1. NREL is a national laboratory of the U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, operated by the Alliance for Sustainable Energy, LLC. Guide to Geothermal Power Finance Colorado Geothermal Working Group Paul Schwabe NREL June 23 rd, 2011

2. NATIONAL RENEWABLE ENERGY LABORATORY Discussion Agenda 1.Guide to Geothermal Power Finance Online Application 2.Federal Policies and Incentives Available for Geothermal 3.The Staging of Geothermal Project Financing 4.Planning and Timing Considerations Related to Geothermal Power Projects 2

3. NATIONAL RENEWABLE ENERGY LABORATORY 3 Guide to Geothermal Power Finance Online www.nrel.gov/geothermal/financing

4. NATIONAL RENEWABLE ENERGY LABORATORY A variety of state- and federal-level policies shape the profitability and timing of investment in geothermal energy projects 4 GHG Regulations Permitting Requirements Transmission Planning Leasing Policies Tax Incentives, Cash Grant, & Loan Guarantees RPS Policies Project Economics Covered Today

5. NATIONAL RENEWABLE ENERGY LABORATORY Federal Financial Incentives for Geothermal 5 Financial IncentiveDescriptionTiming Tax Liability RequiredRelevant Dates Choose only one Production Tax Credit (PTC) 2.2 cents / kWh years First 10 yearsYes In service by 12/31/13 Investment Tax Credit (ITC) 30% of eligible tax basis At end of 1 st tax year Yes In service by 12/31/13 Treasury Cash Payment (“1603 Grant”) 30% of eligible tax basis 60 days after project completion No Under construction by 12/31/11, and in service by 12/31/13 Modified Accelerated Cost Recovery System Accelerated depreciation 5-6 years At end of first 6 tax years YesNone U.S. Department of Energy Loan Guarantees Up to 80% of project loan At financingNo Pending further funding, closed for new applications* Note: Non-exhaustive. For example a diminished 10% ITC is available for projects in service by 12/31/16. A diminished 10% Treasury Cash Payment is available for projects under construction by 12/31/2011 and in service by 12/31/16. Timing and value of federal incentives may change with future federal legislation. * Section 1703 of the loan guarantee program is still available for innovative technologies.

6. NATIONAL RENEWABLE ENERGY LABORATORY Staging of Geothermal Project Financing 6 Resource Identification Resource EvaluationTest Well Drilling Production Well Drilling Plant ConstructionPlant Operation Risk Profile Early-Stage FinancingLate DevelopmentConstruction and Project Finance Multiple investors with diverse risk profiles are typically needed to raise the capital needed for geothermal power projects

7. NATIONAL RENEWABLE ENERGY LABORATORY Sources of Funds for Geothermal Financing 7 Construction and Project Operating Finance Bank Loans Often Bundle These Two Products Mezzanine Finance Bank LoanCorporate DebtCorporate Lines of Credit Early-Stage Equity Exchange Traded EquityPrivate EquityCorporate Balance Sheet

8. NATIONAL RENEWABLE ENERGY LABORATORY Planning and Timing Considerations for Geothermal Power Development 8 Sufficient Contingency Planning Planning for the unexpected Adequate contingency funds at all times Strategically Targeted Funding Sources Matching investor risk appetite with appropriate project stage Timely Financing Requests Meeting milestones/metrics set by investors at each stage before furthering financing asks

9. NATIONAL RENEWABLE ENERGY LABORATORY Key Takeaways and Additional Information 9 No magic bullet for financing geothermal power projects Innovative approaches to investment in geothermal power projects leverage state and federal policies and target specific investor profiles Staging investment enables project developers to match the project’s risk profile at a given stage with investors’ risk tolerance Developers can address key challenges to financing geothermal power projects by being aware of investors’ requirements and needs Additional Information: NREL’s Financing Geothermal Power Projects website: http://www.nrel.gov/geothermal/financing/ http://www.nrel.gov/geothermal/financing/ Guidebook to Geothermal Power Finance: http://www.nrel.gov/geothermal/financing/pdfs/49391.pdf http://www.nrel.gov/geothermal/financing/pdfs/49391.pdf

10. NATIONAL RENEWABLE ENERGY LABORATORY Thank You! 10 Paul Schwabe Renewable Energy Financing Analyst paul.schwabe@nrel.gov