Critical Municipal Facilities
Executive Committee
May 7, 2025
Agenda
2 1. Transaction Update
2. CMF Program Structure
3. RFP Process
4. Next Steps
1. Transaction Overview
3 Executive Summary • Ava is in the final round of a RFP process to select an EPC Contractor to further negotiate and execute an EPC Agreement to design, construct, and warranty solar and storage systems on up to 12 municipal sites by entering power purchase agreements (“PPAs”) with 6 participating cities. • Ava to own and operate the systems (in lieu of Developer PPA) while levering EPC for project development.
• City project portfolios are designed to provide resiliency benefits to protect against grid outages and extreme weather events, and deliver energy savings and energy hedge over the project term.
• Projects to be constructed to achieve final electrical clearance and NEM2 qualification by PG&E’s April 15, 2026 cliff date.
• Ava to provide 0.5% savings floor to Cities while bearing up to $13.8M in NEM2.0 savings and federal policy risk on City’s behalf. • Ava must execute EPC Agreement and City PPAs in June/July 2025 for NEM2 attainment to be viable.
• Upcoming (May) Board Approval Requests:
1) Authorization to negotiate and execute EPC Agreement with RFP award winner
2) Authorization to negotiate and execute PPAs with Cities and provide Solar and Storage incentives to Cities
4 Cities •Berkeley •Fremont •Hayward •Livermore •Oakland •San Leandro
2. Updates on CMF Program Structure
5 City PPA Overview
Ava to enter long-term energy service agreements with each participating city in which Ava will own and operate the projects. 6 • City PPAs: Ava to enter into individual PPAs with each participating city ▪ Ava to sell energy generation and energy services (e.g. battery for backup energy and savings optimization) to Cities
▪ Ava to deliver construction, operation, and system maintenance (directly or indirectly via Ava’s obligations in the master PPA)
▪ Cities currently confirming participation under revised savings scenarios to make final decision to participate.
The portfolio is likely to become smaller as a result.
• Benefits to Cities:
▪ Resilience through installation of battery at critical municipal facilities to maintain critical site operations during outages and Public Safety Power Shutoff events. Batteries sized to meet critical on-site demands. ▪ Energy hedge: Systems provide energy hedge to sites against rising PG&E costs ▪ Solar / renewables align with Cities’ renewable energy goals ▪ Procurement benefits: Multi-city initiative enables improved commercial terms for Cities relative to single-project development ▪ Trusted counterparty: Ava Board oversight ensures accountability Shift to Ava Ownership & EPC Contractor RFP
As of Feb 2025, Ava has pivoted from negotiating a back-to-back master PPA with a developer to an Ava ownership model to lever an EPC Contractor to develop, construct, and sell the projects to Ava. 7 • Ava previously intended to enter master PPA with Green Bridge to construct, operate, and own the systems and backstop Ava’s obligations of City PPAs.
• With previous developer's withdrawal and NEM2 cliff date in Apr 2026, Ava advancing to develop and own smaller CMF portfolio by entering EPC Agreement with EPC Contractor. • EPC Contractor to backstop key project development and construction obligations of the City PPAs, including:
▪ Project design
▪ Permitting
▪ Equipment procurement
• Ava intends to claim Direct Pay investment tax credit under Inflation Reduction Act to support project capitalization.
• Ava will develop experience in project delivery, project ownership, asset management and capturing ITC
▪ Project construction
▪ Testing, commissioning, and interconnection
EPC Contractor RFP Overview
• Over past 2 months, Ava has designed and run an accelerated RFP to select the EPC Contractor.
• Ava has engaged with TerraVerde (SF-based owner’s rep energy consultant specializing in municipal RFPs) to manage the RFP and advise Ava.
• Participation to date:
▪ RFQ: 10 responses
▪ Round 1 Pricing: 6 responses
▪ Round 2 Final Pricing : 3 finalists (post site walks) • Final round bids and interview to be conducted 4/30 – 5/5, with an expected award date of 5/9.
