Arroyo Energy Investment Partners LLC

Item 5   Fees and Compensation

   A.    Our Compensation

         As detailed below, Arroyo may receive management fees and carried interest in connection
         with providing investment advisory services to Fund Clients.

         With respect to the Main Funds and future Funds, generally, Investors pay or will pay
         management fees quarterly in advance based on the Fund’s aggregate capital commitments
         during its investment period, and based on invested capital, as defined in Fund Offering
         Documents, thereafter, until the termination of the Fund. Arroyo or an affiliated entity, in its
         sole discretion, may waive or reduce the management fees to be paid by any Investor, including
         Investors that are principals, employees or affiliates of Arroyo, or relatives of such persons,
         and for certain large or strategic investors. Additionally, management fees are lowered
         accounting for the portion of the general partner capital contribution that is funded by limited
         partners. Investors generally do not pay any management fees in the Co-Invest Vehicles. For
         those investors that do pay management fees in the Co-Invest Vehicles, the management fees
         are generally the same as the Main Fund. Please see the respective Fund’s Offering Documents
         for a detailed description of the management fee calculations.

         Arroyo or an affiliated entity may also receive a carried interest or other performance-based
         allocation from the Main Funds and future Funds, generally at the time of an investment’s
         disposition and the corresponding distribution of cash to the Investors, after return of
         contributed capital and a preferred return, as established in Fund Offering Documents. Arroyo
         or an affiliated entity may, in its sole discretion, waive or reduce the carried interest or other
         performance-based distributions to be paid by any Investor, including Investors that are
         principals, employees or affiliates of Arroyo, or relatives of such persons. Investors generally
         do not pay a carried interest or other performance-based distributions in the Co-Invest Vehicles.

         Pursuant to the terms of Fund Offering Documents for each Main Fund, the management fees
         otherwise payable to Arroyo generally will be reduced to offset certain fees or expenses paid
         or due and payable by the Fund, including placement fees, excess organizational expenses, and
         all transaction, break-up, advisory, director or other similar fees received by Arroyo, affiliate
         or related person from a portfolio company or in connection with portfolio company
         transactions.

     Arroyo may have a conflict of interest to the extent, for example, it is incentivized to make an
     investment to earn a transaction fee or provide a service to a particular portfolio company to
     earn a director or monitoring fee. However, Arroyo believes that this potential conflict of
     interest is mitigated by the management fee offset mechanic described above.

     For additional information regarding the fees charged to any Fund, Investors and prospective
     investors should refer to Fund’s Offering Documents.

B.   How We Collect Fees

     The management fee will be payable by each Fund quarterly in advance and will be deducted
     from Fund’s account as funded through capital calls to Investors, a Fund’s credit facility, or
     other available capital. Carried interest will be allocated and paid to the general partner of each
     Fund at the time distributions are made to the Investors in the Fund.

C.   Other Fees or Expenses

     The Funds bear all expenses incurred in its formation and the offering of Fund interests up to
     an amount specified in the respective Fund’s Offering Documents (for Funds II and III, not to
     exceed $3 million; for Fund IV, not to exceed $4 million). Generally, the Funds also pay all
     costs, expenses and liabilities in connection with its ongoing operations, as more fully defined
     and described in the respective Fund’s Offering Documents. Except as otherwise described in
     the respective Fund’s limited partnership agreement, expenses, investment advisory and other
     fees may be paid over the term of the Fund.

     Generally, Arroyo or an affiliated entity will pay the compensation and overhead expenses of
     the personnel who act on their behalf. Fund Clients will be responsible for all fund-related
     expenses, including all expenses incurred in connection with potential investments and the
     evaluation, acquisition, ownership, sale, hedging or financing of any investment; expenses
     incurred in connection with transactions not consummated (“dead deal expenses”); insurance
     premiums; fees and expenses of accountants, counsel and consultants; costs and expenses
     involved in reporting to Investors and government authorities; costs and expenses related to the
     Advisory Committee activities and the annual meeting; banking, custodial, administration,
     appraisal, auditing, tax preparation, regulatory and compliance expenses; legal, litigation-
     related and indemnification expenses; taxes and other government charges imposed on the
     Fund or fund subsidiaries; administrative expenses; costs of winding up and liquidating the
     Fund; and other extraordinary expenses. Fund-related expenses may include travel and
     entertainment costs, which may involve coach, business or first-class accommodations on
     commercial, private or chartered carriers. To the extent practicable, third-party costs and other
     expenses related to a specific portfolio company will be charged to the respective portfolio
     company.

