SOLICHAMBA AM and O&M Market Update [FINAL3]

ASSET MANAGEMENT AND O&M MARKET UPDATE

Cedric Brehaut | Executive Consultant | SOLICHAMBA

Prepared for the Intersolar Asset Management Summit 2017 U.S. MARKET SIZE 41 GW of PV Plants in Operation in the U.S. (2016YE)

U.S. PV Installed Base, Gigawatts by Capacity Segment, 2007 to 2016

45.00

40.00

35.00

30.00 23.17

25.00

20.00 Gigawatts (cumulative) 15.00 4.59

10.00 4.72

5.00 8.45 - 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

< 20 kW 20 kW to 1 MW 1 MW to 5 MW > 5 MW

Source: GTM Research ‘Solar PV Asset Management 2017-2022: Markets, Investors, Asset Managers and Software’

U.S. PV Installed Base, Gigawatts by Year of COD Key Stats*

• 36.6 GW installed in 2012-2016 2010 2011 14.8 GW in 2016 alone 0.85 including 1.93

2012, 3.37 • 4.3 GW installed prior to 2012 2016, 14.76 • 1.5 GW installed prior to 2010 (already past ITC recapture) 2013, 4.76

• 0.85 GW installed in 2010 (i.e. past ITC recapture by 2017YE)

2014, 6.25

2015, 7.50

* Installed base by capacity segment Source: GTM Research ‘Solar PV Asset Management 2017-2022: (<20kW, 20kW-1MW, 1-5MW, 5MW+) Markets, Investors, Asset Managers and Software’ available in report.

U.S. PV Installed Base, Share of Gigawatts by State, 2016 Key Stats*

• 17.1 GW in California alone

All Other 20% • 15.7 GW in next 9 States

• 8.1 GW in all other States (less California than half of California) 42%

• Share of California peaked in 2014 at 57% and gradually shrunk to 35% in 2016

ArizonaNorth Carolina 7% 7%

* Installed base by State for top 10 States, Source: GTM Research ‘Solar PV Asset Management 2017-2022: for each capacity segment (<20kW, 20kW- Markets, Investors, Asset Managers and Software’ 1MW, 1-5MW, 5MW+) available in report.

Bankruptcies, Market Exits, Etc. At Risk

• Developers and Installers • Inverter Manufacturers

• Module Manufacturers • Module Manufacturers

U.S. PV Installed Base, Gigawatts by Capacity Segment, Forecast to 2022E

140.00

120.00

100.00 74.47 80.00

60.00

Gigawatts (cumulative) 11.70 40.00 11.01

20.00 30.79

0.00 2017E 2018E 2019E 2020E 2021E 2022E

< 20 kW 20 kW to 1 MW 1 MW to 5 MW > 5 MW

Source: GTM Research ‘Solar PV Asset Management 2017-2022: Markets, Investors, Asset Managers and Software’

U.S. PV Installed Base, Share of Gigawatts by State, 2022E Key Stats*

• 34.9 GW in California alone

• 51.6 GW in next 9 States California All Other 27% 32% • 41.1 GW in all other States (~20% more than in California)

• Share of California drops from 42% in 2016 to 27% in 2022E Texas 7% • Texas becomes second largest Arizona market in installed base 6% North Carolina 6%

• If Suniva remedies were applied: • Imported module prices would jump to 2012 levels • System prices would jump to 2015 levels w/ imported modules • Domestic module market would become supply-constrained; prices would go up

• Impact would vary by segment: • Residential: +13% system cost • C&I: +24% system cost • Utility: +40% fixed tilt system cost

• Geographic diversification would temporarily halt as system price increases roll back grid parity

• Markets are impacted by hedging (module demand pull and price Note: Although the petition can be interpreted both ways, the ‘Minimum Module Price’ scenario above best represents Suniva’s requested remedy. increases, capital tightening)

