Olmeda Park Valuation - TASE · 2011. 5. 30. · Trigger-Foresight has conducted strategic and...

Confidential. Copyrights Trigger-Foresight, All rights reserved 1Confidential. Copyrights Trigger-Foresight, All rights reserved

Olmeda Park Valuation

Impairment Testing as of March 31st, 2011

May 2011

Submitted to:

Sunflower Gmbh & CO.kg

Confidential. Copyrights Trigger-Foresight, All rights reserved 2

Disclaimer & Restriction of Liability

The following valuation of “PHOTOVOLTAIKPARK OLMEDA DE LA CUESTA A.I.E.” (hereafter “Olmeda”) has been conducted at the request of “Sunflower Gmbh & CO.kg” (hereafter “the Partnership”).

This opinion is provided for the information and benefit of the Board of Directors of "the Partnership”, and is submitted to the Board of Directors in connection to the Valuation.

It is agreed that "the Partnership” and/or it’s shareholders may include, or make reference to, this opinion in, or in connection with, the financial reports submitted, or filed, as required by pertinent securities law, case law, or other sources of legal duty.

Moreover, "the Partnership” and/or its shareholders may make use of this opinion in any proceedings related to the approval of its valuation, including, but not limited to, in meetings with or deliberations before any person, entity and/or authority that "the Partnership” and it’s shareholders deem fit.

The use of this opinion is permitted only by "the Partnership’s” management and/or its shareholders. Trigger Foresight shall, under no circumstances, bare any liability, or hold any responsibility, towards a third party that receives this opinion with or without our consent, as mentioned before.

In arriving at our opinion, we have relied upon, and assumed the accuracy and completeness of all of the financial and other information that was issued by “the Partnership” without assuming any responsibility for any independent verification of any such information .

We have further relied upon the assurances that “the Partnership” is not aware of any facts or circumstances that would make any such information inaccurate or misleading.


Disclaimer & Restriction of Liability (Cont.)

With respect to the financial information utilized, we assumed that such information has been reasonably prepared on a basis reflecting the best currently available estimates and judgments, and that such information provides a reasonable basis upon which we could perform our analysis and form an opinion.

We have not carried out a physical inspection of the properties and facilities of “the Partnership” and have not made or obtained any evaluations or appraisals of the “the Partnership’s” assets or liabilities (contingent or otherwise) other than publicly available information. We have not attempted to confirm whether “the Partnership” has good title to its assets.

This study is partially based on assumptions and forecasts. Trigger-Foresight claims no responsibility for the accuracy of these assumptions and forecasts.

This opnion does not cinstitute a due diligence process , nor does it claim to take into account all information, tests or other information included in a true due diligence process , including, for example, the thorough examination of contracts and agreements. Note also that this opinion may in no way be construed as legal advice.

The information in this opinion does not include all of the information required by a potential investor, and in no way presumes to determine the value of “the Partnership” or its assets for any particular investor.

This opinion refers to the valuation of Olmeda and not of "the Partnership” as a whole.

Trigger-Foresight has no personal interest in "the Partnership” and/or it’s shareholders and no personal interest in the outcome of this valuation.


Disclaimer & Restriction of Liability (Cont.)

Trigger-Foresight has conducted strategic and financial consulting processes for Shikun & BinuiGroup , as well as companies held by its shareholders and/or affiliated with Shikun & Binui. However, Trigger-Foresight is not financial depended on Shikun & Binui.

Trigger-Foresight has received professional fees for the above mentioned services provided to Shikun & Binui Group and will also receive a fee for providing this opinion. However, the opinion fee is in no way dependent on the opinion results.

Trigger-Foresight has received an indemnification letter from “the Partnership”, which includes the following:

• “The Partnership“ confirms that all existing information necessary for this valuation regarding Olmeda was made available to Trigger-Foresight and that to the best of its knowledge there is no other relevant information that may affect the results of this valuation.

• “The Partnership” concurs that this valuation is based on estimated values and expectations about future results from the project’s activities, including some estimations made by Trigger-Foresight which are not precise and are subject to change.

• “The Partnership” agrees to reimburse, indemnify and hold harmless, Trigger Foresight upon receiving a final court ruling, for any direct or indirect damages, losses, and/or expenses incurred by, or imposed on Trigger Foresight, by any third party, as a result of any claim or suit deriving from, or in connection with this opinion, be it from investors or parties related to them. Furthermore, “The Partnership” agrees to reimburse and indemnify Trigger Foresight, immediately upon its first request, for any cost, loss, or expense of over $25,000 USD related to legal council and/or representation as a result of such a claim or suit, under the condition that Trigger Foresight give “the Partnership” notice within 14 days of receiving any demand, claim or suit, and that Trigger Foresight allow “the Partnership” to take part in its defense and refrain from agreeing to any settlement without its approval. Trigger Foresight’s right to indemnification shall be null and void if its actions in relation to this opinion are determined to be reckless, negligent, or malicious.

• Sunflower Renewable Energy Ltd. shall bear a share of the aforementioned indemnification only to the extent of its share in “The Partnership” regardless of the other shareholders liabilities


Details of Appraiser

Trigger-Foresight

Trigger-Foresight is one of Israel's leading strategic-financial consulting companies

Trigger-Foresight works with both Israeli and international customers

• Large and medium size companies

• Investors, venture capital firms, private equity funds

• Government agencies

The company’s activities are divided into three pillars:

• Business Strategy

• Strategic Corporate Finance

• Strategic Business Development

Extensive experience in valuation for various needs:

• M&A processes (for foreign and local investors)

• Accounting needs (including IAS 36)

• As part of strategic planning processes

Shally Tshuva

Managing Partner at Trigger-Foresight

More than 15 years experience in business/ strategy consulting

Leading role in tens of complex strategic and financial consulting projects with an emphasis on large companies (telecommunications, finance, holding companies, hi-tech, real estate)

Establishment of Foresight (1993) and its management (about 5 years controlled by Israel Discount Bank)

BA in Mathematics and Computer Science (B.Sc. with honors), MBA (MBA with honors)

Between the years 2001 to 2008 - Lecturer of finance (valuation) and entrepreneurship at the Herzliya Interdisciplinary Center

Shally Tshuva


Scope of Work and Sources of Information

The following presents a fair value analysis of the PV Project “Olmeda” as requested by "the Partnership" following the change in approach of the Spanish National Energy Committee (CNE) towards the Project’s compliance with the requirements for the 2008 Feed-in Tariff.

Our opinion was based in part on meetings held with the following members of Sunflower Sustainable Investments Ltd. (“Sunflower”) and Shikun & Binui Renewable Energy (“SBRE”) management teams:

• Batya Many, CFO, Sunflower

• Meytal Kniajer, CFO, SBRE

• Eran Migdal, Finance Director, SBRE

Primary sources of information utilized in the formulation of our opinion were:

• Financial reports

• Partnership’s management’s financial performance projections for The Park

• Additional documents and input from the company’s technical advisors in support of said projections

• Market research and relevant public information

We have also relied upon documents and opinions provided by the company that were written by its legal consultants.In addition, we have conducted a conversation with the company’s attorneys to further clarify these documents.


Executive Summary

General

We were asked by Sunflower Gmbh & CO.kg to perform a valuation of Olmeda Park for impairment testing according to International Accounting Standard 36

The valuation is accurate as of 31/03/2011

Engagement date of this work: 19/05/2011

The book value of Olmeda Park:

• €37.77M as of 31/12/2010

• €37.39M as of 31/3/20111

Olmeda Park is a PV (Photovoltaics) technology based solar power generating plant, with a nominal capacity of ~6MW

In May 2011, the company was notified that the park’s eligibility for the Feed in Tariff (FiT) was provisionally suspended

The company has appealed the decision and is currently awaiting a response

Valuation Summary

Valuation is calculated using the DCF approach, in nominal Euro terms

Due to the current uncertainty with respect to the appropriate FiT, we have valued the park using the scenario based approach –3 different scenarios for the expected cash flows were considered, with each assigned a probability of occurrence

The probability assigned to each scenario was based on the expert opinion of the company’s lawyers in Spain2 regarding the possible outcomes of the appeal

The total value is the average of the values of the scenarios weighted according to their assigned probability (the probability of obtaining the corresponding tariff)

A rate of 10.31% (nominal terms) was used to discount the cash flows

This paper estimates the value of Olmeda Park as of 31 March, 2011 at € 30.9M

Source: Company’s documents(1) Refers to book value as of 31/12/2010 less depreciation for Q1/2011; (2) Expert opinion summarized in Appendix E


Agenda

21 Company and Business Overview

22 Market and Business Environment Analysis

23 Valuation

24 Appendix


24

Agenda

21

22

23

Company and Business Overview

Market and Business Environment Analysis

Valuation

Appendix



Olmeda - PV Park

General

Olmeda is a Photovoltaic Park jointly owned by SBRE (50%) and Sunflower (50%)

The park is located in Cuenca (about 150km from Madrid, Spain)

The land has been leased for 25 years, with an option for an additional 15 years (2 has past)

The park consists of 63 production units

• 62 with 96kW nominal power each and 1 with 48kW nominal power

The project is managed by a non-related third party O&M supplier

Power transmission is supplied by Union Fenosa

Production of electricity started in 2008

Financing provided by German Bank since 2009

Key Indicators

Area ~72,600m2

Total nominal power 6 MW

Total peak power 6,986kW

Total investment(before depreciation)

€42.6 M

Source: Company Presentations

Location



Holding Structure

Limited Partner

SUN FLOWER GMBH & CO. KG.

