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November 2005
Introduction to:
Kaheawa Wind Power, LLCMaui, Hawaii
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A Convergence of Events
Maui’s First Large Scale Wind Power Project
Robust WindResource
HighPricedEnergy
StrongPoliticalSupport
ProvenTechnology
Local Knowledge
Makani Nui
Industry Expertise
UPC
Hard Assets
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The Environment(For Wind Power)
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Global Market of 39,294 MW installed capacity (12/31/03).Equivalent to 26,000 1.5 MW wind turbine generators.
Worldwide Wind CapacityDecember 2003Country Installed MWGermany 14,609United States 6,374Spain 6,202Denmark 3,110India 2,110Netherlands 912Italy 904Japan 686United Kingdom 649China 568
Worldwide Installed Wind CapacityGlobal Wind Power Capacity
6,2587,669
9,800
13,500
17,300
23,800
31,100
39,294
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
1996 1997 1998 1999 2000 2001 2002 2003
InstalledCapacity(MW)
30%CAGR
Source: AWEA
Wind Power Market Overview
Wind Power Has Become a Viable andEconomic Power Generation Alternative
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Wind Power Market Overview
Wind Power is Less Than 1% of US Total ProductionSource: AWEA
Wind Energy ProjectsThroughout the United States of America
TOTAL INSTALLED U.S. WIND ENERGY CAPACITY: 6,740 MW as of Jan 24, 2005
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Government support through recently passedRenewable Portfolio Standards.
HECO/MECO now actively support renewable projectsso that they can meet RPS goals.
QHTB investment incentives for individuals to invest inrenewable energy projects.
State Government Support
7% by December 31, 20038% by December 31, 200510% by December 31, 201015% by December 31, 201520% by December 31, 2020
HI State RPS Requirements
Governor Lingle has provided the target!
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Advanced Technology
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Technology Innovations: Machine size, reliability and efficiencyhave increased dramatically over the past 20 years.
Proven Technology: GE has over 2,400 1.5 MW machines inoperation worldwide with an average availability over 98%.
Advancements in Technology
Including Hawaii’sAttempts at CommercialWind power
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Advanced Technology
Variable Speed ControlGE technology features unique variable speed controltechnology to maximize energy capture from the wind andminimize turbine drive train loads. Through its advancedelectronics, the GE wind turbine’s control system continuallyadjusts the wind turbine’s blade pitch angle to enable it toachieve optimum rotational speed and maximum lift-to-drag ateach wind speed. This “variable speed” operation maximizes theturbine’s ability to remain at the highest level efficiency.
Unique Wind Volt-Amp-Reactive (“WindVAR”) TechnologyGE’s unique dynamic power conversion system with optionalWindVAR control provides support and control to local gridvoltage, improving transmission efficiencies and providing theutility grid with reactive power (VARs), increasing grid stability.
Low Voltage Ride-Thru TechnologyGE has just taken wind power electronics to the next level ofperformance. Wind turbines can now, for the first time, remainonline and feed reactive power to the electric grid right throughmajor system disturbances.
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Advanced Technology
The 1.5 MW machine is active yaw and pitch regulated withpower/torque control capability and an asynchronousgenerator. It uses a bedplate drive train design where allnacelle components are joined on a common structure,providing exceptional durability. The generator and gearboxare supported by elastomeric elements to minimize noiseemissions.
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Power Generation
Power Generation begins at approximately 8 mph
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Kaheawa Pastures
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Kaheawa Pastures History
The project was first proposed in 1996. Over the yearsseveral companies have been involved in thedevelopment of this renewable energy concept forMaui.
Zond Pacific and Enron Wind
GE Wind Energy
Hawi Renewable Development (HRD)
An Environmental Impact Statement was completedand approved in 1999.
A Conservation District Use Application was approvedby the Board of Land and Natural Resources in January2003.
Kaheawa Wind Power, LLC began development in Julyof 2004.
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Project Description
The “Kaheawa Pastures” project is a commercial scalerenewable energy project. It includes the design,engineering, construction and operations of a 30 MWrenewable wind energy generation facility.
The project will consist of 20 wind turbines arranged in asingle row, an operations & maintenance building,communications system, substation, and aninterconnection to MECO’s transmission lines.
The project includes the construction of a 5 mile accessroad over difficult terrain. Average slope of access roadand project site is 14 degrees.
The turbines are located at the 1900 – 3000 foot level,well away from the central population areas.
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Project Location
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Site Layout & Access
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Robust Wind Resource
Project Site
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KWP Project Site
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Project Sponsors
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The project is being developed and sponsored by UPC WindPartners, LLC and Makani Nui Associates, LLC.
UPC Wind Partners is the US expansion of a leading wind powerdeveloper.
Built, own and operate approximately 640 MW of wind projects
Raised over $900 million in non-recourse project finance debt
Actively developing a further 1,500 MW of wind projects inNorth America
Makani Nui was formed by Kent Smith and Hilton Unemori on Maui.
Kent Smith leads Smith Development a Maui based respectedreal-estate development company.
Hilton Unemori heads ECM, Inc. a Maui-based electricalengineering consultancy.
The Sponsors have entered a state-wide joint developmentagreement to bring subsequent wind projects throughout Hawaii.
