EFTA01454617.pdf

RRP72 - Southern Financial Retrofit Finance Structures The ESA-based strategy being pursued by the Partnership will compete primarily with two existing models for retrofit projects: (i) building owners who do the retrofits on their own ("Do it Yourself' or "DIY"); and (ii) energy service companies or "ESCOs" which finance retrofit projects through third party debt' Retrofit Finance Structures Do it yourself (DIY) Energy Service Company (ESCO) Energy Service Agreement (ESA) Explanation The building owner manages A third party is contracted to design, A third party funds the cost of all aspects of their own energy build and source financing for all energy efficiency equipment and efficiency project aspects of an energy efficiency then operates the equipment to project provide "energy services" to the building Financing Source Equity or third party debt Third party debt Equity/Debt via third party Guarantee of Savings No Yes, but difficult to enforce. Owners All risk borne by third party must oversee Measurement & Verification ("M&V") to ensure they are being paid for savings shortfalls over full term of project. Upfront Cost to Owner Full cost of retrofit Full cost of retrofit, but typically 100% None financed from annual savings via third party debt Difficulty of Execution for Building High Low Low Owner Ability for Tenanted Building Owner Possibly2 Possibly2 Possibly2 to Capture Energy Savings Another alternative is Property Assessed Clean Energy or "PACE,' which is an emerging structure in the marketplace for financing retrofit and dean energy projects. The Partnership may compete with PACE financing for project opportursties and, in certain cases. may use PACE financing as part of an overall Partnership project. See Appendix F. Note 8 for additional important information regarding PACE financing alternatives. Tit depends on specific lease terms and definitions In a typical triple Nat lease the tenard realizes the energy savings instead of the building owner New "green lease' and other lease provisions can address this split incentive Deutsche Asset RREEF Retrofit Partners. L.P. For U.S. Person Clients of the U.S./Americas Key Client Partners Desk Only t Wealth Manage,- June 2014 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0112849 CONFIDENTIAL SDNY_GM_00259033 EFTA01454617