Project:Thermal North America Due Diligence
Location: Multiple U.S. locations

Overview:

Thermal North America owns 12 district heating and cooling plants throughout the United States, most of which were acquired from Trigen in 2005. The majority of these assets are managed and operated by Johnson Controls, Inc. E3 Consulting® assisted Lehman Brothers and Calyon with the technical and financial evaluation of Thermal North America's district heating assets in 2006.

E3 was brought in by the arrangers to review the economic impact of various capital expenditures, including major maintenance capital expenditures and new revenue generating capital expenditures. These expenditures were scheduled to take place at several district heating and cooling assets across the U.S. (the "Assets").

E3 Services Provided:

• Physical inspection of seven of the district heating and cooling assets to generally assess the condition of the Assets and to opine on the necessity of the major capital expenditures

• Review of the company's pro formas and internal rate of return models for the revenue generating projects, and the contracts for these projects

Project Spotlights:

• The E3 project team confirmed that the previous owner of the assets had deferred some maintenance activities pending the sale of the assets to the current owner. Much of the increase in maintenance capital expenditure was to "catch-up" with maintenance that should have been done by the previous owner.

• With regard to revenue generating capital expenditures, E3 determined that these projects, comprised of adding new customers or new products, can be expected to have a positive impact to EBITDA and the senior debt holders' debt service coverage ratio requirements.