FINANCING GEOTHERMAL Status in North America

Alexander Richter Canadian Geothermal Energy Association (CanGEA) ThinkGeoEnergy.com @thinkgeoenergy 17 November 2011 – Australian Geothermal Energy Conference, Melbourne/Victoria, Australia

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in December 2011

GEOTHERMAL FINANCING

Financing geothermal projects

Start-up Exploration/ Pre-Feasibility

Feasibility/ Resource Verification

Detailed Design & Construction

Start of Operation

Venture Capital

Development Equity

Drilling Equity

Project Equity

Tax Equity

Mezz./ Bridge Debt, Const. Financing

Project & Vendor Financing

•  Developers

•  IPPs (Development Pipeline)

•  Resource Speculators

•  Venture Capitalists

•  Private Equity

•  Public Markets

•  Financial Partners

•  Private Equity

•  Strategic Partners

•  Financial Players

•  Large IPPs with ability to monetize PTCs

Source: Islandsbanki

TORONTO STOCK EXCHANGE

Clean Technology Market on TSX and TSXV

•  Total Market Cap: $18 bn

•  Companies: 131

•  New Listings 2011: 6

•  Equity Capital raised in 1H

2011: $723 m

•  32% of TSX issuers

graduated from TSX Venture

Exchange

Source: TSX

Strong Growth in Key Market Metrics

Analyst Coverage Avg. Analyst Coverage for Clean Technology Companies by Market Cap

Strong analyst coverage combined with growth in trading and liquidity provides positive market fundamentals for Clean Technology companies to finance and grow.

1

3

5

910

Market Capitalization (C$ Millions)

150-500 >1,000 50-150 <50 500- 1,000 Source: Capital IQ, December 2010

Volume of Shares Traded Millions of Shares Traded in the Clean Tech Sector

1,446

2,9513,364 3,553 3,580

2006 2010 2008 2009 2007

Source: TSX

Top 10 Clean Technology Financings Last Twelve Months

Company Sector Transaction Date

Transaction Type

Equity Raised (C$)

Innergex Renewable Energy Inc. Hydro & Wind 2011 March Secondary Offering $165 M

5N Plus Inc. Solar Manufacturing 2011 April Secondary Offering $125 M

Westport Innovations Inc. Transportation (Energy Efficiency)

2010 Nov Secondary Offering $123 M

Boralex Inc. Hydro & Wind 2010 Sept Secondary Offering $109 M

EcoSynthetix Inc. Specialty Chemicals 2011 Aug IPO $100 M

Innergex Renewable Energy Inc. Hydro & Wind 2010 Sept Secondary Offering $85 M

Capstone Infrastructure Corp. Infrastructure 2011 June Secondary Offering $75 M

Ram Power Corp. Geothermal 2011 May Secondary Offering $70 M

Capstone Infrastructure Corp. Infrastructure 2011 Jan Secondary Offering $69 M

GWR Global Water Resources Corp. Water 2010 Dec IPO $61 M

Source: TSX TSXV Market Intelligence Group (MiG) , LTM = Last Twelve Months from August 2010 to August 2011

STOCK DEVELOPMENT

Renewable energy equity performance

S&P 500 has outperformed renewables since early 2010

Source: Íslandsbanki, Bloomberg and Bloomberg New Energy Finance

North American Geothermal Stocks

Ram Power (RPG)Nevada Geothermal Power (NGP) US Geothermal (GTH)

Alterra Power (AXY)Ormat Technologies

(ORA)

Chart courtesy of Google Finance

INVESTMENTS & FINANCING

Pace of new investments remains strong

…Despite difficult markets looking at the complete renewables sector

Source: Íslandsbanki, Bloomberg and Bloomberg New Energy Finance

Asset financing - Lead arrangers

Rank Organisation Disclosed Value ($m)