• All finalists have the following qualifications:
▪ 9+ years in business with >40 FTEs
▪ Substantial experience developing/deploying PV+BESS in PG&E territory ▪ Capability to use union labor on the projects
▪ Adequate insurance and bonding capabilities
▪ Indication of being able to support project timelines around NEM2.0 8 RFP Key Dates
RFQ Posted 3/7 Complete
RFP Posted 4/2 Complete
Final Round
Invites Sent
4/18 (to 3
finalists)
Complete
Project site walks
hosted
4/21 – 4/22 Complete
Final bids due 4/30 Complete
Finalist
interviews
5/5 Scheduled
Expected award /
EPC Contractor
selection date
5/9 Forthcoming
Ava BoD meeting 5/21 Forthcoming
EPC Agreement
Execution
EOM May Forthcoming
Ava initiated a design-build contract RFQ / RFP process in March to select an EPC Contractor to construct the CMF portfolio as a public works project
EPC RFP Evaluation Criteria
9 Ava has named the following evaluation criteria in its Request for Proposal.
Criteria Category Description
Experience and Knowledge • Experience and qualifications developing similar projects • Local presence and demonstration of knowledge of local environment and Financial Wherewithal • Company’s financial position w/r/t to ability to uphold warranties & guarantees Insurance and Bonding Capabilities • Ability to procure requirement construction insurance & meet bonding requirements Equipment and Warranties • Quality of proposed equipment & warranties • Focus on ability to mitigate tariff risk through equipment & procurement Cost, Value, and Savings Potential • Proposed project cost and ability to maximize savings to site hosts Project Management and Execution Capabilities • Focus on project schedule to meet key milestones by NEM2 cliff date • Demonstration of project management, coordination, value engineering, etc.
Client References • Reference checks conducted as part of Round 1 responses Labor Plan • Ability to meet PWA; relationships with union • Ability to comply with Ava’s Workforce and Environmental Justice criteria Ability to accept proposed commercial and legal
terms
• Review of comments on Ava’s draft EPCA
• Focus on ability to provide
Clarity, Completeness, Conformance, Suitability, &
Creativity of Proposal
• Addressed prompts comprehensively and conformed to the format • Demonstrated ability to meet the project objectives
Other capabilities • E.g. ability to provide O&M services and/or extended warranties Transaction Diagram
10 [TBD via RFP]
EPC Contractor
Ava
System Owner & PPA
Seller
Participating
Cities
(multiple)
EPC Agreement City PPA
(Various)
Engineering, procurement,
& construction services
Energy delivery & services
energy services
System cost ($) Monthly payment ($)
Lunar
Prospective grid
services platform
MSA
Platform &
capacity
fees ($)
VPP-enabling
software
services
[Prospective grid services
agreement]
DER capacity commitment
Payment / incentive ($)
Structural Summary
1. EPC Contractor and Ava enter master EPC
Agreement. EPC designs & constructs projects;
Ava purchases and operates the projects.
2. Ava enters Power Purchase Agreements (“City
PPA”) with each participating City as final
offtaker.
3. Ava enters O&M Agreement with O&M Service
Provider to maintain the systems over the PPA
term.
4. Ava maintains optionality to enter future grid
services arrangements with Cities.
Ava to own and operate the projects, while levering third-parties to perform development, construction, and maintenance services. [TBD]
O&M Service Provider
O&M Agreement
Operations &
maintenance services
Monthly payment ($)
Ava Passing Through Incentives to Cities
11 Ava has existing CMF budget that can be applied towards Solar & Storage incentives, similar to upcoming Ava Resilience Hub incentives.
• All projects will receive an incentive of
$2/month/kWh of aggregate BESS nameplate
capacity for 5 years.
• If schedules are not met, NEM3.0 projects will
also receive an upfront incentive of $400/kWh to
account for lower bill savings.
• Incentive to be passed to Cities as a monthly bill
credit on City PPA invoices from Ava for a 5-year
credit term.
“Ava BESS Incentive” represents total incentive to be paid on monthly basis over 5 years.
Specific amounts above subject to change based on final as-built BESS capacities for the projects.
