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Open Letter To The Generate Stakeholder Community

March 16, 2020

Dear Friends,

We are all experiencing an unprecedented level of uncertainty as we confront the global health pandemic and the consequences of it for the real economy. Everyone is hit – personally and professionally – in a crisis like this. We took measures in the last year to prepare for what we saw as an inevitable downturn, but clearly nobody was prepared for the precise catalyst or character of the situation in which we now find ourselves. The fundamentals of the Infrastructure Revolution – well underway, thanks to all of us – remain strong. We want to help you be prepared, too, because, together, we can get through this crisis. It is our hope that sharing our current thinking about the situation and how we respond to it is helpful to our partners, customers and communities.

Generate is in an unusually strong position to confront our current challenges, thanks to our values- and mission-driven team, our large and long-term capital base, our cash-generating asset base, and our 100+ year vision. You are our partners, and we appreciate what that means. This is a time when we must come together, more than ever, to help rebuild the world.

First, let’s discuss the pandemic. We are not public health experts, so we’re taking guidance from those who are. As such, we suspended our SF office operations and implemented a mandatory work-from-home model last week to help reduce exposure and spread in our communities and risk to our teammates. We had already canceled all conference attendance and non-essential travel. We have moved all interviews and meetings to virtual meetings facilitated by videoconference capabilities. We have a volunteer force ready to deliver necessary food or supplies to Generators in need.

Second, let’s discuss the consequences of it for the global economy. Taking advice from economists and others, we have contemplated four possible macroeconomic scenarios:

1. “V-shaped” quick recovery from a short-term downturn in economic activity (this was the “expert consensus” view just a week or two ago)
2. “U-shaped” mild impact of virus, 3-6 months before economic growth restarts (this appears to be the consensus “optimistic” view today)
3. “U-shaped” substantial downturn and economic contraction that lasts multiple quarters before growth resumes in 2021 (this appears to be the consensus “pragmatic” view today)
4. “L-shaped” downturn, like the Global Financial Crisis of 2008, with multiple years of contraction or slowed activity before resuming growth toward full capacity (no longer a remote possibility, we would recommend that everyone includes this scenario in all planning activities)

We are preparing for many possibilities. Polling our management team this morning had us far more inclined to believe the darker rather than the rosier outlooks. We are making our own plans accordingly.

Third, let’s focus in on how those health and macroeconomic realities translate to our business. Our executive team is now meeting daily to review data – from the markets, from economists, from our partners, from our customers, from our stakeholders – in order to be agile and responsive to a rapidly changing environment. We consider the four macroeconomic scenarios above against the four main areas where they impact our business:

1. Our portfolio – here we are primarily looking at counterparty risk, supply chain risks for maintaining asset performance, and ensuring we get the benefits inherent in diversity
2. Our pipeline – here we are primarily looking at counterparty risk with our developer and technology partners, development dependencies with government agencies, and constrained overall human capacity everywhere
3. Our liquidity – here we are looking at our corporate equity position and our equity partners, our corporate debt capacity, and liquidity with respect to new project financing (e.g., tax equity partners or project finance lenders)
4. Our people – here we are looking at productivity losses with our team as people are called to care for children or the sick, we are working to create a productive work-from-home model, and we’re reconsidering the priorities in our hiring plan to ensure we can deliver on our goals or perhaps take advantage of newly available talent

In times of extreme uncertainty and heightened anxieties, it’s always important to separate what we can control from what we cannot. Our “Playbook” for this crisis is therefore pretty simple, conveniently summarized as 4 P’s:

• Protect our people – their health, safety, and productivity
• Protect our partners – their stability and financial position, their concerns, their pipelines
• Protect our position – our cash flows, our customers, our communities, our differentiation (our high-quality customer base relying on us to deliver critical resources, our permanent and flexible capital, our Code, our team)
• Plan, plan, plan – listen to the market, aggregate the data, engage the diversity of perspectives we have, and be ready to act

Many of the thoughts above are surely how many of you are already thinking about your own situations. Some of them probably don’t apply to you. And certainly, all of our thinking can benefit by learning more about your own, so please let us know how we can continue to improve.

The world is moving to more digitized, decentralized, democratized and decarbonized infrastructure. We continue to believe we can be the “one stop-shop” for that Infrastructure Revolution, perhaps now more than ever before. We continue to take risks that others won’t. We continue to do work others can’t. Our time horizon is forever. Together with you, we are rebuilding the world.

This crisis will be a blip in a forever time horizon, but it will be turbulent and difficult in the coming months. Let’s show the best of ourselves and confront it together. Stay safe, be well, and please be in touch.

All the best,

Scott + the Generate team