Financing Renewables Presented by John Burges of Knight Capital at the Green Energy Act Finance Forum on Friday January 29, 2010 For more information visit http://www.marsdd.com/greenenergyforum

1. Knight Capital Group
!! Knight (NASDAQ: NITE) is one of the world’s leading financial services firms and has emerged as
a prominent part of the new Wall Street
!! Knight’s most important resource is our people; we employ over 1,000 professionals at 24
locations in the United States, Europe and Asia
!! Our business model integrates our resources enabling our investor and issuer clients direct
access and robust execution across all asset classes and in all of our capital markets activities
!! We offer high-quality trade executions through natural liquidity, capital facilitation when
necessary, and trading technology
!! Knight’s Capital Markets Group provides investment banking services and access to our many
resources for our corporate clients
Origination Sales & Trading Research
!! Originate, structure and market a range of !! Knight has one of the largest and most !! Equity Market Strategic Research offers
equity and fixed-income securities experienced institutional sales trading and perspective on global markets and strategic
including high-yield, high-grade and block trading teams in the world insight
convertible; provide related capital
!! Knight is the #1 market marker in NYSE, !! Fixed Income Research takes a analytical,
structure advisory services
NASDAQ CM, NASDAQ GM AND NASDAQ GSM fundamental “bottoms-up” approach to
!! Core competencies include capital markets, securities issuer’s entire capital structure
structuring, analytical support, new
!! Knight knows thousands of domestic and !! Senior analysts have an average of over 17
product development, and rating agency
international institutional investors years of experience in the industry
analysis
!! The team covers 80% of high yield and
distressed universe
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2. Knight’s Sales & Trading Capabilities
!! Knight is the #1 market maker in NYSE securities, with 17.25% total volume YTD
!! Knight is the #1 market maker in NASDAQ CM securities, with 47.71% total volume YTD
!! Knight is the #1 market maker in NASDAQ GM securities, with 42.16% total volume YTD
!! Knight is the #1 market maker in NASDAQ GSM securities, with 18.06% total volume YTD
Source: AutEx/BlockData FY2009
Global Sales Office Locations
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3. Knight is the Market Leader in Cleantech Equity Trading
#1 in Volume
Share volume in (1/1/2009 – 12/31/2009)
Source: AutEx Blockdata advertised US trade volume
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4. What Does Our Trading Share Mean to Capital Markets?
We track institutional buy and sell activity and generate
real time insight for our capital markets team
The best intelligence on the “new” Wall Street
Capital market targeting and placement is
significantly more efficient and cost effective
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6. Follow the Money
Total Revenue (!)
Market Cap at Year End (!)
Source: Capital IQ
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7. Asset Finance for Renewable Projects are 80% of capital – 70-80% debt financed
Debt Financing for Projects is the bulk of
Investment
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8. PV Capital Requirements: Who Finances?
Source: Good Energies
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9. Renewable Energy Policies Matter
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10. Solar Markets: Germany vs. California
Cumulative MWs
Sources: CPUC, CEC, SEIA and
German equivalents.
Germany added 10 times more solar than California last year even
though California’s solar resource is about 70% better
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11. The Holy Grail for attracting Capital
!! Regulatory stability
!! Avoid stop/start; no cap
!! Simplicity
!! Federal vs. State vs. IOU vs. Muni
!! Numerous variations
!! Barriers to entry – for capital and business
!! Predictable cashflows from selling power
!! Guaranteed transmission access
!! Must take contracts
!! Long term contracts to match long term assets
!! Reasonable Returns across different projects
!! Technology, size
!! Expedited Permitting
…the US share of worldwide solar shrunk to 5%
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12. Parasitic Transaction Costs & Parasitic Transaction Time are Near-Zero
Typical California paperwork for one project Typical Germany paperwork for one project
Could be a 1kW-sized project, but maximum Could be a 1kW or 20MW-sized project, or bigger.
1MW (via CSI program). Even more paperwork
for California projects larger than 1MW (via RPS
program).
