Tri-Solar Business Plan - Wikispaces - socy115socy115.wikispaces.com/file/view/Tri-Solar+PDF1.pdf · Tri-Solar Business Plan 2009 3 Executive Summary Products and/or Services Tri-Solar

Tri-Solar

Business

Plan

Third Party Solutions

Patrick Johnston, CEO

Chris Mathews, Operations Manager

Tri-Solar Business Plan 2009

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Table of Contents

Executive Summary 3

Third Party Solutions 6

Business Section 7

Marketing Section 11

Management Section 13

Credit Reference 15

Tri Solar Financial Statements 16

Special Purpose Vehicle Financial Statements 18

Wire Frame of Investor Page 22

Resume 23


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Executive Summary

Products and/or Services

Tri-Solar is a solar electricity service provider which sells electricity at a 17% discounted rate to

PG&E prices. It is a Limited Liability Company that offers photovoltaic electricity through a

Power Purchase Agreement (PPA). The PPA is a service contract between Tri-Solar and a

customer (site-host) where manage the finance, installation and operation of a solar energy

system. The system is constructed on the roof of the customer and the electricity it generates

is sold to the customer for 25 years. After 25 years the customer can choose to continue the

PPA or buy the photovoltaic system at a 30% salvage value. The monthly fee of the PPA is

based on a discount of PG&E peak electricity rates.

The greatest barrier to entry in the solar electricity industry is the high upfront cost. Given the

long life cycle of photovoltaic cells (about 30 years or more), a consumer installing photovoltaic

(electric solar panels) essentially pays for 30 years of electricity upfront, rather than on a

monthly incremental basis as one pays for plug-in electricity today. Tri-Solar covers the upfront

costs, manages the installation, and covers maintenance. The fee for electricity and solar

services is $.25/kW. Typically, a large consumer like the Safeway on Mission St currently pays

$.30/kWh for demand and peak charges from PG&E. The solar electricity rate will escalate by

5% each year to keep up with the 6.7% annual rate of increase in PG&E prices.

Finance Model

Solar securities will be sold to long-term investors. In truth, the term solar security is

technically incorrect. The investor purchases shares in a Special Purpose Vehicle which owns

the solar installation and shares will be sold through a private offering. However this

investment behaves identical to an asset-backed security so for the purpose of this paper it will

be named a solar security. The solar security represents partial ownership in a Power Purchase

Agreement. Investors will own sections of a large photovoltaic system. The investment is

secure because PV systems are long lasting, depreciate slowly and the PPA contract guarantees

a fixed predictable revenue stream. Each solar security yields an average yearly income of 14%

over the lifetime of the PPA. If an investor purchases a $50,000 solar security they will receive

dividends each year from the revenue generated through the PPA and from the sale of

renewable energy credits (RECs). A $50,000 investment will yield an income of $181,154 over

25 years which will be amortized and paid out annually in the form of dividends. The Solar


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Security will be marketed and sold to local investors as an alternative to risky mutual funds and

hedge funds. Also, a $50,000 solar security offsets 200 tons of carbon emissions.

Customers

Solar Electricity: The target market for the power purchase agreement consists of site-hosts

that have large roof space, high sun exposure, and high electricity consumption. In Santa Cruz

this market includes large offices (County Municipal building), food stores (Safeway) and retail

stores (JC Penny and Ross). These customers already pay for high electricity rates from PG&E at

$.30/kWh during sun hours. The new Safeway under construction on Mission with

approximately 60,000 square feet will pay an electric bill of $1,065,600 each year. Assuming

80% of the roof space could fit photovoltaic cells, $310,560 each year could be allocated into a

Tri-Solar PPA contract. Under this contract Safeway’s electricity bill would decrease by

$62,112.05 each year.

Solar Securities: Our target market for the solar security is environmentally conscious investors

who would benefit from a long term investment, aka baby boomers. Also, this model could be

used to reduce the pension cost burden on the government and corporations. A solar security

is an ideal investment for a pension fund. Local municipalities should not overlook this

opportunity.

Business model: Pricing and Margins

Tri-Solar essentially behaves similar to a holding company because it operates and manages

multiple PPAs. For the sake of simplicity, this business model focuses on a single PPA model,

although Tri-Solar will continue to generate funding for and operate other PPAs. The PPA earns

monthly revenue by selling electricity generated from solar installations on top of commercial,

government, and residential buildings. Renewable Energy Credits will also generate revenue.

Tri-Solar manages a Special Purpose Vehicle (SPV) which consists of equity shares sold to

investors. These solar securities will be acquired before the project begins. The SPV is an LLC

and it pays for the cost of the photovoltaic installation and the maintenance. The building pays

a monthly fee for receiving power from the system at a rate of $.25/kWh, a 17% discount from

PG&E. The service is provided for 25 years, after which the building has the option to buy the

photovoltaic system or continue paying a monthly fee.

