Business Case DG-1

Project number: Date of submittal: Country:

DEVLPL07502 02/01/2008 POLAND
BC Name: BIO-TH SWAC
Golczewo BIO-DIG WOL X
Author: PV WOS
Radosław Koćwin Real Est En Infra
Location / Region: Project Size (MW): 24
Golczewo

1. Project description
Project:
Location: project Golczewo is located on the North from Golczewo city in Zachodniopomorskie vovoidship;
estimated size of wind park is planned for 24MW from 12, 2MW wind turbines;

Satalite map of Golczewo location with Wind Turbines locations:

Business Case v2 9-11-2007 page 1 of 14

 Project:
- Value drivers in this location are:
o One of the best areas for wind power generation in Poland, average wind speed
about 6,5-7,5 m/s,
o grid application process in progress,
o one of the very last areas available for wind development in Northern Poland;
- General Market situation:
o Wind energy production in Poland rapidly grows. In 2004 142,3GWh was produced
with wind, in 2006 it was 245,5GWh. Still it was just 0,16% of total energy production
in Poland; according to the plans in 2010 there should be 2,3% coming from wind
energy of the total consumption (7,5% renewable energy in years 2010-2014);
o local energy utilities are obliged to buy all renewable electricity produced on its
distribution area (the green certificate which follows the produced energy, depending
on the contract between to parties can be sold together or on the Polish Power
Exchange to anybody), energy produced by a wind farm has to be bought at the
market price which right now is rapidly growing – approx. 185PLN per MW/h plus the
amount you can get from green certificates which is always close to 240PLN per
MW/h – the so called buy out price which you have to pay to fulfil your obligation
regarding the percentage of green energy bought each year; Total income is
therefore approx 425 PLN/MWh (=~ 110 euro/MWh)
o In 2008 in Poland starts a new EU found programme called The Operational
Programme Infrastructure and Environment. For years 2007-2013 the total amount of
subsidy will reach 37,6 bilion EUR (27,9 bilion from UE and 9,7 bilion from polish
government). The percentage of the subsidy to the total amount of investment,
possible to obtain is not known yet but for wind parks subsidy only apply to those in
which to total amount of investment exceed 20milion PLN. Development applications
should be ready in February 2008. The responsible organization for the
implementation of this programme is The Ministry of Regional Development (more
information will be available in February 2008. For now is difficult to say if we are
already entitled on this stage of our projects to apply for this subsidy so we have not
taken this subsidy into account in the feasibility calculations..
- Off taker of electricity will be one of the energy operators in this case – Enea. The seller of
green energy will have to sign a contract with the Energy Company and energy will be sold on

Business Case v2 9-11-2007 page 2 of 14

 at the current market price. Certificates of origin are registered on the Polish Power Exchange
which is responsible for their managing and trade.

Map of energy operators in Poland.

2. Position
2.1. Land position / concession
Project:
- Project will be based on land lease agreement with the land owners. Land lease agreements
have been signed for a total area of 180 ha, sufficient to install approximately 12 turbines in the
2-3 MW range (we will also try to rent the lands in neighbourhood which seems to be feasible
for wind park development).
- the price for this location is 22 000PLN per turbine per year and a lease contract has been
signed for 25 years; in this case all land lease agreements are signed with one Landlord
- land situation in Poland is very specific because usually plots that belong to farmers are very
small in general however the price paid for a land lease contract is still relatively small,
reaching 50-60k PLN per turbine in the most attractive areas.
- At this moment we do not find competition from the other wind farm devlopers in mentioned
location;
Denker and Wulf who was interested in cooperation with our company, and who brought this l
ocation to our attention, is no longer active in the project so we can assume they are not interested
anymore. Moreover the project they proposed to us proved to be without any value so the do not
have a strong legal case to make any claims regarding this project.

Business Case v2 9-11-2007 page 3 of 14

 2.2. Political position
General:
Policy:
Position of local and regional political authority is based on polish government plans which state
that sustainable energy sources should increase to 7,5% until 2010 and 14% until 2020 and wind
energy is one of the most promising sources to fullfill this obligation.

The quota obligation is fulfilled by a obligee if the share of RES-E in the overall electricity sales to
end-users amounts to not less than:
- 3.6% in 2006,
- 5.1% in 2007,
- 7.0% in 2008,
- 8.7% in 2009,
- 10.4% in 2010-2014
- 15% in 2020.

