implementation costs higher than mainland due to “off island” skills, labor, and materials • • Savings and energy baseline were difficult to project due to electricity price volatility / up and down with oil companies • Actual savings greater than projected savings due to higher electric prices www.bostonia.com 14

Conclusions Development • Each State needs to be approached as a distinct market • New PACE legislation bills in many different states • Landscape may be increasingly difficult to navigate as programs continue to be refined, modified or expanded, coupled with NIMBY issues • Component pricing declines offer significant incentive to developers • Construction and engineering is very competitive and drawing interest from large EPC organizations at reduced cost Financing • Significant capital looking for the right projects • Municipalities need to consider the strength and experience of the developers it chooses to work with in order to ensure that projects are financeable • Creditworthy contracts and agreements are essential for successful financing • Financing parties will require that developers have sufficient capital and equity at risk. Developers will need to protect investors and lenders in certain circumstances. www.bostonia.com 15

Contact Information Anita P. Molino President 617-226-8102 Direct 617-437-0150 Main amolino@bostonia.com This information has been prepared solely for information purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any trading strategy. No representation or warranty can be given with respect to the accuracy or completeness of the information, or that any future offer of securities, if any, will conform to the terms hereof. Bostonia disclaims any and all liability relating to this information, including without limitation, any express or implied representations or warranties for, statements contained in, and omissions from, this information. www.bostonia.com 16

Energy Efficiency & Renewable Energy Financing Best Practices Julie Metty Bennett Vice President Michigan Saves Lansing, MI Need assistance with your energy finance programs? Consider CDFA’s Research & Advisory Services – offering customized and tailored technical assistance for all of your development finance needs. Learn more at www.cdfa.net. CDFA: Advancing Development Finance Knowledge, Networks & Innovation www.cdfa.net

Michigan Saves: Making Energy Improvements Easy and Affordable August 8, 2013 CDFA National Development Finance Summit Julie Metty Bennett, Executive Director

What is Michigan Saves? Energy Efficiency Loans Homeowners Municipalities Businesses

Structure Key Michigan Saves roles: • Provide loss reserve for participating lenders • Oversee authorized contractors • Drive demand for energy efficiency (outreach and incentives) • Set program guidelines and provide quality control 3

Current Programs 4

Home Energy Loan Program • Affordable, hassle-free loans • Easier than home equity – unsecured loan • $1,000 to $20,000 • Affordable rates and terms for low monthly payment • Easy, quick approval over the phone or online • Energy efficiency, solar, and geothermal • Find Michigan Saves authorized contractors – www.michigansaves.org 5

HELP Lenders • Eight lenders provide statewide coverage • Michigan Saves provides 5% loss reserve 6

HELP Loans Issued Loan value: $22.1 million (of $68 million committed) Loan loss reserve committed: $779,018 (of $3.4 million committed) Loan defaults: 18 loans (out of 2,712 issued or 0.66%) Cumulative Value Monthly Loan Value $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 7

Business Energy Financing • Statewide commercial financing ($2,000 – $150,000) for energy efficiency improvements through local lender, Ervin Leasing • Available to all types of businesses with focus on food industry • Fast, easy process • Below-market rates with flexible terms up to 5 years • 1.99% for food businesses • Rates from 5.99% for others

Special Offer! Typical Improvements $2,000 rebate for 20% energy savings for businesses in food industry • Lighting • HVAC • Refrigeration • Kitchen / cooking equipment • Controls and preventive Photograph by Marvin Shaouni maintenance 9

BEF Leases Issued Lease value: $956,993 (of $10 million committed) Loan loss reserve committed: $95,699 (of $1 million committed) Loan defaults: 0 Cumulative Lease Value Monthly Lease Value $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 Nov Dec Feb Mar Apr May Jun

11 From left to right: Terri Schroeder, Sally Talberg, Gov. Rick Snyder, Julie Metty Bennett, and Todd O’Grady.

Public Sector Energy Financing • Local and state governments and public schools • Energy efficiency and renewable energy upgrades • Building / property must be government owned

Financing Vehicle • Installment purchase agreements through Ervin Leasing • Authorized by PA 99 (1933) and PA 156 (1851) • Amounts of $5,000 to $1M • Streamlined approval and documentation • Firm-term contracts (2-5 years)

Eligible Improvements • Pre-screened energy efficiency and renewable energy measures • Indoor or outdoor lighting • HVAC, refrigeration, and more • Windows • Solar PV • Installed by Michigan Saves authorized contractors • No new construction or remodeling

BetterBuildings for Michigan $30M grant from US DOE to support statewide residential and commercial energy efficiency improvements

Grant goals

Goal 1 communicate with 11,340 serve 9,180

>50 sweeps of varying size: 1-99 100-199 200-299 300+

Goal 2 weatherize 13.5M square feet of commercial, industrial & public buildings

Goal 3 >$162M >$162M leverage $150M in private funds

Goal 4 create 2,063 green jobs

Residential Sweeps: Test and Learn Rebates Driving Demand

Preliminary Finding: Driving Demand Rebates 36% conversion to additional measures 18% Driving Demand 15% 67% Participate in program Say "No" Don't respond

Preliminary Finding: Location Rebates 45% Driving Demand 8% St. Joseph County Grand Rapids (Oakdale, Eastown)

Preliminary Finding: Co-pay Interest rates HIGHER co-pays ($100) produced higher Driving average conversions : Demand 47% vs. 28.6%

Preliminary Finding: Sweep Size Location Sweep size impacts % participating 29% Driving Sweep Size 20% Demand 7% High Medium Low (500 – 1,200) (<500) # of homes: (>1,200)

Preliminary Finding: Duration Co-pay Ideal duration is 4 – 6 months 32% 29% Driving Duration Demand 8% 4 – 6 mo. <3 mo. 7 + mo.

Preliminary Finding: Marketing Sweep size Re-Sweeps homeowners participate & Driving Marketing Demand have conversions

Preliminary Finding: Contractors Duration Contractor performance incentive put in place Driving Contractors Demand Sweep 2 Sweep 3 Sweep 4 Sweep 5 (Riverside) (Oakdale) (Westside) (GVSU)

Preliminary Finding: Rebates Marketing Initial Uptake and Conversion to Additional Measures 44% Driving 30% Rebates Demand 15% 12% Phase I Phase II Initial Uptake

Preliminary Finding: Interest Rates Contractors Driving Interest Rates Demand

Preliminary Finding: Interest Rates Average Conversion Rates Averages: 44% 40% 10% 70% 60% 50% 40% 30% 20% 10% 0% DeWitt Township Marquette Oakdale Riverside Park Roseville Sterling Heights Three Rivers Traverse City Westside GVSU Wyandotte 1 Eastown Ferndale Lathrup Village Rosedale Park Sturgis Southgate Low Medium High Low (0%) Medium High (3.99% and up) (1.99%) (0%) (1.99%) (3.99% and up)

Unique Marketing Approach: GVSU

Resources and Contacts Julie Metty Bennett, Executive Director jbennett@michigansaves.org Phone: (734) 494-2190 Websites: www.michigansaves.org www.betterbuildingsformichigan.org Email: info@michigansaves.org