Tri-Solar has spoken to and reached an installation price with MMA Renewables, a large

photovoltaic company, to install the solar electric system for $6/watt. This is better than Tri-


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Solar doing the installation itself because MMA can buy the components below market price,

install the system at a cheaper rate because of the large size, and discount the tax incentives

from the installation cost. Altogether, state and federal tax incentives equal 45% of the total

cost. So the net cost of the installation is $3.30/watt.

Competitors

There are 17 solar companies in Santa Cruz most of which specialize in the residential market

and only a few that provide third party financing.

Barriers to Entry

The greatest barrier to entry is the high upfront cost of installation. Tri-Solar uses an innovative

finance model to circumvent this obstacle. Third party financing through localized investing

eases the barrier to entry however it creates another barrier. The task becomes investor

acquisition, outreach into the Santa Cruz community for long term investors who will own a

stake in the power purchase agreement.

3 Key Milestones to Profitability

1. Customer acquisition. Preferably a large customer with high visibility and brand recognition

like Safeway.

2. Investor Acquisition. Long term investors who agree to purchase equity shares in the PPA.

3. Long lifespan of photovoltaics. The 25 year lifespan of photovoltaics and a rate of $.25/kWh

generates a 14% average rate of return over 25 years making it one of the best long term

investments in the market today. Equity in the PPA can be sold to long term investors,

specifically pension funds, so that Tri-Solar can use cash to install now for revenue earned

later.

Exit Strategy

Tri-Solar’s exit strategy will allow for a sell option in the solar security. If the investor chooses

to sell their solar security then it will be sold for the total amount of equity. Another possible

exit strategy would be a merger or a corporate acquisition.


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Third Party Solutions

1) Solar Power Purchase Agreement (SPPA)

2) Introducing the Solar Security

3) Localized Securitization and the Third Party Investor- the new frontier.

1) Selling the Tri-Solar power purchase agreement; inexpensive electricity for 25 years.

The solar power purchase agreement (PPA) is an alternative to customer ownership of a solar

electric system. Tri-Solar pays for the upfront cost, the operation, and the maintenance of the

photovoltaic system. In return the customer donates their roof space and pays for solar at a 17%

discount to current PG&E rates. The new Safeway on Mission St. does not have an installer and is

planning on installing a solar electric system.

2) The Solar-Backed Security.

Tri-Solar will sell ownership of its 25 year PPA to the local community. The asset is the power purchase

agreement which is estimated to yield an average income of 14% for 25 years. Tri-Solar will sell equity

shares in the PPA to local investors thereby connecting the investor to the investment. The equity

shares of the PPA behave identically to an asset backed security. The PPA is a Special Purpose Vehicle

(SPV) that is a limited liability company which is under separate ownership from Tri-Solar. Tri-Solar

manages the SPV and charges it service costs.

3) Introducing localized investment; a new model for (green) capitalism.

Tri-Solar will engage in community outreach to find investors for the solar backed security

before the project is started. The solar security will be commoditized within Santa Cruz and sold as a

long term investment which yields an average income of 14% and reduces carbon emissions by 4

tons/$1,000 invested. Investors will have access to a web portal where they can track how many

kilowatts their share is producing ($50,000 solar backed security gives 13.5 kW), how much retained

earnings they have collected, how many pounds of carbon emission they have offset, and how many

RECs they have sold.

Localized financing offsets the risk of pooling together potentially risky assets from various

sources like toxic mortgage-backed securities. It creates a direct relationship between the two entities

(Safeway and the community), and circumvents banks which are currently averse to lending. Most

importantly it enables investors to pursue their own rational self interest while creating a mechanism for

active participation in the social good. For instance, by purchasing a $1,000 solar-backed security the

investor is offsetting 4 tons of carbon emissions while also yielding an average income of 14%/year over


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25 years. By branding solar-backed securities as a solution to global warming, Tri-Solar spearheads itself

into the most evolved frontier of consumerism and investment; one where self interest is balanced with

social and environmental responsibility. The ideal investors are baby boomers who would benefit from

a long term investment in their pension fund.

-Business section that includes but is not limited to: type of business, products/services/proprietary

information, regulations, facilities, equipment, location, operational needs, and environmental

factors.

Type of business

Tri-Solar

Tri-Solar is a limited liability company which will develop and market affordable solar electricity through

a power purchase agreement (PPA). Tri-Solar will arrange financing, design and construction of the

installation. It will process an accelerated depreciation tax shield. It will ensure system monitoring and

production goals. It will work with the contractor who will construct and maintain the installations. It

will sell solar renewable energy credits on behalf of the SPV. Tri-Solar will act as a holding company for

Special Purpose Vehicles that represent different power purchase agreements.

