Subject: Fw: Transatlantic Rosemont Solar Energy I, LLC
From: <[email-masked]>
To: "Biden, Hunter" <[email-masked]>, "Schwerin, Eric D." <[email-masked]>
Date: Fri, 11 Feb 2011 04:20:23 +0000

Sent via BlackBerry by AT&T

-----Original Message-----
From: "Kanan, John P." <[email-masked]>
Date: Thu, 10 Feb 2011 20:17:26 
To: [email-masked]<[email-masked]>
Cc: Opperer, Joshua F.<[email-masked]>; Gubbini, David V.<[email-masked]>
Subject: Transatlantic Rosemont Solar Energy I, LLC

Devon,

    Attached are preliminary drafts of the following documents: 1) Offering Memorandum; 2) Operating Agreement; 3) Subscription Agreement; and 4) Subscription Instructions.  We recommend that you focus your attention first on the Offering Memorandum, or perhaps just the questions that are set forth below (the same questions are embedded in the OM in brackets or footnotes).  Changes to the OM will drive changes to the Operating Agreement, so you might want to hold off reviewing the Operating Agreement until the next round.  You likely won't want to spend much time on the two subscriptions documents, as they're more off-the-shelf than they are tailored to this deal.

    We did our best to tailor the Offering Memorandum to this deal, but there naturally were gaps in the draft materials that you provided to us.  Let's walk through these questions and the additional questions noted in the Operating Agreement when you have a few minutes, and we can then quickly turn the documents as necessary to address your responses.

1) Do you know what you want to name the SPV?

2) As reflected in the summary table, we need to confirm the amount of the offering.  It was difficult to tell from the materials exactly how much would need to be raised so we took a shot however these will likely need to be revised.  The document generally contemplates the following:
    a) 360 units;
    b) $100,000/unit;
    c) 54 units purchased by manager;
    d) anticipated minimum of 10 units for any subscriptions to be accepted (manager can accept less if it decides to do so);
    e) 2.25% of gross proceeds offering fee;
    f) $450,000 of transaction expenses.

If the maximum cost of the Projects in the range as estimated is the final cost, 360 Units may not quite cover the nut.

3) Are we correct in understanding that the manager will receive "investor units" for cash and "manager units" for no cash.

4) Is there a reasonable possibility that cash from operations will be distributed up from the projects before a liquidity event? (see question 9 below)

    If so, should those distributions be 80/20, or should we in some way factor in the IRR preference? (Of course, you can't calculate the IRR at liquidation until you know when the liquidation will be.)

    If distributions from operations are 80/20, at liquidation all distributions will go to the investors until they hit the 11% IRR.  However, if there are insufficient net proceeds at liquidation to pay the IRR in full, should there be a claw back against the 20% distributions from operations that previously were paid to the manager? In a typical real estate syndication, which this deal resembles, there would not be a claw back.  However, in the more typical PE fund arrangement, which is what your investors might be more familiar with, one would be more likely to see a claw back.

    Let's discuss the possible triggers for return of capital distributions if they will be distinguished from operating cash flow distributions.

5) When does the IRR calculation start, upon investment or when the project is put in service? From the investor's standpoint, the former; from the manager's, the latter.  What deal have you sold or can you sell?

6) Can you help us better understand what the terms of the Iberdrola guaranty will be? For instance, is it a guaranty of percentage of uptime, total power output, development costs...?

7) Unless you have an objection, in the next turn we'll insert a structure chart where indicated on page 4 of the OM.

8) What is the status of the financing? Do you know the terms of the loan?

9) Will the tax credit proceeds be distributed immediately? Will this amount be subject to the IRR preference or distributed on a straight 80/20? (see question 4 above)

10) What is NEH? What is "equivalent production"?

11) Do we have a list of all required permits? What's the status of obtaining all required permits.

12) Can you get us a copy of the Interconnect agreements?

13) What rating agencies provided the BBB+/Baa1 and AA/Aa1 ratings?

14) Is "Salt River Project" the full name?

15) Will there be mandatory or permissive tax distributions from the SPV?  Also, if there are not current cash flow distributions from the Company will it have mandatory or permissive tax distributions?

16) See the Risk Factors section and let's discuss.  Consider adding the following:

    a.  Risks related to assumption used in making projections.
    b.  Our estimates of the productivity of the Projects may not be accurate.
    c.  Risks of construction delays.
    d.  Permitting delays or any specific issues or conditions relating to the permits.
    e.  Any risks relating to the SPV Financing agreements, such as covenants which could restrict distributions.
    f.  Risks relating to a default under the interconnect agreements.
    g.  Counterparty concentration. (Only two customers).
    h.  I assume that the customer contracts are for the entire output (I note that they pay a flat fee per MWh)... if not, then we also have significant risks associated with general energy demand and pricing.
    i.  Risks associated with geographic concentration of the projects.
    j. Others once the terms of the deal are nailed down.]

17) Please review the use of proceeds table.

18) Should we keep or delete the management bios? (Since you're a passive investor, management bios may not be material to investors.)

    If we keep them, please note the questions embedded in the bios.

19) Is the management fee paid to Transatlantic or the manager?

    Is the fee based on the offering size or the income of the company?
    When is the fee paid?
    Will there be refinancing or sale fees?

20)  What periodic reporting obligations will the manager of the company have to the investors?

    Will there be audits required?
    Will financial statements be sent annually or quarterly?

21)  Will the investors have any rights to liquidate their investments and cash out?

22)  Should the investors have any right to remove the manager member?

HONIGMAN
John P. Kanan
Partner
Honigman Miller Schwartz and Cohn LLP
Attorneys and Counselors
660 Woodward Avenue
2290 First National Building
Detroit, MI  48226-3506
Telephone Number:  (313) 465-7438
Fax Number:  (313) 465-7439
Cell Phone Number:  (313) 300-8310
[email-masked]<mailto:[email-masked]>
www.honigman.com

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