		Project Finance Advisory Services Techniques for Maximizing Sale Price *Capital Technology, Inc. (CTI)*
For decision makers: Considerations in selecting a Project Finance Advisor Advisory "Firsts"		Why sell a project that's performing satisfactorily? It's not unusual for individual project interests to change hands several times during a project's useful life. The reasons can range from a shift in the owner's strategy, to the simple need to raise capital. The purchasing entity may have a lower cost of capital than the seller's, making the same stream of cash flows more valuable to the purchaser than to the seller. Whatever the reasons for selling, CTI has been highly effective at assisting project owners to value their holdings and package them for maximum investor appeal. Over time, CTI has gotten to know the major investors and has repeatedly demonstrated its skill at managing the sale process to a successful, timely closing, in most cases at a significant premium over the price CTI's client had originally expected. Secrets to maximizing sale price Most energy projects have multiple owners. Often, these include not only the original developer, but also the turnkey contractor and operator or fuel supplier who may have been encouraged to invest in the project to win the bid. Institutional investors may also purchase an ownership interest for their own account, either during or after construction. Changing strategies or a depressed stock market can make the sale of a project or project portfolio an attractive alternative for raising capital. Next to the decision to sell, a project owner's most important decision is often whether to retain a professional advisor like CTI to handle the sale. Here is how retaining an advisor can help a company to maximize sale price: An advisor knows the investors - A common mistake made by sellers is believing that simply knowing the names of prospective investors is enough. In fact, most investors vary widely in their strategies, technological and risk preferences, as well as their accounting and tax constraints. They will disclose these to an advisor they trust, but will seldom open up to developers or other investors, whom they may view as competitors. Ensuring the best sale price requires cultivating a wide range of these specialized investors. CTI goes a step further, by compiling detailed written profiles on each, and noting how they actually behave during bidding. This is extremely useful for predicting which investors will bid, and how far they will stretch during negotiations. When time is of the essence, CTI's profiles enable it to rifle-shot a project interest to only those investors CTI knows will be serious contenders. An advisor can help you accurately value your project - A thorough evaluation of your project, done in close conjunction with your staff, is critical to identifying both its inherent value and its improvement potential in the hands of a new owner. CTI has valued scores of power projects involving a variety of fuels and technologies, employing sophisticated valuation tools to streamline the valuation process. CTI enlists professionals with extensive financial, technical and commercial skills, most with a minimum of 20 years experience, to conduct these complex valuation analyses (see CTI Resources). An advisor can package your project for maximum investor appeal - A well-written private placement memorandum makes it possible for investors to grasp even the most complex and unique project features quickly. Busy investors appreciate this, as they are often able to excerpt sections for use in their internal credit writeups. Concise, compelling marketing materials are one reason CTI has consistently been able to meet the very aggressive time schedules typically set for selling a project. Through repeated interactions with investors, CTI has extensive experience custom-tailoring transaction marketing materials to investors' needs, enabling it to maximize advantages to its client during the bidding process. A professional advisor is often better-equipped to manage the bid process - There are several reasons for this. First, a company's senior management and staff may be "too close" to one or more investors to avoid giving them preferential treatment. An advisor can assure all investors that their bids will be objectively evaluated, thus motivating each to put forth its best efforts. Second, there is no substitute for being in the market on a regular basis, something most project owners are unable to do because of the intensive operating demands of their businesses. A thorough familiarity with investors' behavior patterns enables a professional advisor like CTI to maintain control over the bid submission and evaluation stages, while providing the seller with the highest price the market has to offer. Examples of past CTI-managed project sales US landfill gas asset sale - completed the sale of a U.S. project owner's equity in a 5.0 megawatt PURPA project located in New York State. The winning bid, from an investor introduced by CTI, was substantially higher than the company had been able to attract on its own. See Al Turi Press Release. UK project sale - With a London-based investment bank, co-advised on the sale of a U.K. developer's equity in a 14.5 megawatt portfolio of five operating projects in England and Scotland. The winning bid, from a U.S. investor introduced by CTI, was over twice as high as the highest previous informal offer received by the client. The investor also formed an operations and maintenance joint venture with CTI's client and committed, subject to certain conditions, to purchase 100% of the equity in the client's next 24 NFFO 5 and SRO 3 projects once they are operational. These projects, now in various stages of development, were awarded to CTI's client in the fifth round of the U.K. Government's program to encourage the development of renewable energy projects. Total equity transaction size once all the projects have been purchased will be approximately U.S. $40 million. See CLP Press Release. UK project sale II - in early 2001, CTI's UK client sold another four projects to the investor introduced by CTI a year earlier. See CLP II Press Release. Asset sale - For Dow Chemical USA, led the team that negotiated the sale to Apache Corporation of Dow USA's Oil and Gas Division (600 wells, 14 states, 6000+ leases) for $90 million in cash and an estimated $550 million in deferred consideration. Transaction objective was to generate cash and book profits for Dow while preserving Dow’s first right to purchase oil and gas from the transferred properties. Structure featured three new limited partnerships to hold the transferred oil and gas properties, a $150 million development drilling fund to enable Dow to pay Apache the difference between what Dow’s gas was worth at market prices and the default pricing allowed by the Federal Government at the time for categories of gas not previously under contract, and a special leasehold contingency reserve. Equity remarketings - For Combustion Engineering, successfully remarketed the first culm-fired circulating fluidized bed power project partnership interest to secondary market institutional lease equity investors using a "step-up" income technique designed to accelerate profit from C-E's investments. Subsequently assisted C-E to remarket 11 other interests to institutional and unregulated utility affiliates at a profit. Subordinated debt structuring/placement - For Trust Company of the West, worked with James Greene & Associates as exclusive advisor on the purchase of four CTI-restructured subordinated debt issues in a $160 million waste coal project in western Pennsylvania. Sellers included Goldman Sachs, Bechtel, ABB and Pyropower U.S.A. Utility system sale - For the Ministry of Electricity and Water of the Sultanate of Oman, advised on the sale of the generation, transmission and distribution assets that comprised the country's southern region electric utility system. Assembled a team of financial and technical experts who worked with the law firm of Curtis Mallet-Prevost, Colt & Mosle to revise the bid package previously prepared by another consultant. Changes included specifying technical and supply standards, revising payment formulas to facilitate project financing, and designing incentives for the new owner to encourage fuel efficiency, reductions in system losses and improved receivables collections. CTI is a leading advisor in the under-$100 million project divestitures market. Let us show you how we would approach selling your company's project Member, National Association of Securities Dealers (NASD) and the Securities Investor Protection Corporation (SIPC) David R. Siever, Chairman, Capital Technology, Inc. 46 Tory Hill Lane, Rowayton, CT 06853 203-853-0220 Fax: 203-853-0535 e-mail: drsiever@optonline.net www.capital-technology.com