Sunflower Olmeda Management GmbH

Limited Partner

50% 50% 50% 50%

100%…

PHOTOVOLTAIKPARK3

OLMEDA DE LA CUESTA A.I.E.

100%…

63 SPVs1 + ALCARIA2

(1) Park owners (See Appendix A for detailed list of SPVs); (2) Holder of Licenses; (3) Debt holderSource: Company Documents



Olmeda Park - Milestones

2008June Gilatz Spain acquired the

park with a capacity of 3.84MW

July Agreement signed to

expand capacity to 6MW

September Installations were

connected to the electricity grid for the first time

December Definitive connection of

the plant at the substation Olmeda de la Cuesta

Started production at full capacity

2011May The CNE informed "the

Partnership" that according to its findings, they did not fully comply with the requirements of RD 661/2007

Provisional suspension of payment of the Feed-in Tariff

"The Partnership" appealed the CNE’s decision, requesting that the feed-in tariff be restored

The company is awaiting for the CNE response

2009Feb AIE Parque Solar Olmeda

de la Cuesta was incorporated

The park was acquired by “Shikun & Binui Renewable Energy” and “Sunflower Sustainable Investments”

May Financing contract

achieved

2010October "The Partnership" was

approached by the National Energy Committee (CNE) regarding it’s compliance with the requirements for the 2008 Feed-in Tariff

November Change in regulation

limiting the period of eligibility for the FiT and reducing the tariff applicable for new projects

December New Energy Transport Tax

imposed Production limit for

guaranteed FiT imposed

Source: Company’s documents; “Summary of the Situation of the Olmeda Park from June 2008 to May 2011”- Brenes Abogados, S.L.P.



Olmeda Park - Recent Regulatory Developments

“The Audit”“Provisional Suspension

of the FiT” “The Appeal”

18-19 May 2011 The Notary of Cuenca performed a

physical inspection and certified that the current status of the park was similar to photographs dated 26 September 2008 (evidencing the completion of the plant reviewed) and similar to the status verified by the Notary on 26 September 2008

20 May 2011 “The Partnership” submitted their

defense against the provisional suspension of the FiT, including supplemental documentation, supporting their belief that the CNE’s conclusions were erroneous

2 March 2011 The CNE reviewed the submitted

documents and found that the documents were not sufficient proof of installation prior to 30 September 2008

14 April 2011 The Board of the CNE instructed the

precautionary provisional suspension of FiT payments

6 May 2011 The Directorate General for Energy

and Mines initiated proceedings to verify whether or not the park’s installations complied with the requirements for FiT eligibility set forth in RD 661/2007

9 May 2011 “The Partnership” was notified of

the aforementioned proceedings and received a copy of CNE’s report

23 October 2008 An audit methodology to verify the

eligibility of candidates that received the FiT according to RD 661/207 was defined

5 October 2010 The 63 installations of Olmeda

received requests from the CNE to submit specific documentation proving that the park possessed and installed all panels and inverters before 30 September 2008

22-25 November 2010 “The Partnership” submitted all

documents requested by the CNE. No further clarification or documentary support was requested, therefore, none was provided

Source: Company’s lawyers



Financial Results

Revenue and Margin Evolution

4,936 4,849

1,054

4,276 4,274

933

86.6%

88.1%88.5%

2009 2010 Q1/2011

Energy Production and Feed-in Tariff

10,499 10,408 2,216

0.4700.466

0.476

2009 2010 Q1/2011

Source: Company, Financial Reports

(€, '000)

Revenues Gross Profit Gross Margin Production (MWh) Feed-in Tariff (€)



Financial Results (Cont.)

P&L

Source: Company, Financial Reports(1) Except for Guaranteed Price, in Euros

YoYProduction:

AC kWh Produced -0.9%

€, Thousands1

% of Revenues €, Thousands1

% of Revenues

Revenues:

Garanteed Price (€) -0.9%

Total Revenues 4,936 100% 4,849 100.0% -1.8%

Operating Costs:

Energy Cost 58 1.2% 104 2.1%

Rent cost 17 0.3% 17 0.4%

Insurance 42 0.9% 45 0.9%

Maintenance 437 8.8% 394 8.1%

Supplier Bonnus 104 2.1% 53 1.1%

Other 2 0.0% (38) -0.8%

Total Operating Costs 660 13.4% 576 11.9% -12.8%

Gross Profit 4,276 86.6% 4,274 88.1% -0.1%

G&A 3 0.1% 90 1.9%

Operating Profit 4,273 86.6% 4,184 86.3% -2.1%

2009 2010

10,498,801 10,408,350

0.46590.4702


Agenda

21

22

23



Valuation

24 Appendix



Renewable Energy - Technologies

RenewableEnergy

Wind Energy Solar EnergyBiomassEnergy

GeothermalEnergy

MarineEnergy

HydroelectricEnergy

SolarThermal

(CSP)PV


40%35%

29%23%

21%17% 18%

10% 9%6% 7%

9%5% 7%

9% 7%1%

6% 4%1% 0%

9%

7%

10%

11%

10%13%

6%

13%13%

12% 11% 8% 12% 9%7%

8%14%

7% 9%9% 10%

Sw

ede

n

Latv

ia

Fin

land

Au

str

ia

Po

rtu

ga

l

De

nm

ark

Ro

ma

nia

Fra

nce

Spain

Ge

rma

ny

Gre

ece

US

A

Ita

ly

Ch

ina

Bu

lga

ria

Po

land

UK

Cze

ch

Hu

ng

ary

Isra

el

Ma

lta

2020 Target

2005 Actual49%

42%39%

34%31% 30%

24% 23%22%

18% 18% 17% 17% 16% 16% 15% 15%13% 13%

10% 10%

1

(Renewables share of total energy consumption, including hydro)


Renewable Energy - National Targets

National governments in Europe, US and China have set aggressive targets for renewable energy by 2020

Source: IEA, European Commission(1) USA actuals for 2004, target for 2015


Solar Power Tower

Dish Stirling

Concentrated PV

Thin FilmCrystallized

Silicon

PV(photovaltaic)

CSP(ConcentratedSolar Power)

Experimental NicheCommon ExperimentalGrowing Traditional

high concentration lenses or mirrors to focus sunlight onto miniature solar cells

a solar cell that is made by depositing one or more thin layers (thin film) of photovoltaic material on a substrate

A solar cell or converts light directly into electricity by the photovoltaic effect

Parabolic Trough

Fresnel Reflector

special mirrors shaped as linearparabolas are used which reflect the sun rays on to an absorption tube

circular array of large individually tracking mirrors Heliostats are used to concentrate sunlight on toa focal point mounted at the top of a tower

dish-shaped mirror is used to reflect sunlight on to a central collectinglocation which is a focal point of the dish

line focus system which uses rows of flat mirrors in which solar radiation is concentrated on an elevated inverted linear absorber

Niche

Source: Business Insights


Solar Energy Technologies


(MW)

1,2001,800

2,500

4,000

7,350

8,900

15,000

N/A

50%

39%

60%

84%

21%

69%

2004 2005 2006 2007 2008 2009 2010

Production

YoY Growth

China33%

Europe26%

Japan16%

Taiwan11%

Others14%


PV - Panel Production

Global PV Panel Production PV Panel Production by Country

Global solar PV production recorded a robust growth of 84% in 2008 driven by government incentives in Germany, Spain and the US

Although the US is a key market for solar PV, it was not a major manufacturer in 2008

Source: TFCO Research, Business Insights

(2008)


(GW)

