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					U.S. Solar Market Overview
New Mexico Energy Investment Initiatives

July 2008
MMA Renewable Ventures Overview

   MMA Renewable Ventures is the leading owner and financing source for
    renewable energy and energy efficiency assets in the U.S.
     —   27 MW of solar PV projects in operation;
     —   13 MW of projects currently under construction
     —   30+ customers, 10 integrators/installers

   Recently entered into wind, biomass, and large-scale energy efficiency deals


   Pipeline of $1 billion of identified opportunities for 2008-09

   Delivering reliable and affordable clean energy
    with proven
     —   Project finance
     —   Due diligence
     —   Physical asset management



                                                                                   2
                 Financial Sponsorship

  U.S. market will develop around strong financial partners that can
manage risks for developers, customers, investors, and manufacturers.


  DEVELOPER
   Financing Risk                                       MANUFACTURING
Implementation Risk                                       Technology Risk
      EPC Risk                                          Brand Protection Risk
  Real Estate Risk                                         Regulatory Risk
 Regulatory/Rebate




                                            INVESTOR
                      CUSTOMER            Maintenance Risks
                Implementation Risk       Operating Expense
                 Relationship Risk           Credit Risk
               Regulatory/Rebate Risk      Regulatory Risk
                                           Production Risk




                                                                                3
                         High Potential U.S. Market


     Germany                              United States




Source: Solar Energy
Industries Association
(SEIA)




                                                          4
                    Growing Market Potential for PV
• Rising electricity prices
    – Global demand for coal and
      natural gas
                                                                                                                        2
    – Popular opposition to coal plants                          Avg. Retail Electricity Prices
    – Cap-and-trade system may
                                                           12                                                           24
      increase electricity prices by 20%
                                                                                                                        22




                                                                                                                             Hawaii ($ .00)
                                                           11
      (assuming $40/ton carbon)




                                             U.S. ($.00)
                                                           10                                                           20
• Falling tech and project costs                                                                                        18
                                                            9
                                                                                                                        16
                                                            8                                                           14
• Favorable trend in policy, e.g.,                          7                                                           12
                                                            6                                                           10
    – Renewable Portfolio Standards

                                                                1993

                                                                       1995

                                                                              1997

                                                                                     1999

                                                                                            2001

                                                                                                   2003

                                                                                                          2005

                                                                                                                 2007
    – Net metering and interconnection
    – Federal cap-and-trade system’s                                             U.S.          Hawaii
      distribution of allowances / auction
      proceeds to renewable energy


                                                                                                                                              5
           U.S. PV Installation Growth


MW installed
  2000: 17 MW
  2006: 141 MW (+31%)
  2007: 259 MW (+83%)
  2008: 491 MW (+90%)
  2009: 913 MW (+86%)
  2010: 1590 MW (+74%)

• More than 60% large
  commercial                      Sources: US PV grid-tied module use 2006
                              IREC and Larry Sherwood, PV News, July 2007
                             Greentech Media and Prometheus Institute, 2008



                                                                              6
                                                U.S. Non-Residential PV Installations

                       • California remains over half the U.S. market

                       • Power Purchase Agreements (PPA) growing quickly

                                            By State                                                      By Financing Model
                  70                                                                         140

                  60                                                                         120
 Megawatts (AC)




                                                                            Megawatts (AC)
                  50                                                                         100

                  40                                                                         80

                  30                                                                         60

                  20                                                                         40

                  10                                                                         20

                  0                                                                           0
                        2003




                                     2004




                                                  2005




                                                           2006




                                                                    2007




                                                                                                   2003


                                                                                                          2004


                                                                                                                 2005


                                                                                                                        2006


                                                                                                                               2007


                                                                                                                                      2008*


                                                                                                                                               2009*
Source:
Greentech
Media                   California          New Jersey   Rest of States
                                                                           Source: Greentech Media               PPA     Non-PPA              *Forecast




                                                                                                                                                          7
                  U.S. PV Industry Market Trends


•   Utilities entering owner –
    operator space

•   Policy uncertainties are
    becoming a barrier to
    sustained development

•   Rapid expansion (or
    everyone’s got the ―solar    100%
    bug‖)