• 1/16 Oaktree (Investor) acquires Solarrus (later rebranded as MaxGen Energy Services) • 4/16 EDF RE (IPP) acquires groSolar (Development/EPC) • 4/16 MaxGen (Holding) acquires Power Factors (Software) • 7/16 Bay4 Energy (AM/O&M) acquires Ekhosoft (Software) – and sells it 4 months later • 7/16 DNV GL (Technical Advisor) acquires GreenPowerMonitor (Software) • 9/16 First Solar (Developer/O&M) sells Skytron Energy (Software) • 11/16 Power Factors (Software) acquires Ekhosoft (Software) • 11/16 MaxGen (O&M) acquires Next Phase Solar’s C&I business (O&M) from Enphase • 12/16 Sun System Technology (EPC/O&M) acquires Next Phase Solar’s residential bus. (O&M) from Enphase • 2/17 Mitsui (IPP) acquires SunEdison’s C&I business (Development) • 2/17 AES (IPP) acquires sPower (Development) • 3/17 Brookfield (IPP) acquires 51% of TerraForm Power – incl. 900MW of operational assets in U.S.

O&M Services Monitoring Software Development/IPP

• 11/16 NRG Energy (IPP) acquires 530 MW of operational PV plants, 265 MW of contracted PV projects, and a pipeline of solar and wind projects under development totaling 1,500 MW

• 1/17 Longroad Energy (Developer) acquires 10,000 MW pipeline from 7x Energy

• 2/17 AES (IPP) and Alberta Investment Management Corporation (Investment Manager) split ownership of the sPower portfolio (1,274 MW in operation and 10,000 MW in development)

• 3/17 Brookfield (IPP) acquires 51% of TerraForm Power (900MW in the U.S.)

• 4/17 Fiera Infrastructure (Fund) acquires a non-controlling interest in a 921 MW portfolio of solar and wind projects from DESRI (some operational, some in development)

Date Buyer Category Project(s) State Seller MW MW (Gross) (Net) Jan-16 Terra Nova Renewable Partners Fund Portfolio Multiple Dominion 231 76 Jan-16 ConEdison Development IPP Alamo 7 TX OCI Solar Power 106 106 Feb-16 Southern Power & Turner Renewable Energy IPP Calipatria CA Solar Frontier 20 20 Mar-16 Southern Power IPP East Pecos TX First Solar 120 120 Apr-16 8point3 Energy Partners YieldCo Hooper CO SunPower 50 n/a Apr-16 8point3 Energy Partners YieldCo Kingbird CA First Solar 40 n/a Jun-16 D.E. Shaw Renewable Investments (DESRI) Fund Portal Ridge CA First Solar 31 31 Jul-16 Southern Power IPP Henrietta CA SunPower 102 52 Jul-16 Southern Power IPP Lamesa CA RES America 102 102 Jul-16 Southern Power & Turner Renewable Energy IPP Rutherford NC Cypress Creek Ren. 74 74 Jul-16 D.E. Shaw Renewable Investments (DESRI) Fund North Star MN Community Energy 100 100 Sep-16 NextEra Energy Partners YieldCo Desert Sunlight CA NextEra 550 132 Sep-16 8point3 Energy Partners YieldCo Henrietta CA SunPower 102 50

IPP or utility buyer 100+ MW transactions (net)

Date Buyer Category Project(s) State Seller MW MW (Gross) (Net) Oct-16 Dominion IPP Accomack VA, NJ Community Energy 80 80 Oct-16 Dominion IPP Summit Farms NC SunEnergy1 60 60 Nov-16 8point3 Energy Partners YieldCo Stateline Solar CA First Solar 300 102 Nov-16 Southern Power IPP Boulder Solar I NV SunPower 100 n/a Nov-16 Dominion IPP 4 projects VA Virginia Solar 80 80 Nov-16 NRG Energy IPP Portfolio Multiple SunEdison 530 530 Dec-16 New Energy Solar Fund 2 projects CA SunPower 134 n/a Dec-16 D.E. Shaw Renewable Investments (DESRI) Fund Mississippi 2 MI Origis Devco 42 42 Jan-17 BHE Renewable Energy IPP Alamo 6 TX OCI Solar Power 110 110 Jan-17 Duke Energy Renewables IPP 2 projects CA SunPower 55 55 Mar-17 Brookfield IPP Portfolio Multiple TerraForm Power 900 459 Mar-17 NRG Yield YieldCo Agua Caliente AZ NRG Energy 290 46 Apr-17 Fiera Infrastructure Fund Portfolio Multiple DESRI 560 (e) 100+?

