ASIA PACIFIC ECONOMIC COOPERATION (APEC) RENEWABLE ENERGY FINANCING WORKSHOP May 14, 2004 Honolulu, Hawaii John F. Pierce Stoel Rives LLP Seattle, Washington

RENEWABLE ENERGY FINANCING WORKSHOP What Investors/Financiers look for: –Legal Regime –Strength of Developer –Strength of Project –Structure of Project –Allocation of Risks –Unique Renewables Risks –Other Issues 2

Investors/Financiers Look For: –Legal Regime: Civil Code or Common Law Systems Enforcement of Rights Security Interests Independence of Courts Capacity to Take Disputes Offshore Dispute Resolution International Arbitration Enforcement Under “The New York Convention” RENEWABLE ENERGY FINANCING WORKSHOP 3

Strength of Developer: –Private Actor - Who is Ultimate Parent? - Credit Support? Guarantees? - Completion Undertakings? - Track Record? –State Entity- Sovereign Immunities Waived? - Sovereign Guarantees? - Track Record? –Who leads/Who follows? 4

RENEWABLE ENERGY FINANCING WORKSHOP Strength of Project: –Financial Ability to Stand Alone –Important for Non-Recourse Financings –Cash Flows –Credit Support –Multinational vs. National Lenders –Development Banks –IFC –OPIC 5

RENEWABLE ENERGY FINANCING WORKSHOP Strength of Project cont.: –Form of Concessions - Examples Production Sharing Contracts (PSC) Build, Operate, Transfer (BOT) Build, Own, Operate, Transfer (BOOT) Others –Tax Exemptions –Sales/Use Taxes –Tax Credits (US Example – Production Tax Credits) Production Credits Investment Credits –Green Finance 6

RENEWABLE ENERGY FINANCING WORKSHOP Allocation of Risks: –Financial Risks –Business Risks –No Clear Reproduceable Models 7

RENEWABLE ENERGY FINANCING WORKSHOP Structure of Project: –Contractual Structure – Example –Onshore Entities –Offshore Entities – Exempt Companies (BVI, Cayman, other) – why? –Post-9/11 Tragedy Impacts on Diligence –Alien Tort Claims Act (US) – Impacts –Payment Guarantees –Offtaker/Purchaser –Ability to Exit Project; Transfer to New Owner 8

RENEWABLE ENERGY FINANCING WORKSHOP Example - Biomass 9

RENEWABLE ENERGY FINANCING WORKSHOP Unique Renewables Issues: –Financial Issues –Resources Wind - intermittent Solar - intermittent Biomass – supply and moisture issues Geothermal – good for base load, but capital intensive –State Mandates/Incentives Renewables Portfolio Standards (RPS) Tax Credits Other 10

RENEWABLE ENERGY FINANCING WORKSHOP Unique Renewables Issues cont.: –Technology Wind – Vendor Issues Warranties Lender Fears/Lack of Knowledge Consulting Engineers (Garrard Hassan) Technology (GEWE as example) Geothermal – Renewable? -Injection Issues -Earthquakes – California –Specialized Lenders – New Emphasis 11

RENEWABLE ENERGY FINANCING WORKSHOP Other Issues–Not Particular to Renewables: –Political Risks –Currency Risks –Lack of Supporting Infrastructure –Transmission Constraints –Market Pricing/Merchandising 12

RENEWABLE ENERGY FINANCING WORKSHOP Fourteen years experience with energy projects throughout the Middle East and Asia Oil and Gas – Pipelines, E&P, LNG Power Plants – Gas, Coal, Diesel, Cogeneration New Renewable – Biomass, Geothermal, Wind, Hydroelectric Project Finance, EPC, Turn-key, Operations and Maintenance, Supply Agreements John F. Pierce Stoel Rives LLP 600 University Street Suite 3600 Seattle, WA Tel: (206)

RENEWABLE ENERGY FINANCING WORKSHOP 385 attorneys in 8 locations Offices in Washington, Oregon, California, Utah & Idaho Leading energy practice –#1 ranked U.S. firm for public utility lawyers included in Best Lawyers in America National renewable energy practice in wind, geothermal and biofuels Deep energy project experience in Asia and elsewhere abroad 14