•   Emerging dominance of
    Power Purchase
    Agreements (PPAs)

•   Utility-scale projects
    becoming commonplace –
    hundreds of MWs

                                 0%

                                                   8
               Power Purchase Agreement:
               Opening Markets for Solar

• Complicated financial
  incentives than Europe
  require PPA + third
  party ownership

   – Capital conservation:
     no up-front capital
     expenditure

   – Limited operational
     risk for customer –
     key differentiator from
     lease buyback model

   – System purchase
     options for the energy
     end-user

                                           9
              The Power Purchase Agreement: A Long Marriage

The PPA is a long term contract in which the customer buys the electricity
from the system owner on a set price schedule


        CUSTOMER RESPONSIBILITIES         SYSTEM OWNER RESPONSIBILITIES

             Buys System Electricity      Develop & Finance
                   10—25 year span        Permitting
                                          Design
                                          Procurement
                                          Installation

               Provides System Site       Own & Operate
                   (for retail systems)   Operations
                Site lease agreement      Maintenance
                                          Insurance



                                                                             10
                       PV Projects with Third Party Ownership:
                       Competing Interests on the Path to Standardization

DEVELOPER                                                                          INVESTOR
                          CUSTOMERS WANT TAILORED SOLUTIONS




                                                                   “Just keep it simple and
                                                                       cover all the bases”

“Just this once
and then we can
replicate.”


                     Use new technology         Secure tax benefits
                     Commitments before $       Minimize risk
                     Make customers happy         —   Credits, Technology, Operations
                     Sell high                  Buy low


                                                                                              11
                       Differing Views: Return Expectations

     DEVELOPER                  INVESTOR

“Lower risk than wind”     “Where’s the money?”              Return Expectations
                                                     IRR vs. money
                                                     Valuing the PPA Provider
                                                     Residual Value


“If I deliver, you fund”   “Sure…just make sure                 Financing Risk
                           you deliver”              State regulatory timing issues
                                                     Who bridges delays?
                                                     Credit market meltdown



“No moving parts,          “Get me out in six”                 Operating Risk
…..solar lasts forever”                              Less than perfect installations
                                                     Taxes and changing incentives
                                                     Erosion and peeling on modules


                                                                                        12
                   A Typical U.S. Solar Fund Syndication


• Diverse Financial Products
   – Aggregation of PV projects – diversification of risk
   – Leveraged structure with senior debt at the project level
   – Majority of returns come from federal tax benefits
   – Partnership structure – not a lease
   – Proven technology

• Exit for Investor
   – Clear exit path, terms, and overall deal

• Yields
   – Matching risk & return. Consider fund-level risk, leverage, and credit
      protection from each party


                                                                              13
                 Uncertainty in Federal Policy


• No long-term Federal policy is established.

• Delay in extending the 30% Solar Investment Tax Credit (ITC)
  undercuts installation. Industry believes another one year extension
  is likely, though timing is uncertain. Current ITC restrictions include:
   – Not available to utilities
   – Residential credit capped at $2000
   – Not available to Alternative Minimum Tax (AMT) payers

• Several carbon emissions schemes are currently under debate in the
  Senate. Discussion of national Renewable Portfolio Standard too.

• The leading Presidential candidates all favor a federal cap-and-trade
  system for carbon emissions.



                                                                             14
                       Solar Investment Tax Credit


•   Extension is held up due to lack of compromise between Senate Republicans and
    House Democrats over funding

•   Fundamentally, ITC caught up in larger political issues and election


                                                   •   Industry impact from delay
                                                        – Temporary demand spike to
                                                          qualify for 2008 driving up prices
                                                        – Orphaned projects
                                                        – Layoffs at project firms
                                                        – Domestic firms (and jobs!) going
                                                          offshore
                                                        – Accelerate industry
                                                          consolidation?



