Pure Energy Conference & ExpoClovis Civic Center

July 18, 2012

UNITING THE NATION’S ELECTRIC POWER GRID

The Tres Amigas Transmission Superstation will utilize high voltage direct current (HVDC) technology to link the Eastern, Western, and Texas U.S. Interconnections at a single location in Curry County, near Clovis, New Mexico and will be strategically positioned in proximity to the junction of these three grids

WesternInterconnection166 GWPeak Load

585 GWPeak Load

EasternInterconnection

TexasInterconnection

Clovis,

NM

64 GWPeak Load

Uniting The Nation’s Electric Power Grid

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© 2012 Tres Amigas. All rights reserved. Confidential and proprietary.

Proximity to Wind PowerThe principal economic rationale for transmission investment is that it allows power to be moved from where it is most cost effectively produced to where it is most valuable.

• The Need for Transmission Infrastructure: while growth in electricity demand and investment in generation has continued unfettered over the past four decades , investment in the transmission grid has not kept pace.

• Moving Electricity to Where it is Most Valued: the Eastern, Western and Texas Interconnections each have a different mix of generation /demand characteristics. There is scarce connection between these grids and little coordination. This results in regular, sizable price differences.

• Structural Price Differences: an analysis of historic market prices indicates evidence of material structural price differences, due to the timing of demand, availability of local supply resources, and asynchronous price patterns in gas markets due to transmission bottlenecks.

• Access for Renewables : the US is experiencing significant and growing demand for renewable electricity, and there is substantial wind and solar power potential in the vicinity of the Tres Amigas site, as demonstrated in the figure at left. Tres Amigas is well-positioned to capture the value associated with linking renewable energy supply to multiple markets.

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Voltage Source Converters – The Key to Smart Grid

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· Mature technology with a proven track record

· Key technology for smart transmission grids and for integrating renewables

· Provides a more precise and fast reactive power control and increased stability of the power system

· Tres Amigas has partnered with Alstom Grid, a leading provider of this technology

It operates a 25MW demonstrator plant providing customers a unique opportunity

Regularly picked for major projects by advanced utilities such as in Sweden

© 2012 Tres Amigas. All rights reserved. Confidential and proprietary.

Scope of the Business

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Transmission: The fundamental offering of Tres Amigas is transmission service. From this base it is possible to offer other services, both to support stable system operations, in the interconnected grids, and to facilitate commercial transactions.

Operations: Tres Amigas Operations will serve as the hub for both the transmission operator and market/exchange services. It will ensure reliability and interchange coordination, and it will carry out a number of core market functions necessary to support robust markets

The Tres Amigas Transmission Superstation can be mapped against the NIST Smart Grid Conceptual Model to illustrate the scope of the Tres Amigas business.

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Open Season Auctions

Point-to-Point Transmission Service

• Will be sold in blocks ranging from 1 to 20 years in duration and on shorter-term basis (seasonal, monthly, weekly, daily and hourly)

Anchor Tenant

Agreements

Spot Sales(via Portal)

20 years Annual Monthly Daily Hourly

Firm Capacity Sales – up to 50% of firm capacity

All non-firm capacity andsecondary trading of

previously purchased capacity

Remaining available firm capacity after Anchor Tenant Agreements

• Retailers / Load-Serving Entities (Utilities)• Existing Generators • New Generation Projects (especially Renewable) • Power Merchants / Traders

Target Customers

Revenue Structure and Business Model

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Power Exchange and Other Services• By linking the three electric interconnections of the United States, Tres Amigas is firmly positioned to be a

natural trading hub

• Tres Amigas will provide an exchange facility for the trading of electricity and various other electricity-related physical and financial products (e.g. RECs) providing liquidity and transactional efficiency through price transparency and robust financial clearing processes

Target Customers • Financial Traders

• Execution Brokers

• OTC Brokers

• Futures Commission Merchants

• Transmission Service Customers

• Tres Amigas will also offer ancillary services, including

– spinning reserves and supplemental non-spinning reserves that transmit increased output in response to major generator or transmission outage to maintain system frequency

– frequency regulation that rapidly injects/withdraws energy to correct unintended fluctuations in generator output

Ancillary Services

Revenue Structure and Business Model (continued)

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© 2012 Tres Amigas. All rights reserved. Confidential and proprietary.

Development Plan – Phased ApproachTres Amigas’ development strategy emphasizes a phased approach to growth, building the Superstation overtime using 750 MW VSC block increments. The phases are designed to add VSCs as needed, dictated by customer demand, as follows:

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Development Plan

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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Phase II

Incremental Capacity: 1,500 MW for ERCOT and SPPExpected Cost: ~$400mm

OperationConstruction

Phase III

Incremental Capacity: 3,000 MW for ERCOT and SPPExpected Cost: ~$1.0 billion +

Operation Construction

Phase I

Incremental Capacity: 750MW for WECC and SPPExpected Cost: ~$500mm

OperationConstruction

© 2012 Tres Amigas. All rights reserved. Confidential and proprietary.

• Market-Based Rates: in March, 2010, Tres Amigas obtained all of the necessary FERC approvals to sell transmission service at negotiated, or market-based, rates. FERC approvals apply to all phases of the development plan. Occidental has appealed the FERC approval in DC Circuit court, but should be resolved shortly.

• Jurisdiction: FERC declined to disclaim jurisdiction over prospective transmission facilities to interconnect Tres Amigas and the Electric Reliability Council of Texas ("ERCOT"), stating it did not have the information necessary to grant the request. The Commission went on to state that upon receipt of a valid application (210/211 process), the Commission could issue orders to allow Tres Amigas to proceed and interconnect with ERCOT without conferring FERC jurisdiction over ERCOT utilities.

• Open Access Transmission Tariff (OATT): Tres Amigas is developing an OATT filing which is expected to filed during the second quarter. As part of the filing, Tres Amigas will provide an ancillary services plan, and seek market-based rates for those services.

• Anchor Tenant: Tres Amigas is negotiating with anchor tenant prospects and has ongoing discussions with local wind generators, gas producers, CAES developers, and trading companies. We are also working on plans related to ‘open season’ auctions.

• Interconnection Agreements: Tres Amigas is negotiating IA’s with PNM and SPS/SPP.  These studies are nearing completion with exchanged drafts. We expect to file with FERC in third quarter 2012.

Development Plan – FERC Filings and Status

As a merchant transmission facility, Tres Amigas requires FERC approval to sell transmission service at negotiated rates, which has been granted in March 2010, and Tres Amigas is in the process of making additional filings at FERC.

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© 2012 Tres Amigas. All rights reserved. Confidential and proprietary.

concept

Startup: research, regulatory and local filings, ROW, preliminary engineering, environmental, economics and business plan.

Startup

Preconstruction

Phase I ~$500 Million

Preconstruction: detailed engineering, vendor selection/contracts, product development, additional filings and detailed business plans.

Phase I: construction & operations, East/West transmission node, including HVDC converters, buildings and business infrastructure

Funding – Tres Amigas Merchant TransmissionUnlike traditional transmission facilities, merchant transmission project owners assume all market risk. Tres Amigas has been successful in receiving significant capital through investors and private placements.

Phase II – III~$1.5B

Phase II-III: construction & operations, Texas node, additional HVDC converters, facilities, and business infrastructure

Private PlacementRaises $15 Million

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