1. Alternatives to Financing Generation: What’s in Your Wallet? A presentation to the APPA June 2007 Bob Temple Deputy General Counsel

2. 1 Overview Trends in Risks and Capital Costs for Generation Alternative Forms of Generation Ownership –Risks & benefits Alternatives to Generation Ownership –Risks & benefits

3. 2 Generation Development Risks Examples: Cost of raw materials Availability and costs of construction labor Permitting uncertainties and costs Interest rate and other financial risks Willingness of Constructors to “wrap” project

4. 3 EXAMPLE ONLY!

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6. 5 Characteristics of IUO Generation Partner Corporate Structure –Holding company GenCo assets held apart from the “mothership” Assets held in LLCs or LLPs Financing –Used to be on balance sheet –Now, off balance sheet – project financed –PPAs used as basis for project financing –Project risks carried by financing entities and PPA purchaser

7. 6 Terms Take-or-Pay –Agreement between a buyer and seller in which the buyer will still pay some amount even if the product or service is not provided. Take-and-Pay –An agreement that obligates the buyer to take any product that is offered (and pay the cash purchase price) and pay a specified amount if the product is not taken.

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13. 12 Summary With the increase cost and risk of new generation development, the key to building new generation is financing –Evaluate all of your alternatives –Don’t present to a jointly-held project a larger risk profile to your stakeholders than your partner(s) What’s Really in Your Wallet?

14. 13 Questions?