EFTA02700742.pdf

MISSION Strictly Privileged and Confidential POWER Draft for Discussion Purposes Only 1000 MW Solar Energy Power Mission Power LLC Inves ent Discussion Materials August 2012 EFTA_R1_02067883 EFTA02700742  Section 1 Executive Summary • MISSION POWER 2 EFTA_R1_02067884 EFTA02700743  Executive Summary Overview Mission Power LLC ('AP") represents a unique opportunity to participate in the fastest growing solar energy sector in Chile. MP's objective is to acquire, develop and operate up to 1,000 MW of solar energy plants in Chile to convert the high solar resource of the Atacama desert, which has the highest solar irradiation, into a competitive, reliable and sustainable energy source to large offtakers: primarily, conventional generators that by mandate need to inject to the grid a certain percentage of their energy from renewable sources in order to comply with Law 20,257. mining, and iron ore operators as a way to reduce their carbon footprint and comply with their social responsibility mandate MP's business strategy is a "reverse approach" to the classical way of developing green field projects. Our approach is first to: identify and partner with investment grade companies in Chile that are required to generate and/or purchase energy derived from renewable energy sources, including solar, in order to comply with Chilean laws and their own social responsibility programs. By focusing on offtakers and regions with high renewable energy demand, MP is able to identify locations where solar resources may be harvested and transmitted at the lowest capital cost, with lower labor costs, and minimal environmental impact. In fact, many of the projects will be developed on land owned by the targeted mining companies, reducing the development time. • MP aims to deliver projects that have the highest economic, social and environmental value. MP, with offices located in New York City and Santiago, Chile, is a U.S. based company founded by Todd Meister, of Meister Global, and the principals of Caravel Wind Ventures Limited, an independent renewable energy holding company, which was established in 2010 to acquire and co-sponsor/develop an up to 460 MW wind farm project in the south of Chile, which upon achieving commercial operation will be the largest wind farm in Latin America. • MISSION POWER 3 EFTA_R1_02067885 EFTA02700744  • I Ir To minimize the development, execution an r i n l risk MP has formed a strate ispartnership with a U.S. based company (the "Strategic Partner"). with worldwide ri in develo in buildin and o eratin solar energy farms. The Strategic Partner has more thanIs operational sites delivering more than MWh of electricity. MP and the Strategic Partner have the technology and expertise to structure, build. operate and maintain solar power plants globally and with MP's finance roots, has access to an international network of finance partners and investors. • MISSION POWER 4 EFTA_R1_02067886 EFTA02700745  Executive Summary k.' st The 0. •ortunit Chile is the most developed and fastest growing country in Latin America and the largest copper producer in the world which is mined in the world's driest desert with one of the highest radiations. These unique set of characteristics combined with the fact that Chile's energy matrix is highly dependent on fossil fuels, create a unique investment opportunity for MP business model. The Opportunity: Spot prices at more than US$ 250/MW, make Chile one of the most expensive energy markets in the region. To reduce the cost of energy, Chile's government is determined to increase the participation of renewable energy from its current 2.4% to up to 20% by creating incentives, including enacting Law 20,257: