For many businesses and property owners, the high upfront cost of solar photovoltaic systems remains the single largest barrier to adoption. The solution? Solar financing. Fresh Energy’s solar financing event, the final installment of a three-part Solar Opportunities Series, will introduce participants to the range of current and emerging solar-financing options available in Minnesota. Learn more at fresh-energy.org/solarseries.

1. Third Party
Financing (TPO)
for Solar

2. Overview
1. What does TPO do for markets?
2. TPO Vehicles: How they work
1.
2.
3.
4.
Capital Lease
Operating Lease
PPA
New Investment Vehicles
P. 2 | SunEdison Confidential

3. TPO Cost-Effectively Expands Market Opportunity
Without TPO, the market adoption is limited to a select few customers:
Future parity economics will improve (but not broadly enable) market adoption
FUTURE with TPO
TODAY without TPO
MARKET DEMOGRAPHICS:
Mostly Resi and Small Commercial
•Customers with upfront cash
•Customers with tax appetite
•Customers with strong balance
sheets
MARKET DEMOGRAPHICS:
Resi, Small, Medium, Large C&I, Tax Exempt
•Customers with upfront cash
•Customers with tax appetite
•Customers with strong balance sheets
PLUS
•Customers with no tax appetite
•Commercial customers with desire to offbalance sheet finance
•Customers in 20 kW- 1 MW range
•Tax Exempt Entities
With TPO, market transformation occurs and adoption increases prior to parity economics:
Eliminating upfront cost hurdles for Customers, leveraging commercial economics are the
primary drivers
P. 3 | SunEdison Confidential

4. VEHICLES
GOOD
1. Capital Lease
BETTER
2. Operating Lease
BEST
4. Power Purchase
Agreement (PPA)
3. Solar Service Agreement
(SSA)
•
•
Still requires lessee
(Customer) to bear
liability and risk
Provides access to upfront
capital needed, similar to
a loan
•
•
•
Allows tax exempt
participation
Lender balance sheet
Performance risk remains with
Lessee
• Risks fall on Lessor
• Lender balance sheet
• Longer term, typically
strongest project
economics
Payment
$/month
$/month
(with O&M true-up)
$/kWh
Term
5-12 years
5-10 years, 20+ years
15-20+ years
End of
Term
Ownership transfers to Lessee
Renew/Return/FMV Purchase
Renew/Return/FMV
Purchase
P. 4 | SunEdison Confidential

5. The SunEdison Model: A tool for the local Developers
Lender (debt)
Tax Equity
$
$
Special Purpose Vehicle
(Third Party Financier-SunEd)
•Lender contributes debt; possibly Sponsor equity
•Repaid through interest and revenue streams
•Tax Equity Investor contributes tax equity
•Repaid through tax MACRS and ITC
•SunEdison creates the SPV; provides SPV access to local
installers (channel partners)
$
O&M,
Installation
$
Lease
Payment
Installer
Host
Utility
•Qualified installers are provided with access to SPV
•These projects create a Project Portfolio then
financed by the SPV
•SPV pays Installer Installation and O&M fees
•Pays monthly lease payment to investors via developer
•Customer Net meters, etc.
P. 5 | SunEdison Confidential

6. Capital Lease
Term
Payment
End of Life
5-12 years
$/month
Lessee owns
LESSEE (customer)
• Customer tax appetite necessary
• Lessee takes ITC and Depreciation
• Interest component of lease payment is considered an expense
• Lessee takes incentives
• Customer owns asset at end of lease
• Economics less favorable than cash/loan purchase typically
LESSOR (lender)
• 100% financing of equipment and installation
P. 6 | SunEdison Confidential

7. Operating Lease
Term
Payment
End of Life
5-10 years
$/month (with
O&M agreement)
Renew/Return/
FMV
LESSEE (customer)
• Entire lease payment can be a deduction
• Production risk assumed (unless O&M true-up)
• Incentives (PBIs)
• Benefits from technology obsolescence---10 years is ideal timing
LESSOR (lender)
• Monetizes tax benefits
• Asset and liability recorded on balance sheet: title remains with lessor
• 100% financing of equipment and installation
• Still challenges for tax-exempt entities per Section 7701(e) of federal tax code
• Service contracts, SSAs
P. 7 | SunEdison Confidential

8. Power Purchase Agreement
Term
Payment
End of Life
15-20+ years
$/kWh
Renew/Return/
FMV
Off-taker (customer)
• Purchasing power
• De-risked
Owner (lender)
• Monetizes tax benefits and incentives
• Asset and liability recorded on balance sheet: title remains with owner
• 100% financing of equipment and installation
• Still challenges for tax-exempt entities per Section 7701(e) of federal tax code
• Service contracts, SSAs
P. 8 | SunEdison Confidential

9. Buzz Words: New Investment Vehicles
New investment vehicles help lower the cost of capital thereby reducing
finance costs. Focusing on innovative financing is a critical way to lower
market costs and drive market adoption
1.
2.
3.
4.
YieldCo
Master Limited Partnerships (MLPs)
Real Estate Investment Trusts (REITs)
….
P. 9 | SunEdison Confidential