PACE: Ideal Commercial Solar Financing Joshua Kagan VP, Business Development CleanFund SEIA’s Solar Goes Corporate – April 27, 2018

Shift in Topic for Today… PACE Has the Highest NPV… PACE: Ideal Commercial Solar Financing Profitable 2. Flexible 3. Easy

About CleanFund and SolarPACE CleanFund Commercial PACE Capital Founded in 2009 by PACE financing pioneers Team of 35 professionals with 100% focus on commercial PACE financing Direct capital provider (not a broker) National coverage with headquarters in the San Francisco Bay Area SolarPACE Financing Created specifically for commercial solar projects Flexible options to create positive cash flows for most projects

Property Assessed Clean Energy What is PACE Financing? Property Assessed Clean Energy Legislatively enacted program for financing energy efficiency and renewable energy projects through property tax assessments. Available for “public good” property improvements. Simple repayment via property tax bill. Typically uses private capital, with negligible cost to municipalities.

Using PACE to Create Positive Cash Flow Long terms (20-30 years) result in lower annual payments Building owner keeps all tax benefits, rebates, RECs, and other PBIs Ability to ’buy down’ assessment with tax benefits results in even lower payments Combination results in solar PACE having the highest NPV of any financial mechanism for solar Profitable

Highest Net Present Value with PACE Cumulative Discounted Cash Flow (NPV) Profitable * 180 kW system example, 7% discount rate, full after tax analysis.

Overcoming the Split Incentive – Owners & Tenants Increased property value Potential income tax savings Can receive rental income Owner PACE Solar Project Repays via pass-through property taxes or increased rent Tenant Electricity cost savings Green workspace Flexible

SolarPACE PPA – For Those Without Tax Appetite Client has tax appetite? Yes No Structure: SolarPACE Direct Ownership SolarPACE PPA System owner: Property owner. Third party owner, buyout option after year 6. Solar tax benefits: Direct to property owner. Indirect through 3rd party owner. SolarPACE finances: 100% of system price. Upfront electricity payment equal to 80 to 90% of system price. Maximum term: Up to 30 years. Client types: Businesses with sufficient income tax liability. Non-profits, businesses without income tax liability. Cash flow source: Positive operational cash flow plus income tax benefits. High positive operational cash flow. Flexible

Property Types and Eligible Improvements CleanFund finances up to 100% of both hard and soft costs for performance-enhancing building projects Some of the building types eligible for CleanFund’s PACE financing Flexible

Financing and Solar Benefit Stay with Property Utility Bill Savings PACE Payments YEARS Property Sold Property Sold Owner 1 Owner 2 Owner 3 Easy

Case Studies Select CleanFund SolarPACE Case Studies

Case Study: Prologis, Pier 1 PACE Financing: $1.4 million Term: 20 years Projected Energy Savings: 32% Address: Pier 1, San Francisco, CA Type: Office Size: 151,000 sq ft Year Built: 1918 Year of Project: 2014 Eligible Measures: 200kW rooftop solar 1,500 new LED lighting fixtures HVAC overhaul Building controls Project Synopsis: CleanFund and GreenFinanceSF, San Francisco’s PACE program, joined with vendor Johnson Controls, a provider of building energy efficiency projects and services, and Prologis, an owner and operator of industrial real estate, in a project to upgrade the buildings lighting system, add PV and improve energy efficiency. CleanFund financed energy efficiency improvements in the form of building systems' retro commissioning and LED lighting upgrades, plus a 200kW solar electric system. Pier 1, a landmark building that serves as Prologis’ corporate headquarters, is owned by Port of San Francisco. The Pier 1 financing was the first for the San Francisco GreenFinanceSF commercial PACE program and is the first PACE transaction to be secured by a leasehold interest.

Case Study: The River at Rancho Mirage PACE Financing: $2.4 million Term: 25 years Projected Energy Savings: 95% Address: 71800 Highway 111, Rancho Mirage, CA Type: Retail – Anchored – Big Box Size: 227,550 sq ft Year Built: 2002 Year of Project: 2017 Eligible Measures: 667kW DC solar carport system New water pumping and control system Project Synopsis: The PACE financing of this project allows for the pass-through of both the PACE payments as a property tax assessment and the energy cost savings as CAM charges to the tenants of the mall. The net effect to the tenants will be a reduction in costs. CleanFund provided $2.4 million in financing for the construction of a solar PV carport system and installation of energy efficiency upgrades at The River at Rancho Mirage. The River, which was acquired by the CheerLand Investment Group in June 2014, is the premier shopping, dining, and entertainment destination in the Coachella Valley. The River features Century Theatres; leading restaurants including Fleming’s Steakhouse, The Yard House, PF Chang’s, and the Cheesecake Factory; and many high-end retail establishments. The improvements will offset over 95% of the facility common area electricity use and will generate CAM charge reductions to the tenants of over $200K per year.

Case Study: Pacific Ethanol PACE Financing: $10 million Term: 20 years Projected Energy Savings: 40% Address: 31470 Ave 12, Madera, CA Type: Industrial [Ethanol plant] Size: 137 acres Year Built: 2006 Year of Project: 2016 Eligible Measures: 5MW solar PV Project Synopsis: CleanFund provided $10 million in financing through CleanFund’s SolarPACE program will be used for a 5MW solar PV system, which is expected to reduce the Madera facility’s annual utility costs by over $1 million and will be cash flow positive from year one. The system also qualifies for the Energy Investment Tax Credit, further improving its attractive investment profile. The high performance solar energy system was designed and installed by Borrego Solar Systems under California’s Net Metering 2.0 rules that allow offset of greater energy usage than previously available. “Pacific Ethanol represents the new generation of fuel companies—low carbon fuel production powered by zero carbon energy,” said Mike Hall, CEO of Borrego Solar. “This will be one of the largest single-site net metered projects in PG&E territory.

Questions?

Thank you! Joshua Kagan Joshua.Kagan@CleanFund.com