1. Michael J. Goldman Nixon Peabody LLP Financing Wind Power: The Future of Energy Introduction to New Markets Tax Credits May 9, 2008

2. Sample Wind PTC Structure Tax Credit Investor Wind Production Partnership Turbines Developer LENDER $7,000,000 Loan 7-year, 7.0% ($490,000/year) $3,000,000 (99.0%) $30,000 (1.0%)

3. NMTC Structure LENDER Allocatee, LLC NMTC Investor CDE, LLC Leverage Fund Leverage Fund $3,900,000 New Markets Tax Credits over 7 years $7,000,000 Loan 7-year, 7.0% ($490,000/year) $3,000,000 $10,000,000 (99.99%) $1,000 (0.01%) Wind Production Partnership PTC Investor $9,500,000 Loan 7-year, 5.3% ($503,500/year) $503,500 Debt service $500,000 (99.0%) Developer $500 (1.0%) Turbines

4. Qualified Active Low-Income Community Business (QALICB) General definition: A corporation or partnership having significant ties to one or more low-income communities and being engaged in the active conduct of a qualified business

5. Low-Income Community Defined Census tracts where: – Poverty rate equals or exceeds 20%, OR – Median income is below 80% of the greater of: Statewide median income if in non-metropolitan area Metropolitan area median income – Certain designated Targeted Populations – Census tracts with less than 2,000 people that are contiguous to a LIC and within an empowerment zone – High migration rural counties (use 85% vs. 80%) – Special GO Zone rules

6. QALICB Requirements Must generate revenues within 3 years, unless the entity is a nonprofit and uses the proceeds in furtherance of its nonprofit mission There are also 5 ongoing financial requirements: – Gross Income – Tangible Property – Services Performed – Collectibles – Nonqualified Financial Property

7. QALICB Requirements At least 50% of the business gross income is from the active conduct of a qualified business in LICs At least 40% of the use of the tangible property of the business is located in LICs At least 40% of the services provided by the business employees are performed in LICs

8. QALICB Requirements Services Test – At least 40% of the services performed for the business by its employees (amount paid) is performed in any LIC If the business does not have employees, it can meet the Gross Income and Services tests if it meets the Tangible Property test at a minimum of 85%

9. QALICB Requirements Nonqualified Financial Property Test – Less than 5% of the average adjusted bases of the property of the entity is attributable to certain nonqualified financial property Includes debt, stock, partnership interests, options, futures contracts, forward contracts, warrants, notional principal contracts, annuities, and other similar property with a term in excess of 18 months – Exception: reasonable amount of working capital Safe Harbor: for construction loans, if the proceeds of the loan will be expended by the QALICB within 12 months after the loan is made, then it is treated as a reasonable amount of working capital

10. QALICB Ineligible Business Activities Operation of residential rental property – Buildings which derive 80% or more of gross rental income from residential dwelling units Properties where no substantial improvements are made Development or holding of intangibles for sale or license Operation of certain ineligible businesses – Golf courses – Race tracks – Gambling facilities – Certain farming businesses – Stores where the principal business is the sale of alcoholic beverages for consumption off premises

11. Available NMTC Investment Authority 2001$1.0 billion 2002$1.5 billion 2003$1.5 billion 2004$2.0 billion 2005$2.0 billion 2006$3.5 billion + $400 million 2007$3.5 billion + $600 million 2008$3.5 billion Total$19.5 billion

12. Process Overview Step 1:Entities apply to the CDFI Fund for certification as Community Development Entities (CDEs) Step 2:CDEs apply to the CDFI Fund for an award of NMTC allocation authority Step 3:CDFI Fund selects CDEs to receive NMTC allocations Step 4:CDEs use allocations to offer NMTCs to investors Step 5:Investors make Qualified Equity Investments (QEIs) in CDEs and are entitled to NMTCs Step 6:CDEs use QEI proceeds to make Qualified Low-Income Community Investments (QLICIs) in Qualified Active Low- Income Community Businesses (QALICBs)

13. Recapture NMTCs may be recaptured from investors during the 7-year credit period if: – The CDE ceases to qualify as a CDE – The CDE redeems the investment – The Substantially-All requirement is not met

14. Indemnification/Guaranty Typically, a QALICB is asked to: Covenant to maintain status as a QALICB throughout the term of the loan Indemnify the Tax Credit Investor for loss of NMTCs plus any interest and penalties imposed by the IRS

15. How to secure NMTC financing How to locate CDEs – Talk to CDEs (See QEI Report) – Talk to industry experts How to locate Investors – Talk to industry experts How to sell your project – LIC is in an area of higher distress – Project would not be completed but for NMTCs

17. Require Additional Information? Michael J. Goldman Nixon Peabody LLP 202-585-8289 mjgoldman@nixonpeabody.com To ensure compliance with IRS requirements, we inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.