Conventional generators are obligated to generate a certain percentage of their energy from renewable sources — currently this requirement is 5%. Beginning in 2014, this percentage will increase by 0.5% per year until reaching 10% by 2024. Generators can comply with the law by developing their own non-conventional renewable energy ("NCRE") projects, or they can purchase a renewable attribute associated to each MW of renewable energy generated by a NCRE generator. Conventional generators that do not comply with the law face a fine of USS 32 for each MW that they are not in compliance. Conventional generators present a ripe target market for MP's business proposition: "build-to-suit" solar farms, from the development phase through O&M on a turnkey basis. Mining companies also present a big opportunity for MP's business plan. For mining companies, energy is the largest production cost. Thus. entering into a -build-to-suit" arrangement with MP allows them: (i) reduce their cost of energy; and (ii) reduce their carbon footprint and comply with their social responsibility. Chile's "A+" credit rating by S&P for true project financing opportunities — 80% leverage ratios. Chile's stability and well-developed local capital markets, also allows for multiple exit strategies. • MISSION POWER 5 EFTA_R1_02087887 EFTA02700746  Executive Summary The 0. •ortuni Strategy / Implementation: MP plans to develop the solar projects listed on page 22 and continue to build its pipeline until it controls 1,000 MW. Under the terms of JV agreement, the Strategic Partner is obligated to provide the most competitive prices available at the time of development — currently at US$ 1.8 mm/MW on a turnkey basis. Upon development of the solar farms, the Strategic Partner will become the EPC during the construction period and the O&M during the operational phase. Solar farm advantages relative to conventional power plants: Shorter construction period — 7 to 10 MWs per month on average • Northern Chile's desert presents low environmental risks, reducing risks of permitting delays • Northern Chile is the driest desert in the world with one of the highest radiation levels • The largest international mining companies are located in the north of Chile paying more than US$ 250/MW at current spot prices — highly motivated to find solutions to reduce their largest single production cost EBITDA margins in excess of 80% - solar radiation is free • In exchange for MP's "build-to-suit" business proposition on a tumkey basis, the offtakers of the solar farms' energy must enter into a "bankable PPA- to allow for project financing - Expected PPA price US$ 100 - 110/MW. • MP has secured its first project — 100 MW solar energy project (the Project") located in Region III. • MP is in advanced negotiations to secure its second 100 MW solar energy project (the Project"). • " y stage negotiations for its third s energy project v as a total energy capacity of 150 MW (the Project" and collectively with the Project and the... Project, the "Projects"). • MISSION POWER 6 EFTA_R1_02067888 EFTA02700747  Executive Summary Solar Potential in Chile Radiation Levels Percentage of Cloudy Days T • Out of the Twelve Regions in which Chile is divided. Region I, II and Ill present unique Region I - Tarapacä characteristics which allows for the development of solar energy projects: ✓ The highest radiation levels, with Region II more that 7 KWhIM2 Antofagasta -25,- ✓ The lowest percentage of cloudy days, with less than 20% of the year Region Ill ✓ Where the world largest mining Atacama companies are located 1 Region IV 1 Face the country's highest energy Coquimbo prices Region Metropolitana Region V Region VI O'Higgins _ Region