Emergent Ventures International An Integrated Climate Change and Energy Company Solar Projects – Financial Levers & Risks Deepak Verma, Chief Operating Officer January 27, 2010 1

Solar – intrinsics of power market makes compelling case Serious Shortage in Supply Low Penetration of Renewable Energy Immense Solar Potential Approximately 145 GW of power generating capacity installed However only 55% of Indian households have electricity Electricity demand expected to grow @ 10% - 12% p.a for the next 15 years Huge gap between supply and demand Renewable energy installations constitute only 9% of total power capacity ~160 GW of RE potential has been identified 92 % of available resources untapped as of now Solar Potential in India greatly exceeds potential from other renewable energy sources Good solar intensity 4 – 7 kWh/m2/d More than 300 sunny days However, solar has not taken off due to high capital costs; 2

Levers affecting investor returns Project Cost Financing Costs Tariff & Incentives Future: Renewable Energy Certificates Solar PV Panel costs have reduced substantially over the past couple of years due to the financial crisis and abundant stocks Low-cost alternatives like thin-film are getting mainstream Project cost expected to reduce further as technology improves Tradeoffs between project cost, efficiency, reliability and bankability Solar Thermal Innovative techniques required to reduce projects cost Indigenous manufacturing of components would help in reduction of project cost 5% reduction in Project Costs increases equity return by 1.5%-2% 3

Levers affecting investor returns Project Cost Financing Costs Tariff & Incentives Future: Renewable Energy Certificates Domestic debt expensive Rates ranging from 9%-12% Banks still uncomfortable with financing solar projects Government schemes available through IREDA and REC for lower cost financing; However limited capacity available Most project proponents would have to look at alternative means International debt markets can provide cheaper rates EXIM Financing - ~3%-4% International Debt Markets – ~5%-6% Refinancing guarantee via ADB However long-term hedging is expensive (3-6% for 5-10 years) 1% reduction in Financing Costs increases equity return by .75%-1% 4

Levers affecting investor returns Project Cost Financing Costs Tariff & Incentives Future: Renewable Energy Certificates National Solar Mission Target of 20,000 MW by 2020 Base Tariff of INR 17.91 for solar PV However Tariff bidding reduced the actual tariff to INR 10.95 – INR 12.76 150 MW allocated based on highest discounts offered Gujarat State Policy Phase 1 and 2 have a split tariff; INR 15 for 13 years INR 5 for the remaining 12 for solar PV Evacuation infrastructure provided to all proponents Over 900 MW of PPA’s signed with GUVNL Small Solar Programme Tariffs ranging from INR 15-18 in various states GBI to state electricity boards from IREDA PPA signed for 100 MW Rajasthan State Policy Wasteland provided at 10% of DLC on long-term lease An INR 1 increase in Tariff increases equity return by 2%-2.5% 5

Levers affecting investor returns Project Cost Financing Costs Tariff & Incentives Future: Renewable Energy Certificates Renewable Energy Certificates (REC) announced by CERC To be traded on the energy exchange Separate solar specific REC set-up with floor price of INR 12 and cap of INR 18 Solar generators not availing preferential tariffs would be awarded RECs by a central regulatory body Would be used to set-off Renewable Purchase Obligations (RPO) of various state electricity boards However as of date, there are no penalties to SEBs for not fulfilling RPOs; Markets for RECs not developed Can become a potential revenue stream ensuring project viability and returns Achieving bankability with uncertain revenue streams will be challenging 6

Risks to Solar Projects Aggressive bidding Low Quality Imports Financial Closure Aggressive discounts on tariff have been provided by project proponents under NSM Ground radiation likely to be lower than solar model forecasts Project proponents would have to seek creative ways to ensure projects remain afloat Low-cost international financing Long-term financing / re-financing options Lower costs through various means Project Proponents may achieve only sub-par equity returns of 5%-8% Discounted tariffs have reduced equity returns by 7%-10% 7

Risks to Solar Projects Aggressive bidding Low Quality Imports Financial Closure Investors may start looking at low quality imports to enhance returns; however: Long-term guarantees from these vendors may not be bankable Performance of plants may deteriorate Additional expenditure would be required for replacements of modules and cells Project Owners may also make design and engineering choices to reduce cost, which in turn could impact medium to long-term reliability 8

Risks to Solar Projects Aggressive bidding Low Quality Imports Financial Closure Domestic Banks still uncomfortable with the Solar growth story Many projects which had signed PPAs in June 2010 are struggling to achieve financial closure Transfer of government land is a very lengthy procedure – causes delays to financial closure Solar Projects is not in the priority lending sectors Awareness of international debt options still very low among the small project proponents Options for carbon finance very limited Small set of projects likely to receive non-recourse financing Most of the projects in the NSM programme would be ineligible for non-recourse project financing 9

Opportunistic Investor/Operator Developer Independent Power Producer Likely players Speculator Opportunistic Investor/Operator Developer Independent Power Producer De-risked Long-term Investor 10

Emergent Ventures International An Integrated Climate Change and Energy Company Corporate Profile January, 2010 11

Emergent Ventures International (EVI) An Integrated Climate Change and Energy Company A pioneer in the field of climate change mitigation with business interests in: Climate Change and Sustainability Clean Technologies Established in 2004, EVI has grown from a carbon advisory to offer comprehensive solutions that contribute to the key vision of the company “Sustainable Solutions for The Environment”. Currently, EVI has more than 120 consultants working on over 300 client engagements in over 15 countries across 5 continents. Carbon Advisory Sustainability Advisory Clean Energy Business 12

Partnership with Clients Our Work @ Clean Energy Business We help organizations develop clean energy solutions We partner with Clients to provide end-to-end services for the development of renewable energy projects across a variety of technologies (Wind, Solar, Biomass, Waste). We believe in maximizing the Client’s returns and work towards this goal. Our aim is to provide a one-stop shop for Clients wanting to enter / expand in the Renewable Energy Domain. Renewable Energy Project Development Engineering Services – Renewable Energy Clean Energy Generation Technical Experience EVI and its Affiliates are engaged in developing ~ 150 MW of bio-mass based power plants, 300 MW+ wind energy plants, 50 MW+ solar power plants, and 200,000 acres+ of plantations. Partnership with Clients EVI partners with the Clients to provide end-to-end services. Some of the services include project feasibility analysis, policy support, site selection, resource assessment, basic engineering design, project management, etc. Projects Biomass: 132 MW in Bihar; 11.5 MW in Sri Lanka Waste-to-Energy: 5.6 MW in Haryana Wind: 300 MW projects in Tamil Nadu Solar: 50 MW in Rajasthan and Andhra Pradesh 13

Clean Energy Business Key Service Offerings Renewable Energy Project Development Engineering Services – Renewable Energy Clean Generation Prefeasibility analysis & survey; Techno-economic viability study Policy Support Site analysis / selection Power Sale / PPA Vendor relations / development Financial closure / Syndication Carbon asset management for in-house projects Engineering, procurement & construction services (EPC) Overall management of projects (Owners’ engineer) O & M of project (Management lease) Has identified attractive generation projects under development; includes biomass, waste to energy and wind farms Technologies include: Biomass, Waste-to-energy, Gasification, Solar PV, CSP and Wind Projects are diversified across fuel source and geography to build a balanced portfolio 14

Thanks Emergent Ventures International 5th Floor, Universal Trade Tower, Sec-49, Gurgaon, India +91-124-4353100 contact@emergent-ventures.com www.emergent-ventures.com @EVItweets Thanks 15