0.1 1.3

5.0

10.4

16.1

0.1

0.4

0.9

1.2

1.8

0.7

2.2

3.3

3.9

5.1

1

4

9

16

23

1999 2004 2007 2008 2009

Others

North America

Europe

305

363

365

465

526

1,188

1,646

2,343

2,628

3,423

9,677

China

Belgium

France

Czech Republic

Korea

Italy

US

Other

Japan

Spain

Germany

(MW)


PV - Installed Capacity

Global PV Installed Capacity PV Installed Capacity by Country (2009)

The key driver for solar PV growth has been Europe’s strategic transition to renewable energy aimed at reducing carbon emissions

Top 10 countries accounted for ~90% of total Solar PV installed capacity in 2009




PV - Key Manufacturers


Japan

Crystalline PV

Germany

US

Thin Film

China

Taiwan

(2009)



Spanish Solar Market - Overview

General

Additional Solar Power Capacity

Electricity Generation Mix

Nat. Gas 30%

Nuclear 20%

Hydro 20%Wind 16%

Coal 6%

Oil 4%

Solar 2%

Biomass 2%

47 545

2,500

270 500 500 5001,199

1,955

4,715

6,173

13,841

11,578

9,865

2006 2007 2008 2009 2010 E 2011 E 2012 E

Spain

Europe

Spain is one of the leading countries in solar energy production

In 2004 the government removed economic barriers relating to the connection of renewable energy to the electricity grid

A Feed-in Tariff policy for large scale solar plants was adopted

In 2007 the first European solar power plant began operation in Spain

After the 2008 financial crisis, subsidies were drastically cut and a cap of 500MW per year was imposed for future increases in capacity

Total solar production capacity (2010): 4GW

Total solar energy production (2010): 6.9TWh (~2.7% of the country’s electricity demand)

Source: IDAE 2010; Goldman Sachs Global Investment Research

(2010)

(MW)



Spanish Solar Market - Regulation

Regulation History

Spanish government committed to achieving a target of 12% of primary energy from renewable sources by 2010 (in fact they have reached ~20% of energy production from renewable sources, with solar power accounting for ~2%)

In 2004, legislation (Royal Decree 436/2004) was enacted to encouraged the installation of solar power plants by offering high guaranteed feed-in tariffs (FiTs)

In 2008, specific legislation (Royal Decree 1578/2008) was updated to include Photovoltaic (PV) power plants

Following a rapid increase in solar power plants installations, the government imposed a limit on additional capacity growth of 500MW per year

Recent Developments

In Aug. 2010 the government announced cuts of 5%-45% in the FiT for new PV solar plants

In 2010, new legislation (Royal Decrees 1565/2010 and 14/2010) enacted the following changes:

• The reduction of the FiT for new projects

• Limits on the duration of current projects

• Imposed a new tax for use of transmission and distribution lines

• Limits on the electricity production guaranteed to be purchased at the FiT


Agenda

21

22

23



Valuation

24 Appendix


Valuation

Methodology

This valuation was performed in accordance with International Accounting Standard 36 -

“Impairment of Assets” (hereinafter “IAS36").

IAS36 requires that the value of an asset be accessed annually or whenever there is a sign

indicating significant depreciation of the asset. In such events the asset must undergo a

valuation process which should be compared to its book value. If the book value of the asset exceeds the resulting valuation, an impairment loss is recognized.

The value of the asset shall be the greater of two amounts:

• The “fair value less cost to sell”.

• The “value in use” of the asset.

“Fair value less cost to sell” represents the amount received from the sale of an asset at an

acceptable market price less the costs incurred by the transaction.

“Value in use” is the present value of future cash flows expected to be derived from the asset.

Due to CNE’s notification of the provisional suspension of the Feed in Tariff for which Olmeda

is eligible, there has been an event of significant impact on the expected future cash flows derived from the subject of this valuation.

The calculations and assumptions, presented herein, were performed in order to reflect the

“value in use” as defined under IAS36.

Additionally the option to dismantle and sell the PV plant in parts was considered, with the

resulting net value corresponding to the “fair value less cost to sell”.


Valuation

Methodology (Cont.)

Valuation Methods:

• Discounted Cash Flow (DCF) - Value of asset equated to present value of expected future cash flows

generated by the asset.

• Comparable-based - Value of asset derived from pricing of 'comparable' assets generally calculated by

multipliers of relevant financial figures (i.e. earnings, cash flows, book value or sales).

• Net Asset Value (NAV) – Value of asset equated to the sum the net value of its components.

This work utilizes the DCF valuation method, which is most appropriate for this situation.

The valuation is calculated in Euros, in nominal terms (in gross terms) for the purpose of asset impairment examination (according to IAS 36) of “Olmeda” as of 31/03/2011, based on the financial reports of 2010 and Q1/2011.

Theoretically, the same results should be obtained by discounting pre-tax cash flows at a pre-tax discount rate or post-tax cash flows at a post-tax discount rate, as long as the post-tax discount rate is properly adjusted for the future tax expenses. This valuation was based on the latter. The pre-tax discount rate may be calculated as the value which equates in present value terms pre-tax cash flows with the valuation.

The current complex regulatory situation with the Spanish authority has created a high level of uncertainty regarding the future results of the company, and the corresponding cash flows.

Following current accepted valuation methodologies for cases where likely scenarios for future cash flows are highly divergent, the approach taken in this report is the scenario based methodology.


Valuation

Methodology (Cont.)

The scenario based approach is widely accepted in the relevant professional literature as the favorable alternative for the valuation of assets under high uncertainty:

Source: Damodaran, Copland, Koller & Murrin, McKinsey & Company, Inc.

“Uncertainty is the hardest part of valuing high-growth technology companies, and the use of probability –weighted scenarios is a simple and straightforward way to deal with it.”

“We capture cash-flow risk through the probability-weighting of scenarios, so that the cost of equity applied to each of them shouldn’t include any extra premium; it can consist of the risk-free rate, an industry-average beta, and general market risk premium.”

(“Valuation- Measuring and Managing the Value of Companies” p. 315-325, by Copland, Koller & Murrin,

McKinsey & Company, Inc.)

“The expected cash flows that we use to value risky assets can be estimated in one or two ways. They can represent a probability-weighted average of cash flows under all possible scenarios or they can be the cash flows under the most likely scenario. While the former is the more precise measure, it is seldom used simply because it requires far more information to compile.”

(“Probabilistic Approaches: Scenario Analysis, Decision Trees and Simulations” by Aswath Damodaran.)


Valuation

Methodology (Cont.)

In an attempt to minimize the possibility of deviation in determining the additional risk imposed by regulatory uncertainty, this valuation is based on expected cash flows that may result from the different possible regulatory decision outcomes (scenarios).

The scenarios were defined by the different Feed in Tariffs that the company may receive as a result of the Ministry of Energy’s decision as well as other changes that are derived from the decision about the tariff:

• “Original Feed-in Tariff” Scenario: Assumes that “the Partnership” will be able to restore the park’s previous status under Royal Decree 661/2007 and thus receive the corresponding higher FiT

• “New Feed-in Tariff” Scenario: Assumes that “the Partnership” is not granted the FiT it previously enjoyed, thus it is required to apply and receives the lower FiT currently offered (2011), which is still above market prices

• “No Feed-in Tariff” Scenario: Assumes a situation in which “the Partnership” is not granted any FiT and must sell all of the electricity produced at free market rates

Each scenario was assigned a probability of occurrence - the probabilities were defined based on the expert opinion of the company’s lawyers about the likelihood of the legal process decision.

The final valuation is calculated based on the weighted average of the DCF of each scenario weighted by the appropriate probability.


Valuation

WACC - Methodology

Weighted Average Cost of Capital - represents the weighted cost of the capital used to finance a company’s activity.

The WACC incorporates the cost of the capital provided by each funding source according to the relative weight of it in the total funding.

It is customary to divide the WACC into two factors: the cost of debt (external capital) and the cost of equity (own capital).