VII - Maule Region VIII - Biobio Region IX - Araucania -40- Region X - Los Lagos • MISSION -te Region XI - Alsen POWER -45 •68 .66 7 -74 -m EFTA_R1_02067889 EFTA02700748  Executive Summary About Chile 17 million inhabitants, primarily European descent (Roughly the size of the state of Florida) GDP: US$ 239 Billion (Florida = US$ 735 Billion) 6,435 Km of Pacific coastline Varied climate - Rainy and temperate in the south, Mediterranean in the Center, and desert in the north Very low country risk — "A+" by S&P and "A1" by Moody's 5th freest economy according to the CATO institute - ranked ahead of the US Economic 4th lowest debt/GDP ratio in the world (national debt 6% of GDP) Highest GDP per capita in Latin America Stability Strong Western legal system & protection of private property rights # 1 Destination for Private Equity & Venture Capital in Latin America (LAVCA & Economic Investment Intelligence Unit) # 1 'Place to do business" in Latin America (Forbes) Friendly Favorable tax regime for foreign investors Most peaceful country in Latin America measured by foreign relations & crime rates (Global Peace Index) Political # 1 in Latin America for ethics and accountability in government & business (Transparency Stability International) Lowest Corruption in Latin America (Corruptions Perception Index) • The Global Competitive Report for 2009-2010 ranked Chile as the 30th most competitive country in the world and 1st in Latin America • Chile's strong economy and lack of domestic source of hydrocarbons (gas, oil or coal) has increased its need to secure stable supplies of energy • Chile's power capacity are already severely strained and local authorities are estimating that demand will double over the next 12 years forcing Chile to look for alternative sources of energy in the renewable space. Only 2.4% of Chile's generation capacity comes from non-conventional renewable sources • Clear regulatory and legal framework favoring energy generation from renewable sources: Law 20,257 currently requires 5% of the energy produced by conventional generators must be generated from renewable sources increasing annually at a rate of 0.5% from until reaching 10%. • MISSION POWER 8 EFTA_R1_02067890 EFTA02700749  Country Comparison =16 Chile China Brazil U.S. India Debt/GOP Rau," 6% 17% (60% Unofficial) 41% 63% 56% 2009 Deficit/GOP 4% 4% 7% 12% 9% Economic Freedom 51n 82nd 111th 611, 87th Legal Foundation Western Communist Western Western Western Corrupuon Perception 25th (1s, in Lat Am) 79th 75th 19th 84th GDP/capita (PPP) $14,299 USD $10,296 USD $46,433 USD $3,270 USD $6,546 USD Trade Freedom 3th 39th 90th 29th 721h Source: CATO Institute and the World Bank • MISSION POWER 9 EFTA_R1_02067891 EFTA02700750  Executive Summary Business Pro .osition MP is currently seeking its first round of equity funding of US$ 132 MM to develop theill and Projects. The equity raising is based on the following metrics: Installed Capacity: 350 MW Cost per MW: US$ 1.8 mm Project Financing: 80% Construction Equity: 20% - US$ 126 mm Development Expenses: (1) US$ 6.0 mm Total Equity Raising: US$ 132 mm Pre Money Valuation: US$ 300,000/MW - US$ 105 mm Post Money Investor's Ownership: 56% EBITDA Margins: > 80% Expected IRR: > 40% Management Entity: Mission Power • MISSION (1) Development expenses include environmental studies, basic engineering, interconnection studies, legal expenses, overhead, etc. POWER 10 EFTA_R1_02067892 EFTA02700751  Section 2 The Business Model • MISSION POWER 11 EFTA_R1_020137893 EFTA02700752  The Business Model Re • licable and Scalable • "Build-to-suit" solar energy solutions at competitive prices and on a turnkey basis • "Reverse Business Model": MP first identifies