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Community Choice Energy (CCE) Financing Overview November 8, 2016 2 up into full operations. A bridge loan or initial line of credit covers pre-revenue, negative cash flow in the early stages of program launch and, most importantly, provides the capital necessary to sign contracts in the wholesale power market. EBCE cannot launch and begin serving customers until those contracts are signed and executed. The amount of early working capital that is needed will be dependent on EBCE’s customer phasing plans, early staffing/ Agency expenses, and the size and cost of the initial energy contract(s). Lines of credit can range from a low of $5M to a high of $20M or more depending on the program size at initial launch. This debt is usually put in place approximately 6 months prior to program launch, is short-term (e.g., a 1-2 year line of credit), and is often provided by a lender, although it can be municipally or vendor financed as well. Unless there is some other arrangement agreed to by the JPA Board, the amount of pre- revenue credit needed to support the new program will require a credit guaranty. This credit backing, analogous to a co-sign on a mortgage loan, is usually provided by one or more members of the CCE Agency. The guaranty requirement is released soon after revenues begin flowing (usually within 6-12 months) and the Agency is ready for longer-term debt and larger lines of credit. Some notes regarding bridge financing/early working capital:  This type of financing requires a guaranty to cover pre-revenue credit, which will be released when the CCE is generating solid revenues  This debt will provide the credit backing required for the initial energy supply contract, utility bond and supplier deposits, and early operating expenses.  This debt can be used to repay initial seed capital once the program is generating revenue  During the time the CCE is seeking working capital, it will also want to consider other banking services such as deposit accounts, secured account (“lockbox”) services and the like. If these services are provided by the lender as a bundled package with the loan, interest rates and terms are generally more favorable. Longer Term Debt/Term Loans, Etc: Once the program is revenue-positive, fully independent, and operationally more mature, EBCE will want to consider longer-term debt, lines of credit and perhaps bond financing to support an expanded portfolio of energy contracts, local energy programs, and local power development. Typically, this type of longer-term debt is used to refinance early working capital and, because it is backed by Agency revenues, does not have a credit guaranty requirement. This type of debt is generally offered at a stable, fixed rate that can be repaid over time and may be accompanied by a separate line of credit to serve as backing for power contracts. Existing CCE programs have