Special Purpose Vehicle

The Special Purpose Vehicle (SPV) is a legal entity which is under separate ownership from Tri-Solar and

receives income from PV electricity sales and the sale of RECs. The legal entity pays Tri-Solar a yearly

solar services fee of $103,500. The legal entity is used to distribute tax benefits, depreciation, and

dividends to Investors. The host/customer will sign contracts with the Special Purpose Vehicle. When

an investor purchases a solar security they are in fact investing in the SPV.

Products/services.

The launch market is large commercial and government buildings with high electricity demand and lots

of sunlight. The product is solar electricity which is sold below PG&E rates.

The customer “donates” their roof which hosts the photovoltaic (PV) system. Electricity generated from

the system is sold to the client at a fixed rate of $.25/kWh. This price escalates 5% per year for 25 years

to keep up a historical 6.7% escalation in PG&E rates. Tri-Solar therefore sells electricity at a 17%

cheaper rate than what the customer would otherwise pay PG&E. In effect, Tri-Solar is an electricity

service company (ESCO) similar to PG&E. By agreeing to a PPA, the customer gains cheaper electricity

and a predictable energy rate which will hedge energy price volatility.


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PG&E’s electricity rate is currently $.30/kWh during sun exposure hours. According to weather metrics,

the daily number of direct peak sun hours in Santa Cruz is 5.5. This means that a 160 watt panel will

generate 880 watts each day on average. Sun exposure hours are associated with expensive electricity

because they are during the high peak period when electricity demand from the grid is at its greatest.

Solar Electricity Value Proposition

Safeway is under construction on 2111-2203 Mission St. and represents an ideal host site for Tri-Solar’s

power purchase agreement (PPA). Safeway’s high electricity consumption, large roof space, high sun

exposure, and its long term lifespan fit the necessary requirements for a Tri-Solar power purchase

agreement. Any customer that has these characteristics could benefit from a PPA. Under the

agreement, Tri-Solar will sell electricity at a current rate of $.25/kWh to Safeway. According to PG&E,

the monthly electricity bill for large grocery stores with freezers is $88,800 for 629,131 kWh. Tri-Solar

plans to install 4,250 panels with a peak capacity of 160 Watts each. The panels would take up 11.5 sq ft

each. The installation would be 47,725 sq ft., taking up more than 80% of the total roof space which is

60,000 sq ft. Assuming 91% efficiency, Tri-Solar’s photovoltaic (PV) system will generate 1,242,241 kWh

per year. Safeway will pay Tri-Solar $310,560.25 / year (rates increase 5%/year) at a price of $.25/kWh.

Tri-Solar’s PV system will decrease Safeway’s electricity bill by $62,112.05/year. This amounts to a

5.829% net decline in Safeway’s electricity bill and above $1 million in savings over the lifetime of the

power purchase agreement. It is important to mention that price of solar electricity in the contract

($.25/kWh) will escalate by 5% per year to keep up with inflation and rising electricity prices.

Safeway without the power purchase agreement (yearly)

• 7,549,572kWh consumed.

• $1,065,600 in electricity costs.

• PG&E currently charges $.30/kWh during sun hours.

Safeway with the Tri-Solar power purchase agreement (yearly).

• 1,242,241 kWh purchased through Tri-Solar PPA (4,250 panels x 160 watts x 91% efficiency x 5.5

sun hrs x 365 days= 1,242,241 kWh).

• $310,560 in solar electricity cost paid through power purchase agreement. ($.25 x 1,242,241

kWh).

• $692,927 in PG&E cost ($1,065,600 – (1,242,241 kWh x $.30/kWh) = $692,927).


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• $1,003,487 in total electricity cost ($692,927 + $310,560. = $1,003,487).

• PPA generates $62,112.05 in savings/year. ($1,065,600 - $-1,003,487 = $62,112)

• 5.83% electricity cost reduction ($372,672 - $310,560.25)/$1,065,600 = 5.83%).

• Over $1,000,000 in savings over the life of the PPA (62,112.05 x 25 years)

Solar-Backed Security Value Proposition

The following is an estimated dividend schedule for a $50,000 solar security which equates to ownership

of a 13.5 kW section of the installation. These numbers take into account the sale of renewable energy

credits, an accelerated depreciation deferred tax shield, straight-line depreciation, revenue from the

PPA, degradation of the solar system, taxes, and a 5% price escalation/year.