potential credit worthy offtakers prior to incurring any development expenses vs. "conventional wisdom" first look to develop a project and then look for offtakers to execute a PPA and thus be able to secure project financing = high development risk • MP's offtakers become the exclusive energy offtaker under a "bankable PPA- • Low execution risk through a strategic joint venture with a well-known PV supplier, EPC, and O&M Energy Commitment: 100% of the solar farm's energy production • Tenor: Financing tenor + 2 years (ex. 20 year PPA w/ 18 years Financing) • Contract Type: Take or Pay Contract • Pricing: Fixed in US$ and indexed to US' CPI Index - Completed for CAP Project at US$ 107 MWh • In the case of mining companies, which tend to have massive extensions of land, solar farm would be built on their land, reducing time to reach COD • Transmission Line either "in the park" or a short distance to interconnection point on the national grid • Evaluate "Build, Own and Operate" model by a 3t° party to minimize upfront CAPEX for the transmission line Structure: Project Finance on a non-recourse basis • Financing Amount: Up to 80% • Tenor: 18 years Interest Rate: Libor + 2.50% - 3.50% • Pre-negotiated with the offtaker • Through M&A: Once MP controls more than 200 MW in installed capacity, it will be an attractive acquisition target for conventional generators looking to enter the renewable energy market or by large financial investors (i.e., pension funds) seeking stable long-term and predictable cash flows • Exit through an IPO • MISSION POWER 12 EFTA_R1_02067894 EFTA02700753  The Business Model Capitalization Strategy by Project Phase Development Secure Project Project Technical Phase Site Assessment Studies • Timing (months): • Basic engineering • Outright purchase Renewable Resource • Environmental • 12 to 14 License • [Transmission Line • Long-term lease Assessment: • Capital Required: Radiation studies) • Land granted by • Electric Concession USS1 tot 5 MM confirmation study • (Interconnection Offtaker • Mining Concessions per Project studies) • Right of Ways • Logistic studies for • [Interconnection construction Permits to National Grid] Construction Phase • Project Cost per MW: Project Financing • Up to 80% leverage. but not less than 11AllaSI • Approximately 1 month per 7 MW in installed capacity • Project COD ex • ed 40 2013 • USS 1.8 MM 70% • IS/Project COD • Up to 30% Equity expected by 20 Investment 2014 • Tenure: Up to 20 infeffif years. but not less COO expected by than 15 years 40 2014 • Interest rate: Libor + 2.50 - 3.50% • MISSION POWER (1) Including substation 13 EFTA_R1_02067895 EFTA02700754  Section 3 Project • MISSION POWER 14 EFTA_R1_02067896 EFTA02700755  j Project Company Profile • Investment Grade • MISSION POWER EFTA_R1_02067897 EFTA02700756  Project as, Summa Expected COD: IVO 2013 • IQ 2014 Distance to the National Grid: •In the park" • Expected Project Cost: US$ 1.8 MM per MW or approximately US$ 180 MM • Expected Leverage: 80% • Equity Investment: US$ 38 MM (US$ 2 MM development expense and US$ 36 MM construction expense) • Status: MOU executed and PPA negotiations almost concluded. • Exit: Predetermined (put/call combo) • Equity IRR > 43% The project financing is expected to have an eighteen (18) year maturity, including nine (9) months of construction period. The Project's projected free cash flow allows for solid debt service coverage ratios after the construction period. The PPA price is US3107 MWh • MISSION POWER 16 EFTA_R1_02067898 EFTA02700757  Project PPA Expected Total Revenue per MWh 518 8107 USS Dollars per MWh sold $7.7 $81 Energy Price Capacity NCRE EXPECTED total Payment Attribute price per MWh The revenue Firm