Tarrifs:
In Poland the main support system for renewable energy is based on quota obligation applied to all
sellers of electricity to end users on the territory of Poland. The support scheme uses green
certificates which are originating from the guarantees of origin issued by the President of the
Energy Regulatory Office (see official website). The Guarantee of Origin is a document, issued for
the whole RES-E production over a certain period. Green certificates are issued on the basis of
Guarantees of Origin for every 1 kWh of production . The green certificates become valid at the
moment of recording the Guarantees of Origin on the recording account of the entity that is entitled
to them. The number of green certificates corresponds to the energy volume specified in a certain
Guarantee of Origin. The green certificates have unlimited duration, they expire only when the
Guarantee of Origin has been redeemed. The Guarantee of Origin may be redeemed fully or
partially. The redemption of the Guarantee of Origin causes the expiry of all or a part of underlying
green certificates. The current Polish energy legislation policy foresees the duration of the quota
obligation support scheme till 2014.

Aspects related to the Guarantees of Origin and green certificates are regulated by the amended
Act called the Energy Law (the Act of 10th April 1997, see Polish version), in particular by the parts
addressed to renewable energy sources.

From 1st October 2005 the Polish Power Exchange (Towarowa Giełda Energii S.A. PolPX)
manages the registry of green certificates and their trade. The results from the green certificate
market presented by the Polish Power Exchange are not differentiated for sorts of RES-E such as
wind energy (onshore or offshore), hydro energy, solar energy, biomass combustion etc. Also the
Energy Law has in general no special arrangements for particular sorts of renewable energy and as
such also not for offshore wind energy.

The redemption of Guarantees of Origin must take place till 31 March each year for the previous
st
year (e.g. till March 31 2007 for the year 2006) and is obligatory as a proof of fulfilling the
obligation. Energy companies can also pay a so-called ‘buy out price’ which amounts to 240
1
PLN/MWh (62.41 Euro/MWh ).

Development and permitting procedures:

Before one can start the construction works, you have to prepare all necessary permits and
documents. One of the key stages on the path towards acquiring the building permit and putting the
wind farm into operation is the amendment of the local development plan. Its statements define the
purpose of use of the area as well as possibilities for future building. Parcels usually appointed for
the project are defined as an agricultural area, which means we have to complete the full
amendment procedure for the local plan in order to acquire the building permit in line with our
intentions. The procedure to amend the development plan takes about 18 months. As part of the

1
Exchange rate from 23rd August 2007 1€= 0.26 PLN

Business Case v2 9-11-2007 page 4 of 14

 amendment procedure of the development plan, in some cases an EIA has to be done. This may
increase the time to prepare an application to amend the development plan.
In the case of Golczewo the development plan has to be amended as it does not foresee the
installation of wind turbines yet.
Following the development plan amendment it is necessary to obtain the decision on development
conditions(given by the municipality stating the plot borders, it’s development plan and destination
and the size of potential construction), which allows to apply for the most crucial document - the
building permit. The procedure to obtain the decision takes about 4-6 months.
Thereafter the building permit can be obtained and this takes about 1-2 months.
Total procedure therefore lasts approximately 2 years.

So far wind projects have not been delayed by public protests or appeals. The strong support from
the government is one reason and usually there is also quite a good local support for wind projects
as both the landowners and the municipalities profit from a wind farm.

Business Case v2 9-11-2007 page 5 of 14

Business Case v2 9-11-2007 page 6 of 14
Business Case v2 9-11-2007 page 7 of 14
 2.3. Available resource
Project:
The wind data for Poland have been plotted by Anemos (see map hereunder). For individual
projects the wind speed can be estimated at this moment – no wind measurements are made yet –
with the wind maps of Anemos. For this project the wind speed is estimated by Ecofys to be 6.5-6.7
m/s on hub height

2.4. Grid connection

General:
In parallel to the permitting procedure the project has to be discussed with the power utilities. The
possibility to obtain the technical requirements for connection to the grid is the most vital issue. The
Minister of the Economy Ordinance of December 15th, 2000 on the obligation to purchase the
electricity from unconventional and renewable sources sets obligatory share indices for the
electricity from unconventional and renewable sources in the total volume of electricity turnover. In
practice, power utilities have to purchase the amount of renewable electricity corresponding to their
annual turnover volume. However, there are too many wind power applications so not all
applications can be rewarded. The usual procedure is to ask first for initial grid conditions. For this
the developer has to contract a specialised company that makes an initial grid study. This study
gives an indication on the changes to get a (affordable) grid connection. If the result is positive, a
more extensive study will be performed, indicating in detail how the wind farm should be
connected. The total procedure takes about 3 + 9 months for the initial and detailed study
respectively.