Project Finance Advisory Services

Techniques for Maximizing Sale Price

Capital Technology, Inc. (CTI)

For decision makers: Considerations in selecting a Project Finance Advisor

Advisory "Firsts"

Why sell a project that's performing satisfactorily?

It's not unusual for individual project interests to change hands several times during a project's useful life. The reasons can range from a shift in the owner's strategy, to the simple need to raise capital. The purchasing entity may have a lower cost of capital than the seller's, making the same stream of cash flows more valuable to the purchaser than to the seller.

Whatever the reasons for selling, CTI has been highly effective at assisting project owners to value their holdings and package them for maximum investor appeal. Over time, CTI has gotten to know the major investors and has repeatedly demonstrated its skill at managing the sale process to a successful, timely closing, in most cases at a significant premium over the price CTI's client had originally expected.

Secrets to maximizing sale price

Most energy projects have multiple owners. Often, these include not only the original developer, but also the turnkey contractor and operator or fuel supplier who may have been encouraged to invest in the project to win the bid. Institutional investors may also purchase an ownership interest for their own account, either during or after construction. Changing strategies or a depressed stock market can make the sale of a project or project portfolio an attractive alternative for raising capital.

Next to the decision to sell, a project owner's most important decision is often whether to retain a professional advisor like CTI to handle the sale. Here is how retaining an advisor can help a company to maximize sale price:

An advisor knows the investors - A common mistake made by sellers is believing that simply knowing the names of prospective investors is enough. In fact, most investors vary widely in their strategies, technological and risk preferences, as well as their accounting and tax constraints. They will disclose these to an advisor they trust, but will seldom open up to developers or other investors, whom they may view as competitors. Ensuring the best sale price requires cultivating a wide range of these specialized investors.

CTI goes a step further, by compiling detailed written profiles on each, and noting how they actually behave during bidding. This is extremely useful for predicting which investors will bid, and how far they will stretch during negotiations. When time is of the essence, CTI's profiles enable it to rifle-shot a project interest to only those investors CTI knows will be serious contenders.

An advisor can help you accurately value your project - A thorough evaluation of your project, done in close conjunction with your staff, is critical to identifying both its inherent value and its improvement potential in the hands of a new owner.