Year 1 $ 3,304.21 Year 13 $ 6,499.42

Year 2 $ 3,544.09 Year 14 $ 6,852.85

Year 3 $ 3,861.45 Year 15 $ 7,011.17

Year 4 $ 5,864.96 Year 16 $ 7,390.74

Year 5 $ 6,215.42 Year 17 $ 7,789.55

Year 6 $ 6,583.67 Year 18 $ 8,051.87

Year 7 $ 6,970.61 Year 19 $ 9,096.60

Year 8 $ 6,853.74 Year 20 $ 9,111.39

Year 9 $ 4,573.80 Year 21 $ 9,597.33

Year 10 $ 5,538.44 Year 22 $ 10,107.84

Year 11 $ 5,843.01 Year 23 $ 10,644.16

Year 12 $ 6,163.07 Year 24 $ 11,538.08

Year 25 $ 12,146.45

The Investor also will become a member of the Tri-Solar web portal. The website enables investors to

become active participants in the project. They can keep track of the dividends they receive, the

electricity their share of the system is generating, and the amount of carbon emissions that have been

offset by their investment. A wire frame of the website is attached to this document.


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Proprietary Information

The ownership composition of Tri-Solar is that of a Limited Liability Company (LLC). Tri-Solar is

also a holding company which earns revenue from the Special Purpose Vehicle (SPV) which owns the

PPA. The SPV is a separate LLC which generates revenue from the PPA, pays Tri-Solar a service fee, pays

taxes, receives an accelerated depreciation tax shield, sells renewable energy credits ($20/megawatt),

and sells shareholder equity in the form of solar securities. An investment in a $50,000 solar security is

an equity stake in the special purpose vehicle. The SPV receives payment from the customer and then

pays the investors in the form of dividends. Due to its ownership composition Tri-Solar has separate

financial statements from the SPV. The costs of the installation, maintenance, and fees will be

expressed on the SPV financial statements not the Tri-Solar financial statements.

Barriers to entry

Tri-Solar’s competitive advantage is an innovative form of localized financing. The greatest

barrier to entry in the solar industry is the high upfront cost of the installation. Due to the nature of the

product, all the electricity is paid for up front. By finding long term investors before hand and convincing

them of the great long term investment opportunity Tri-Solar overcomes the biggest barrier to entry

which is the high upfront cost. The solar security will be marketed to the local Santa Cruz community.

The initial investment will pay for the installation costs as well as a cushion to pay for any unanticipated

costs. However it encounters another cost in the process which is the Tri-Solar service fee. Tri-Solar will

do the financial leg work, make sure the production schedule is done on time, and peddle securities to

investors.

Facilities

The office for Tri-Solar is located on 2100 Delaware Ave. It shares a work environment with other

technology-based companies. Tri-Solar benefits from cross-pollination in an entrepreneurial community

on Delaware Ave. which help keep the company on the cutting edge of finance and technology and

engaged with other entrepreneurs.

MMA Renewables is contracted to do the installation for $3.30/Watt and the maintenance for

$16,320/year thereafter. Tri-Solar therefore does not have to have a storage facility or significant supply

chain management.

Regulations

The city of Santa Cruz charges a flat $ 125 building permit fee for most rooftop solar panels. This is

significantly less than other cities. Currently there is a nationwide Federal tax credit for Solar


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installations of 30%. The state of California offers tax rebates amounting to $1.55 per Watt which is at

least 15% of the installation costs. These tax incentives are discounted from the cost of the panel in our

financial statements because MMA Renewables subtracts it from the installation cost.

The SPV can sell renewable energy credits (RECs) to polluters around the country. The average market

price for an REC is $20/megawatt hour. This is added to the estimated revenue on the SPV’s income

statement. Also, the RECs are not taxed.

The SPV can also take advantage of a tax shield from accelerated depreciation. This amounts to a large

portion of savings during the early years of the solar electric system.

Second Section

Marketing section that includes but is not limited to: target markets, customer segments, competition,

market entry, location, industry trends, method(s) of distribution, promotion, and pricing.

The target market for Tri-Solar’s power purchase agreements is large buildings with high sun

exposure and high electricity consumption. Large office buildings like the county municipal building are

worthy candidates for a PPA because they consume large amounts of electricity during the day when the

solar installation will be generating electricity. Large grocery stores like the new Safeway under

construction on 2111 Mission St are an ideal target market because of the electricity consumed by

freezers. Totally offsetting the customer’s electricity cost is unnecessary due to the nature of PG&E’s

billing structure. Under this structure, any excess capacity produced by the photovoltaic installation is

given a PG&E credit equal to the amount the client would be charged for consuming electricity during

the time period it was produced. At the end of the year, these electricity credits are rescinded. This

rate structure creates an incentive against producing enough solar electricity to offset the entire

customer’s electricity bill because it presents the risk of generating too much electricity which would

turn into a sunk cost. However the target market is virtually unlimited thanks to high electricity costs,

high electricity consumption, and large roof spaces across the state.