Equity Weight in total capital

Debt Weight in total capital

Tax Shield on financing expenses

Cost of Debt: return on capital required by third party lenders

Cost of Equity: return on capital required by stockholders

CAPM

WACC

Risk Free Rate - generally associated with Government long-term bonds

Risk Factor representing the relation of returns with theseof the financial market as a whole

Market Risk Premium


Parameter Value

Cost of Equity (Ke) 12.4%

Cost of Debt (Kd) 8.5%

D/(D+E) 35.2%

Tax 25%

WACC 10.3%

Valuation

WACC Calculation

Cost of Equity WACC

Source: Damodaran, Bloomberg, Company Reports(1) Sunflower’s leverage ratio stands around 30% as of May, 2011

Parameter Value

Risk Free Rate (Rf) 5.3%

Market Beta (Unlevered) 0.64

Levered Beta 0.90

Market Risk Premium 5.2%

Liquidity/Small Cap Premium 2.5%

Cost of Equity (Ke) 12.4%


Valuation

Main Assumptions

Source: “Economic update Spain”, Rabobank Economic Research Department, May 2011, Inflation.eu, Company’s documents(1) 2011 - 2.75%; 2012 - 1.25%; Long term - 2.87%

Electricity Production

Expected electricity production is based on “the Partnership’s” assumptions, which are derived from

production in previous years and along with the opinions of their technical advisors

Annual degradation of ~0.5% is expected due to production line exhaustion. This assumption is in-line with a

benchmark of similar PV projects

Electricity Tariff

The electricity generated is sold according to two separate tariffs

• Feed in Tariff (guaranteed rate) are provided up to a defined quota

• The remainder is sold at free market rates negotiated daily

With regards to Olmeda Park, the Feed in Tariff (FiT) quota was calculated by "the Partnership" based on

Royal Decree 661/2007 and the amendments made in RD 165/2010 and RD 14/2010 and the plant’s specific

characteristics (size and location)

Currently, there is uncertainty regarding the Feed in Tariff rate for Olmeda Park as it is currently under review.

Each of the scenario in the valuation model assumes a different outcome of the Feed in Tariff review

For the purposes of the model, free market electricity rates follow the technical advisors’ estimations relying

on historical average market prices

Electricity tariffs are expected to grow during the model period. We assumed that it will grow with inflation,

thus adjustments to inflation were made according to relevant inflation forecast1

For Feed in Tariffs, the adjustment is reduced by 0.25 percentage points in 2011-2012 and 0.5 percentage

points for each following year, in accordance with Royal Decree 661/2007

All of the scenarios consider revenues based on the original FiT until April 2011


Valuation

Main Assumptions (Cont.)

Source: Company

Expenses

All expense items are derived from 2011 expected values adjusted annually based on each item’s specific characteristics

Power transmission expenses - Estimated at €0.01 per kWh for 2011 and are expected to decrease according management expectation regarding a contract with a new supplier as of the beginning of 2012

Land lease, insurance, O&M and supplier bonus expenses - Calculated based on information provided by "the Partnership", in accordance with current supplier contracts. These expenses items vary per scenario

Insurance expenses - Based on 2011 expected values and are assumed to remain constant over time due as on the one hand, prices are increasing due to inflation, and on the other hand insurance premiums are expected to decrease

G&A expenses - Assumed to be €10,000 in 2011, with annual growth equal to inflation

Tax

Tax expenses were calculated based on tax rate of 25%, which is the appropriate tax rate for "the Partnership"

"The Partnership" enjoys several tax benefits:

• Accelerated depreciation of assets

• Tax benefits stemming from environmental investments

Impact of tax benefits are calculated in accordance with the views of "the Partnership“

“Fair Value Less Cost to Sell”

According to “the Partnership’s” technical consultants, the net value of the park’s equipment, sold in parts is ~€7M (see Appendix G). This value was measured against the “value in use” under each scenario with the greater of the two considered in the total value calculation.


Valuation

Main Assumptions - Scenarios

“Original FiT” Scenario “New FiT” Scenario “No FiT” Scenario This scenario assumes no Feed-in Tariff

is awarded to “the Partnership”, thus the whole of the electricity produced is sold at the free market rateO&M cost - under this scenario, the

current model would lead to values lower than acceptable by suppliers. Therefore, the model assumes costs at €30k per MW (maintenance only) , based on company’s assumption and in-line with market This scenario doesn’t have regulatory

limitations about the project duration and was modeled considering 30 years of activity

This scenario assumes that “the Partnership” will be awarded a new FiT in accordance with RD 1578/2008, equal to the current rate at the time of approval –The current rate now stands at €0.13 and decreases by 2.6% per quarterA delay period (time to recover tariff) is

incorporated to reflect the time until the new FiT is set - during this period electricity is sold at the market rateO&M cost - under this scenario, the

current model would lead to values lower than acceptable by suppliers. Therefore, the model assumes fixed costs of €30k per MW (maintenance only) , based on company’s assumption and in-line with market prices Based on the amendment to RD

1578/2008, the project will be eligible for the FiT for 25 years

This scenario assumes the full restoration of the originally applied FiT, according to Royal Decree 661/2007Under this scenario, any delay in

restoring the tariff will be compensated retroactive in a manner that compensates for the timing of the paymentsO&M expenses (including insurance and

land lease) are priced at 10% of revenues after transmission costs in 2011 and are expected to be reduced to 8% in 2012 Based on the amendment to Royal

Decree 14/2010, the project will be eligible for the FiT for 28 more years after 2011 (for a total of 30 years)

Parameter Value

Feed-in Tariff (2011) € 0.4756

Market Tariff (2011) € 0.0400

Time to recover tariff (months) 0

Project Duration (years, from 2011) 28

Feed-in Tariff Duration (years, from 2011) 28

Maintenance Costs (2011) 10%

Parameter Value





Feed-in Tariff Duration (years) 25

Maintenance Costs (2011) € 180,000

Parameter Value

Feed-in Tariff (2011) N/R


Time to recover tariff (months) N/R


Feed-in Tariff Duration (years) N/R



Valuation

Valuation Results - “Original FiT” Scenario

Key Results Forecast1

Main AssumptionsValuation

(1) Detailed Cash flows are presented in Appendix C; (2) Profit Before Taxes after accelerated depreciation, not accounting depreciation

Original Feed-In Tariff (€, '000) Q2-Q4/2011 2012 2013 2014 2015 2020 2030

AC kWh Produced 8,161,728 10,325,715 10,274,087 10,222,716 10,171,603 9,919,843 9,434,863

Revenues 2,628 3,772 3,799 4,507 4,588 5,147 6,476

Operating Costs 328 334 336 392 398 438 526

EBITDA 2,300 3,438 3,463 4,115 4,190 4,709 5,950

Profit Before Taxes (896) (824) (799) (147) (72) 4,709 5,950

Project CF 2,296 3,433 3,458 4,110 4,185 3,938 4,458

NPV (31/3/2011) 38,419

Parameter Value





Feed-in Tariff Duration (years, from 2011) 28

Maintenance Costs (2011) 10%

2

(€, '000)


Valuation

Valuation Results - “New FiT” Scenario




New Feed-In Tariff (€, '000) Q2-Q4/2011 2012 2013 2014 2015 2020 2030

AC kWh Produced 8,161,728 10,325,715 10,274,087 10,222,716 10,171,603 9,919,843 9,434,863

Revenues 813 1,043 1,049 1,183 1,202 1,341 1,665

Operating Costs 276 277 280 284 289 323 402

EBITDA 537 766 769 899 914 1,017 1,264

Profit Before Taxes (2,659) (3,496) (3,493) (3,363) (3,348) 1,017 1,264

Project CF 533 761 764 894 908 1,012 1,259

NPV (31/3/2011) 9,074

Parameter Value





Feed-in Tariff Duration (years) 25


(€, '000)

2


No Feed-In Tariff (€, '000) Q2-Q4/2011 2012 2013 2014 2015 2020 2030

AC kWh Produced 8,161,728 10,325,715 10,274,087 10,222,716 10,171,603 9,919,843 9,434,863

Revenues 813 424 428 434 442 496 626

Operating Costs 276 277 280 284 289 324 402

EBITDA 537 147 148 150 152 172 224

Profit Before Taxes (2,659) (4,115) (4,114) (4,112) (4,109) 172 224

Project CF 533 142 143 144 147 167 219

Valuation

Valuation Results - “No FiT” Scenario



Parameter Value

Feed-in Tariff (2011) N/R


Time to recover tariff (months) N/R


Feed-in Tariff Duration (years) N/R



2

"Value in Use" NPV (31/3/2011) 2,043

Dismantlement Net Value 7,000

NPV (31/3/2011) 7,000

(€, '000)


Valuation

Scenario Based Valuation - Summary

Scenario Probability Valuation Summary

The probability of the scenarios described was calculated based on the expert opinion of the company’s lawyers in Spain (see Appendix E).

The lawyers estimated the likelihood of recovering the original Feed-in Tariff to be “HIGHLY PROBABLE”.

After reviewing innumerous interpretations of this term, we considered it to be equivalent to about 75% probability (see Appendix F).

In addition, we estimate a probability of 15% for the scenario in a new FiT is imposed and of 10% for the case in which no FiT is approved. These are conservative estimations, based on conversations with the company’s legal advisors and management.