     In addition, when deemed appropriate by the General Partner in good faith, the Fund or a
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Types of Clients

         As noted in Item 4, Arroyo will provide portfolio management services to the Funds. In the
         future, Arroyo may provide portfolio management services to other Funds under domestic or
         foreign laws and operated as exempt investment pools under the Investment Company Act of

         1940, as amended. The Investors participating in the Funds may include individuals, banks or
         thrift institutions, sovereign wealth funds, pension and profit-sharing plans, trusts, estates,
         charitable organizations or other corporations or business entities and also may include, directly
         or indirectly, principals or other employees of Arroyo.

         The minimum initial investment in the Main Funds currently is $10,000,000, though lesser
         amounts may be accepted at the sole discretion of the General Partner. The General Partner
         will only admit into the Main Funds Investors who qualify as both “accredited investors,” as
         defined under the Securities Act of 1933, as amended (the “Securities Act”), and “qualified
         purchasers,” as defined under the Investment Company Act of 1940, as amended. Generally,
         an “accredited investor” includes (a) a person with an individual net worth, or joint net worth
         with the person’s spouse or spousal equivalent, that exceeds $1,000,000 (excluding the value
         of such person’s primary residence) and (b) a person with income exceeding $200,000 in each
         of the two most recent years or joint income with a spouse or spousal equivalent exceeding
         $300,000 for those years and a reasonable expectation of the same income level in the current
         year. (c) a knowledgeable employee and/or (d) individuals with certain professional
         certifications, designations, or credentials or other credentials issued by an accredited
         educational institution. Largely, a “qualified purchaser” includes a person or company who
         owns not less than $5,000,000 in investments.

Item 7   Methods of Analysis, Investment Strategies and Risk of Loss

   A.    Analysis and Strategies

         The Main Funds are private investment funds with a broad investment mandate. Primarily, the
         Main Funds seek to realize medium and long-term capital appreciation by making investments
         in the power and energy infrastructure sectors in the Americas. The Partners have been
         developing and executing their investment strategy over the past 20 years, including in respect
         of Fund I, to deliver what Arroyo believes are superior risk-adjusted returns within the North
         and South American power and energy infrastructure space, as detailed further below.

         Disciplined and Direct Sourcing

         The Partners have a proven expertise in identifying and acquiring power and energy
         infrastructure investment companies that have potential for material improvements in financial
         performance at lower risk. The Partners have remained disciplined in only sourcing
         investments that fit its investment strategy and have avoided targets outside of its core
         management expertise. To mitigate potential risks, the Partners seek to target quality assets
         with strong operating histories that typically have five to seven years of stable, predictable
         operating margins that support base case returns. However, Arroyo will only seek opportunities
         where the Partners are also able to establish cogent and executable commercial strategies to
         realize additional upside value (as detailed below). The primary commercial strategies Arroyo
         seeks to employ for Fund II, Fund III, and Fund IV are expected to be typically revenue
         focused, with the aim of increasing the amount of operating margins at the project, while
         reducing the risk associated with achieving such increased margins.

         Related to this discipline is Arroyo’s ability to identify, conduct due diligence regarding, and
         underwrite its investments on a self-sourced basis outside of the mainstream marketing efforts
         of brokers and investment bankers. Every single asset in Fund I’s portfolio was originated on
         a proprietary basis, and the Partners have developed extensive networks in both North and
         South America over the past 25 years, which the team hopes will allow it to source deals on a
         proprietary basis that fits its investment screen.

     Delivering Value to Projects

     Arroyo will be actively involved in the day-to-day management of each investment and will
     typically seek control positions. In the instance that it acquires a minority interest, Arroyo
     expects to employ control mechanisms that it believes will ensure Arroyo’s ability to execute
     the commercial strategies for value enhancement it has identified.

     The primary commercial strategies for which the Partners have a proven track record and
     expertise in successfully implementing include (a) the unbundling and restructuring of the
     existing contractual framework around the asset to increase operating margins; (b) the
     negotiation of incremental commercial fuel input and/or off-take agreements with both existing
     and new counterparties in order to reduce risk and enhance operating margins; (c) developing
     brownfield capacity; and (d) driving operational improvement. Arroyo will seek to continue
     the successful implementation of these strategies for Fund II, Fund III, and Fund IV.

     Technical Expertise to Execute and Manage

     The Partners believe it is able to carry out highly specialized diligence and M&A processes
     within expedited timeframes due to their in-house M&A, engineering, regulatory and financial
     backgrounds. The Investment Team believes that their collective skillset will provide Arroyo
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