Competition and Industry trends

There are 17 solar companies in Santa Cruz most of which specialize in the residential market and only a

few that provide third party financing. Independent Energy Systems focuses on commercial and

residential customers in the Santa Cruz area and offers third party financing. Solar Technologies

provides multiple third party financing options however none are directly financed by the company

itself. REC solar is a large company that provides financing tools for solar installation. Tri-Solar does not


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compete with PG&E however competition does exist with other Solar service providers who offer power

purchase agreements.

The solar electric market is experiencing accelerated growth due to political and social pressure and

market/technological forces. Photovoltaic tax incentives and rebates are higher than they have ever

been (45% of installation costs). PG&E prices have been growing at 6.7% in California, more so than

anywhere else in the nation. And President Obama is promising to make all federal buildings green

friendly as part of the stimulus package. Although it is true that this market growth will somewhat

diminish competition, Tri-Solar still faces the risk of being under bid on a contract. $.25/kWh is how

much Tri-Solar will charge customers like Safeway, which is $.05 below the market rate. There is a risk

that another solar installation and power purchase agreement company will undercut Tri-Solar and offer

$.23/kWh, in which case Tri-Solar will walk away from the contract and look for another customer.

However our localized finance model could be used as leverage enhancing our bargaining position with

customers. This is because solar backed securities will connect the customer to the local community

thereby increasing the customer’s brand value. In Safeway’s case this is absolutely true. Tri-Solar has

learned from Robert Blumberg at the Santa Cruz technology meetup who spoke with a designer for the

blueprint of Safeway and he said that a primary objective in the blueprint was to make Safeway green

friendly. Robert also mentioned that Safeway desired to connect somehow with the community, which

in large part consists of UCSC students. What better way to do this than by taking on a contract with

UCSC students for the solar installation?

The positive attitude toward renewable energy has made the solar power purchase agreement and the

solar security more appealing because of the social/environmental value created by going green. The

new frontier of consumerism is one where personal interest is balanced with the public good, solar

securities and the PPA will be well positioned to take advantage of this rapidly expanding market.

Market Entry

There is a market failure around the deployment of solar projects. The market failure is actually one of

financing, not one of the economics of the underlying technology. The greatest barrier to entry in the

solar industry is the high upfront cost of PV installation. Tri-Solar confronts the barrier with its solar

backed security financing model. The first task is to find investors in the local Santa Cruz community.

This is a sales task. However once it is accomplished Tri-Solar will be able to enter the market.

Patrick Johnston is the CEO of Tri-Solar and is enrolled in a class title, “Collaborative Design and

Sustainable Technology.” Patrick has formed a strategic alliance with the professor who is giving him a

team of students to pursue the solar backed security model on a residential scale. This will allow Tri-

Solar to test its business model before jumping into a large project like Safeway. The small scale

experiment will need some sort of funding from the University, a local bank, or a third party investor. If


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all goes as planned the loan should be paid back as soon as the power purchase agreement is initiated

and the solar backed securities are sold.

Promotion

Tri-Solar’s promotional strategy will be implemented through viral marketing and public relations.

Patrick Johnston has several connections with local newspapers including City on a Hill Press and the

Sentinel. These strategic alliances can be used to promote the “greening” of Safeway, thereby

increasing Safeway’s brand value and publicizing solar-backed securities in the process. Viral marketing

has already been initiated through Tri-Solar’s presentation at the Santa Cruz Technology Meetup which

included business leaders and proactive community members.

Pricing

Solar electricity will be sold through a power purchase agreement for $.25/kWh. This price is attractive

to Safeway because it discounts PG&E rates by $.05/kWh. Solar-backed securities can be packaged and

sold to investors in increments of $10,000, $50,000 and $100,000. The size of the investment is directly

proportional to the amount of dividends received from the security. Retained earnings serve no

function within the SPV aside from paying maintenance costs of the solar installation system. Therefore

all the income earned through the PPA will be paid out as dividends to investors. Investors will sign a

contract with the SPV guaranteeing not to withdraw shares for the first five years. This is to ensure that

long term investors will stay with the SPV and to avoid the risk of capital flight.

Methods of Distribution

Electricity is generated from the PV system, turned into an Accelerated Current using an inverter (91%

efficiency), and then immediately consumed by the customer. If by some chance the electricity is not

consumed it is pulled onto the grid, in which case PG&E ensures a buyback where it credits the customer

the same amount it would normally charge so the net effect is the same.


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Management Section

-Management section that includes but is not limited to: ownership composition, management

structure, managing personnel, key personnel, security, and consultants.

