ElectroRoof TM Managing Energy Risk: Are You Ready for a Crisis? December 8, 2005 Barry Swenson Builder MCM Diversified.

ElectroRoof TM

Managing Energy Risk: Managing Energy Risk: Are You Ready for a Crisis?Are You Ready for a Crisis?

December 8, 2005

Barry Swenson Builder

MCM Diversified

ElectroRoof TM

A looming energy crisis

ElectroRoof TM

A looming energy crisis

ElectroRoof TM

A looming energy crisis

47%

17%

21%

12%1% 1%

California Energy Production

ElectroRoof TM

A looming energy crisis

Electricity Rates 2005 - 2015

??6%

10%

15%

ElectroRoof TM

Managing Energy RiskManaging Energy Risk

Energy crisis: the big picture

Risks to building developers and owners

Strategies for managing energy risk

The ElectroRoof solution

Proposed projects

ElectroRoof TM

Key drivers of rising electric rates

Growing demand

Tightening supply

Vulnerability to supply disruptions

ElectroRoof TM

Growing demand

OWN SUPPLY

DEMAND

ElectroRoof TM

Oil production is peaking

Source: ASPO

Oil production has peaked

Oil production can be increased

China 2003India

2004

US 1971

Australia 2000

Indonesia 1977

Canada 1973

Venezuela 1970

Argentina 1998

Ecudador 2004

Columbia 1999

Mexico 2002

Congo 2001

Libya 1970

Sudan 2005

UK 1999

Norway 2003

Uzbekistan 2003

ElectroRoof TM

Oil production is peaking

Source: ASPO

Oil production has peaked

Oil production can be increased

Brazil

Boliva

Russia

Nigeria

Algeria

Angola

ChadIran

Iraq

Saudi Arabia

KazakhstanAzerbaijan

ElectroRoof TM

?

01920 1960

World100

80

60

40

20

2000 2040

When will global production peak?

ElectroRoof TM

Vulnerability to supply disruption

Natural disasters?

Human error?

War?

ElectroRoof TM

Managing Energy RiskManaging Energy Risk

Energy crisis: the big picture

Risks to building developers and owners

Strategies for managing energy risk

The ElectroRoof solution

Proposed projects

ElectroRoof TM

Energy risks for developers and owners

Reduced income, resulting from:

• Tenant turnover

• Higher vacancy rates

• Increased operating expenses

Lower property values

ElectroRoof TM

Energy risk by type of building

Warehouse: 2-5 watts per square foot

Office Building: 5-10 watts per square foot

Low Risk Medium Risk

ElectroRoof TM

Energy risk by type of building

Manufacturing: 10-50 watts per square foot

Data Center: 50-100 watts per square foot

High Risk High Risk

ElectroRoof TM

Rising energy costs erode property values

Source: BOMA

22%

11% 67%NOI

Energy Costs

Other Operating Costs

ElectroRoof TM

Rising energy costs erode property values

Source: BOMA

22%

31%

48%NOI

Energy Costs

Other Operating Costs

ElectroRoof TM

Property value based on income capitalization:

Annual expected gross revenue $ 3,000,000Less operating expenses - 1,000,000

Net operating income (NOI) $ 2,000,000

Capitalization rate (Ro) 0.085

VALUE (NOI/ Ro) $ 23,529,412

Rising energy costs erode property values

ElectroRoof TM

After 10 years, assuming a 10% annual increase in electric rates:

Annual expected gross revenue $ 3,000,000Less operating expenses - 1,000,000 1,778,122

Net operating income (NOI) $ 2,000,000 1,221,878Capitalization rate (Ro) 0.085

VALUE (NOI/ Ro) $ 23,529,412 14,375,035

$9,154,377 (39%) net decrease in calculated building value

Rising energy costs erode property values

ElectroRoof TM

Managing Energy RiskManaging Energy Risk

Energy crisis: the big picture

Risks for building owners and developers

Strategies for managing energy risk

The ElectroRoof solution

Proposed projects

ElectroRoof TM

Strategies for managing energy risk

PhotovoltaicsEnergy efficiency

ElectroRoof TM

Managing energy risk: case study

120,000 sq. ft. class A office

building in Syracuse, NY

Bank REO commissioned an

appraisal in preparation for a

bankruptcy auction

ElectroRoof TM

Managing energy risk: case study

Results of initial REO appraisal:

Total annual energy costs $ 517,000Cost per sq. ft. 4.46

Property value $ 4,300,000Value per sq. ft. 37.13

ElectroRoof TM

Managing energy risk: case study

Appraisal was revised to reflect the results of an energy analysis:

Total annual energy costs $ 517,000 227,000

Cost per sq. ft. 4.46 2.35

Property value $ 4,300,000 5,500,000

Value per sq. ft. 37.13 47.50

$1,200,000 (28%) net increase in appraised building value.

ElectroRoof TM

Risk management ROI

Lower operating costs

Higher net operating income

Increase in building value

Better financing opportunities

ElectroRoof TM

Managing Energy RiskManaging Energy Risk

Energy crisis: the big picture

Risks for building owners and developers

Strategies for managing energy risk

The ElectroRoof solution

Proposed projects

ElectroRoof TM

Integrated energy solution

ElectroRoof TM

Who we are

Contractor

Insulated Roofing

Marketing and Project Development

ElectroRoof TM

Who we are

ElectroRoof TM

Waterproof insulated roofing

ElectroRoof TM

Managing Energy RiskManaging Energy Risk

Rising electric rates: the bigger picture

Risks for building owners and developers

Strategies for managing energy risk

The ElectroRoof solution

Proposed projects

ElectroRoof TM

• GSA Building – Salinas

• CIS Building – Monterey Avenue, San Jose

• 7th and Alma, San Jose

• 13000 Depot Street, San Martin

• 696 E. Trimble Road, San Jose

• 2930 Pacific Avenue, Livermore

Potential solar development projects

ElectroRoof TM

CIS Building, Monterey Avenue

System Cost

Total gross price $ 1,533,000Incentives - $ 1,297,000Installed cost after incentives $ 236,373

Cost Savings

Year one cost savings $ 50,000Percent of electrical expenses 51%

Economic AnalysisPayback in years 6.7Internal rate of return 11%

ElectroRoof TM

CIS Building, Monterey Avenue