Update on Solar Energy Financing Intersolar East New York City - - PowerPoint PPT Presentation

Michael Eckhart Managing Director Global Head of Environmental Finance Citigroup, Inc. michael.eckhart@citi.com

“Update on Solar Energy Financing”

Intersolar East New York City April 2018

’s Deep Renewable Energy Expertise

Citi has developed industry leading global alternative energy capabilities with a broad range and depth of expertise and execution capability.

 Citi is the most global bank  220,000 employees  98 countries with Citi offices  Doing business in 160 countries  $2 trillion assets  $4 trillion / day funds flow  Renewable Energy:  Corporate banking  Investment banking  Capital markets

Global Presence of Solar Banking

2017 $1.6bn sale to Joint Advisor to sPower and Fir Tree Sydney Hong Kong London New York San Francisco Mumbai Sao Paulo Largest Independent Solar Developer Comprehensive Advisory Role to NRG World’s only fully- integrated sustainable energy company 2016 $2.6bn sale to Advisor to SolarCity 2017 Business Review Committee / Transformational Plan Advisor to BRC

Ongoing

Sale of ~33% stake in 1.7 GW solar portfolio Sellside Advisor Operating utility scale solar portfolio 2

2015 US $420mm IPO Active Bookrunner and Structuring Agent

Global Leadership in Renewable Energy at +/- $25 billion / year

Citi is a consistent leader in Alternative Energy transactions across sectors, geographies and products.

2015 US $800mm High Yield Senior Notes Joint Bookrunner 2015 US $351mm Follow-On Offering Joint Bookrunner 2015 France €200mm Sale of 95% stake to Advisor to Solairedirect 2015 US $670mm PIPE Lead Placement Agent 2015 US $200mm IPO Joint Bookrunner 2015 US $1bn Warehouse Facility Joint Lead Arranger, Joint Bookrunner, and Co-Syndication Agent 2015 US $300mm Senior Unsecured Notes for Invenergy Wind Portfolio acquisition Lead Left Bookrunner 2015 U.K. Sale of 49.9% interest in Baltic 2 offshore windfarm Sole Advisor to EnBW 2015 US Sale to Energy Capital Partners Sole Advisor to Terra- Gen 2015 US $2.2bn acquisition of Vivint Solar Joint Financial Advisor 2016 U.K. Sale of 50% interest in Burbo Bank Extension wind project Advisor to Dong Energy 2015 US $159mm Senior Secured Notes for Solar Portfolio Joint Lead Placement Agent 2015 US $675mm IPO Active Bookrunner and Structuring Agent 2015 US $394mm Construction Loan, $73mm Letter of Credit Facilities for South Plains II Wind Project Lead Arranger and Sole Bookrunner 2016 US $246mm Construction Loan, $210mm Tax Equity Commitment and Energy Hedge for Mariah Wind Project Joint Bookrunner, Mandated Lead Arranger 2016 US $218mm Senior Secured Notes for Solar Portfolio Joint Lead Placement Agent 2015 US $500mm ProjectCo Term Loan A Joint Lead Placement Agent 2016 Europe Sale of 49% stake in

• nshore wind portfolio

to Advisor to EDP 2016 US $95mm 4(a)(2) Private Placement for Solar Portfolio Joint Lead Placement Agent 2016 $2.6bn acquisition of Financial Advisor to SolarCity 2016 US $270mm Follow-On Offering Joint Bookrunner 2016 US $350mm Senior Unsecured Notes Joint Bookrunner 2016 US $103mm Follow-On Offering Joint Bookrunner 2017 UK $580mm acquisition of 365 MW solar portfolio from Sole Financial Advisor to TerraForm Power 2017 Indonesia/Philippines Sale of geothermal assets to Advisor to Chevron 2017 US $350mm Senior Unsecured Notes Joint Bookrunner 2016 US Block Island Offshore Wind Project Construction Lender / Tax Equity Investor 2017 US Rattlesnake Wind Project Energy Hedge and Tax Equity Provider Ongoing Canada / LatAm / Europe Sale of renewable energy developer and 805 MW portfolio Sellside Advisor 2017 US $1.5bn 4(a)(2) Private Placement for AES Southland Project Joint Lead Placement Agent 2017 US Completed strategic review and announced Transformation Plan Financial Advisor Ongoing US Sale of ~33% stake in 1.7 GW solar portfolio Sellside Advisor Ongoing Sale of Majority Stake in and Renewables Business Sellside Advisor 2017 $421mm Private Placement

Sole Ratings Advisor, Sole Structuring Agent, Sole Lead Placement Agent, and Sole Lead Hedge Advisor

2017 US $1.6bn sale to Joint Advisor to sPower and Fir Tree

3

Pursuing Energy Technology-Driven Markets 1978 - 2018

10 20 30 40 50 60 $70 1975 1980 1985 1990 1995 2000 2005 2010 2015 1 10 100 1,000 10,000 100,000 MW Installed Crystalline Silicon PV Module Price (2015 $/W (DC))—LH Scale Volume Installed (MW)—RH Scale Historical Learning Rate: 23%

Solar Cost Declines with Volume

Cost Reductions and Market Growth

Source: Maycock, Bloomberg New Energy Finance.

The historical solar learning rate is 23%, which means that solar module costs decline by 23% every time cumulative installations double. Lithium ion batteries have so far demonstrated a learning rate of 19%.

