Clean Energy BC 2010Panel 2, Financing Getting It Done: Market Observations

David and Goliath

The power development business has been impacted by the following market forces

—Unequal Cost of Capital

—Increasing Dilution in Share issuance

—Divergent Share Price Performance of Various Developers

—Industry Consolidation

2

Developer Comparison

Tier 1 Tier 2 Tier 3Characteristics

• Predominantly operating assets

• Minimal development activities relative to operating portfolio

• Focus on acquisitions

• Large market capitalization companies

• Mix of operating and development assets

• Operating cash flow sufficient to fund overhead and some development

• Focus on acquisitions and development

• Mid-market capitalization companies

• Predominantly development assets

• Operating cash flow insufficient to fund development activities

• Focus on development activities

• Small capitalization companies

Strengths • Access to lowest cost capital

• Large balance sheet

• Substantial ongoing operating cashflows

• Balance sheet size can meet most minimum project bid criteria

• Operating assets provide cashflow

• Development provides a growth upside

• Strong management focus on development

• Development provides extremely high growth upside

Weakness • Less management focus on development

• Scale generally provides investors with relatively less exposure to growth

• Still dependent on development pipeline

• Development projects tend to drag cashflow and earnings metrics

• Yield primarily drives the share value

• Higher cost of capital due to high risk perception

• Lack of size may also require partnerships

• Highly dependent on the success of each individual project in the pipeline

3

Cost of Capital

Cost of Capital Is Not Created Equally

Levered Cost of Capital

Source: Bloomberg

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Brook

field

Renew

able

Capita

l Pow

er

Tran

sAlta

Tran

sCan

ada

Algonq

uin

Borale

x Inc

Fort

Chica

go

Inne

rgex

North

land

Fina

vera

Nevad

a Geo

ther

mal

Pluton

ic

US Geo

ther

mal

Run o

f Rive

r Pow

er

9.53% 10.78%

18.10%Tier Avg:

Tier Avg:

Tier Avg:

4

Increasing Dilution

Large IPPs are able to access capital at lower new issue discounts compared to mid-tier and smaller developers.

Issuer DiscountMedian Issue Size ($mm)

Tier 1 4.6% $190

Tier 2 5.0% $46

Tier 3 8.3% $14

Two-Year Historical Equity Raise Summary Details

Source: Company filings

5

Share Price Performance

0

20

40

60

80

100

120

140

J un-07 Sep-07 Dec-07 Mar-08 J un-08 Sep-08 Dec-08 Mar-09 J un-09 Sep-09 Dec-09 Mar-10 J un-10 Sep-10

TIER 1 TIER 2 TIER 3

Tier 1 Share Prices Have Outperformed Since Mid-2007

6

Share Price Performance

Tier 3 Share Prices Have Lagged in 2010

60

70

80

90

100

110

120

130

140

J an-10 Mar-10 May-10 J ul-10 Sep-10 Nov-10

TIER 1 TIER 2 TIER 3

7

Consolidation Continues

Target Aquirer DateFort Chicago Energy Partners LP

Pristine Power (announced)September 22, 2010

Fort Chicago Energy Partners LP

Enmax Energy’s BC AssetsSeptember 9, 2010

Ram Power Corp.Sierra Geothermal Power Corp

September 3, 2010

Fort Chicago Energy Partners LP

Swift Power June 22, 2010

Boralex Inc Boralex Power Income Fund May 5, 2010

Innergex Renewable Energy Inc

Innergex Power Income Fund

February 2, 2010

Ram Power CorpPolaris Geothermal Inc and Western Geopower Corp.

November 21, 2010

Northland Power Income Fund

Northland Inc. July 16, 2009

Emera Inc. 9.9% stake in Algonquin Power Income Fund

April 23, 20098

Summary

Access to Capital

—All developers require access to capital

—Larger developers have more options to raise capital with access to equity, bank and bond markets

—Smaller developers are more reliant on investor appetite for development capital due to absence of operating cash flows

Unequal Cost of Capital

—Larger developers have a lower cost of capital reflective of higher proportion of operating assets

Increasing Dilution

—Larger companies have lower new issue discounts hence cheaper capitalDivergent Share Price Performance

—Since 2007, larger developers have outperformed smaller developers reflecting investors’ reduced appetite for risk

Consolidation Continues

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