PEG (Technology and “Blackbox”)

Del Long, Richard Molsbee, Gary Bush and Cliff Phillips

1 – x% Ownership therefore
1-x% of Devco’s cashflow Sweat equity and the irrevocable right to the tech and
blackbox for that project

Development
Capital: ~$5MM
Development
Development Capital [Equity
Company (Devco) Investors]
X% Ownership and
Cashflow of Deveco

•Spade Ready Project •10% Royalty

•Management Contract •~15% Watefall
•Closing costs ~$2MM
•Management Fee (Overhead)

~100% Equity

100% Equity Return

Project Equity
Project Company MINUS WATERFALL

(Projectco) 100% Debt Capital

Project Debt/Credit
Fees, Principal and
Interest

Property of The Soares Group, LLC

 Notes on Diagram
• The right to PEG’s technology and blackbox must be irrevocable or both development capital
investors and project equity investors will not invest. These rights survive change of control
situations. Effectively they survive as long as Projectco is an ongoing concern
• Development capital investors could get near 50% of Deveco for $5MM; meaning PEG only
gets 50% of the cashflow to Deveco
• Deveco investors could be part of the project equity investor group
• Project equity investor group could be a sole investor or a club/syndicate
• If Deveco (read PEG) wants in on the Project Equity Investor Group, it normally can get that
right. REMEMBER that normally the Project Equity Investor Group wants complete control of
the Project (at the board level)
• The management contract is usually with Devco OR AN INDEPENDENT GROUP. IMPORTANT –
THE WATERFALL GOES TO THE MANAGEMENT CONTRACT HOLDER AS WELL AS THE
MANAGEMENT FEE TO COVER OVERHEAD. THE ROYALTY GOES TO THE DEVCO, NOT THE
MANAGEMENT CONTRACT HOLDER, AS DOES THE CLOSING COST.
• The waterfall is realized on an exit. Until then the recurring cashflow comes from the
management fee and the royalty stream.
• The royalty stream should survive a liquidation event.

Property of The Soares Group, LLC