Deal Count

Market Share

1 BNDES $2,148.87 12 9%

2 Kreditanstalt fuer Wiederaufbau (KfW) $1,627.67 10 7%

3 Mitsubishi UFJ Financial $1,441.56 15 6%

4 Banco Bilbao Vizcaya Argentaria (BBVA) $1,254.70 17 5%

5 Banco Santander $1,164.03 21 5%

6 European Investment Bank (EIB) $1,052.47 8 4%

7 World Bank $696.20 4 3%

8 Commerzbank $651.47 6 3%

9 Banco Espanol de Credito $610.88 10 2%

10 Banco de Sabadell $591.02 9 2%

11 Societe Generale $570.81 6 2%

12 Lloyds Bank $509.23 8 2%

13 Rabobank $483.84 8 2%

14 Dexia $426.29 4 2%

15 Valero Energy $407.70 1 2%

16 Instituto de Credito Oficial $403.17 7 2%

17 Eksport Kredit Fonden (EKF) $400.57 2 2%

18 Credit Agricole $396.57 8 2%

19 Natixis $390.32 7 2%

20 Caixa Bank $353.43 4 1%

Source: Bloomberg New Energy Finance

Asset financing - syndicated lenders

Rank Organisation Disclosed Value ($m)

Deal Count

Market Share

1 SNS REAAL $1,378.55 1 27%

1 JC Flowers & Co $1,378.55 1 27%

3 European Investment Bank (EIB) $292.60 2 6%

4 Woori Finance Holdings Co $180.00 2 4%

5 Commerzbank $147.60 1 3%

6 BNP Paribas $139.80 2 3%

7 Rabobank $100.00 2 2%

7 Societe Generale $100.00 1 2%

7 Credit Agricole $100.00 1 2%

7 Natixis $100.00 1 2%

7 ING Groep $100.00 1 2%

12 Kreditanstalt fuer Wiederaufbau (KfW) $88.90 2 2%

13 Banco Santander $79.57 1 2%

13 Banesto $79.57 1 2%

13 Banco de Sabadell $79.57 1 2%

13 Bankia $79.57 1 2%

13 LaCaixa $79.57 1 2%

13 Bankinter $79.57 1 2%

13 Instituto de Credito Oficial $79.57 1 2%

20 Provredna Banka Zagreb $76.30 1 2%

Source: Bloomberg New Energy Finance

Key challenges for geothermal

•  Creditworthiness of smaller firms •  Challenges securing debt with recourse on a

single project •  Higher transaction costs at the project level

Geothermal financing

•  Equity financing: difficult •  Debt financing: not problematic if equity is spent and drilling

results are good

•  Money is available but too expensive for developers •  Developer needs a couple production wells before getting

equity-financed •  Difficult public markets: 80% of steam output before debt

becomes available

Equity Financing Activity (since Sept-10)

Company Amount Activity

Alterra Power None

ORMAT None

U.S. Geothermal $5.0m Mar-2011 - $1.00 + ½ warrant at $1.075 for 1 year

Nevada Geothermal Power $10.5m Sep-2010 - $0.50 + warrant at $0.70 for 3 years

Ram Power $70.6m May-2011 - $0.55 + warrant at $0.72 for 3 years

Source: John McIlveen, Jacob Securities

Debt Financing Activity (selected deals)

Company Amount Activity

US Geothermal $9m San Emidio, Bridge loan/ ITC cash grant

Ormat Technologies $152m Development Tuscarora & McGinness Hills, loan guarantee (up to $350m)

US Geothermal $97m Neal Hot Springs development

Ram Power $160m Debt package, San Jacinto

EnergySource $400m Construction finance, Hudson Ranch

Source: ThinkGeoEnergy

New finance market emerging

•  Vendor and/ or EPC contractor financing •  Bridge loans secured by ITC cash grants •  Operator JVs •  IPP JVs •  Tax monetization

De-risked

Joint venture partnerships IRR to partner declines with each stage de-risking

Source: John McIlveen, Jacob Securities

Stage

IRR

Exploration Resource

Inferred Resource

Indicated Resource

Measured Resource

Probable Resource

Proven Resource

Full value 7% Investor IRR declines with site progress

JV JV Vendor Finance

OUTLOOK

•  Fragmentation of industry •  Partnerships •  Portfolio of projects vs. diversification into other

technologies •  Equity finance

• Drilling finance •  Securing debt •  Transaction costs •  Tax credits

Contact Alexander Richter Canadian Geothermal Energy Association (CanGEA) alexander@cangea.ca ThinkGeoEnergy.com alex@thinkgeoenergy.com Follow me:

Twitter: @thinkgeoenergy LinkedIn Group: ThinkGeoEnergy Flickr.com/thinkgeoenergy YouTube.com/thinkgeoenergy Slideshare.com/thinkgeoenergy