Valuation Probability

"Original FiT" € 38,419 75%

"New FiT" € 9,074 15%

"No FiT" € 7,000 10%

Total

Valuation€ 30,875

This paper estimates the value of Olmeda Park as of 31 March, 2011 at € 30,875k

(€, '000)


Valuation

Sensitivity Analysis

WACC

Regulatory Influence

Scenario Probabilities

A Sensitivity analysis was performed in order to examine the impact of variations in the WACC, Scenario Probabilities, and Regulatory influence on the total value of Olmeda Park

WACC Valuation

8.7% € 35,281

9.0% € 34,316

9.3% € 33,395

9.7% € 32,516

10.0% € 31,677

10.3% € 30,875

10.6% € 30,109

11.0% € 29,376

11.3% € 28,674

11.6% € 28,002

11.9% € 27,358

0.0020 0.0010 0.0005 0.0001 0.0000

-1.0% € 30,495 € 30,581 € 30,624 € 30,662 € 30,667

-0.5% € 30,621 € 30,707 € 30,750 € 30,788 € 30,792

0.0% € 30,747 € 30,832 € 30,875 € 30,914 € 30,918

0.5% € 30,873 € 30,958 € 31,001 € 31,040 € 31,044

1.0% € 30,998 € 31,084 € 31,127 € 31,165 € 31,170

Transmission Tax (€/kWh)

Gu

ara

nte

ed

Pu

rch

ase

"Original FiT" Valuation

65.00% € 27,941

70.0% € 29,408

75.0% € 30,875

80.0% € 32,343

85.00% € 33,810

(€, '000) (€, '000)

(€, '000)


Valuation

Notes on Previous Valuation

According to The Israel Securities Authority standards, a valuation shall include details pertaining to previous

valuations that were performed regarding the asset in question

Sunflower Gmbh & CO.kg has received a valuation of the Olmeda Park conducted by Giza-Singer-Even Ltd. In

March 2011. The valuation was in the capacity of impairment testing as of 31 December, 2010 and was

required due to legislative changes in Spain (Royal Decrees 14/2010 and 1565/2010)

Below is a comparison of key results in the two valuations:

There is a minor difference in the WACC assumed (see Appendix D for further clarification)

There is a difference of over 20% in the value of Olmeda Park as calculated in the two valuations

This dissimilarity is a result of changes in the park’s status (due to the provisional suspension of the FiT) that

occurred in the beginning of May 2011, and created uncertainty as to the future FiT and cash flow of the park

Our model was designed to represent this uncertainty through the use of the scenario approach

The “Original FiT” scenario in our model is most similar to the Giza-Singer-Even valuation, as it incorporates

the assumption made by Giza-Singer-Even that Olmeda Park shall continue to be eligible for the historic FiT

The difference between the value calculated under the “Original FiT” scenario, and the one reflected in the

Giza-Singer-Even valuation is minimal (under 2%) and is a result of changes in the inflation rate1 expected in

Spain for 2011 and 2012 (updated estimations)

(1) As of Jan.2011, expected inflation in Spain for 2011 was 1% ; updated data from May/2011 forecasts inflation rates in Spain for 2011 at 2.75%-4%

(€, '000) Giza Trigger-Foresight

WACC 10.23% 10.31%

Value € 37,769 € 30,875

Source: “Economic update Spain”, Rabobank Economic Research Department, May 2011, Inflation.eu,


Agenda

21

22

23



Valuation

24 Appendix


Appendix

Appendix A - 63 SPVs

1 OLMEDA SONNIG 1, S.L. 17 OLMEDA SONNIG 17 S.L. 33 OLMEDA SONNIG 33 S.L. 49 OLMEDA SONNIG 49, S.L.

2 OLMEDA SONNIG 2 S.L. 18 OLMEDA SONNIG 18 S.L. 34 OLMEDA SONNIG 34 S.L. 50 OLMEDA SONNIG 50, S.L.

3 OLMEDA SONNIG 3 S.L. 19 OLMEDA SONNIG 19 S.L. 35 OLMEDA SONNIG 35 S.L. 51 OLMEDA SONNIG 51, S.L.

4 OLMEDA SONNIG 4 S.L. 20 OLMEDA SONNIG 20 S.L. 36 OLMEDA SONNIG 36 S.L. 52 LLANOS SOLEIL 19, S.L.U.





9 OLMEDA SONNIG 9 S.L. 25 OLMEDA SONNIG 25 S.L. 41 OLMEDA SONNIG 41, S.L. 57 LLANOS SOLEIL 24, S.L.U.







16 OLMEDA SONNIG 16 S.L. 32 OLMEDA SONNIG 32 S.L. 48 OLMEDA SONNIG 48, S.L.

Source: Company Documents


Appendix

Appendix B - Comparable Companies

Due to "the Partnership's” distinctive characteristics, the choice of the suitable peer group in the same environment with similar operational structure posed some difficulty.

The search for peer companies was extended to adjacent markets and the peer group is based on relevant publicly traded companies in the solar power market.

The peer group was analyzed for the calculation of the market beta (unlevered) and for comparison to the company’s long term leverage levels.

Source: Damodaran, Bloomberg

Company Beta(L) Beta(U) D/EV

Alter Energy AG 0.92 0.92 0%

Conergy AG 0.93 0.53 61%

EDP Renovaveis 0.83 0.53 45%

Iberdrola Renovables SA 0.63 0.44 37%

Phoenix Solar AG 0.95 0.78 23%

Sechilienne-Sidec 0.87 0.48 50%

Solar Millenium 0.79 0.79 0%

Solaria Energia 1.18 0.65 45%

Average 0.89 0.64 35%


Appendix

Appendix C - Valuation Results

“Original FiT” Scenario

(EUR, '000)

Inflation Rate

Accumulated Inflation

Production:

AC kWh Produced

Guaranteed Purchase

Excess Production

Revenues

Garanteed Price

Market Price

Total Revenues

Costs

Energy Cost per kWh

Energy Cost

Rent cost

Insurance

Maintenance

Supplier Bonnus

G&A

Total Operating Costs

EBITDA

New Energy Tax

Depreciation for Tax

Profit Before Taxes (tax calculation)

Accumulated Profit Before Taxes

Tax Credit for environmental investments

Use of Tax Credit

Nominal Tax

Effective Tax

Project CF

Q2-Q4/2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

2.8% 1.3% 1.8% 2.3% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9%

2.8% 4.0% 5.9% 8.4% 11.5% 14.7% 18.0% 21.4% 24.8% 28.4%

8,161,728 10,325,715 10,274,087 10,222,716 10,171,603 10,120,745 10,070,141 10,019,790 9,969,691 9,919,843

5,284,125 7,500,000 7,500,000 8,952,000 8,952,000 8,952,000 8,952,000 8,952,000 8,952,000 8,952,000

2,877,603 2,825,715 2,774,087 1,270,716 1,219,603 1,168,745 1,118,141 1,067,790 1,017,691 967,843

0.476 0.487 0.491 0.497 0.507 0.519 0.531 0.543 0.556 0.570

0.040 0.041 0.042 0.042 0.043 0.045 0.046 0.047 0.049 0.050

2,628 3,772 3,799 4,507 4,588 4,695 4,804 4,915 5,030 5,147

0.0100 0.00125 0.00125 0.00125 0.00125 0.00125 0.00125 0.00125 0.00125 0.00125

81.62 12.91 12.84 12.78 12.71 12.65 12.59 12.52 12.46 12.40

12.75 17.47 17.69 18.00 18.42 18.95 19.49 20.05 20.63 21.22

35.25 47.00 47.00 47.00 47.00 47.00 47.00 47.00 47.00 47.00

187.51 242.06 243.47 299.07 304.11 310.88 317.79 324.85 332.07 339.44

3.44 4.56 4.62 4.71 4.82 4.96 5.11 5.26 5.42 5.57

7.50 10.28 10.40 10.59 10.84 11.15 11.47 11.80 12.14 12.48

328 334 336 392 398 406 413 421 430 438

2,300 3,438 3,463 4,115 4,190 4,289 4,390 4,494 4,600 4,709

88% 91% 91% 91% 91% 91% 91% 91% 91% 91%

4.1 5.2 5.1 5.1 5.1 5.1 5.0 5.0 5.0 5.0

3,196 4,262 4,262 4,262 4,262 4,262 4,262 4,262 902 0

(896) (824) (799) (147) (72) 27 128 232 3,698 4,709

(896) (1,720) (2,519) (2,666) (2,738) (2,711) (2,582) (2,350) 1,348 6,056

1,705 1,705 1,705 1,705 1,705 1,705 1,705 1,705 1,705 1,587

0 0 0 0 0 0 0 0 118 412

0 0 0 0 0 0 0 0 337 1,177

0 0 0 0 0 0 0 0 219 765

2,296 3,433 3,458 4,110 4,185 4,284 4,385 4,489 4,376 3,938


2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9%

32.1% 35.9% 39.8% 43.8% 47.9% 52.2% 56.5% 61.0% 65.7% 70.4%

9,870,244 9,820,892 9,771,788 9,722,929 9,674,314 9,625,943 9,577,813 9,529,924 9,482,274 9,434,863