Management Team
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UPC Has Raised Over $900Million in Connection with637 MW of Operating Wind
Projects
Non-Recourse Project Finance Facilities
For 165.75 MW
Italian Green Certificate Wind Farm Projects
(Project Sponsor)
The Undersigned acted as financial advisers to the Borrowersand Structured the Facilities
This Announcement appears as a matter of record only
€ 170,000,000
December 2003
ENERGY FINANCEADVISORSENERGY FINANCEADVISORS
Non-Recourse Project Finance Facilities
For 165.75 MW
Italian Green Certificate Wind Farm Projects
(Project Sponsor)
The Undersigned acted as financial advisers to the Borrowersand Structured the Facilities
This Announcement appears as a matter of record only
€ 170,000,000
December 2003
ENERGY FINANCEADVISORSENERGY FINANCEADVISORS
UPC Wind Projects
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Power Pricing
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Size: 206 MW total installed capacity at 12/31/03.
Fuel Mix: Maui highly dependent upon petroleum based fuel.
Expensive Maui Power
Replacing 9% of MECO Load with Clean Renewable In-State Generation at a Discount to Current Market Rates
Sugar CaneWaste
7%
93%
2003Production
Petroleum
9%
6%
85%
KaheawaWind
Projected2006 Production
Petroleum
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Oil Price Correlation
Note: There is a correlation between Avoided Cost and theprice of crude, and the trend is up! What price in the future?
No hedge on future prices!No hedge on future prices!
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Innovative Power Pricing
HECO/MECO and KWP have arrived at an innovative pricingagreement, providing benefits to all parties.
Avoided Costs pricing option (currently about $0.14/kWh)
For HECO/MECO, not desirable because of current high price
For KWP, maximizes revenue, but debt financing costs more.
Fixed Price pricing option
For HECO/MECO, not desirable unless it is very low.
For KWP, lowers revenue, but is best for securing financing.
Solution:
A hybrid pricing agreement utilizing both Avoided Cost and fixedcost pricing.
Result:
Immediate benefit to HECO/MECO of approximately 40% vs.straight Avoided Costs.
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Derived Benefits
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Some Economic Benefits
Revenue to the State from lease payments on theproject site (percent of gross revenue).
Local jobs; during design, development, constructionand operations.
Improved balance of trade, reducing imports of oil byapproximately $10 million annually.1
KWP has offered local banks senior project debt, and isproud to announce that CPB has joined the syndication,thereby keeping the dollars circulating in our state.
Current price of energy offered to the utility isapproximately 40% below current avoided costs.
Pricing agreement is a hedge against raising crudeprices now and in the future, reducing volatility forconsumers.
1. At $41 per barrel.1. At $41 per barrel.
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Benefits for Hawaii/Maui
Direct short term economic activity of $18.1M including:$17M in site constructing contracts and services.$1.1M in state excise tax revenues.
Direct long term economic activity in excess of $100Mincluding:
Estimated $7M of lease revenue for land use.$3.8M in job-related income (plus the income taxrevenues)$1.9M of property taxes (0.2% per year over 25 yrs.)$76.6M in imported fuel costs savings (based on oil at$30/barrel)$13.4M in ratepayer savings (based on 3.5%/yearincrease in MECO’s avoided costs)
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Some Environment Benefits
The project can generate enough renewable energy topower approximately 11,0001 average Maui homes.
Importantly, the project will eliminate the use of 244,000barrels of oil annually, and thereby help reduce the State’sdependence on imported oil.
Some of the air emissions eliminated in our state as abenefit of this project not burning fossil fuels
Source: 1. Hawaii Electric web site, 7/04Source: 1. Hawaii Electric web site, 7/04
2. lbs/year, American Wind Energy Association2. lbs/year, American Wind Energy Association
321,2261,242,581177,645,442
Nitrogen Oxides2Sulfur Dioxide2Carbon Dioxide2
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Significant Tangible andIntangible Benefits for Hawaii
Tangible BenefitsPrimarily measured economically andenvironmentally, but with a tremendous humanimpact
Currently hard to quantify, but fewer emissions resultin fewer health problems
Intangible Benefits
Pride in our progress toward creating and utilizingclean energy sources
Satisfaction in improving our environmental legacy forfuture generations
Utilizing our technological progress for the benefit ofour society
Improving our national security and energyindependence
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Conclusions
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Barriers to Entry
There are still significant hurdles to overcome for renewableenergy projects in Hawaii
Siting: anti development, cultural and land use issues
Economically, Hawaii projects are too large for a smallcompany and too small for a large company.
Some utility resistance to Independent Power Producers,stringent interconnect requirements which results in highcosts and longer lead times.
Extensive government agency involvement, which increasescosts and lead times.
Difficult and costly logistics for transportation, challenging andexpensive access to site.
In short, the issue of project size, location, expensivedevelopment and construction create barriers that makeHawaii projects less desirable when compared to others.
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And the Good News is:
The State of Hawaii has excellent dynamics for smallto mid-sized commercial wind farms
High power prices (relatively)Excellent wind resourceTechnology advancesGovernment support
Community support for Renewable Energy is strongSuccessful development does require an experiencedand determined sponsor group with adequate financialstrength to bring a project to fruition
Conclusions
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Mahalo!