Tianjin Plastics Group Gamma Samir Bhargava Jung-Chang Cho Jennifer Cota Kurt Ellison Kelly Hickman Jiby Mathews

Joint Venture Tianjin Plastics / Chinese Ministry of Power Industry Government owned enterprise Uses energy-intensive extrusion process for production of raw industrial plastic products Maple Energy U.S. – based international power plant developer Established in 1989 Successful power plant projects in Argentina, Costa Rica, the Dominican Republic, and the United Kingdom

The Proposed Power Plant 140 megawatt coal-fired steam-electric plant Provide all of Tianjin’s power needs Excess power to be sold on regional electrical power grid Construction & testing requires 4 years Power purchasing agreement with Chinese Ministry of Power Industry Provision for free coal feedstock for life of power plant

Build-Operate-Transfer (BOT) Agreement Maple-Tianjin-MOPI Joint Venture – own & manage for 20 years Turn over to Hebei Province in 2020

What is Project Financing? Typically used for large-scale, long-term projects Lenders look to assets & cash flow of project Preferred & primary method for financing infrastructures Structured as a single-purpose corporation Lenders have no recourse to non-project assets

Choose the best financing option Issue Defined Choose the best financing option Repatriation Currency Risk

Contract Fulfillment Not Guaranteed by Chinese Government Basic Matrix Important/ Urgent Low High Export-Import Bank Announcing its Non-Participation in Funding Large Projects in China Contract Fulfillment Not Guaranteed by Chinese Government Currency Controls Exchange Rate Risk

Immediate Matrix Important/ Urgent Low High Inadequate Capital Resources in China Limits on ROI Cash Flow Risk Ensure Repatriation of Original Equity Investment

Fishbone Analysis

Financing Arrangements

Constraints & Opportunities -Enormous market potential -Local economic prosperity Constraints - Inadequate capital resources - Investment barriers

Available Solutions Indirect RMB Swap Dollar-Indexed Rate Adjustment Borrow in Local Currency Back-to-Back Loan

Decision Criteria Feasibility Risk Assessment Cost Cash Flow / NPV Internal Rate of Return

Indirect RMB Swap Feasibility? Not feasible due to lack of financial derivates to hedge Non-existence of financial markets in China Chinese government controls the amount of Rmb converted to hard currency

Dollar-Indexed Rate Adjustment Power price paid by Tianjin Plastics indexed to the dollar -Simplest solution -Dependable revenue stream -Minor role of costs of production -Earnings essentially guaranteed, preserving U.S. dollar value Feasibility? -NO -> MOPI ruled out immediately -Revenue structure Rmb based -Negative impact on returns of invested capital

Borrow in Local Currency Feasible? -Yes -Cash inflows and outflows in same currency (RMB) Risk? -Currency valuation risk -Maple is not insulated from currency exchange risk Cost? -Bank of China will charge 13% interest for 10 year loan -Initial collateral in 100% dollar-denominated deposit (not required until fourth year)

Borrow in Local Currency Income? -4% interest in collateral deposit Repatriation? -Deposit returned in last 6 years amortization schedule -Profits exposed to currency risk 17

Real Cash Inflows (Repatriation) Local Currency Loan Real Cash Inflows (Repatriation) RMB Appreciate RMB Depreciate Date Exch. Rate (RMB/$) Real Cash Inflow Real Cash Inflow 2000 7.51 $ 2,567,474.07 10.99 $ 3,757,195.74 2001 7.30 $ 893,483.46 11.68 $ 1,429,573.53 2002 7.11 $ 939,592.05 12.28 $ 1,622,811.59 2003 6.91 $ 987,636.62 12.92 $ 1,846,637.51 2004 6.71 $ 1,039,053.31 13.53 $ 2,095,140.29 2005 6.51 $ 1,094,057.46 14.06 $ 2,362,895.22 2006 6.31 $ 22,842.97 14.45 $ 52,310.77 Total $ 7,544,139.95 $ 13,166,564.65

Back-to-Back Loan Loan of US $8.415m Maple Energy (USA) Wintel (USA) LIBOR + 1.45% Loan of Rmb70.018m Maple Energy (CHN) Wintel - China (CHN) 10.5%

Back-to-Back Loan Feasible? Risk? -Yes -Cash inflows in U.S. Dollars -Cash outflows in local currency (RMB) Risk? -Currency valuation risk borne by Wintel -Maple insulated from currency exchange risk -Limited interest rate risk due to variable loan rate

Back-to-Back Loan Cost? Income? -Initial capital loaned to Wintel -Immediately converted to current currency exchange rate (Rmb$8.32/$) -Wintel will charge 10.5% for six year loan Income? -Maple earns LIBOR + 1.45% return on six year loan 22

Back-to-Back Loan Repatriation? -Interest earned on initial capital -Initial capital returned in 6 years -Profits not exposed to currency risk 23

Real Cash Inflows (Repatriation) Back-to-Back Loan Real Cash Inflows (Repatriation) RMB Appreciate RMB Depreciate Date Exch. Rate (RMB/$) Real Cash Inflow Real Cash Inflow 1996 8.32 $ 1,776,346.38 1997 1998 1999 2000 7.51 $ 1,603,408.81 10.99 $ 2,346,399.84 2001 7.30 $ 1,558,573.14 11.68 $ 2,493,717.03 Total $ 10,267,367.45 $ 11,945,502.37

Cash Flows for Original Financing Arrangement

Borrow in Local Currency vs. Back-to-Back Loan Cash Flow / NPV: Borrow in Local Currency: $1,003,415 Back-to-Back Loan: $1,639,503 Internal Rate of Return: Borrow in Local Currency: 15.2% Back-to-Back Loan: 15.3%

Action Plan Finance with Back-to-Back Loan Feasible, includes Solving Repatriation Issue No Currency Risk Lower Cost than Borrowing in Local Currency -Netting Interest Expense & Interest Income Lower Cost Leads to Higher NPV & IRR