8,952,000 8,952,000 8,952,000 8,952,000 8,952,000 8,952,000 8,952,000 8,952,000 8,952,000 8,952,000

918,244 868,892 819,788 770,929 722,314 673,943 625,813 577,924 530,274 482,863

0.583 0.597 0.611 0.625 0.640 0.655 0.671 0.687 0.703 0.720

0.051 0.053 0.054 0.056 0.058 0.059 0.061 0.063 0.064 0.066

5,266 5,389 5,514 5,642 5,773 5,908 6,045 6,185 6,329 6,476

0.00125 0.00125 0.00125 0.00125 0.00125 0.00125 0.00125 0.00125 0.00125 0.00125

12.34 12.28 12.21 12.15 12.09 12.03 11.97 11.91 11.85 11.79

21.83 22.46 23.10 23.76 24.45 25.15 25.87 26.61 27.38 28.16

47.00 47.00 47.00 47.00 47.00 47.00 47.00 47.00 47.00 47.00

346.97 354.67 362.53 370.56 378.77 387.15 395.71 404.46 413.39 422.52

5.74 5.91 6.08 6.26 5.19 3.94 2.62 1.23 0.00 0.00

12.84 13.21 13.59 13.98 14.38 14.79 15.22 15.65 16.10 16.57

447 456 465 474 482 490 498 507 516 526

4,820 4,933 5,050 5,169 5,292 5,418 5,546 5,678 5,813 5,950

92% 92% 92% 92% 92% 92% 92% 92% 92% 92%

4.9 4.9 4.9 4.9 4.8 4.8 4.8 4.8 4.7 4.7

0 0 0 0 0 0 0 0 0 0

4,820 4,933 5,050 5,169 5,292 5,418 5,546 5,678 5,813 5,950

10,876 15,809 20,859 26,028 31,319 36,737 42,283 47,962 53,775 59,725

1,175 753 321 0 0 0 0 0 0 0

422 432 321 0 0 0 0 0 0 0

1,205 1,233 1,262 1,292 1,323 1,354 1,387 1,420 1,453 1,488

783 802 941 1,292 1,323 1,354 1,387 1,420 1,453 1,488

4,032 4,127 4,104 3,872 3,964 4,058 4,155 4,254 4,355 4,458

Appendix

Appendix C - Valuation Results (Cont.)


(EUR, '000)

Inflation Rate


Production:

AC kWh Produced

Guaranteed Purchase

Excess Production

Revenues

Garanteed Price

Market Price

Total Revenues

Costs

Energy Cost per kWh

Energy Cost

Rent cost

Insurance

Maintenance

Supplier Bonnus

G&A


EBITDA

New Energy Tax





Use of Tax Credit

Nominal Tax

Effective Tax

Project CF


Appendix



(EUR, '000)

Inflation Rate


Production:

AC kWh Produced

Guaranteed Purchase

Excess Production

Revenues

Garanteed Price

Market Price

Total Revenues

Costs

Energy Cost per kWh

Energy Cost

Rent cost

Insurance

Maintenance

Supplier Bonnus

G&A


EBITDA

New Energy Tax





Use of Tax Credit

Nominal Tax

Effective Tax

Project CF

2031 2032 2033 2034 2035 2036 2037 2038

2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9%

75.3% 80.3% 85.5% 90.8% 96.3% 101.9% 107.7% 113.7%

9,387,689 9,340,750 9,294,046 9,247,576 9,201,338 9,155,332 9,109,555 9,064,007

8,952,000 8,952,000 8,952,000 8,952,000 8,952,000 8,952,000 8,952,000 8,952,000

435,689 388,750 342,046 295,576 249,338 203,332 157,555 112,007

0.737 0.754 0.772 0.791 0.809 0.828 0.848 0.868

0.068 0.070 0.072 0.074 0.076 0.079 0.081 0.083

6,627 6,780 6,938 7,099 7,264 7,432 7,605 7,781

0.00125 0.00125 0.00125 0.00125 0.00125 0.00125 0.00125 0.00125

11.73 11.68 11.62 11.56 11.50 11.44 11.39 11.33

28.97 29.80 30.66 31.54 32.44 33.37 34.33 35.32

47.00 47.00 47.00 47.00 47.00 47.00 47.00 47.00

431.84 441.36 451.09 461.03 471.18 481.55 492.13 502.95

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

17.04 17.53 18.03 18.55 19.08 19.63 20.19 20.77

537 547 558 570 581 593 605 617

6,090 6,233 6,379 6,529 6,683 6,839 7,000 7,164

92% 92% 92% 92% 92% 92% 92% 92%

4.7 4.7 4.6 4.6 4.6 4.6 4.6 4.5

0 0 0 0 0 0 0 0

6,090 6,233 6,379 6,529 6,683 6,839 7,000 7,164

65,815 72,048 78,427 84,957 91,639 98,479 105,479 112,643

0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0

1,522 1,558 1,595 1,632 1,671 1,710 1,750 1,791

1,522 1,558 1,595 1,632 1,671 1,710 1,750 1,791

4,563 4,670 4,780 4,892 5,007 5,125 5,245 5,369


Q2-Q4/2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

2.8% 1.3% 1.8% 2.3% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9%

2.8% 4.0% 5.9% 8.4% 11.5% 14.7% 18.0% 21.4% 24.8% 28.4%

8,161,728 10,325,715 10,274,087 10,222,716 10,171,603 10,120,745 10,070,141 10,019,790 9,969,691 9,919,843

1,115,891 7,500,000 7,500,000 8,952,000 8,952,000 8,952,000 8,952,000 8,952,000 8,952,000 8,952,000

7,045,837 2,825,715 2,774,087 1,270,716 1,219,603 1,168,745 1,118,141 1,067,790 1,017,691 967,843

0.476 0.124 0.124 0.126 0.128 0.131 0.135 0.138 0.141 0.144

0.040 0.041 0.042 0.042 0.043 0.045 0.046 0.047 0.049 0.050

813 1,043 1,049 1,183 1,202 1,229 1,256 1,284 1,312 1,341

0.0100 0.00125 0.00125 0.00125 0.00125 0.00125 0.00125 0.00125 0.00125 0.00125

81.62 12.91 12.84 12.78 12.71 12.65 12.59 12.52 12.46 12.40

12.75 17.47 17.69 18.00 18.42 18.95 19.49 20.05 20.63 21.22

35.25 47.00 47.00 47.00 47.00 47.00 47.00 47.00 47.00 47.00

135.00 184.95 187.26 190.61 195.06 200.65 206.41 212.34 218.43 224.70

3.44 4.56 4.62 4.71 4.82 4.96 5.11 5.26 5.42 5.57

7.50 10.28 10.40 10.59 10.84 11.15 11.47 11.80 12.14 12.48

276 277 280 284 289 295 302 309 316 323

537 766 769 899 914 933 954 975 996 1,017

66% 73% 73% 76% 76% 76% 76% 76% 76% 76%

4.1 5.2 5.1 5.1 5.1 5.1 5.0 5.0 5.0 5.0

3,196 4,262 4,262 4,262 4,262 4,262 4,262 4,262 902 0

(2,659) (3,496) (3,493) (3,363) (3,348) (3,328) (3,308) (3,287) 94 1,017

(2,659) (6,156) (9,648) (13,011) (16,360) (19,688) (22,996) (26,283) (26,189) (25,172)

1,705 1,705 1,705 1,705 1,705 1,705 1,705 1,705 1,705 1,705

0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0

533 761 764 894 908 928 949 970 991 1,012

Appendix


“New FiT” Scenario

(EUR, '000)

Inflation Rate


Production:

AC kWh Produced

Guaranteed Purchase

Excess Production

Revenues

Garanteed Price

Market Price

Total Revenues

Costs

Energy Cost per kWh

Energy Cost

Rent cost

Insurance

Maintenance

Supplier Bonnus

G&A


EBITDA

New Energy Tax





Use of Tax Credit

Nominal Tax

Effective Tax

Project CF


2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9%

32.1% 35.9% 39.8% 43.8% 47.9% 52.2% 56.5% 61.0% 65.7% 70.4%

9,870,244 9,820,892 9,771,788 9,722,929 9,674,314 9,625,943 9,577,813 9,529,924 9,482,274 9,434,863

8,952,000 8,952,000 8,952,000 8,952,000 8,952,000 8,952,000 8,952,000 8,952,000 8,952,000 8,952,000

918,244 868,892 819,788 770,929 722,314 673,943 625,813 577,924 530,274 482,863

0.148 0.151 0.155 0.159 0.162 0.166 0.170 0.174 0.178 0.182

0.051 0.053 0.054 0.056 0.058 0.059 0.061 0.063 0.064 0.066

1,370 1,400 1,431 1,462 1,494 1,527 1,561 1,595 1,630 1,665

0.00125 0.00125 0.00125 0.00125 0.00125 0.00125 0.00125 0.00125 0.00125 0.00125

12.34 12.28 12.21 12.15 12.09 12.03 11.97 11.91 11.85 11.79

21.83 22.46 23.10 23.76 24.45 25.15 25.87 26.61 27.38 28.16

47.00 47.00 47.00 47.00 47.00 47.00 47.00 47.00 47.00 47.00

231.15 237.78 244.61 251.63 258.85 266.28 273.92 281.78 289.87 298.19

5.74 5.91 6.08 6.26 5.19 3.94 2.62 1.23 0.00 0.00

12.84 13.21 13.59 13.98 14.38 14.79 15.22 15.65 16.10 16.57

331 339 347 355 362 369 377 384 392 402

1,039 1,062 1,084 1,108 1,132 1,158 1,184 1,211 1,238 1,264

76% 76% 76% 76% 76% 76% 76% 76% 76% 76%

4.9 4.9 4.9 4.9 4.8 4.8 4.8 4.8 4.7 4.7

0 0 0 0 0 0 0 0 0 0

1,039 1,062 1,084 1,108 1,132 1,158 1,184 1,211 1,238 1,264

(24,133) (23,071) (21,987) (20,879) (19,747) (18,589) (17,405) (16,194) (14,957) (13,693)

1,705 1,705 1,705 1,705 1,705 1,705 1,705 1,705 1,705 1,705

0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0

1,034 1,057 1,079 1,103 1,128 1,153 1,179 1,206 1,233 1,259

Appendix



(EUR, '000)

Inflation Rate


Production:

AC kWh Produced

Guaranteed Purchase

Excess Production

Revenues

Garanteed Price

Market Price

Total Revenues

Costs

Energy Cost per kWh

Energy Cost

Rent cost

Insurance

Maintenance

Supplier Bonnus

G&A


EBITDA

New Energy Tax





Use of Tax Credit

Nominal Tax

Effective Tax

Project CF


2031 2032 2033 2034 2035 2036

2.9% 2.9% 2.9% 2.9% 2.9% 2.9%

75.3% 80.3% 85.5% 90.8% 96.3% 101.9%

9,387,689 9,340,750 9,294,046 9,247,576 9,201,338 9,155,332

8,952,000 8,952,000 8,952,000 8,952,000 8,952,000 8,952,000

435,689 388,750 342,046 295,576 249,338 203,332

0.187 0.191 0.196 0.200 0.205 0.210

0.068 0.070 0.072 0.074 0.076 0.079

1,702 1,739 1,777 1,816 1,855 1,896

0.00125 0.00125 0.00125 0.00125 0.00125 0.00125

11.73 11.68 11.62 11.56 11.50 11.44

28.97 29.80 30.66 31.54 32.44 33.37

47.00 47.00 47.00 47.00 47.00 47.00

306.74 315.55 324.60 333.92 343.50 353.36

0.00 0.00 0.00 0.00 0.00 0.00

17.04 17.53 18.03 18.55 19.08 19.63

411 422 432 443 454 465

1,290 1,317 1,345 1,373 1,402 1,431

76% 76% 76% 76% 76% 75%

4.7 4.7 4.6 4.6 4.6 4.6

0 0 0 0 0 0

1,290 1,317 1,345 1,373 1,402 1,431

(12,403) (11,085) (9,740) (8,367) (6,965) (5,534)

1,705 1,705 1,705 1,705 1,705 1,705

0 0 0 0 0 0

0 0 0 0 0 0

0 0 0 0 0 0

1,286 1,313 1,340 1,369 1,397 1,426

Appendix



(EUR, '000)

Inflation Rate


Production:

AC kWh Produced

Guaranteed Purchase

Excess Production

Revenues

Garanteed Price

Market Price

Total Revenues

Costs

Energy Cost per kWh

Energy Cost

Rent cost

Insurance

Maintenance

Supplier Bonnus

G&A


EBITDA

New Energy Tax





Use of Tax Credit

Nominal Tax

Effective Tax

Project CF


Q2-Q4/2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

2.8% 1.3% 1.9% 2.4% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9%

2.8% 4.0% 6.0% 8.6% 11.7% 14.9% 18.2% 21.6% 25.1% 28.6%

8,161,728 10,325,715 10,274,087 10,222,716 10,171,603 10,120,745 10,070,141 10,019,790 9,969,691 9,919,843

1,115,891 0 0 0 0 0 0 0 0 0

7,045,837 10,325,715 10,274,087 10,222,716 10,171,603 10,120,745 10,070,141 10,019,790 9,969,691 9,919,843

0.476 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.0400 0.0411 0.0416 0.0424 0.0434 0.0447 0.0460 0.0473 0.0486 0.0500

813 424 428 434 442 452 463 474 485 496

0.0100 0.0013 0.0013 0.0013 0.0013 0.0013 0.0013 0.0013 0.0013 0.0013

81.62 12.91 12.84 12.78 12.71 12.65 12.59 12.52 12.46 12.40

12.75 17.47 17.69 18.03 18.45 18.98 19.53 20.09 20.67 21.26

35.25 47.00 47.00 47.00 47.00 47.00 47.00 47.00 47.00 47.00

135.00 184.95 187.26 190.86 195.40 201.01 206.78 212.71 218.82 225.10

3.44 4.56 4.62 4.71 4.83 4.97 5.12 5.27 5.43 5.58

7.50 10.28 10.40 10.60 10.86 11.17 11.49 11.82 12.16 12.51

276 277 280 284 289 296 302 309 317 324

537 147 148 150 152 156 160 164 168 172

66% 35% 35% 35% 35% 35% 35% 35% 35% 35%

4.1 5.2 5.1 5.1 5.1 5.1 5.0 5.0 5.0 5.0

3,196 4,262 4,262 4,262 4,262 4,262 4,262 4,262 902 0

(2,659) (4,115) (4,114) (4,112) (4,109) (4,106) (4,102) (4,098) (734) 172

(2,659) (6,774) (10,888) (15,001) (19,110) (23,216) (27,317) (31,415) (32,149) (31,976)

1,705 1,705 1,705 1,705 1,705 1,705 1,705 1,705 1,705 1,705

0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0

533 142 143 144 147 151 155 159 163 167

Appendix


“No FiT” Scenario

(EUR, '000)

Inflation Rate


Production:

AC kWh Produced

Guaranteed Purchase

Excess Production

Revenues

Garanteed Price

Market Price

Total Revenues

Costs

Energy Cost per kWh

Energy Cost

Rent cost

Insurance

Maintenance

Supplier Bonnus

G&A


EBITDA

New Energy Tax





Use of Tax Credit

Nominal Tax

Effective Tax

Project CF


2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9%

32.3% 36.1% 40.0% 44.1% 48.2% 52.4% 56.8% 61.3% 66.0% 70.7%

9,870,244 9,820,892 9,771,788 9,722,929 9,674,314 9,625,943 9,577,813 9,529,924 9,482,274 9,434,863

0 0 0 0 0 0 0 0 0 0

9,870,244 9,820,892 9,771,788 9,722,929 9,674,314 9,625,943 9,577,813 9,529,924 9,482,274 9,434,863

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.0515 0.0529 0.0545 0.0560 0.0576 0.0593 0.0610 0.0627 0.0645 0.0664

