INNOVATIVE FINANCIAL INSTRUMENTS TO SUPPORT ENERGY EFFICIENCY: LED STREETLIGHT PROJECTS LIMA, PERU NOVEMBER 15, 2016 Kerry Wilson, MBA Managing Director, Business Solutions

TOPICS Government & Private sector roles EXAMPLE OF SUCCESSFUL MODEL RealTerm Energy EXPERIENCE PUBLIC PRIVATE PARTNERSHIPS IN LED Conversion ESCO FINANCING ALTERNATIVE

EXPERIENCE WITH LED TURNKEY CONVERSION PROJECTS 165 LED Conversion Projects in 3 Canadian provinces and 6 US states 190,000+ fixtures to date Projects from 14 to >12,000 fixtures 71,722 fixtures installed in 2015, including 31,000 in Q4 2015 40 full and part-time LED streetlight professionals Pioneered 10 Year Energy Performance Contracts in 15 Cities in Ontario, Canada

BENEFITS: SUSTAINABLE LIGHTING SOLUTION Increased Light Quality/Quantity Reduced Energy Consumption Economical Solution for all Parties Reduced GHG Emissions Reduced GHG emissions Simple and affordable way to go ‘green’ Mercury and lead-free GHG reductions Targets Contributes to internal, Federal or National GHG reduction targets Reduced light pollution (minimal light trespass) Dark sky friendly Low-Carbon positioning positive PR, gives utility a competitive advantage; more and more utilities initiating/developing sustainability initiatives/programs

TURNKEY PUBLIC PRIVATE PARTNERSHIP MODEL Define Project Scope ( >$25MM US) Procure Product & Operating Partners Establish Baseline Savings Potential Evaluate Project & Operational Risk Project Cash Flow Distributions Creation of SPV to Operate Assets Finance with or without Securitization Project Implementation

ASSESSING PROJECT RISK Implementation of an LED Streetlight conversion Project scope, grid hardening, operating costs defined Long term Measurement & Verification Repurchase of lights, Establish Baseline to identify savings Documentation, Financing, Transfer of Operating and Maintenance costs / risk

STEPS TO MAXIMIZE SAVINGS AND MINIMIZE RISK GIS Data Collection Photometric Design Investment Grade Audit Installation & Project Management Identify Billing Changes Contract & Operations

GOVERNMENT PROGRAMS & INCENTIVES Electric Utility Buyback Legislation & Assistance State-level, low interest capital pool for infrastructure programs Incentives for upgrades, smart city controls that optimizing design M&V Standards for Billing & Reporting Municipal Customer

ELEMENTS OF A WORKING ESCO MODEL Define pool of Savings, Project Failure Rates & Maintenance Costs, Warranty Coverage Hell or High Water, securitizable income stream regardless of energy rate fluctuations Minimal Term to amortize project costs, warranty exposure Establish split of energy/maintenance savings 3rd Party Insurance to protect owner for non-performance

SELF FUNDED PROJECT vs. PRIVATE ESCO FINANCING No. of LEDs: 43,000 Project Cost $21.6 MM kWh Savings: 66% E. Cost Savings: 50% Maint. Savings: 80% Savings Pool: $4.75MM Per Annum Approx. $7.45M Annual Streetlight Expenditure (Energy/Maintenance) 2.0% Interest 5 Year Term 3.5 Year Payback 9% IRR to ESCO 65% - 35% Split 10 Year Term w/ Maint.

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