Financing Power Infrastructure in New England Electricity Restructuring

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Financing Power Infrastructure in New England Electricity Restructuring Roundtable June 10, 2011 Mauricio Del

Financing Power Infrastructure in New England Electricity Restructuring Roundtable June 10, 2011 Mauricio Del Valle Morgan Stanley Vice President, Global Power and Utilities

Capital Markets Environment

Capital Markets Environment

prototype template (5428278)screen library_new_final. ppt 9/15/2020 Equity Markets and Volatility Indexed Price Chart and

prototype template (5428278)screen library_new_final. ppt 9/15/2020 Equity Markets and Volatility Indexed Price Chart and Volatility Index (VIX) Last 4 Years (%) S&P 500 VIX Source: Fact. Set 3

prototype template (5428278)screen library_new_final. ppt 9/15/2020 Utility Debt Issuance By Year 2006 – Present

prototype template (5428278)screen library_new_final. ppt 9/15/2020 Utility Debt Issuance By Year 2006 – Present (U. S. ) Investment Grade Debt Issuance High Yield Debt Issuance ($MM) BBB Index Term Cost of Debt 5 y – 30 y 3. 0% – 6. 0% Source: Thomson Reuters, Bloomberg BB Index Term Cost of Debt 5 y – 12 y 4. 5% – 6. 0% 4

prototype template (5428278)screen library_new_final. ppt 9/15/2020 Project Finance Market Update Global Project Finance Volume

prototype template (5428278)screen library_new_final. ppt 9/15/2020 Project Finance Market Update Global Project Finance Volume (Debt and Equity) ($Bn) Sectors Regions (Debt and Equity) Volume (Debt and Equity) Telecom Industrial Mining Asia Pacific Volume Energy Latin America and Caribbean Oil & Gas Middle East and Africa Infrastructure Source: Project Finance Magazine, Dealogic Europe North America 5

NE Supply / Demand Dynamics

NE Supply / Demand Dynamics

prototype template (5428278)screen library_new_final. ppt 9/15/2020 ISO – NE Fuel Mix Composition Capacity vs.

prototype template (5428278)screen library_new_final. ppt 9/15/2020 ISO – NE Fuel Mix Composition Capacity vs. Generation 2010 Capacity Fuel Mix 2010 Generation Fuel Mix Others Coal Gas / Oil Others 1% Wood / Refuse Hydro Oil <1% Natural Gas Hydro Coal Nuclear Gas / Oil Natural Gas Oil Nuclear Installed Capacity: 30, 380 MW Source: ISO – NE Total Generation: 126, 403 GWh 7

prototype template (5428278)screen library_new_final. ppt 9/15/2020 ISO – NE Capacity Auction Results of First

prototype template (5428278)screen library_new_final. ppt 9/15/2020 ISO – NE Capacity Auction Results of First Five Capacity Auctions (MW) (USD) (1) Total Cleared Capacity (MW) Excess Supply (MW) Floor Price ($/k. W-month) Source: ISO – NE (1) Represents preliminary results 8

prototype template (5428278)screen library_new_final. ppt 9/15/2020 ISO – NE Capacity Auction Results ISO –

prototype template (5428278)screen library_new_final. ppt 9/15/2020 ISO – NE Capacity Auction Results ISO – NE Reserve Margins Reserve Margin (%) Projected Reserved Margin (includes only operating capacity, capacity under construction, and expected retirements) Target Reserve Margin Source: Ventyx Advisors 9

Financing New Power Infrastructure in NE

Financing New Power Infrastructure in NE

prototype template (5428278)screen library_new_final. ppt 9/15/2020 What Is Needed to Finance New Power Infrastructure?

prototype template (5428278)screen library_new_final. ppt 9/15/2020 What Is Needed to Finance New Power Infrastructure? Capital Availability (Debt and Equity) Adequate Documentation (Engineer’s Report, etc. ) Project Viability (Permitting / Interconnection) Policy Support (Regulatory / Environmental, Tax Credits) Adequate Investor Returns (Power Supply and Demand / Energy and Capacity Pricing) 11

prototype template (5428278)screen library_new_final. ppt 9/15/2020 Project Finance: Required Diligence Materials · Material Project

prototype template (5428278)screen library_new_final. ppt 9/15/2020 Project Finance: Required Diligence Materials · Material Project Agreements - Offtake Agreements, EPC / Construction contract , O&M Agreements · Independent Engineer · Environmental Consultant · Market Consultant · Insurance Consultant · Legal / Tax 12

prototype template (5428278)screen library_new_final. ppt 9/15/2020 Key Characteristics for Successful Project Finance Lender’s Perspective

prototype template (5428278)screen library_new_final. ppt 9/15/2020 Key Characteristics for Successful Project Finance Lender’s Perspective Equity Perspective · Project size greater than $100 MM · No risk of “cram down” · 3 x EBIT / Interest · Strategic partners in place · Contracted revenues (PPA or off-take agreement) · Certain path to profitability · Liquidation value greater debt obligation · Limited technology risk · Reputable contracted suppliers · Secured control · No conflicts of interest · Anti-dilution rights · Creditors control uses of cash flow · Commercialization timeline matches exit strategy · No quick exit for sponsor · Liquidity event in near-term · Creditor has ability to veto · Returns on capital at least 500 bps above WACC Source: Jefferies Equity Research 13

prototype template (5428278)screen library_new_final. ppt 9/15/2020 Financing Solar and Wind Projects Key Items Wind

prototype template (5428278)screen library_new_final. ppt 9/15/2020 Financing Solar and Wind Projects Key Items Wind Solar · Long-term PPA or offtake agreement from an investment grade purchaser · Long-term PPA or offtake agreement sufficient in length to fully amortize project debt · Independent engineer’s report · EPC contract with performance surety · “Bankable” meteorological wind data · Contracted site control · Reputable project manager · Environmental permits · Adequate turbine technology · Transmission / interconnection agreement 14

prototype template (5428278)screen library_new_final. ppt 9/15/2020 IPP Trading Analysis – $/k. W Trading Analysis

prototype template (5428278)screen library_new_final. ppt 9/15/2020 IPP Trading Analysis – $/k. W Trading Analysis – $AV/k. W ($/k. W) Median: 445/k. W Source: Company filings, Fact. Set 15

prototype template (5428278)screen library_new_final. ppt 9/15/2020 Gas Asset Precedent Analysis – $/k. W Precedents

prototype template (5428278)screen library_new_final. ppt 9/15/2020 Gas Asset Precedent Analysis – $/k. W Precedents Analysis – $/k. W ($/k. W) Northeast Median: $509/k. W California Median: $658/k. W Texas Median: $435/k. W (1) Northeast (1) Transaction terminated (1) Texas California 16

prototype template (5428278)screen library_new_final. ppt 9/15/2020 Illustrative Pricing Required to Support New Build Key

prototype template (5428278)screen library_new_final. ppt 9/15/2020 Illustrative Pricing Required to Support New Build Key Model Assumptions · 500 MW combined-cycle gas turbine plant · 7, 000 Btu/k. Wh heat rate · 40% capacity factor · 1, 300 $-k. W total capital cost Illustrative Pricing Needed to Attract New Investment Capacity Pricing (1) Energy Pricing (2) Current Forecasted Pricing Range Pricing Needed to Achieve Target Returns ~ 3 area ($/k. W-month) 9 – 12 ($/k. W-month) 50 – 60 ($/MWh) 75 – 85 ($/MWh) (1) Capacity pricing calculated assuming current forward energy prices held constant. (2) Energy pricing calculated assuming current forward capacity prices held constant. 17