IPP or utility buyer 100+ MW transactions (net)

• Major acquisitions of developers, pipelines, and asset portfolios by large IPPs • AES (sPower) • Southern Power • Duke Energy Renewables • Brookfield (TerraForm) • ConEdison Development • EDF RE (groSolar) • NRG Energy (SunEdison) • Dominion • Mitsui (SunEdison C&I)

• YieldCos are not dead • 8point3 Energy Partners, NextEra Energy Partners, and NRG Yield bought assets

• Limited consolidation activity in the O&M space • Opportunistic acquisitions due to Enphase divesting its O&M business

• O&M providers have diverging strategies concerning software • MaxGen (Holding) invests (Power Factors, Ekhosoft) • First Solar and Bay4 divest (Skytron Energy, Ekhosoft)

Ownership Asset Management O&M

• Decline of TPO (<50% of new • Equity investors want backup • Opportunity for third-party field installs) and ramp-up of loans, service providers for portfolio services due to installer & TPO PACE, and cash purchases and fleet management exits (but few active players)

• Multiple bankruptcies/exits of • Opportunity for AM services due • Uncertainty that maintenance TPO firms (Sungevity, OneRoof, to TPO market exits and the will be achievable at budgeted NRG Home Solar) small scale of some portfolios costs (for TPO portfolios)

• Increased fragmentation as • Blurred line between portfolio • Loan providers are reluctant to national TPO/installers grow at management and field service providing maintenance plans due slower pace than smaller players dispatch due to tight economics to risk exposure (except TPOs)

• Increased use of software for • Lack of installations density analytics and process flow remains a challenge in most solar automation markets (except a few pockets)

Market & Ownership Asset Management O&M

• Highly fragmented market • Opportunity for AM services due • Many EPCs now offering O&M except for a few large players to small scale of most TPO services, especially for plants (e.g. Greenskies, SolarCity) portfolios in C&I market above 500 kW

• IPPs increasingly present in this • Difficult AM cost equation due to • Margins remain healthy despite segment, organically or via M&A complexity of AM compared to increased competition and some (AES, Constellation, EDF, Mitsui) average portfolio & project size price pressure

• Large opportunity for energy • Opportunity for AM software to • Increased use of monitoring data storage solutions (with or automate processes, improve aggregation platforms (e.g. without solar) efficiencies, and reduce costs Lens™, Power Factors)

• Increased efforts to standardize tools (CMMS), processes, and scopes… but a long way to go!

Ownership Asset Management O&M

• Portfolios scaling at a rapid pace • Most IPPs self-perform AM • Steep price decline (potentially via both new projects and except when acquiring projects below healthy margins) due to secondary market transactions with existing AM contracts competition and low PPA rates

• IPPs dominate the landscape • Only two third-party AM • Few large players dominate (NextEra, BHE, Southern Power, providers at gigawatt scale third-party O&M services (SOLV, Dominion, ConEdison, Duke…) (SunPower, RadianGEN) First Solar, MaxGen)

• Most large solar investors also • Increased use of AM software • Threshold for ‘manned’ PV plant own wind plants in their asset (e.g. 3megawatt, PowerHub…) to keeps increasing under price

portfolios automate processes pressure (currently ~100 MWDC)

• Power scheduling/forecasting • NERC compliance for 75 MWAC requirements for increasing plants and 1.5 GWAC ops centers share of new utility projects • Technology innovation (robotic cleaning, aerial IR, analytics)

