ElectroRoof TM Managing Energy Risk: Are You Ready for a Crisis? December 8, 2005 Barry Swenson Builder MCM Diversified

ElectroRoof TM A looming energy crisis

ElectroRoof TM A looming energy crisis

ElectroRoof TM A looming energy crisis 47% 17% 21% 12% 1% California Energy Production

ElectroRoof TM A looming energy crisis Electricity Rates ? 6% 10% 15%

ElectroRoof TM Managing Energy Risk  Energy crisis: the big picture  Risks to building developers and owners  Strategies for managing energy risk  The ElectroRoof solution  Proposed projects

ElectroRoof TM Key drivers of rising electric rates  Growing demand  Tightening supply  Vulnerability to supply disruptions

ElectroRoof TM Growing demand OWN SUPPLY DEMAND

ElectroRoof TM Oil production is peaking Source: ASPO Oil production has peaked Oil production can be increased China 2003 India 2004 US 1971 Australia 2000 Indonesia 1977 Canada 1973 Venezuela 1970 Argentina 1998 Ecudador 2004 Columbia 1999 Mexico 2002 Congo 2001 Libya 1970 Sudan 2005 UK 1999 Norway 2003 Uzbekistan 2003

ElectroRoof TM Oil production is peaking Source: ASPO Oil production has peaked Oil production can be increased Brazil Boliva Russia Nigeria Algeria Angola Chad Iran Iraq Saudi Arabia Kazakhstan Azerbaijan

ElectroRoof TM ? World When will global production peak?

ElectroRoof TM Vulnerability to supply disruption Natural disasters? Human error? War?

ElectroRoof TM Managing Energy Risk  Energy crisis: the big picture  Risks to building developers and owners  Strategies for managing energy risk  The ElectroRoof solution  Proposed projects

ElectroRoof TM Energy risks for developers and owners  Reduced income, resulting from: Tenant turnover Higher vacancy rates Increased operating expenses  Lower property values

ElectroRoof TM Energy risk by type of building Warehouse: 2-5 watts per square foot Office Building: 5-10 watts per square foot Low Risk Medium Risk

ElectroRoof TM Energy risk by type of building Manufacturing: watts per square foot Data Center: watts per square foot High Risk

ElectroRoof TM Rising energy costs erode property values Source: BOMA

ElectroRoof TM Rising energy costs erode property values Source: BOMA

ElectroRoof TM Property value based on income capitalization: Annual expected gross revenue$ 3,000,000 Less operating expenses - 1,000,000 Net operating income (NOI)$ 2,000,000 Capitalization rate (R o ) VALUE (NOI/ R o ) $ 23,529,412 Rising energy costs erode property values

ElectroRoof TM After 10 years, assuming a 10% annual increase in electric rates: Annual expected gross revenue$ 3,000,000 Less operating expenses - 1,000,0001,778,122 Net operating income (NOI)$ 2,000,0001,221,878 Capitalization rate (R o ) VALUE (NOI/ R o ) $ 23,529,412 14,375,035 $9,154,377 (39%) net decrease in calculated building value Rising energy costs erode property values

ElectroRoof TM Managing Energy Risk  Energy crisis: the big picture  Risks for building owners and developers  Strategies for managing energy risk  The ElectroRoof solution  Proposed projects

ElectroRoof TM Strategies for managing energy risk Photovoltaics Energy efficiency

ElectroRoof TM Managing energy risk: case study  120,000 sq. ft. class A office building in Syracuse, NY  Bank REO commissioned an appraisal in preparation for a bankruptcy auction

ElectroRoof TM Managing energy risk: case study Results of initial REO appraisal: Total annual energy costs$ 517,000 Cost per sq. ft Property value$ 4,300,000 Value per sq. ft

ElectroRoof TM Managing energy risk: case study Appraisal was revised to reflect the results of an energy analysis: Total annual energy costs$ 517, ,000 Cost per sq. ft Property value$ 4,300,000 5,500,000 Value per sq. ft $1,200,000 (28%) net increase in appraised building value.

ElectroRoof TM Risk management ROI  Lower operating costs  Higher net operating income  Increase in building value  Better financing opportunities

ElectroRoof TM Managing Energy Risk  Energy crisis: the big picture  Risks for building owners and developers  Strategies for managing energy risk  The ElectroRoof solution  Proposed projects

ElectroRoof TM Integrated energy solution

ElectroRoof TM Who we are Contractor Insulated Roofing Marketing and Project Development

ElectroRoof TM Who we are

ElectroRoof TM Waterproof insulated roofing

ElectroRoof TM Managing Energy Risk  Rising electric rates: the bigger picture  Risks for building owners and developers  Strategies for managing energy risk  The ElectroRoof solution  Proposed projects

ElectroRoof TM GSA Building – Salinas CIS Building – Monterey Avenue, San Jose 7 th and Alma, San Jose Depot Street, San Martin 696 E. Trimble Road, San Jose 2930 Pacific Avenue, Livermore Potential solar development projects

ElectroRoof TM CIS Building, Monterey Avenue System Cost Total gross price$ 1,533,000 Incentives - $ 1,297,000 Installed cost after incentives$ 236,373 Cost Savings Year one cost savings$ 50,000 Percent of electrical expenses 51% Economic Analysis Payback in years6.7 Internal rate of return 11%

ElectroRoof TM CIS Building, Monterey Avenue