Tri-Solar is a limited liability holding company. The power purchase agreement is a special purpose

vehicle that is controlled by Tri-Solar which acts as a holding company. For the sake of financing, the

power purchase agreement is made into its own limited liability company so that shares can be bought

and sold to investors. Investors purchase the solar security by owning a share of the special purpose

vehicle. This allows yearly revenue streams to be paid to the investor in the form of a dividend. Tri-

Solar has an extremely advantageous agreement with MMA Renewables. The company agreed to

contract with Tri-Solar last week. MMA Renewables is a solar installation company which will function

as an independent contractor, supplier, and consultant. Tri-Solar will oversee the work and ensure that

the installation is done properly and MMA Renewables will contribute their expertise as well as the

discounts they can provide through their suppliers.

Chris Mathews is the Operations Manager. He is responsible for supply chain management, installation

oversight, and will work closely with MMA Renewables and customers (like Safeway) to ensure that

maintenance is done properly and all parties are satisfied. Patrick Johnston is the Chief Executive

Officer. He will assign tasks for Tri-Solar, manage the PPA, securitize the solar installation for local

investors, and deal with the financial aspects of the SPV.

Tri-Solar is promoting a localized finance model that is connected to the community through solar

securities. As such, it is important to maintain a horizontal management structure to be responsive to

the community’s needs. The goal is to engage workers with similar businesses and community leaders

to form an alliance around solar energy. By fostering collaboration connecting it to the community, Tri-

Solar will benefit from network externalities and cross-pollination. Tri-Solar plans to take up office on

2100 Delaware in the new live-work complex in the hopes that it can engage with related businesses.


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If necessary, Tri-Solar will use the credit reference of local investors who to receive a commercial loan

should the need arise. A typical credit reference from an investor would look something like this:

Investor: Rita Hernandez

Credit References: Scotts Valley Property Management, Play it Again Sports, and Venture Quest Kayaks

Line of Credit: $50,000

Name of Bank: Santa Cruz County Bank


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Financial Statements:

The financial statement for the special purpose vehicle is separate from the statement for Tri-Solar. Tri-

Solar earns revenue from a solar service fee it charges the SPV. The SPV earns its revenue from monthly

payments through the power purchase agreement. Investors own shares in the SPV. The income

statement for the SPV takes into account depreciation, the sale of renewable energy credits

($20/megawatt generated), Tri-Solar’s fee for services rendered, maintenance costs, and a deferred tax

asset in the first eight years from accelerated depreciation. The solar installation depreciates over 25

years and has a salvage value of 30% the initial cost after 25 years.

Tri-Solar Pro-Forma Income

Statement Column1 Column2 Column3

Year 1 Year 2 Year 3

Revenue From Fees $ 103,500.00 $ 103,500.00 $ 103,500.00

Variable Costs $ - $ - $ -

Gross Profit $ 103,500.00 $ 103,500.00 $ 103,500.00

Fixed Costs $ 93,500.00 $ 93,500.00 $ 93,500.00

EBIT $ 10,000.00 $ 10,000.00 $ 10,000.00

Taxes $ 3,500.00 $ 3,500.00 $ 3,500.00

Net Income $ 6,500.00 $ 6,500.00 $ 6,500.00

Tri-Solar Fixed Costs Column1

Salaries $ 80,000.00

Facilities $ 12,000.00

Utilities $ 1,500.00

Total $ 93,500.00

SPV Fixed Costs Column1

Fees to Tri-Solar $ 103,500.00

Total Fixed Costs $ 103,500.00


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Tri-Solar Pro Forma Balance Sheet


Assets

Cash $6,500.00 $13,000.00 $19,500.00

Total Assets $6,500.00 $13,000.00 $19,500.00

Liabilities $ - $ - $ -

Total Liabilities $ - $ - $ -

Equity

Owner's Equity

Retained Earnings $ 6,500.00 $6,500.00 $6,500.00

Total Equity $ 6,500.00 $13,000.00 $19,500.00

Total Equity and Liabilities $ 6,500.00 $13,000.00 $ 19,500.00

Tri-Solar Statement of Cash Flows


Operating Cash Flows

Cash from Services Rendered $ 103,500.00 $ 103,500.00 $ 103,500.00

Payroll $ 80,000.00 $ 80,000.00 $ 80,000.00

Rent on Office Space $ 12,000.00 $ 12,000.00 $ 12,000.00

Utilities on Office Space $ 1,500.00 $ 1,500.00 $ 1,500.00

Tax Payments (Deferred) $ 3,500.00 $ 3,500.00 $ 3,500.00

Net Operating Cash Flows $ 6,500.00 $ 6,500.00 $ 6,500.00

Investing Cash Flows

Net Investing Cash Flows $ - $ - $ -

Financing Cash Flows

Net Financing Cash Flows $ - $ - $ -


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Year 6 Year 7 Year 8 Year 9 Year 10