Frictional Costs add 10% on the ratepayer for California projects vs. German ones
Source: Gary Gerber, President of CalSEIA and Sun Light & Power, Jun09
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13. Global Financial Meltdown
!! Exacerbated winners from losers
!! Less tax capacity & capital available by institutional investors
!! Federal tax credits were becoming “worthless”
!! Equity supply dries up; returns increase
!! Fewer renewable energy projects
!! ~3,000 MW less wind farms installed in US in ’09 vs. ’08
!! Loss of 38,000 “green collar” jobs
Warren Buffet: “When the tide goes out you can see who has been
swimming naked”
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14. Shortfall in Tax Equity
Source – GE Energy Financial Services
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15. NREL Research Findings
!! Countries with FITs:
!! Have highest RE deployment
!! Have highest job creation; highest economist
benefits tied to industry, manufacturing &
services
!! Have counter-intuitively delivered lower-cost RE
generation than countries employing
“competitive” policies like the RPS & RO in the UK
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16. FITS vs. Alternative Policies
Wind power deployment in the EU:
Source: EUROSTAT, 2008; NREL, 2008
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17. NREL Findings - RE Policy & Cost
FITs
RPS +
RECs
* Electricity price + Tradable Green Certificate (i.e. REC)
Source: BMU 2008; ISI, 2008; Fouquet, D. et al., 2008
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18. NREL - FITS vs. RPS on Cost
" NREL Research finding that FITs
offer better value for money
Source: OPTRES, 2007; NREL 2009
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19. How Does Ontario’s RE Policy Compare?
Ontario has the best RE policies in the Western Hemisphere
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20. Investment Return for ON FIT
Implied Debt Costs
!! Investment appetite has returned – HY index has improved from 20% to ~ 8-9%; bank appetite remains restrained
!! The FIT must take obligation from OPA (100% owned by the Province of Ontario) provides a stable source of cash
flows for FIT projects and makes them financeable
!! Province of Ontario’s (Corp rating: Aa1/AA-) bonds are trading at 4.2%; similar regulated US utilities trade
within 100bps risk premium Treasuries
!! FPL Group’s (Corp rating: A2/A) bonds are trading at 4.9%; US IPP’s long term bonds are trading between 8%
to 9%
!! Project Finance debt spreads for RE projects 300-350bps for all in costs 6.5-7%; cost of debt not the issue
Yield to worst for Electric Utilities Yield to worst for Independent Power Producers
FPL: 4.9%
MIR: 9.1%
ONT: 4.2% NRG: 8.4%
RRI: 8.2%
Source: Bloomberg, Knight as of 01/25/10 Source: Bloomberg, Knight as of 01/25/10
Notes: ONT: Province of Ontario, FPL: FPL Group Notes: MIR: Mirant Corp, NRG: NRG Energy, RRI: Reliant Energy
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21. Ontario Projected IRRs
OPA targeted 11% levered IRR
OPA targeted 11% levered IRR
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22. Attractive Post Tax Levered Equity IRR Returns
Solar Ground Mounted
(Installed $4.20-5.60)
Wind Onshore
(Installed $2.50-3.20)
Scotia Capital Research
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23. Conclusion
!! Investment is fungible – it will flow to the best risk weighted returns
!!Without debt financing RE isn’t scalable
!! High IRRs are healthy but based on European experience show flexibility
!! Get organized to protect FITs; articulate benefits
Investors will pay a premium for liquidity – Knight is the leading
provider of equity liquidity
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24. Contact Information
Capital Markets Contact Information
Please contact John Burges for Clean Tech and Energy inquiries:
jburges@knight.com
212-479-7498
Capital Markets Office Locations
Greenwich, CT – DCM
Corporate Headquarters New York City – ECM Headquarters
Headquarters
545 Washington Blvd 405 Lexington Ave, 46th Fl
1 Greenwich Office Park South
Jersey City, NJ 07310 New York, NY 10017
2nd Floor
Greenwich, CT 06831
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