Asset Management Software Other Software Systems

Technical Asset Management Maintenance Management (CMMS) Monitoring or DAS/SCADA System - System production tracking and aggregationSystem production tracking & aggregation - Maintenance work orders/tickets - Data acquisition - Performance tracking/normalization - Staff/truck route scheduling/optimization - Supervision (dashboards, alerts) - Outages and curtailment tracking - Maintenance manuals and procedures - Power plant controls - Maintenance activity reporting - Health and safety compliance management - Reporting (technical) - Spare parts inventory tracking - Spare parts inventory & procurement - Analytics (technical) - Component/equipment warranty tracking - Time and materials tracking - Technician performance evaluation Forecasting System Commercial Asset Management - Site access information management - Solar resource data - Contract & compliance management - Solar resource forecasting - Supplier qualification and selection Invoicing - System production forecasting - Supplier activity and cost tracking - Energy production/export invoicing - Supplier performance and SLA tracking - Shadow billing & statement verification Commodity Trading System - System performance guarantee tracking - Energy consumption invoicing - Real-time market data - Operating expenses tracking & budgetingOperating expenses tracking and budgeting - Multi-offtaker and community solar invoicing - Trading risk analysis - Revenue tracking & budgetingtracking and budgeting - Green energy credits/certificates invoicing - Power scheduling/trading - Variable and mixed land lease calculations - Wholesale market trading settlements Accounting or ERP System SPV/Portfolio Management Financial/Fund Management - Accounts receivable and collections - Regulatory/tax/accounting filings storage - Financial KPI tracking (DCR, CAFD, other) - Accounts payable and purchasing - Equity and debt tracking - ProPro forma statements tracking & budgeting-forma statements tracking & budgeting - General ledger and bookkeeping - Governance info management - Multi-investor distributions calculations - System-specific ERP functions

Cross-Functional - Document/record management Financial Services System - Task and event/incident management - Contacts/relationship management - Investment structuring - Approval/escalation workflow automation - Risk management KPI tracking - Asset valuation and risk analysis - Reporting - Project management - Fund deployment

Inside AM s/w scope Scope overlaps w/ other system Vendor-specific in/out choice Outside AM s/w scope

Source: GTM Research ‘Solar PV Asset Management 2017-2022: Markets, Investors, Asset Managers and Software’

Financial Software Asset Management Software New Entrants

Monitoring Software Source: GTM Research ‘Solar PV Asset Management 2017-2022: Markets, Investors, Asset Managers and Software’ (revised)

• 10-12 active vendors in 2017 (vs. only 1 a few years ago) • 12.5+ GW of operational plants managed (2016YE) • More competitors expected to enter market in 2017/18

Opportunities Challenges

• Portfolio growth • Microsoft Excel and in-house tools

• Concentration of assets in the hands of fewer, • Lack of visibility on AM labor costs more professional owners • Long sales cycles • Secondary market transactions • Delivering both simplicity and customizability • Increased market complexity • Price pressure • Compliance requirements (e.g. NERC)

• Asset management cost/price pressure

Asset Management O&M Monitoring

• Solar PV Asset Management 2017- • Megawatt-Scale PV O&M and • Global PV Monitoring 2016-2020: 2022: Markets, Investors, Asset Asset Management 2016-2021: Markets, Trends and Leading Managers and Software Services, Markets and Competitors Players

• Analyzes global asset management • Analyzes global O&M markets, • Analyzes global monitoring markets, landscapes, trends, with landscapes and trends for plants 1 markets, landscapes and trends by forecast to 2022 MW+, with forecast to 2021 segment, with forecast to 2021

• 13 key markets across 4 continents • 13 key markets across 4 continents • 16 key markets across 4 continents

• 198 investors accounting for 55 • 120 O&M providers accounting for • 54 monitoring providers whose GW of operational PV plants 61 GW of operational PV plants software monitors 107 MW of PV

• 46 third-party asset managers • 66 detailed company profiles • 44 detailed vendor profiles providing services to 17.6 GW of including fleet by country, services including fleet by country, product operational PV plants and sourcing, and more scope, and more

• 10 software vendors supplying AM • Next edition in Q4 • Next edition in Q3 automation solutions for 12.5 GW of operational PV plants

Services Areas of Focus Clients

• Company/product strategy • Operations & maintenance • O&M service providers • Marketing • Asset management • Project development firms • Private market research • Services, software, technologies • Monitoring software vendors • Competitive intelligence • All segments • Inverter/power electronics firms • M&A prospecting & due diligence • U.S. and international • Investors

Email: [email protected] Web: www.solichamba.com