5

1978 Call for 99% cost reduction

10 20 30 40 50 60 $70 1975 1980 1985 1990 1995 2000 2005 2010 2015 1 10 100 1,000 10,000 100,000 MW Installed Crystalline Silicon PV Module Price (2015 $/W (DC))—LH Scale Volume Installed (MW)—RH Scale Historical Learning Rate: 23%

Solar Cost Declines with Volume

Cost Reductions and Market Growth

Source: Maycock, Bloomberg New Energy Finance.

The historical solar learning rate is 23%, which means that solar module costs decline by 23% every time cumulative installations double. Lithium ion batteries have so far demonstrated a learning rate of 19%.

5

1978 Call for a 99% cost reduction 99.3% Cost Reduction In 2016

100 200 300 400 100 200 300 400 500 600 700 800 900 1,000 1,100 1,200 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 Global Volumes (GWh) EV Battery Pack Costs ($/kWh) Global EV Li-ion Battery Production Observed Values Moderate Scenario: 15% learning rate Aggressive Scenario: 22% learning rate Historical Learning Rate: 19% 10 20 30 40 50 60 $70 1975 1980 1985 1990 1995 2000 2005 2010 2015 1 10 100 1,000 10,000 100,000 MW Installed Crystalline Silicon PV Module Price (2015 $/W (DC))—LH Scale Volume Installed (MW)—RH Scale Historical Learning Rate: 23%

Solar Cost Declines with Volume

Cost Reductions for Solar AND Storage

Source: Maycock, Bloomberg New Energy Finance.

The historical solar learning rate is 23%, which means that solar module costs decline by 23% every time cumulative installations double. Lithium ion batteries have so far demonstrated a learning rate of 19%. Energy Storage Cost Declines with Volume

Long-term Cost Range 5

99.3% Reduction since 1978

Renewables Development Landscape is Strong

Discussion  “Develop and sell” business models are transitioning to IPP models and looking to raise more permanent capital  Significant interest in development platforms with influx of new market entrants  Shell investment into Silicon Valley Ranch  Continuing strong demand from institutional investors to deploy capital to solar  AES and AIMCo acquire sPower  Development track record / team are major drivers

• f developer valuations

Development funding has never been stronger and better. Select Developers

Renewable Investments 27

Utility-Scale Solar Bidding Trends in the US 2008 – 2017

California New York Northwest PJM Southeast Southwest $ / MWH

Sources: Compiled by Citi from Bloomberg New Energy Finance, GreenTech Media, CleanTechnica.

 Tax benefits: – Accelerated Depreciation (“MACRS”) – Investment Tax Credits (“ITCs”)(solar)  Solar ITC competes with wind power Production Tax Credits (“PTCs”)  Tax Equity investors include: – Banks (e.g., Citi) – Insurance Companies (e.g., MetLife) – Finance Companies (e.g., GE) – U.S. Corporations (e.g., Google) – Utilities (e.g., Berkshire Hathaway) – Co-investment arrangements  ITC and PTC will be ramping down over the next five years

Tax Equity is Mature and Competitive – about $10-12 billion/year

Major Tax Equity Investors Other Tax Equity Investors

49

Commercial Solar Market is Growing PLUS Corporate Off-Take

The U.S. commercial solar market is considerably more fragmented than the utility scale solar industry. Top Corporate Offtakers of Solar Projects1

(MW)

494 469 337 220 210 141 124 100 80 75 72 71 68 59 56 52 50 47 40 40 Apple Inc US Department of Defense Amazon Kaiser Permanente Switch SuperNAP Wal-Mart Stores Inc Equinix Target Corp University of California US General Services Administration Google Inc Massachusetts Institute of Technology,… Stanford University Corning Inc Virginia State Corp Commission George Washington University… Ikea Group Corp City of Pasadena CA ; City of Riverside… Ecolab Inc ; Macalester College Arizona State University

Source: BNEF, GTM Research. 1. Ranking as of August 2017.

2017 YTD Top Commercial Solar Installers

National Market Share %

Tesla SunPower REC Solar Borrego Solar Systems Geronimo Energy EnterSolar Innovative Power Systems Safari Energy Coldwell Solar Vanguard Energy Partners SunDurance Energy PFMG Solar CalCom Solar Ameresco NRG Solar Other

~1 GW

34

Residential Solar Industry is Highly Competitive

Illustrative Industry Segmentation

Installation Sales Financing

39

Resi-Rooftop Financing:

• End-user methods – standard docs
• PPA
• Lease
• Loan
• Tax equity driven
• Securitization of the cash flows

Community Solar is Emerging with IPP and Utility Potential

Source: Company Websites, SEIA, SEPA.

Leading Community Solar Developers

38

Energy Storage is a Strategic Landscape

Stationary Battery Suppliers

Integrators

Power Companies Invested in Storage

Power Companies Invested in Storage

Energy Management / Distributed Solar Providers

Battery & Integrator

System Integrators

46

Global Markets - Experiencing the Same Solar Cost Reductions

$ / Kilowatt

Global Results of Competitive Bid Pricing 2010-2017

Source: IRENA

Renewable Energy Growth in Phase III: 2025 – 2050

Cumulative GW of Clean Energy Installed Globally

Cumulative Global GW Installed

Base Case: $300bn / year Upside Case: $600bn / year Downside Case: $150bn / year

Phase III

 Population Growth  Economic Growth  Electrification  Climate Policy  System Economics  Grid Integration & Storage

Source: History: U.S. Energy Information Administration, Bloomberg New Energy Finance. Forecasts: Citigroup.

6

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 1975 2000 2025 2050

2018 Phase II Phase I

Michael Eckhart Managing Director Global Head of Environmental Finance Citigroup, Inc. michael.eckhart@citi.com

“Thank You”