1. Negotiating Wind Park Easements and Analyzing Comparable Sales presented by Justin Bierschwale Bierschwale Appraisals PO Box 154 517 College Street Junction, TX 76849 Ph (325) 446-3052 jbierschwale@gmail.com Terry Argotsinger Stalcup Ag Service, Inc. P O Box 67 910 Flindt Drive Storm Lake, IA 50588 712-732-6462 targotsinger@stalcupag.com

2. Take a look from their perspective first

3. Wind Project Development Process Site Selection Land Agreements Wind Assessments Environmental Review Economic Modeling Interconnection Studies Permitting Sales Agreements Financing Turbine Procurement Construction Contracting Operations and Maintenance

4. Locating Wind Parks Power Grid Wind Velocity State and Federal Mandates (cap and trade) Tax incentives Power demand Will of the people

5. Mutual desire to make it compatible for everyone

6. Cost of Construction 1.5 MWh turbine Blades $300,000 Generator $1,250,000 Transportation $225,000 Tower $330,000 Materials $400,000 Labor $400,000 Engineering, Dev., etc $80,000 $3,000,000 / 1.5 Mwh = $2,000/Kwh RCN Deprec., O&M, Land rent, RE Tax – $60,000 Debt Service ?

7. Income Stream Electricity - $35 to $100 per Mwh at the hub Carbon Credits - $5 to $25 per mmt PTC/ITC/Direct payments - $.021 per Kwh Depreciation – 5 year equipment

8. Actual Production (1.5 MW Turbine) 4,000,000 Kwh x $.055/Kwh = $220,000 4,000,000 Kwh x $.021/Kwh PTC = $84,000 1.5 Mwh x 2,000 mmt CO2/Mwh x $15/mmt = $45,000 SO2, NOx – EPA clearing house for pollution credits (Meets Electricity needs for 300 people/year)

9. The Queue Federal Energy Regulatory Commission - FERC Independent Transmission System Operators - ISO http://www.midwestmarket.org/page/Total+Wind+Generation http://www.midwestmarket.org/page/Total+Wind+Generation $200,000 to $300,000 for permits Application Feasibility Study System Impact Study Facilities Study 459 to 884 days

10. Method of Negotiation Get legal advice Individually As a group Trustee, LLC – Combine wind rights into one package if rights can be separated under state code Option, Lease, Easement Privacy clause – Agreement and Memorandum

11. Key Terms of Agreement 3 phases Development – Construction - Operations Rates Site selection Insurance Re-powering Decommissioning Most Favored Nation

12. Development Phase 3 to 5 years State mandates with limits – 7 years http://www.dsireusa.org/ $3 to $40 per acre per year

13. Construction Phase Usually less than one year One time payment Crop Damages Compaction Access Laydown areas Crane paths

14. Operations Phase 30 to 90 years Fixed Payments - $2,500 - $6,000 per MW CPI-U minimum 2% Royalty – individual tower 3,4,5 or 6% Royalty – prorated Fixed plus royalty Per acre plus royalty – 40/60 Renewable energy credits Carbon credits Roads, cables, buildings, substation

15. Site Selection Proposed plat Final plat Landowner approval The larger the turbine the fewer per farm 1.1 fall down distance – state code ? Setbacks from roads, dwellings

16. Insurance State code minimums $2,000,000 to $10,000,000 Adjust to inflation

17. Re-Powering okay but renegotiate

18. Decommissioning 5 feet 400 cu yds Performance bond for 1.5 x cost of removal 180 days

19. Most Favored Nation Same terms for all agreements Private negotiation - addendum

20. ELECTRIC TRANSMISSION SYSTEM OF TEXAS

21. FIRST WIND DEVELOPMENT

22. CONTINUED DEVELOPMENT

23. BOTTLENECK

24. DEVELOPERS AREN’T STUPID CURRENT DEVELOPMENT

25. DEVELOPERS AREN’T STUPID TIRED OF WAITING FOR EXPANSION FP&L PRIVATELY BUILT TRANSMISSION LINE

26. WHAT THE TRANSMISSION COMPANIES ARE SAYING $4.93 BILLION IN EXPANSION PROJECTS 2400 MILES OF NEW TRANSMISSION POTENTIAL FOR 18.5 GIGAWATTS IN NEW WIND POWER PROJECTS AEP & DUKE ENERGY – 240 MILES OF 765 KV TRANSMISSION LINES, EST. $1 BILLION COMING ONLINE WITHIN 8 YEARS

28. ONSITE DATA Anemometers Research Facilities Terrain Neighborhood Existing Turbines Data, Data, Data

29. Regulations Siting Visual & Noise Wildlife Impact Development Stages County Zoning? Safety? Synchronization with Power Grid Property Tax

30. Who All Gets Involved Wind Developer State Government Local Government Federal Agencies Community Groups & Activists Environmental Organizations & Activists General Public

31. BACK TO BASICS--6 FUNCTIONS OF $1.00 1. Future Worth of $1.00 2. Future Worth of $1.00 Per Period 3. Sinking Fund Factor 4. Present Worth of $1.00 5. Present Worth of $1.00 Per Period 6. Annuity Worth of $1.00 TODAY

32. INTERNAL RATE OF RETURN RATE THAT SETS THE VALUE OF FUTURE CASH FLOWS EQUAL TO THE CURRENT VALUE 10.4% IRR???

33. SALE DETAILS 640 Acres Sale Price $1,581,257 Land Contributory Value: $2,000/Acre Residual Wind Lease Contribution: $301,257 Number of Turbines: 5 Lease Period at time of sale: Development

34. FINDING THE PIECES

35. CONSTRUCT THE TIMELINE

36. THINGS TO WATCH FOR

37. RENTS

39. Possible Expenses to Consider?

40. CALCULATE THE IRR IRR = 17.36%

41. SUBJECT DETAILS 320 ACRES ROYALTY PAYMENTS – SAME AS SALE TERMS – SAME AS SALE NUMBER OF TURBINES – 2 STAGE ON DATE OF APPRAISAL –DEVELOPMENT

42. CONSTRUCT THE TIMELINE

43. APPLY IT 17% IRR NPV = $131,670 320 ACRES X $2,500/ACRE = $800,000 + CV OF WIND LEASE: $131,000 TOTAL VALUE = $931,000

44. What Ifs: Justin’s Fuzzy Logic What if the Subject already had turbines producing and had 5 years of payment history? What if the Subject sat right next to an expanding wind farm but did not yet have a lease in place?

45. Things to Consider Make certain you have measured value as it contributes to the whole package, i.e. avoid flat out summation. –Extract Rates as they relate to contributory value, not as they stand separate and apart from the land. Extract and Apply in the exact same way. –If you include bonus payments in extraction, include them in application, etc. Step Away from the ledge at the end of the day and think through your conclusions. Are they logical?

46. QUESTIONS