Revenue $ 392,398.70 $ 412,018.63 $ 432,619.56 $ 454,250.54 $ 476,963.07

Variable Costs (maintenance) $ 16,320.00 $ 16,320.00 $ 16,320.00 $ 16,320.00 $ 16,320.00

Gross Profit $ 376,078.70 $ 395,698.63 $ 416,299.56 $ 437,930.54 $ 460,643.07

Fixed Costs (Tri-Solar services fee) $ 10,000.00 $ 10,000.00 $ 10,000.00 $ 10,000.00 $ 10,000.00

Depreciation $ 62,832.00 $ 62,832.00 $ 62,832.00 $ 62,832.00 $ 62,832.00

EBIT $ 303,246.70 $ 322,866.63 $ 343,467.56 $ 365,098.54 $ 387,811.07

Taxes $ - $ $ $ - $ 135,733.87

Income From RECs (Non Taxable) $ 25,936.90 $25,663.88 $ 25,390.86 $ 25,117.84 $ 24,844.82

Net Income $ 329,183.60 $ 348,530.51 $ 368,858.42 $ 390,216.38 $ 276,922.02


Revenue $ 500,811.22 $ 525,851.78 $ 552,144.37 $ 579,751.59 $ 608,739.17


Gross Profit $ 484,491.22 $ 509,531.78 $ 535,824.37 $ 563,431.59 $ 592,419.17


Depreciation $ 62,832.00 $ 62,832.00 $ 62,832.00 $ 62,832.00 $ 62,832.00

EBIT $ 411,659.22 $ 436,699.78 $ 462,992.37 $ 490,599.59 $ 519,587.17

Taxes $ 144,080.73 $ 152,844.92 $ 162,047.33 $ 171,709.86 $ 203,694.03

Income From RECs (Non Taxable) $ 24,571.80 $ 24,298.78 $ 24,025.76 $ 23,752.74 $ 23,479.72

Net Income $ 292,150.29 $ 308,153.64 $ 324,970.80 $ 342,642.47 $ 339,372.86

SPV Pro-Forma Income Statement


Revenue $ 310,560.25 $ 322,827.38 $ 338,968.75 $ 355,917.19 $ 373,713.05


Gross Profit $ 294,240.25 $ 306,507.38 $ 322,648.75 $ 339,597.19 $ 357,393.05


Depreciation $ 62,832.00 $ 62,832.00 $ 62,832.00 $ 62,832.00 $ 62,832.00

EBIT $ 127,908.25 $ 140,175.38 $ 156,316.75 $ 266,765.19 $ 284,561.05

Taxes $ - $ - $ - $ - $ -


Net Income $ 155,210.25 $ 167,204.36 $ 183,072.71 $ 293,248.13 $ 310,770.97


19


Revenue $ 639,176.13 $ 671,134.94 $ 704,691.68 $ 739,926.27 $ 776,922.58


Gross Profit $ 622,856.13 $ 654,814.94 $ 688,371.68 $ 723,606.27 $ 760,602.58


Depreciation $ 10,000.00 $ 10,000.00 $ 10,000.00 $ 10,000.00 $ 10,000.00

EBIT $ 550,024.13 $ 581,982.94 $ 615,539.68 $ 673,161.91 $ 687,770.58

Taxes $ 215,438.89 $ 235,606.67 $ 240,719.70 $ 254,315.85 $ 268,591.80


Net Income $ 357,791.94 $ 369,309.95 $ 397,480.64 $ 441,233.70 $ 441,293.40


$ 815,768.71 $ 856,557.15 $ 899,385.00 $ 944,354.25 $ 991,571.97

$ 16,320.00 $ 16,320.00 $ 16,320.00 $ 16,320.00 $ 16,320.00

$ 799,448.71 $ 840,237.15 $ 883,065.00 $ 928,034.25 $ 975,251.97

$ 10,000.00 $ 10,000.00 $ 10,000.00 $ 10,000.00 $ 10,000.00

$ 62,832.00 $ 62,832.00 $ 62,832.00 $ 62,832.00 $ 62,832.00

$ 726,616.71 $ 767,405.15 $ 810,233.00 $ 855,202.25 $ 902,419.97

$ 283,581.55 $ 299,320.79 $ 315,846.99 $ 315,846.99 $ 315,846.99

$ 21,841.60 $ 21,568.58 $ 21,295.56 $ 21,022.54 $ 20,749.52

$ 464,876.76 $ 489,652.94 $ 515,681.57 $ 560,377.80 $ 607,322.50

Revenue

Variable Costs (maintenance)

Gross Profit

Fixed Costs (Tri-Solar services fee)

Depreciation

EBIT

Taxes

Income From RECs (Non Taxable)