capacity payments are Law 20.257 establishes Graph indicates long generated per MWh made to generators for a minimum requirement term revenue potential loaded to the grid increasing the capacity of of energy to be sourced based on 100% spot governed either by the grid from renewable market exposure. KAS PPA terms or Spot • This payment is based on resources projected long term Market rate the capacity of the plant The penalty for non- Energy Revenue at $79 compliance is $32 MWh MWh Spot Market price is during peak demand times the highest Marginal • Wind Farms receive a low It is estimated that the ERNC Attribute is Cost of the last Finn Capacity payment due 'market' value for the currently estimated to dispatched power plant to the low capacity factor NCRE attribute is be around US$18/MVVh to supply the grid relative to other plants such around US$ 18/MW based on information as thermal (coal) provided by KAS. This price will increase when demand for NCRE is greater than supply • MISSION POWER 17 EFTA_R1_02067899 EFTA02700758  Financial Parameters Figures in US$ 2013 2014 Total Equity Ownership 100% Solar Farm Capacity (MW) 100 100 100 Plant Load Factor 30.00% Annual Production Degradation 0.70% (In reality 0 3% • 04%l (guaranteed by Strategic Partner not to exceed 0.7% per yr.) Energy Price (USS/MW) 107.00 O&M (USUMW) $ 37,000.00 Overhead $ 1,148,545.18 Land Lease (% of Revenues) 2.00% Depreciation (Years) 10 Construction Period (Months) 12 Price Escalator per Year 2.00% Investment (USS/MVV) $ 1.800,000 CAPEX - Replacement of inverters every 10 years $ 85.000.00 Modules do not need any overhaul for 30 + years (USSMIN) Leverage (%) 80% Tenor (Years) 20 Interest Rate (Fixed) 7.00% Amortization Semi-annual Income Tax 20.00% EBITDA Exit Multiple (Times) 8.00 Development Equity $ 2,000,000 Construction Equity - 20% equity contribution $ 36.000,000 • MISSION POWER 18 EFTA_R1_02067900 EFTA02700759  Project Financial Pro'ections Financial Projections Figures in US$ 2013 2014 201$ 2016 2017 2016 2019 2020 2021 2022 2023 Rovonuos 5 24.119.600 $20.461218 528.447.467 $29218,465 5 29.594.215 $29.974,796 $30360,272 530,750,705 511.146.159 531,546,699 Operating Expeuns: 0881 $ 3,700,040 $ 3.774 000 $ 3,849.460 $ 3.928.470 $ 4,004.999 $ 4,085.099 $ 4.166.801 $ 4,250.137 $ 4.335.140 $ 4.421.843 Owelula0 $ 1.148,545 $ 1.171.516 $ 1.194.948 $ 1.218.845 5 1.243.222 3 1,268.007 $ 1293.448 $ 1.319,317 5 1.346.704 $ 1.372,618 Land InS4 $ 562392 $ 569.624 $ 576.960 $ 564.369 5 591.844 $ 599.496 5 607.205 5 615,014 $ 622,923 $ 630.934 Depredation $ 18,000,000 $ismoosoo s is.000aso s iseoo.000 $ le.oac000 $laaoasoo $16,000,000 518,000.000 $18.000,000 $18,000,000 Teal Operating Examines $ 23.410437 523,615.140 323,621.376 $ 23.729.684 $ 23.8.0.106 3 23.952.482 $ 24.067,456 524.184.468 524,303.767 $24,425394 Operating locums $ 4.706.663 4.966078 $ 5.226.110 $ 5.438.781 5,754.109 6.022115 $ 6292.817 6.566.237 6,642.393 7.121.305 Plus 00908411on $ lissom° morass moot000 s iseoo.000 $ 18.000000 moose® $iaosoaso mamma $16,000,000 $18,000,000 EBITDA $ 22.746.663 22.965,078 5 23.226.110 S24484781 $ 23.754.109 24.022115 24292,817 $ 24.566237 24.842393 25.121.305 EMMA Slargin 81% 81% 81% 80% 80% 60% BO% 80% 80% 80% Company Free Cash Flow Ow. Worm $ 4.708.663 $ 4.966.078 $ 5.224.110 $ 5,488.781 $ 4754.109 3 6.022.115 $ 6292.4117 $ 6.560237 5 6.842.393 S 7.121.305 Tun (20%) $ - 5 - 5 . 