1. Options for Financing Small CHP Systems Barry Sanders, AmericanDG

2. Financing  Presentation will compare options — Active ownership to passive savings — Select the best option for your needs  Business decision  CHP acquisition options: — Purchase — Lease — Shared savings (Performance contract) — On-site utility

3. Assumptions Economic Comparisons:  150 kw installed  $0.11 per kwh electric rate  $0.80 per therm natural gas  8,000 annual operating hours  $2,000 per kw installation price

4. Purchase  Purchase equipment and services — Own equipment and all operating responsibilities — Keeps 100% of potential savings  Select, contract and pay for: — Equipment — Engineering & installation — Maintenance — Fuel

5. Purchase  Up-front investment:$300,000  Value of energy* supplied:$220,000  Annual cogen costs**:$143,000  Annual savings:$77,000  Payback:3.9 years *Electricity & hot water **Fuel & maintenance

6. Purchase  Advantages — Greater potential savings — Greatest independence  Disadvantages — Cash upfront  Payback required — Owning & operating equipment responsibilities and costs  Pay for maintenance & fuel  Management requirements

7. Lease  Finance equipment and pay for services — Portion of potential savings used to pay for financing  Select and contract for: — Equipment — Engineering & installation — Finance company  Pay for: — Finance fees — Maintenance — Fuel

8. Lease  Up-front investment:$0  Value of energy supplied:$220,000  Annual cogen costs*:$217,000  Annual savings:$3,000  Payback:0 Assumptions:9% rate 5 year lease *Fuel, maintenance & finance fees ($74,000)

9. Lease  Advantages — No upfront cash  Savings used to finance equipment & installation — Off balance sheet transaction  Disadvantages — Finance charges and terms  Financial history determines interest rate & acceptance — Owning & operating equipment responsibilities and costs  Pay for maintenance & fuel  Management requirements — Lowest net savings

10. Shared Savings  No cost for equipment & installation — Supplier owns and operates equipment — Customer keeps 20% of savings (after operating costs)  Select and contract for: — Supplier  One-source installs, maintains & operates equipment  Pay for: — Maintenance, fuel & supplier share of savings (80%)

11. Shared Savings  Up-front investment:$0  Value of energy supplied:$220,000  Annual cogen costs*:$205,000  Annual savings:$15,000  Payback:0 Assumptions:20% share 12 year agreement * Fuel, maintenance & 80% of savings ($77,000)

12. Shared Savings  Advantages — No upfront cash required — Off balance sheet transaction  Disadvantages — Lower net savings — Long term agreement (10 to 15 years) — Pay operating costs

13. On-Site Utility  No cost for equipment, installation, maintenance & fuel — Only pay for energy used — Supplier owns and operates equipment — Energy discounted below local utility rates  Select and contract for — Supplier  One-source installs, maintains & operates equipment  Pay for: — Electricity & hot water produced (discount range: 5% - 15%)

14. On-Site Utility  Up-Front Investment:$0  Value of Energy Supplied:$220,000  Annual Cogen Costs*:$198,000  Annual Savings:$22,000  Payback:0 Assumptions:10% Discount 12 Year Agreement *90% of the Energy Value

15. On-Site Utility  Advantages — No upfront cash — Greatest immediate cash flow benefit — No owning & operating responsibilities or costs  Cost of electricity, natural gas & maintenance does not effect savings  Disadvantages — Lower net savings — Long term agreement (10 to 15 years)

16. Decision Summary  Business decision  Economics — Savings potential — Energy rates  Ownership responsibility & involvement — Technical capability — Technology options — Labor availability — Fuel purchase — Supplier credentials — Electric utility interconnect

17. Decision Summary  Investment criteria for capital equipment — Payback & return on investment (ROI) — Capital availability & needs — Cash flow requirements  Incentives improve savings for all options  Active or passive energy supply

18. Selection  Equipment — Installed base — Parts availability — Service and serviceability  Supplier — Experienced with recent references — Local service — Knows your building, application and business deal — National capability (if applicable) — Capital source — “Read the fine print”

19.  Purchase — Customer pays for equipment, installation, service & fuel  Lease — Finance equipment and installation — Customer pays for service, fuel and finance fees  Shared savings — No cost for equipment and installation (supplier owns equip.) — Customer pays for service, fuel & shared savings fees — Customer keeps % of actual savings (10% - 25%)  On-site utility — No cost for equipment, installation, service & fuel (supplier owns equip.) — Only pay for energy used — Price of energy discounted (5% - 15%) Comparison

20. PurchaseLease Shared SavingsOn-Site Utility Up-Front Investment$300,000$0$0$0 Value of Energy$220,000$220,000 $220,000$220,000 Annual Cost$143,000$217,000 $205,000$198,000 Annual Savings $77,000$3,000 $15,000$22,000 Payback (Years) 3.9000 Comparison

21. STRENGTHS Purchase LeaseShared SavingsOn-Site Utility All of Savings No Upfront CostsNo Upfront CashNo Upfront Cash Best Cash Flow Improvement Best Net Income Improvement No Owning Responsibilities No Operating Responsibilities WEAKNESSES Upfront CashLowest Net SavingsLower Net SavingsLower Net Savings PaybackPay Operating Costs Agreement LengthAgreement Length Pay Operating CostsOper. Responsibility Pay Operating Costs Operating Responsibility Finance Terms Comparison: Active to Passive

22. Barry J. Sanders President & COO AmericanDG Inc. Waltham, Massachusetts 781.522.6010 bsanders@americandg.com Contact