The grid application process for Golczewo can be started (application for the conditions of
connecting to the grid has been filed). This is only possible when you can proof that you own or
lease the described land and when you submit detailed electrical specifications of the wind
turbines.

Project:
We sent application to Enea Operator sp. z o.o. We should send them additional maps. We are still
waiting for maps. We have 70% chance to get grid conditions there. However before a final

Business Case v2 9-11-2007 page 8 of 14

 decision can be made on the grid connection, a detailed electrical expertise is required. Hopefully
this expertise could start in Q3 2008, when we secure land for this project.

3. Cooperation
3.1. Partnerships
Project:
- We do not have partners in this project
- Denker and Wulf who was interested in cooperation with our company, and who brought this
location to our attention, is no longer active in the project so we can assume they are not
interested anymore. Moreover the project they proposed to us proved to be without any value
so the do not have a strong legal case to make any claims regarding this project.

3.2. Stakeholders
Project:
- Major stakeholders and their involvement (goals/ role) in the project (description of partners
and clients) – Not applicable

4. Financial project analysis

4.1. Investment estimate
- Initial estimate of Capex + basis of estimate:
o Turbines 1.25 Meuro/MW (incl foundation and transformer)
o Grid connection 100.000 euro per km grid cable (for Golczewo 15 km)
o Park cable 100.000 euro per km cable (for Golczewo 5 km)
o Roads and crane pads 250.000 euro
- Devex estimate, referring to budget format in annex 1
o 600.000 euro

4.2. Financial assumptions

- Income from energy produced (PPA): wind park owners usually sign contracts for a maximum
of 10 years with a grid operator with a fixed price for total amount of electricity and green
certificates.
- Support regime per MWH (present regime + outlook) The price of green certificates grows at
the moment because the pay out price grows each year and the number of green certificates is
not sufficient. There is a chance that the price of green certificates can drop in case that supply
of green certificates will be higher then real demand but it is hard to estimate when green
electricity production reaches this point. There is also plan to open from September 2008 our
green certificate market, in this case most of them will be sold outside the country with a higher
price and the pay out price in this case can rise even more rapidly.
- Other financial facilities (local / national subsidies, tax facilities): possibly we can obtain
subsidy on a wind farm from the EU-funds (see section 2.2). It is not known yet what the
possibilities are so we did not include them in the feasibility calculations.
- Financing (interest rate, ROE, leverage) The bank loans differ of course depending on the
amount of investment financed by the investor between 4-7% of interest (has to be checked
and negotiated with the banks)
- Taxes (company tax, depreciation scheme, local taxes) The company tax is a 19%; According
to yearly depreciation scheme wind turbines are listed as objects of land and sea engineering
with yearly amortisation deduction of 4,5%.
- Opex assumptions (fuel, other inputs, O&M, insurance): for Opex expenses we assume:
o 1.2 ct/kWh for a full service O&M contract
o 0.5% of Capex for machine breakdown insurance
o 0% of turnover for loss-of-income insurance
o 22.000 PLN/turbine for land lease
o 100.000 euro/year for management fee
o 2% local tax

Business Case v2 9-11-2007 page 9 of 14

 4.3. Cash flow analysis
- Cash flow overview for project life span (annex 2)
- Analysis results:
o RoE pre tax 18%
o RoE after tax 12%
o DSCR average 1.6

4.4. Sensitivity analysis

- Major sensitivity elements
o Tariff can be 10% lower
o Net yield can be 10% lower or higher
- Effect on result
o 10% lower tariff: RoE after tax= 6%
o 10% higher yield: RoE after tax = 16 %
o 10% lower yield: RoE after tax = 9%

5. Planning
- Preliminary development planning:
o DG1 – start development Q1 2008
o DG2 – consent achieved Q3 2009
o DG3 – start construction / FC Q1 2010
o DG4 – start generation Q4 2010
- Overview of required human resources (internal / external)
o See DEVEX spreadsheet in annex 1
o internal ~ 2000 hours
o Ecofys ~ 100.000 euro
o external ~ 330.000 euro

6. Feasibility / risk summary

- Major risk for Evelop wind development in Poland:
many competitors trying to obtain localizations feasible for wind parks together with grid
connection available, having strong man power sources they will try to finish most of projects
until 2013; Greenfield projects with insufficient staff and tools available can lead to the situation
when most of areas feasible will be already in possession of our competitors.