PPA Pricing to Ensure City Savings
12 Ava’s pricing construct ensures each City achieves at least a minimum level of energy savings and resilience benefits, factoring each City’s utility bill savings after PPA payments and Ava incentives.
City Savings Calculation
Estimated site utility costs during term without projects (-) Estimated site utility costs during term with projects = Estimated City utility bill savings
(+) Ava BESS incentives
(-) cumulative PPA payments for the projects
= Cumulative net energy bill savings to City
Site list and capacity figures to be finalized as part of EPC designs Total 25-year energy savings for 12 sites across
6 Cities: ~$130,000
Ava Financial Risk / Return Profile
13 Ava expects to attain cash-flow positivity on its investment after consideration of project revenues, capital expenditures, and 25-year operating expenses. Ava faces material policy risk (ITC/tariff) and development risk that may impact returns.
Ava Risk
Risk Scale
($)
Missing NEM2.0 deadline for projects $(6.0)M
Tariff risk on project equipment5 $(4.4)M
Increased CapEx from EPC $(0.9)M
Risk of repeal of ITC / Direct Pay
provisions1
$(3.6)M
$ Ava at-risk if all events occur $(14.9)M
Nominal CF to Ava if all risks occur6 $(9.7)M
1Assumes 40% Direct Pay (30% base credit + 10% Energy Communities bonus credit) and $8.9M eligible ITC basis.
2 "Net CapEx after ITC Proceeds" means total upfront project costs, less Expected ITC Proceeds. Final CapEx TBD pending final EPC Contractor award through RFP. 3 "Net Cash Flows to Ava" means the sum of expected 25-year City PPA revenue for the projects less the sum of 25-year estimates expenses related to operations & maintenance, project insurance, non-warranty equipment replacements, decommissioning, & other Ava operating overhead for the projects.
4 "Present Value of Net Cash Flows to Ava" assumes a 6% discount rate to the annual cash flows from Net Cash Flows to Ava, which assumes a return with slight premium to municipal cost of debt.
Scenario
Maximum ITC
Proceeds1
Net CapEx after ITC
Proceeds2
40% ITC to Ava $3.6M $5.3M
No ITC to Ava $0M $8.9M
Scenario
Nominal Net Cash
Flows to Ava3
Present Value of Net Cash
Flows to Ava4 @ 6%
discount rate
40% ITC to Ava $5.2M $0.1M
No ITC to Ava $1.6M $(3.5)M
5Tariff subject to federal policy variability. Assumes average 100% tariff on CapEx being 50% equipment.
6$(9.7)M = $5.2M nominal 25-year net CF to Ava less $14.9M $ Ava at-risk if all events occur
Table above excludes potential liquidated damages Ava may recover under EPC Agreement negotiations.
Labor Commitments
14 As part of RFP evaluation criteria, Ava is requiring that Contractor comply prevailing wages and apprenticeship and has prioritized use of union labor.
• Prevailing wages: Commitment to pay prevailing wages across all projects.
• Use of union labor: All three RFP finalists have agreed to use union labor on labor to construct the projects.
• 2 Contractors are signatory contractors with IBEW 595 (Alameda County) and IBEW 6 (San Francisco County)
• Third contractor has agreed to use Union Labor and comply with Ava's Workforce and Environmental Justice Project
Selection Criteria for projects under 20MW including hiring locally and from disadvantaged communities
3. Key Counterparties
15 RFP Advisor:
TerraVerde
• San Francisco-based owner’s representative energy consulting firm proudly supporting clients with the design and deployment of energy projects and programs
• Supported the successful implementation of over $500 million in solar and battery energy storage systems since 2009.
• Focus on supporting municipal agencies with reducing operational costs, supporting over 140 public entities on over 260 energy project assessments and procurements.
• California clients have included the Alameda County Water District, Contra Costa Water District, and the City of Lathrop, amongst many more.