                                                                                               15
The Solar Alliance

•   An Alliance of
     – PV Manufacturers
     – Systems Integrators
     – Financiers

•   Working at the state level to
    adopt cost-effective solar
    policies and programs




                                    16
  State Rebate Programs




                                                 D.C.




                          Both state & utility/other programs available
                          State programs available
                          Utility/other programs available

DSIRE: www.dsireusa.org                                  March 2008

                                                                      17
       Solar Policy Puzzle




                RPS    Net Metering       Interconnection

Insolation


                          Utility Rates
Tilt &            State
Orientation       Incentive      TOU
                                              Decoupling
Fixed/Tracker               Demand



Total System                                  Property &
Cost =                                        Sales Tax
                 ITC        MACRS             Exemptions
Modules +
BOS
                                                            18
19
                               Track Record at Scale vs Price



                                                                              2010—2012

                                  Wind
TRACK RECORD




                                                                                                Solar
               Geothermal
                                                                                             Photovoltaic
                                 Biomass
                                                                                              Crystalline



                             Solar –                                            Solar Thin Film
                            Parabolic
                             Trough                            Solar –
                                                           Concentrating PV



                                        Solar – Stirling
                                             Dish




                                                           PRICE

                                                                                                            20
                 Creating the Next Nellis


• The two biggest PV projects in U.S. are located in Nevada
  (Nellis) and Colorado. Both states have:

   – Good solar insulation – not nearly as good as New Mexico
   – Stable, long-term policy regimes – state Renewable Portfolio Standard
     with a solar carve-out – enabling long-term contracts with utilities


• Building similar projects in New Mexico will depend on:

   – Certainty on federal ITC extension through 2010-2011
   – Motivated communities and stakeholders to help bring all the required
     pieces into place (expedited permitting, additional financial support,
     etc)



                                                                              21
              Nellis Air Force Base


  Nellis Air Force Base – 14.2 MWs    Ground mounted tracking
                                      system that covers 140 acres

                                      Using over 70,000 solar
                                      modules with tilted trackers




Largest PV system in Americas
                                                                     22
Nellis Air Force Base

              MMA RV: Financed, Owned & Operated

              •   ~$100MM project on Nellis Air Force
                  Base (AFB) property, eight miles
                  northeast of Las Vegas, Nevada

              •   All electricity sold to U.S. Air Force
                  under 20 year Power Purchase
                  Agreement contract

              •   All Renewable Energy Certificates
                  (RECs) sold to Nevada Power under
                  contract under State Renewable
                  Portfolio Standard w/solar carve out

              •   Saves Nellis ~$1 Million annually


                                                           23
                                 Nellis Construction Funding Schedule

   Total Third Party Construction Cost ~ $100 million
                  $120,000,000                                           12/21/07 – Final Completion Date and Perm Debt Funded


                  $100,000,000


                    $80,000,000


                    $60,000,000


                    $40,000,000


                    $20,000,000


                               $0
                            De 7
                                  07




                            Fe 8
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                                      Construction Debt Outstanding         Letters of Credit from MMA



    * A typical solar project construction takes approx. 8 – 9 months.


                                                                                                                                 24
                     Final Thoughts


•   U.S. is the most promising solar market in
    the world today

•   U.S. solar industry competing with
    European firms
     – Third party ownership facilitates entry
       of European firms
     – ITC risk pushing U.S. firms overseas

•   But, U.S. solar industry still playing catch-
    up with Europe, due to weaker policy
    environment

•   Project financier and third party capital
    necessary for U.S. market growth due to
    incentives structures

                                                    25
                     Seeking a Level Playing Field for Solar


•   Congress considering permitting
    utilities to receive ITC (currently not
    permitted)

     – Utilities starting to enter the
       North America PV generation
       market
       (SCE, Duke)

•   Utilities can bring scale to industry

•   But utilities are already receiving
    federal subsidies and regulatory
    advantages

•   Incentives should encourage all
    market participants to make the
    solar marketplace


                                                               26
     Thank You!




      Matt Cheney
matt.cheney@mmarenew.com
        415.229.8801
www.renewableventures.com


                            27

				
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