CTI has valued scores of power projects involving a variety of fuels and technologies, employing sophisticated valuation tools to streamline the valuation process. CTI enlists professionals with extensive financial, technical and commercial skills, most with a minimum of 20 years experience, to conduct these complex valuation analyses (see CTI Resources).

An advisor can package your project for maximum investor appeal - A well-written private placement memorandum makes it possible for investors to grasp even the most complex and unique project features quickly. Busy investors appreciate this, as they are often able to excerpt sections for use in their internal credit writeups.

Concise, compelling marketing materials are one reason CTI has consistently been able to meet the very aggressive time schedules typically set for selling a project. Through repeated interactions with investors, CTI has extensive experience custom-tailoring transaction marketing materials to investors' needs, enabling it to maximize advantages to its client during the bidding process.

A professional advisor is often better-equipped to manage the bid process - There are several reasons for this. First, a company's senior management and staff may be "too close" to one or more investors to avoid giving them preferential treatment. An advisor can assure all investors that their bids will be objectively evaluated, thus motivating each to put forth its best efforts. Second, there is no substitute for being in the market on a regular basis, something most project owners are unable to do because of the intensive operating demands of their businesses.

A thorough familiarity with investors' behavior patterns enables a professional advisor like CTI to maintain control over the bid submission and evaluation stages, while providing the seller with the highest price the market has to offer.

Examples of past CTI-managed project sales
US landfill gas asset sale - completed the sale of a U.S. project owner's equity in a 5.0 megawatt PURPA project located in New York State. The winning bid, from an investor introduced by CTI, was substantially higher than the company had been able to attract on its own. See Al Turi Press Release.
UK project sale - With a London-based investment bank, co-advised on the sale of a U.K. developer's equity in a 14.5 megawatt portfolio of five operating projects in England and Scotland. The winning bid, from a U.S. investor introduced by CTI, was over twice as high as the highest previous informal offer received by the client. The investor also formed an operations and maintenance joint venture with CTI's client and committed, subject to certain conditions, to purchase 100% of the equity in the client's next 24 NFFO 5 and SRO 3 projects once they are operational. These projects, now in various stages of development, were awarded to CTI's client in the fifth round of the U.K. Government's program to encourage the development of renewable energy projects. Total equity transaction size once all the projects have been purchased will be approximately U.S. $40 million. See CLP Press Release.
UK project sale II - in early 2001, CTI's UK client sold another four projects to the investor introduced by CTI a year earlier. See CLP II Press Release.
Asset sale - For Dow Chemical USA, led the team that negotiated the sale to Apache Corporation of Dow USA's Oil and Gas Division (600 wells, 14 states, 6000+ leases) for $90 million in cash and an estimated $550 million in deferred consideration. Transaction objective was to generate cash and book profits for Dow while preserving Dow’s first right to purchase oil and gas from the transferred properties. Structure featured three new limited partnerships to hold the transferred oil and gas properties, a $150 million development drilling fund to enable Dow to pay Apache the difference between what Dow’s gas was worth at market prices and the default pricing allowed by the Federal Government at the time for categories of gas not previously under contract, and a special leasehold contingency reserve.
Equity remarketings - For Combustion Engineering, successfully remarketed the first culm-fired circulating fluidized bed power project partnership interest to secondary market institutional lease equity investors using a "step-up" income technique designed to accelerate profit from C-E's investments. Subsequently assisted C-E to remarket 11 other interests to institutional and unregulated utility affiliates at a profit.
Subordinated debt structuring/placement - For Trust Company of the West, worked with James Greene & Associates as exclusive advisor on the purchase of four CTI-restructured subordinated debt issues in a $160 million waste coal project in western Pennsylvania. Sellers included Goldman Sachs, Bechtel, ABB and Pyropower U.S.A.
Utility system sale - For the Ministry of Electricity and Water of the Sultanate of Oman, advised on the sale of the generation, transmission and distribution assets that comprised the country's southern region electric utility system. Assembled a team of financial and technical experts who worked with the law firm of Curtis Mallet-Prevost, Colt & Mosle to revise the bid package previously prepared by another consultant. Changes included specifying technical and supply standards, revising payment formulas to facilitate project financing, and designing incentives for the new owner to encourage fuel efficiency, reductions in system losses and improved receivables collections.

CTI is a leading advisor in the under-$100 million project divestitures market. Let us show you how we would approach selling your company's project

Member, National Association of Securities Dealers (NASD) and the Securities Investor Protection Corporation (SIPC)

David R. Siever, Chairman, Capital Technology, Inc. 46 Tory Hill Lane, Rowayton, CT 06853 203-853-0220 Fax: 203-853-0535 e-mail: drsiever@optonline.net www.capital-technology.com