- Resume
Strengths: Weakness:
International company with good reputation Insufficient number of staff
Office in Poland Lack of business cars which are necessary
People with broad experience – not only in wind for projects developers who should spend
energy most of time out of office
Lack of simple tools like for instance gsm
device
Opportunities: Threats
Chance to develop wind park with relatively small In case the percentage of green electricity
costs of investment reach the mandatory level and above the
Opportunity to build up revenue from green price of green certificates on the Polish Power
electricity Exchange can drop
Chance to get a financial support from EU fund

7. Proposal / recommendation to the board

General:
We advise to continue the development of wind projects in Poland for the following reasons:
• We have a basis in Poland: an office and staff and expertise to develop projects

Business Case v2 9-11-2007 page 10 of 14

 • There are opportunities to acquire and develop projects in Poland. There is a substantial
potential of at least several hundred MW so a valuable contribution to the overall target of
Evelop can be made.
• The wind climate in Poland is moderate, there are sufficient sites in Poland with a
reasonably good wind speed (6-7 m/s)
• The green electricity prices + income from green certificates (together amounting to 100-
110 euro/MWh) generate sufficient income to realise feasible projects

If we do not pursue this opportunity we miss the possibility to realise a medium size wind project.

Project:

We advise to start the development of this project. If we do not pursue this opportunity we miss the
possibility to realise a 24 MW wind project.
The project has a good chance for success:
• The land has been secured,
• The wind speed has been estimated at 6.5-7.0 m/s
• The grid connection is available

Next steps are to start wind speed measurements and a detailed grid analysis to secure the grid
capacity.

Business Case v2 9-11-2007 page 11 of 14

Annex 1: Project budget (devex estimate)

PROJECT DEVEX / BUDGET EST IMAT ION

Project name Example bd= business developer OOP= Out of Pocket costs
Request ow ner ebe tpd= technical project developer
Project number devlfr07545 fdp= financial project developer
Area WOL cm= contract manager
Size (MW) 12 pm= project (construction) manager
Capex est (M€) € 14,400,000 om= operations manager
Devex € 595794 (=4.1%) pd= project director
TPD / BD XXX
Start date 01/01/2007
End date 12/31/2010

yes/no planned 140 120 160 160 140 100 200 Internal Ecofys 3rd parties
Fase Deliverables applicable year bd tpd fpd cm pm om pd Costs hrs tariff cr comp OOP Budget
1. Business case
Position all 2006 32 24 €7,360 0 €0 €0 €7,360
Resource assessment all 2007 0 2 €240 6 €564 €0 €804
Feasibility / risk assessment all 2007 10 €1,200 24 79 €1,896 €0 €3,096
DG1 proposal 2007 2 10 6 8 €4,040 €0 €0 €4,040
Mngmnt phase 1 all 2007 8 16 €3,040 €0 €0 €3,040
sub-total 1 DG1 42 62 6 €15,880 30 €82 €2,460 €0 €18,340
2. Development
Cooperation all 2007 832 0 €4,960 €0 €0 €4,960
Location all 2007 72 8 €9,920 €0 €0 €9,920
Resources / fuels all 2007 18 0 €2,160 48 €4,152 €50,000 €56,312
Basic engineering / prel. design all 2007 16 €1,920 48 €5,280 €0 €7,200
Consents (mod, telecom, airport, etc) all 2007 8 48 79 €7,040
Permitting 2008 12 110 €14,880 450 €42,582 €10,600 €68,062
Energy contracts (LOI/MOU level) all 2008 52 20 €9,440 €0 €0 €9,440
DG2 proposal all 2009 36 6 8 €6,880 €0 €0 €6,880
Mngmnt phase 2 all 2009 100 €12,000 €0 €0 €12,000
sub-total 2 DG2 20 444 26 8 0 0 8 €62,160 594 €99 €59,054 €60,600 €174,774
3. Contracting Contract strategy 2009 24 8 €5,440 €5,440
Cooperation 2009 36 40 €13,760 €0 €10,000 €23,760
Resources / fuels 2009 €0 €0 €12,000 €12,000
Detailed Design elaboration 2009 80 40 €17,600 120 130 €15,600 €20,000 €53,200
Tendering 2009 48 166 88 36 52 €58,640 0 €0 €0 €58,640
Energy contracting 2009 16 32 40 0 0 8 €15,040 60 €6,600 €0 €21,640
Financial contracting 2009 0 282 52 0 0 60 €65,440 80 €8,800 €100,000 €174,240
DG3 (=Investment) proposal 2009 20 40 100 0 44 20 70 €45,760 €0 €0 €45,760
Mngmnt phase 3 2009 40 €8,000 €0 €0 €8,000
sub-total 3 DG3=FC 20 184 414 318 132 56 318 €229,680 260 €119 €31,000 €142,000 €402,680
TOTAL DEVEX 82 690 446 326 132 56 326 €307,720 884 €105 €92,514 €202,600 €595,794

