Rockland Capital (“Rockland”) recognizes that there is more to investing than simply looking at pure financial risks and rewards. Sustainable environmental and social practices not only generate goodwill, but also contribute to positive financial returns. Rockland operates principally in North America, where there are relatively well-developed regulations dictating a high standard for environmental, operational, and safety practices with processes in place for enforcing those regulations. The culture at Rockland is to absolutely comply with these regulations at a minimum and to use commercially reasonable efforts to exceed regulatory standards when there are social or environmental benefits. Rockland seeks to be a positive force in the communities in which it operates.

Rockland is an investment adviser registered with U.S. Securities & Exchange Commission (“SEC”)*. Accordingly, a comprehensive compliance program with high standards for ethical conduct and governance is detailed in the Rockland Compliance Manual and Employee Handbook. A summary of related considerations taken when evaluating and managing investments is provided below.

Plant Safety Status, History, Development, and Community Impact

• Provide a safe working environment for employees and ensure that portfolio companies make this the top priority.
• Understand and assess any existing or potential EHS risks related to the operations or development of a facility.
• Work with engineering consultants and legal firms to confirm compliance with existing laws and regulations; survey status of existing operations of the facility; study environmental control technologies in place to ensure current and future compliance; and assess the impact of potential facility developments or expansions, if applicable.
• Implementation of cost-effective technological upgrades that improve the efficiency of existing plants with respect to emissions, fuel use, and water consumption where appropriate regardless of whether such action is required to comply with permits.
• Manage noise levels of generation facilities to, at a minimum, meet applicable regulations and to address any concerns of neighbors in a cost-effective manner.

Environmental Regulatory Compliance

• Monitor air emissions, water consumption and discharges, and waste handling with monthly compliance reporting required from O&M providers.
• Manage water and chemical usage to minimize use and impacts on the environment as appropriate and within regulatory requirements.
• Seek opportunities to reduce solid wastes, proper handling of solid wastes generated, and appreciate recycling opportunities.
• Conduct environmental and regulatory compliance due diligence as appropriate for the assets under evaluation.

EHS Management at Rockland Power Plants

Requirements of Portfolio Companies which own/operate power plants are summarized in the Environmental, Health and Safety Policy for Rockland Power Plants (available upon request). Notably, Rockland has standardized on Gensuite EHS Management Software as a tool for administering power plant EHS compliance, auditing, and reporting. All O&M providers at Rockland power plants are required to use this software which allows Rockland asset managers to track and confirm compliance. As noted in the above-referenced policy, Rockland will provide financial incentives to its O&M providers rewarding proactive EHS performance through a bonus program with measurable goals.

Environmental Impact Opportunities

While Rockland makes investments in power plants which, by their very nature, produce air emissions, these investments are managed in a manner to generate high-risk adjusted returns and in an environmentally and socially responsible manner. A key strategy in Rockland’s investment approach is to find and execute on opportunities to remove economic and operational inefficiencies in the power production process to create value; generally, this results in less waste and fewer emissions. A few examples of how Rockland’s acquisition strategy removes inefficiencies, improves economics and creates value, while aligning with environmental improvements and social responsibility are provided below:

• Prime Energy: Rockland restructured the Prime Energy project by separating the physical power plant from an above-market contract which had given the plant the incentive to run in an economically inefficient manner. By negotiating for an option to supply power from the market when it was more economically advantageous to do so, Rockland improved the EBITDA of the overall enterprise while running the plant less frequently. The replacement power was sourced from more efficient plants, which produce less air emissions per unit of power produced.
• Midlands Cogeneration: Rockland restructured the power sales agreement with Consumers Power to remove a pricing mechanic that caused this natural gas plant to be dispatched as if it were a coal plant. Rockland further installed boilers to supply steam to an adjacent industrial customer, using the boilers rather than forcing the power plant to run uneconomically to produce “waste heat” to meet the customer’s steam needs. Due to Rockland’s interventions, the plant now runs only when it is economically appropriate to do so resulting in a reduction in overall air emissions.
• Eagle Point: Rockland purchased a former cogeneration plant which had lost its steam host resulting in a relatively inefficient power production process. Rockland is implementing its acquisition strategy of utilizing this waste heat to increase the power production capacity of the plant while (i) improving economic and operational efficiency, (ii) reducing emissions on a unit basis, and (iii) reducing noise levels caused by the venting of steam.
• Grand Tower: Rockland purchased a natural gas plant from a utility (Ameren) who had converted a coal plant to natural gas; however, the new operation lacked optimization and a legacy, coal ash pond remained. Ameren had repurposed the coal ash landfill to process wastewater from the plant. Following the acquisition, Rockland built a standalone waste water treatment plant (“WWTP”) that did not rely on the ash pond. Following start-up of the new WWTP and the completion of extensive groundwater testing, Rockland implemented a capital project to permanently cap and close the ash pond protecting the community’s ground water from any possibility of contamination from the site.

Natural gas-fired power plants, which dominate Rockland’s portfolio, are relatively benign in terms of hazardous waste. Unlike chemical plants or power plants utilizing coal or nuclear fuel, there are minimal hazardous wastes generated by natural gas-fired power plants. For example, air emissions such as nitrogen oxides and carbon monoxide are limited by air quality standards and are controlled using mitigation technologies and process improvements. Furthermore, sulfur dioxide, mercury, and particulate matter emissions from natural gas plants are de minimis compared to emissions from coal-fired power plants.

Carbon Dioxide Emissions from Power Plants

Carbon dioxide (CO2) emissions are a natural byproduct of the production of power using fossil fuels. Natural gas plants produce less CO2 emissions than any other fossil fuel on a unit basis – generally 50% less CO2 is produced per MWH from a natural gas plant as compared to a coal plant. Government initiatives are expected to continue to encourage the development of new technology and to reduce CO2 emissions.

Rockland is also seeking opportunities to invest in renewable power resources such as wind, solar and hydro. In fact, Rockland has built both wind and solar projects producing good risk-adjusted returns. Rockland also seeks to invest in power production technologies that will complement and enable renewable initiatives such as energy storage and flexible gas-fired peaking facilities that provide the capacity and ramping response necessary to support the reliability of the power grid.

Rockland is committed to making sound, strategic investments that generate strong risk-adjusted returns with appreciable consideration to environmental and social impacts. Rockland holds steadfast to its commitment to high standards for environmental stewardship, operational excellence, and the safety practices in the power generation industry.

*Registration with the SEC does not imply any level of skill or training.