• For Ava’s EPC Contractor RFP, TerraVerde has supported RFP structuring, advisory, and process management
16 EPC Contractor, Equipment, Operations, & Warranties
• Engineering, Procurement, and Construction Contractor: TBD through RFP
▪ Required workmanship warranty: 2 years
▪ Required roof warranty: 10 years
• Major Equipment
▪ Manufacturer and country of original to be further diligence as part of RFP • Solar modules: Minimum 25 year warranty
• Battery energy storage systems: Minimum 10 year warranty • Inverters: Minimum 5 year warranty
• Operations & Maintenance: TBD through RFP
▪ Ava assessing EPC Contractor’s ability to provide O&M and extended warranty as RFP decisioning criteria
17 Other Third-Party Advisors
• Outside counsel: Ava representation and transaction
document drafting by Wilson Sonsini, a leading renewable energy and clean technology law firm.
• Energy modeling: Project site assessment verification services provided by EcoMotion, an experienced
consultancy with specialty in microgrid resiliency projects. • Independent Engineering: Technical and engineering
advisory by NV5, a leading consultancy in the environmental and energy space.
18 Program structure and project consultation has been supported by best-in-class advisory.
4. Next Steps
19 Next Steps & Timing
Key milestones
• Mid May: Award RFP to EPC Contractor
• EOM May: Execute EPC Agreement; commence final design • June-July 2025: Execute City PPAs following remaining City approval process ▪ Note that City PPA approvals follow Ava EPC signing and will incur out of pocket expenses if cities do not end up approving the PPAs
• Q2 – Q4 2025: Permitting and procurement, and construction commencement
• Q1 2026: PV mechanical completion & final electrical clearance • April 15, 2026: PG&E’s NEM2 cliff date to achieve PV final electrical clearance • Q2 - Q4 2026: Complete remaining BESS construction, testing, & commissioning; achieve commercial operation date
20 **Note: Timelines are subject to finalized with final EPC Contractor selected under RFP Appendix – Risk Registers
21 Financial Risk Register (1 of 2)
Risk Sub-Risk or Description
Risk
Level Next Steps / Mitigation
Missing NEM 2.0
Deadline
• If Contractor misses NEM 2.0 cliff dates for project(s), loss of NEM2 export value would deteriorate savings potential for all sites. • Ava would need to materially reduce PPA prices to deliver cost neutrality to Cities
High
• Ability to accept liquidated damages in EPC
Agreement is key decisioning factor for RFP
Tariff Risk on
Equipment
• Recent volatility (and general increases) around tariffs to countries with strong PV and BESS export presence
• Risk of tariffs continuing to change between procurement order and equipment reaching port of entry
High
• Contractor’s supply chain, OEMs, and tariff
mitigation strategy are diligence requests and
decisioning criteria in RFP
• Negotiating termination for cause for material tariff increases in EPCA
Federal repeal of IRA
provisions around
ITC impacting Ava
• Non-zero chance of federal repeal of Inflation Reduction Act provisions that would enable Ava to claim up to 40% investment tax credit via Direct Pay on eligible project costs
High
• Ava pricing City PPAs to minimal savings, with ability to reduce PPA rates to increase savings if Direct Pay
credits can be claimed
Contractor change
orders on project
cost
• Project costs may change as Contractor finalizes technical review and completes 90-100% design Medium
• Ava requesting adherence to 60% designs
• Conducted site walks and requesting pricing
contingencies as part of RFP
City PPA Execution
Timeline
• Ava does not yet have clarity from each City on council approval and execution timelines
Medium
• Pushing cities for short timeline and clarity on
approval timelines
• Proactively engaging City attorneys to condense
execution timelines
Risk Key:
• High = Portfolio at Risk;
• Medium = 3+ Day Delay;
• Low = Low probability &/or 1-2 Day Delay
**Note: Mitigation strategies are subject to further negotiation with EPC Contractor under EPC Agreement Financial Risk Register (2 of 2)
Risk Sub-Risk or Description Risk Level Next Steps / Mitigation City Permitting Approval
Timeline
• Signing/permitting delays risk NEM 2.0 deadline & create an “out” for EPC to pay damages owed for NEM 2.0 delays
• Ava will proceed with design work under EPC Agreement prior to City PPA execution. Medium
• Cities have reviewed 60% designs for projects
• Ava will not proceed past design phase to
procurement until City PPAs are signed. Maximum
potential design phase spend capped at $0.9M
under EPC Agreement.