5 - $ - 5 - 5 - 5 - 5 - $ - Op. Income Met Taxes 5 4.708.663 $ 4.966.078 5 5.224.110 $ 5.488.781 $ 5.754.109 3 8.022.115 $ 6292.817 5 13.566237 5 6.842.393 $ 7.121.305 Plus Creprectiftion $ 18.000.000 $ 18.400.000 $ 18.000.000 $18.000.000 5 18.000.000 $ 18.0001:00 $18.000,000 5 18.000.000 518.000.000 $18.000,000 Less CAPE% $ -5 -3 -s -s -3 -$ -$ - S - 3 6.530.000 Free Cash Flow 5 22.708.663 522.986.078 523.226110 523.488.781 5 23.754.109 5 24.022115 $ 24292.817 524,566237 $24,642,393 $ 16421.306 Debt Service Interest Payment $ 10.000.000 9.678.870 $ 9.249.661 8.790.408 8,299.406 7,773.207 7210.602 6.608.614 5.964.487 $ 5275.272 Principal Amyl:radon 5.730.426 6.131.556 $ 6.560.765 $ 7,020.018 7.511.419 8.037.219 8.599.824 9.201.812 9.845.939 $10.535,154 05CR 1.44 1.45 1.47 1.49 ISO 1.52 1.54 1.55 1.57 1.05 Equity Valuation Fr.. Cash Flew $22.704683 $22.968.078 523.226.110 $23.488.781 423.754.109 324.022115 524.292.817 $24.566237 $24.442393 $16.821.305 Exit Multiple st Year S Ohl 5190.032.873 Less Debt &Kyles 1515.814426) ($t5,810.428) 1515110.426i ($15.810.4261 (515.810.426) Les. Debt Outstanding (5111.045.816) Equity Investment 152.000.000) ($38,000,000) Free Cash Flow to the Equity ($2.000.000) ($29.101,763) $7.155.462 $7.415.684 $7.678.155 586.930.740 Oevetopment Equity Investment 52.000.000 Construction Equity Investment 5.36.003.000 IRR 43.11% • MISSION POWER 19 EFTA_R1_02067901 EFTA02700760  Section 4 Project Pipeline • MISSION POWER 20 EFTA_R1_02067902 EFTA02700761  Project Project 100 MW Solar Farm (Negotiating MOU) 150 MW Solar Farm (Negotiating MOU) •Expected Capacity: 100 MW •Expected Capacity: 150 MW •Expected Ownership: 100% •Expected Ownership: 100% •Expected COD: IIQ 2014 •Expected COD: IVQ 2014 •Distance to National Grid: Less than 40 kilometers •Distance to National Grid: Less than 30 kilometers •Expected Project Cost: US$ 1.8 MM per MW, or •Expected Project Cost: US$ 1.8 MM per MW, or approximately US$ 180 MM approximately US$ 270 MM •Expected Leverage: 80% •Expected Leverage: 80% •Equity Investment: US$ 36 MM •Equity Investment: US$ 54 MM •Expected Development Cost: Up to US$ 2.0 MM in •Expected Development Cost: Up to US$ 2.0 MM in studies and engineering expenses to take the project to studies and engineering expenses to take the project to a "bankable" stage a "bankable" stage •Equity IRR > 41% •Equity IRR > 41% MISSION POWER 21 EFTA_R1_02067903 EFTA02700762  Project Pipeline Solar Pro'ect Pipeline Development Equity Equity Raise Expected Project Name Project Size Project Stage Ownership Investment Investment Expected (Development + Equity) IRR (MW) (%) (USS MM) (USS MM) ul COD 2012 2013 (%) ao 100 100 PAOU executed MOU negotiation 100% 100% (2) (2) S2.00 82.00 536.00 536.00 IVO 13 IIQ 14 $2.00 $2.00 $36.00 $36.00 43% 41% (3) (3) 150 MOU negotiation 100% (2) 82.00 $54.00 IVQ 14 $2.00 $54.00 41% (3) 350 $6.00 $128.00 $6.00 $126.00 MW Ownership: 350 COD in 2013: 100 COD in 2014: 250 (1) Equity .,vestment during the construction phase based on an 80% debt 120% equity .,vestment (2) The ofI taker ney have a cal option to purchase 100% of the scrar farm (or up to 49%) at term to be agreed (3) Assures an extt at year 5 at a 8x Ebitda maniple • MISSION POWER 22 EFTA_R1_02067904 EFTA02700763  Section 5 Team: Executive Management • MISSION POWER 23 EFTA_R1_02067905 EFTA02700764  Team: Executive Management Bios Anibal Palma, Co-Founder Anibal oversees project origination. development. strategic planning and raising 1 structuring capital for Mission Power. Before forming Mission Power. Anibal co-led the effort of Caravel Wind Ventures Limited as co-sponsor of the 460 MW wind farm project in Lebu. Chie responsible for managing the day-to-day matters of the project including, hiring and overseeing the local management team, negotiating project financing and generaly overseeing the project in his role at Chief Executive Officer. Anibal is a former Managing Partner and Head of Investment Execution of Ctuantek Asset Management (GUAM). the management compan