Net Income


20

SPV Pro Forma Balance Sheet


Assets

Cash $256,000.00 $ 256,000.00 $ 256,000.00

Current Assets $2,244,000.00 $2,244,000.00 $2,244,000.00

Total Assets $2,500,000.00 $2,500,000.00 $2,500,000.00

Liabilities $ - $ - $ -

Total Liabilities $ - $ - $ -

Equity

Owner's Equity 2,500,000.00 $2,500,000.00 $2,500,000.00

Total Equity 2,500,000.00 $2,500,000.00 $2,500,000.00

Total Equity and Liabilities $2,500,000.00 $2,500,000.00 $2,500,000.00

SPV Statement of Cash Flows


Operating Cash Flows

Cash from Sales $ 294,240.25 $ 306,507.38 $ 322,648.75

Maintenance on Panels $ 16,320.00 $ 16,320.00 $ 16,320.00

Tax Payments (Deferred) $ - $ - $ -

Net Operating Cash Flows $ 184,420.25 $ 196,687.38 $ 212,828.75

Investing Cash Flows

Purchase of Installation $ (2,500,000.00) $ - $ -

Net Investing Cash Flows $ (2,500,000.00) $ - $ -


21

Financing Cash Flows

Cash Received from Equity $ 2,500,000.00 $ - $ -

Legal Fees $ 10,000.00 $ - $ -

Dividends Paid $ 3,104.21 $ 3,344.09 $ 3,661.45

Net Financing Cash Flows $ 2,500,000.00 $ - $ -

Statement of Capital (1/50) Year 1 Year 2 Year 3 Year 4 Year 5

Rita Hernandez, capital $ 50,000.00 $ 50,000.00 $ 50,000.00 $ 50,000.00 $ 50,000.00

Net Income $ 3,104.21 $ 3,344.09 $ 3,661.45 $ 5,864.96 $ 6,215.42

Total Withdrawals $ 3,104.21 $ 3,344.09 $ 3,661.45 $ 5,864.96 $ 6,215.42

Rita Hernandez, capital $ 50,000.00 $ 50,000.00 $ 50,000.00 $ 50,000.00 $ 50,000.00


22

Wire Frame of Tri-Solar Investor Page

Rita Hernandez' Portal

(logout)

Tracking generation, carbon offset and earnings for Rita Hernandez' solar security

Total investment: $50,000

Date of investment: May 1, 2010

Current date: April 30, 2011

Ownership share: 13.5 kW in a 680 kW system

Location: 2111 Mission St., Santa Cruz, CA

Total kW hours generated to date: 27101.25

Total revenues earned to date: $3,301.21

Total carbon emissions offset: 14201.055 lbs

TRI-SOLAR Third Party Solutions

[email protected]


23

Resume Patrick William Elliott Johnston Current Address: 416 Clinton St., Santa Cruz CA, 95062 Home phone: (831) 423-4108 cell phone: (831) 239-7447 Email: [email protected]

Education

University of California Santa Cruz. Will graduate with a degree in Business Management

Economics (BME). I expect to graduate in the June of 2009 with a GPA of 3.3 and a GPA in my major of

3.6. Experience with information systems, accounting, quantitative analysis, economics, and managerial

decision making. Career goals in the field of business, policy, renewable energy, and innovative

technology.

Work Experience

July 2008- Present

Economic Development Analyst and Project Lead for the Santa Cruz Design and Innovation

Center (SCD+IC). Project was to identify and analyze the scope of the Santa Cruz design industry which

includes but is not limited to product, web, digital media, industrial and architectural design. Also give an

assessment of the educational resources available to designers and business owners in Santa Cruz.

Tasks were to manage the project, write the business survey, analyze and interpret the data and produce

a report: Industry Sector Identification Study (63 pp; available on request). The report gave

recommendations for business incubator services. I also worked in public relations and convinced the

local newspaper to write a front page story on the Santa Cruz Design + Innovation Center. Competency

in survey methodology, Excel, research writing,event coordination, and public relations.

Employer: Matt Guerrieri

Phone: (831) 252-5220 Email: [email protected]

Office Manager and Tour Guide. Worked at Venture Quest an ocean kayak rental business.

Competency in customer relations, guided tours, accounting and business organization.

Employer: Dave Johnston Phone: (831) 427-2267 Summers: 2007/2008

Entrepreneur. Helped start a wind turbine company in Mexico. Purchased turbine parts, hired

labor, and assembled a 20 Kw turbine for a restaurant. Fluency in Spanish.

Employer: John Elliott Email: [email protected]

Documents

Tri-Solar Business Plan - Wikispaces - socy115socy115.wikispaces.com/file/view/Tri-Solar+PDF1.pdf · Tri-Solar Business Plan 2009 3 Executive Summary Products and/or Services Tri-Solar