TransmissionHub Quarterly Market Update March 11, 2015 Kent Knutson, Director Hub Services, PennWell Corporation

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• 2015 will be one of the most important years in the history of the power industry

• Compliance to MATS (Mercury Air Toxics Standards) starts next month – nearly 22.7 GW in coal retirements in 2015

• EPA rules on carbon emissions from existing and planned power plants set to roll out this summer

• Myriad of FERC policy issues including Order 1000, Order 745 and Order 531(a) will continue to be debated and moved forward

• FERC clarification on ROE – base versus incentive adders • The dash to gas, solar and wind will continue

Transmission Uncertainties

TransmissionHub data . . . . • 2015 large number of projects to be energized • 2016 much lower than previously expected • 2017 and beyond forecast is robust but includes

a number of speculative projects Current spending at a record high – EEI estimates Investor-owned utility CapEx at record $103.3bn in 2014 – 42% T&D – forecast total CapEx at over $90bn annually over the next few years

Transmission Investment Trends

US/Canada Planned Transmission Investments - $bn

• HVDC – $53.0bn • Underground and water – $17.3bn • $12.5bn in 2013 • $10.2bn in 2014 – lower than expected

– THub forecast $14.1bn in January 14’ • $22.4bn in 2015 – $13.2bn UC • $10.9bn in 2016 – $1.0bn UC • $26.6bn in 2017 – $7.2bn UC • $36.4bn in 2018 – $0.1bn UC • 2015 – 191 projects, 50 > $100m • 2016 – 105 projects, 29 > $100m • 2017 – 105 projects, 41 > $100m

Statistics Continue to Support Robust Transmission Market

Transmission Investment by NERC ($M)

Transmission Investment by Status ($M)

Transmission Investment by Objective ($M)

• Aging infrastructure – reliability upgrades • Renewables to meet state RPS (Renewable

Portfolio Standards) • Compliance to CPP (Clean Power Plan) rules • Coal retirements – between 60 and 100 GW’s by

2020 – most replaced with gas • Integrate new generation – gas, solar and wind • Load serving interconnections – into high growth

areas in the south and west

Transmission Key Drivers

Transmission Development by Sponsor Type ($bn)

Utility and Independent Development

• Most utility projects are for reliability purposes – needed to replace aging infrastructure

• Utility projects are attractive investments for bankers – rate-based with guaranteed ROE

• Many of the merchant projects need investors; suppliers and consumers at both ends of the project

• There are well established non-utility (non-incumbent) players including ITC Holdings, DATC, Anbaric, TransElect, TransWest, SunZia, Clean Line, NextEra, RES Americas, several companies involved with the Texas CREZ build-out and others – all happy FERC upheld key elements of Order 1000 back in August 14’

Record 2014 for Transmission Investment

2013 Report: 17.0 15.3 14.4

January, 2015 Update

Top US/Canada Projects Scheduled Online in 2015 Under Construction as of March ‘15

Canada

• AltaLink’s and ATCO’s Alberta north south 500-kV transmission projects complete line construction – CREZ like development – $3.5bn

• Tehachapi line work expected to complete next month despite City of Ontario petition

• Susquehanna-Roseland Line expected to fully enter service this year

• Maritime Link Continues on schedule, on budget • Xcel Energy CapEx-2020 projects near completion

Recent Project News Highlights

• Ameren files application for Missouri portion of Illinois Rivers Project – 385 mile, $1.1bn, 345-kV

• Manitoba Hydro holds final open houses and Minnesota Power gets FERC approval for their portion of the 500-kV Manitoba-Minnesota Line

• Public Hearing on New England Clean Power Link Project held in February in Vermont – ambitious 97.3 miles underwater and 56.7 miles underground

• Plains & Eastern Clean Line advances following approval in Tennessee – 700 mile HVDC – $2.0bn

• SunZia backers seek state permits following federal approval

Investment Marches On . . . .

Recent Policy News Highlights

• FERC Chairman LaFleur: Gas, electric infrastructure additions will be needed for Clean Power Plan (CPP) compliance

• AWEA/WIRES – suggest making CPP plan a public policy requirement under Order 1000

• PJM CEO: PJM continues focus on reliability, fair markets and infrastructure planning

• Cal-ISO gets ready for Harry Allen to Eldorado competitive solicitation and validates six sponsor application for 500-kV Delaney to Colorado River Project

US Current Electric Capacity First Year Online by Fuel Type (MW)

• Gas, Wind and Solar Continue to Dominate the New Generation Landscape

Investment 2015-17 • Gas: 85.7 GW (63%) • Wind: 26.9 GW (20%) • Solar: 16.1 GW (12%) • GWS: 128.7 GW (95%) • All: 135.3 GW

Planned Generation by Fuel (MWs)

Planned Gas Power by NERC Region – MW

US Wind Power Capacity – Annual and Cumulative (MW) • PTC Renewed 10 times since

1992 – 2.3 cents/kWh • HR 5771 extends PTC one year • Required construction start by

end of 2014 • January vote to extend 5 years

voted down 47-51 • Oklahoma house voted 89-0 to

reduce wind tax credit by 70% • ITC set to expire in 2016 –

could affect solar development • RPS kicks in for some states –

others pushing back

Tax Incentives for Renewables Up in the Air Could have Impact on Trans Development

• Crude Oil Futures for March delivery around $50/barrel • Doesn’t reach $60 until February 2016 • Only gets to $71 for December 2023 deliveries

• HH Natural Gas spot prices $2.69/mmBtu – not above $4.00 until January 2020

• Iron Ore 62% Fe CFR China – What’s driving the decline? • November/2014: 84.0 • February/ 2015: 58.4

• Lower commodity prices will lower the cost of infrastructure construction

• The “Tale of Two Regions”: on February 10, 2015 • Northeast (gas $8.50 and power $83.70) • Northwest (gas $2.06 and power $13.50)

Low Sustained Oil and Gas Prices . . .

• Flat load growth driven by expansion of EE (energy efficiency), DG (distributed generation) and DR (demand response) programs

• Diminishing incentives like lower ROE (return on equity) could stymie investment

• Order 1000 challenges including: non-incumbent and incumbent rights, interregional oversight and cost allocation battles

• Final version of CPP including how states will implement – “Grid Doesn’t Stop at State Lines”

• 2015 will be a year to remember

Transmission Development Challenges

Questions and Answers At this point I would like to field any questions . . . .

Thank You to Our Sponsor

To find out more about TransmissionHub and to schedule a demonstration of our online intelligence service call or email . . . . Laura Kresse (918) 831-9731 laurak@pennwell.com

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