EPC Agreement
terminates or not
executed
• Ava must successfully execute EPC Agreement to proceed with the portfolio
• In event the EPC Agreement terminates after City PPAs are executed (e.g. due to EPC Contractor default), Ava would need to engage a replacement EPC to proceed with the
projects.
Medium
• Ava to sign EPC Agreement before City PPAs
• Ava has right to terminate City PPAs prior to
Construction Start if EPC Agreement terminates
• Ava to use commercially-reasonable efforts to
replace EPC after Construction Start; otherwise
agreement can be terminated under Ava default
Ava procurement of
O&M Contract
• In lieu of building internal O&M function, Ava will need to sign O&M services agreement to monitor system for billing, and uphold its operations & maintenance and performance guarantee obligations
Low
• Requested O&M and extended warranty pricing from
RFP finalists
• Ava has 9-12 months to run O&M-specific process
as needed before initial projects reach COD
Risk Key:
• High = Portfolio at Risk;
• Medium = 3+ Day Delay;
• Low = Low probability &/or 1-2 Day Delay
**Note: Mitigation strategies are subject to further negotiation with EPC Contractor under EPC Agreement Ava Project Risk Register (1 of 2)
24 Issue Risk(s) Mitigation
Development Timing • Project construction and commissioning runs late, causing certain projects to miss NEM2.0 deadline and/or inconvenience at project sites
• EPC Contractor to owe liquidated damages, which are passed through to Cities in event project does not meet NEM2.0 cliff date.
• If COD is severely delayed, City PPAs may be terminated. Ava’s damages obligations capped at passthrough damages from EPC Contractor Equipment
Performance
• Poor solar or battery performance result in reduced
energy savings delivered to the site
• 85% solar performance guarantee and 92% BESS availability guarantee, with damages payable to Cities if not met
• Ava working to backstop guarantees through its O&M agreement via back-to-back guarantees and/or fulsome SLAs around system maintenance Project Operation &
Maintenance
• Solar or BESS equipment fails or underperforms during contract term
• Ava has modeled City PPA pricing to cash-flow positivity after expected O&M and equipment replacement costs
• Ava to lean on EPC Contractor workmanship and roof warranties during EPC Agreement warranty period
• Ava to enter O&M agreement following EPC Agreement execution to have reputable third-party responsibility for project monitoring and issue resolution Equipment Selection &
Procurement
• Equipment does not meet industry standards around
performance and/or warranty
• Sourcing practices conflict with federal/state/local
regulations
• Ava and its technical consultants vetting RFP shortlisters’ proposed equipment as part of RFP decisioning
• EPC Agreement to require Tier 1 PV and BESS equipment with minimum manufacturer’s warranties
• Ava to have explicit approval rights under the EPC Agreement on OEMs prior to placement of major procurement orders
Project / Portfolio
Termination Rights
• Project terminations or default by City impacts on EPC Agreement
• Project termination or default by EPC Contractor to leave Ava at risk to its City PPA obligations
• Ava requesting termination for convenience in EPC Agreement, along with ability to terminate individual project(s)
• In City PPA, Ava to have right to terminate City PPA prior to construction start if EPC Agreement terminates.
Program has been designed to offer cost-neutral renewable-based energy resiliency for Cities. Ava directly provides services to Cities, while mitigating risk to Ava as owner. **Note: Mitigation strategies are subject to further negotiation with EPC Contractor under EPC Agreement 25 Issue Risk Mitigation
Insurable damage to
System
• Unforeseen installer liability during construction
• Disaster, wildfire, extreme weather, or other insurable event results in system loss during operation
• Ava requiring EPC Contractor to procure construction all-risk insurance during the design & construction phases
• Ava to procure operational all-risk insurance during City PPA operational term
• Force majeure language limits performance obligation
Project Removal • Cities left bearing the responsibility and expense of removing systems from their sites at end of term
• Ava bears obligation to pay for end-of-term project removals • In event Ava loses investment grade status, Ava to post cash or LC security at City’s benefit for use in system removals
Ava Project Risk Register (2 of 2)