508 520 532 545 557 571 584 598 612 626

0.0013 0.0013 0.0013 0.0013 0.0013 0.0013 0.0013 0.0013 0.0013 0.0013

12.34 12.28 12.21 12.15 12.09 12.03 11.97 11.91 11.85 11.79

21.87 22.50 23.14 23.81 24.49 25.19 25.92 26.66 27.42 28.21

47.00 47.00 47.00 47.00 47.00 47.00 47.00 47.00 47.00 47.00

231.56 238.20 245.04 252.07 259.31 266.75 274.40 282.28 290.38 298.71

5.75 5.92 6.09 6.27 5.20 3.95 2.63 1.23 0.00 0.00

12.86 13.23 13.61 14.00 14.41 14.82 15.24 15.68 16.13 16.60

331 339 347 355 362 370 377 385 393 402

177 181 185 189 195 201 207 213 219 224

35% 35% 35% 35% 35% 35% 35% 36% 36% 36%

4.9 4.9 4.9 4.9 4.8 4.8 4.8 4.8 4.7 4.7

0 0 0 0 0 0 0 0 0 0

177 181 185 189 195 201 207 213 219 224

(31,800) (31,619) (31,434) (31,245) (31,050) (30,849) (30,642) (30,429) (30,210) (29,986)

1,705 1,705 1,705 1,705 1,705 1,705 1,705 1,705 1,705 1,705

0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0

172 176 180 184 190 196 202 208 214 219

Appendix



(EUR, '000)

Inflation Rate


Production:

AC kWh Produced

Guaranteed Purchase

Excess Production

Revenues

Garanteed Price

Market Price

Total Revenues

Costs

Energy Cost per kWh

Energy Cost

Rent cost

Insurance

Maintenance

Supplier Bonnus

G&A


EBITDA

New Energy Tax





Use of Tax Credit

Nominal Tax

Effective Tax

Project CF


Appendix



(EUR, '000)

Inflation Rate


Production:

AC kWh Produced

Guaranteed Purchase

Excess Production

Revenues

Garanteed Price

Market Price

Total Revenues

Costs

Energy Cost per kWh

Energy Cost

Rent cost

Insurance

Maintenance

Supplier Bonnus

G&A


EBITDA

New Energy Tax





Use of Tax Credit

Nominal Tax

Effective Tax

Project CF

2031 2032 2033 2034 2035 2036 2037 2038 2039 2040

2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9%

75.6% 80.7% 85.8% 91.2% 96.7% 102.3% 108.1% 114.1% 120.2% 126.5%

9,387,689 9,340,750 9,294,046 9,247,576 9,201,338 9,155,332 9,109,555 9,064,007 9,018,687 8,973,594

0 0 0 0 0 0 0 0 0 0

9,387,689 9,340,750 9,294,046 9,247,576 9,201,338 9,155,332 9,109,555 9,064,007 9,018,687 8,973,594

0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

0.0683 0.0702 0.0723 0.0743 0.0765 0.0787 0.0809 0.0832 0.0856 0.0881

641 656 672 687 704 720 737 755 772 790

0.0013 0.0013 0.0013 0.0013 0.0013 0.0013 0.0013 0.0013 0.0013 0.0013

11.73 11.68 11.62 11.56 11.50 11.44 11.39 11.33 11.27 11.22

29.02 29.85 30.71 31.59 32.50 33.43 34.39 35.38 36.39 37.44

47.00 47.00 47.00 47.00 47.00 47.00 47.00 47.00 47.00 47.00

307.29 316.11 325.18 334.51 344.11 353.99 364.15 374.60 385.35 396.41

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

17.07 17.56 18.07 18.58 19.12 19.67 20.23 20.81 21.41 22.02

412 422 433 443 454 466 477 489 501 514

229 234 239 244 249 255 260 265 271 276

36% 36% 36% 36% 35% 35% 35% 35% 35% 35%

4.7 4.7 4.6 4.6 4.6 4.6 4.6 4.5 4.5 4.5

0 0 0 0 0 0 0 0 0 0

229 234 239 244 249 255 260 265 271 276

(29,757) (29,523) (29,284) (29,040) (28,790) (28,536) (28,276) (28,010) (27,739) (27,463)

1,705 1,705 1,705 1,705 1,705 1,705 1,705 1,705 1,705 1,705

0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0

224 229 234 240 245 250 255 261 266 272


Appendix

Appendix D - WACC Comparison

Source: Damodaran, Bloomberg

Parameter Giza Trigger-Foresight Remarks

Risk Free Rate (Rf) 1.7% 5.3%

Previous model was based on long-term US Government bond yields in real

terms adjusted for inflation, while the present model is based on long-term

Spanish Government bond yields in nominal terms.

Market Beta (Unlevered) 0.67 0.64 Different set of comparable companies.

D/(D+E) 34.6% 35.2% Different set of comparable companies.

Market Risk Premium 5.4% 5.2%

Previous model was based on the equity risk premium for the Spanish market,

while this model assumes the risk premium of a mature market (the country risk

premium is embedded in the risk free rate).

Other Risk Premiums 2.5% 2.5% Different assumptions of excess risk premium.

Cost of Equity 9.2% 12.4%Reflecting different assumptions in CAPM parameters.

Previous model was in real terms, while this model is in nominal terms.

Cost of Debt 5.3% 8.5%This model is based on current debt data received from the company.

Previous model was in real terms, while this model is in nominal terms.

Tax 25% 25% No change.

WACC (Nominal Terms) 10.23% 10.31%


Appendix

Appendix E - Summary of Lawyers’ Opinion

“In summation, in our opinion, with the reservations derived from the absence of precedents and, therefore, of

administrative doctrine and case law in relation to RD 1003/2010, it is highly probable that the contestation of

the Client against the decisions to suspend payment of the subsidized feed in tariff on a precautionary basis and

that the tariff regime of RD 661/2007 were not applicable to the installations shall be finally accepted by the

Contentious-Administrative Courts and the installations shall be declared eligible to be paid the subsided feed in

tariff pursuant to the regime set under RD 661/2001 and consequently the tariff that was suspended/withheld

from the Client will be repaid together with interest thereon.”

“Although all documents required by the National Energy Commission were submitted and none of these

documents lead to conclude that the 63 installations were completed after 29 September 2008, the National

Commission’s Report on the 63 installations that comprise the plant, concluded that, apparently “installation of

the necessary equipment for energy production before 30 September 2008 has not been proven””

“*…+ the large amount of additional evidence filed (listed above), shows beyond doubt that the installations were

indeed fully completed (with the inverters and modules installed), and all these installations were connected to the

grid, all before 30 September 2008”

“All the supplementary documentation now filed in the administrative proceedings show that the 63 installations

were completed before 30 September 2008”

Source: Ramón y Cajal Abogados (Company’s lawyers)


Appendix

Appendix F - Translation of Worded Probabilities to Numeric Values

General

The estimation of the occurrence of a given event is generally described by a phrase or expression that offers a sense of probability.

These expressions (known as “Words of Estimative Probability -WEPs”) were originally developed by Sherman Kent in 1964, in relation to Intelligence Analysis.

The concept of WEPs was later expanded and is currently applied in other areas including accounting.

Evidence for Interpretation

A survey conducted among Portuguese statutory auditors revealed that they associate the following range of probability with the expression “Highly Probable”:

CIA research defines commonly accepted probability ranges for frequently used expressions:

The expression “Highly Probable” is commonly associated with the probability range of 75%-95%

We conservatively chose to associate it with a probability of 75%

Source: “Accounting for Uncertain Tax Positions”, America’s Community Bankers; “The Interpretation of Verbal Probability Expressions used in IAS/IFRS: Some Portuguese Evidence”, by C. Teixeira and A. Fialho Silva; CIA (www.cia.gov)

“In practice, the “probable" threshold is generally understood to

mean a 70 to 75 percent confidence level*…+”

(“Accounting for Uncertain Tax Positions”, America’s Community

Bankers)

Expression Mean Median Std Dev Min Max

Highly Probable 88% 90% 7% 70% 100%

Definition Probability (%)

Almost Certainly 80 - 100

Highly Probable 75 - 95

Probably 60 - 80

Unlikely 10 - 30

Some Slight Chance 0 - 20


Appendix

Appendix G - “Fair Value Less Cost to Sell” Analysis

Due to the uncertainty of the future FiT, it may be more profitable for “the Partnership” to dismantle the park and sell the parts.

According to “the Partnership’s” technical advisors there is a market for PV panels, transformers and other parts.

The following table summarizes the value obtained from selling the parts:

Source: Novatec Asesoria (Company’s technical consultants)

Parameter Value

Actual Price of PV Panels (€/Wp) 1.20

Plant Size (kWp) 6,986

Aproximate Net Value (€, '000) 7,000

Expected Net Income from Sale

of Parts (€/Wp)1.00

2011-05-30T22:29:14+0000IsaSig 4 Client

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