Business Case v2 9-11-2007 page 12 of 14

Annex 2: Cashflow analysis
SCENARIO: B ase c ase (B C)
TURBINE TYPE
Exam ple Example
Exa mp le
RESULTS SCENAR IO: B ase c ase (BC )
-
-
-
-
-
-
-
Investme nt pe r MW installed 1 ,445 ,067
-
-
-
-
-
-
WAC C on t he project 7.30%
-
-
-
-
-
IRR (af ter tax) 1 1.68%
WI ND
Uncertainty f actor corre ct ion in P90 scena rio 1 0.00% IRR (pre t ax) 1 7.50%
Win d Scen ario P50 scenario
P50 scena rio
P90 scenario
P90 scena rio
PV @ cost of equ ity ra te 8 ,513 ,838
CAPEX
NPV @ cost o f equ ity ra te -1 ,890 ,641
WTGs (CAR include d)
Fo unda tion s
2 6,400 ,000
1,800 ,000
Average DSCR (sub debt exclude d, af ter tax) 1.59
Civil inf ra stru ctu re
Grid conne ction
200 ,000
1,500 ,000
Minimum DSC R (afte r t ax) 1.52
Ele ctrica l infrastructure
Project Develo pment
500 ,000
600 ,000
Minimum DSC R (befo re tax) 1.64
- 0 Max de bt capa city 29 ,541 ,388
- 0
-
-
0
0
Leverage 70.0%
% Project De velopment Evelo p 5.00% Total Deb t 24 ,277 ,119
% Con ting ency CAPEX 5.00%
REVISION COSTS Equ ity other sha re holders 0
Revision cost s 0
PPA Equ ity Evelo p 10 ,404 ,479
PPA fro m year 1 4 8.10
PPA fro m year 16 4 8.10 Total in vestm ent 34 ,681 ,598
PPA fro m year 21
SUBSIDY Equ ity Evelo p/Assets 30.0%
Tarif 6 2.40
Sta rting date sub sidy p eriod % shares Evelop 100%
OPEX
O&M year 1-5 621 ,000
O&M year 6-10 621 ,000
O&M year 11-2 0 621 ,000
Machine brea kd own insurance 132 ,000
Tax profession elle 620 ,000
Ele ctricity t ra nsportation costs 0
Mana gement 100 ,000
Land lea se 36 ,000
Oth er (property tax, etc) 20 ,000
% Increased costs over OPEX 2.00%
% Con ting ency OPEX 1 0.00%
FINANCIALS/TAX
% required ROE 1 5.00%
% Se nio r D ebt 70.0%
Matu rity Senior Deb t 1 4.00
Dedu cta ble "notionele" interest over eq uity 0.00%
Corporat e Tax rate 3 3.33%

Business Case v2 9-11-2007 page 13 of 14

 Annex 3: Risk table

Risk Item Mitigation Prob Imp

Development
Cooperation • Possible conflict with • We have to prepare a file to 10% L
Denker & Wulf show that we developed the
project ourselves without
information received by D&W
Location • Possible competition from • Get overview of possible 30% M
other developers competitors. Secure position
by obtaining grid connection
and (exclusive) agreement
with municipality.
Resource • Exact wind data not • We will make a first estimate 100 L
(wind/sun/bio) known yet based upon electronic wind %
maps. Then wind speed
measurements on site.
However, for Golczewo we
know for sure that the wind
speed is high enough as it is
close to the coast.
Consenting / • N.a. •
stakeholders
Permitting • Municipality may not • Sign agreement with 10% F
cooperate. municipality on amendment
development plan and
permitting procedure.
Delay • Procedures may take • Contract right companies to 50% M
long assist in permitting and grid
connection procedures.
Contracting
Technology • Obtain Wind turbines in • Via framework contracts 10% L
time against right terms
Grid • Grid connection • See text BC. We will ask for 30% F
grid connection in steps
(initial + detailed grid study)
to minimise risks and
obtained clarity asap
O&M • n/a •

PPA • Get PPA signed • Start early enough with 10% F

signing LoI with off taker,
specifying contract terms
Subsidies • Get green certificate • Start early enough with 10% F
contract signed signing LoI with off taker,
specifying contract terms
Insurance • n/a •

Finance – Loan • Get loan agreement • Start early enough with 10% F
signed signing LoI with off taker,
specifying contract terms
Finance – Eq • n/a •

* L = Low; M = Medium; H=High; F=Factual / Fatal

Business Case v2 9-11-2007 page 14 of 14