I n t e g r i t y - S e r v i c e - E x c e l l e n c e Headquarters U.S. Air Force 1 Enhanced Use Lease Components, Terms and Conditions Mr. Allan Curlee SAF/GCN 29 Jun 11

I n t e g r i t y - S e r v i c e - E x c e l l e n c e Contents Energy EUL Deal Structure Project Types and Characteristics Terms and Conditions Air Force Real Estate Instruments Real Estate Instruments – Lease versus Easement Real Estate Execution Methodology Energy EUL Projects Summary 2

I n t e g r i t y - S e r v i c e - E x c e l l e n c e Energy EUL Deal Structure Energy EULs Assist in meeting AF asset management and energy goals Diversify and optimize value of AF real property assets Are long-term, 30 to 50 year, Public Private Partnerships (PPP) Are driven by external market demand State Renewable Portfolio Standards (RPS) Unlike PPA, EUL project not limited to installation need; scalable to capture market demand Are not Power Purchase Agreements (PPA) – commitment to procure energy AF exploring development of Combined EUL / PPA; regulatory factors being addressed 3

I n t e g r i t y - S e r v i c e - E x c e l l e n c e Project Types and Characteristics Solar Photovoltaic (PV) & Concentrated Solar Power (CSP), Wind, Geothermal, Biomass, Waste-to-Energy (WTE) are all acceptable based on resource availability Utility-scale and distributed generation both acceptable State Renewable Portfolio Standards drive project type Project phasing acceptable and encouraged Long-term development partnerships based on single Request for Qualifications (RFQ) Project phasing allows for rapid Phase I implementation; speed to market and cash flow Community partnerships for biomass and WTE often required Development costs require scale to bring down cost of generation AF installation resources often insufficient alone Utility-scale energy storage (long-term planning) High-resource installations in key markets require to fully exploit 4

I n t e g r i t y - S e r v i c e - E x c e l l e n c e 5 Terms and Conditions AFRPA lead Air Force agency for EUL Program Property use determined by Feasibility Study (Highest and Best Use) Risk analysis included in Feasibility Studies Project must be competed; use Request for Qualifications (RFQ) process Extended lease terms allow developer to amortize project costs (up to 50 years) EUL project minimum goal is 3:1 return on investment (ROI) SAF/IEI is lease signature authority Fair Market Value received in cash or in-kind consideration Escrow account used to manage funds & secure delivery of in-kind consideration

I n t e g r i t y - S e r v i c e - E x c e l l e n c e Project requirements can influence selected instrument (such as lenders and utility company requirements) EULs are executed under 10 USC 2667 and require a lease PPAs may use a lease or easement as required 6 Air Force Real Estate Instruments Energy Project Real Property Instrument PermitLicenseEasementLease AF requires no interest in property; excess to mission needs Not excess but not needed by mission for term of lease; grantee has exclusive use and possession Not excess to mission needs; would not interfere with mission; grantee generally has non-exclusive use for specific purpose/use but no possessory rights No interest in real property conveyed; personal to the licensee, revocable at will Generally used for governmental tenants only; conveys no interest in real property Disposal (Fee) EUL or PPA PPA

I n t e g r i t y - S e r v i c e - E x c e l l e n c e Lease authorized under 10 USC 2667 Provides exclusive use & possession of property for set term Common for commercial real estate, energy, banks, schools, and grazing and includes EUL projects AF use of the property is not permitted during term of lease, except as specifically negotiated and incorporated into lease Easement authorized under 10 USC 2668 and 40 USC 1314 Used to provide non-possessory, but potentially exclusive use of property for specific purpose and specific term Common for roadways, rail lines, and utilities AF or 3rd party use of property is permitted if non- exclusive but may not interfere with previously granted easements 7 Real Estate Instruments Lease versus Easement

I n t e g r i t y - S e r v i c e - E x c e l l e n c e Real Estate Execution Methodology Potential renewable energy projects vetted to AF Renewable Energy Project Development (REPD) Subpanel for selection Projects are structured to bring greatest benefit to AF and development partner EUL projects designed to optimize value of non-excess real property PPA projects designed to meet requirements for utility cost savings management of federal facilities Selected projects follow real estate guiding principles Identify project requirements for either EUL or PPA Apply required real property interest needed consistent with requirements Lease or easement 8

I n t e g r i t y - S e r v i c e - E x c e l l e n c e Energy EUL Projects 9 Edwards AFB Solar Photovoltaic (PV) Project, CA – Enhanced Use Lease Provides renewable electricity to the California power grid Located on 3,288 acres with anticipated 50 year lease term Phase III - Lease under negotiations Hill AFB Waste-to-Energy (WTE) Project, Utah – Enhanced Use Lease Provides renewable electricity to the Utah power grid Located on 13.7 acres with anticipated lease term of 50 years Phase III - Lease under negotiations Project Pipeline Phase II (Project Acquisition) – 2 projects Phase I (Project Definition) – 1 project Phase 0 (Project Identification) – 3 opportunities (site visits conducted); 16 other opportunities being evaluated

I n t e g r i t y - S e r v i c e - E x c e l l e n c e AF interested in full spectrum of renewable energy project types to monetize non-excess assets, and in some cases to meet AF energy goals Market demand determines EUL project scale and phased rollout of project Flexibility is key to structuring deals; speed to market and cash flow being essential goals for the AF AF has matured the EUL business model and commercial-like processes to implement deals Current business development pipeline for energy EULs offers significant opportunity for the development community 10 Summary