November 15, 2012

Compliance with the Clean Air Act: Remove Retrofit or Replace?

RE POWER Initiative

CONFIDENTIAL

RE POWER™ Summary

Fuel economics, generation technology, energy efficiency and more stringent regulations are changing the U.S. generating fleet.

Gas turbine plants are winning in the power supply auctions and gaining market share from coal and oil fired steam plants.

Re Power ™ - Retire, Retrofit or Replace Retirements are estimated at 60 GW of coal plant closures of

a total of 340 GW, or approximately 500 boiler/turbine units. Retrofits are estimated to be 103 GW of a total of 340 GW,

or about 200 fuel switch or scrubber projects on larger plants. Replacements with combined cycle gas turbine plants are estimated

at 35 GW, or 70 GTs at 500 MW per plant in PJM, MISO and SERC ISOs. Forecast capital spend is $70 – 100 billion.

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Do We Need to Replace All Closed Plants?

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Regional reserve margin estimates and targets for summer2012

What Does Reserve Capacity Look Like?

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Current (2010) capacity by initial year of operation and fuel type

What Coal Plants are Retiring?

CONFIDENTIAL 5

Announced coal plant capacity retirements 2011-2020

As of June 10, 2011 Source: SNL Energy Map credit: J. Bellavance, C. Kerr

Where are the Retrofit Projects?

CONFIDENTIAL

Each of these red dots will likely turn green or go away.

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SO2 emissions by coal plant, 2010Short tons

What about New Build?

Forecast new build is 35 GWs of combined cycle gas turbine from 2015 - 2020. PJM 9 GW MISO 8W SERC 20 GW

Timing is from 2015 – 2020.

CALISO, ERCOT and NYISO will likely need new build, subject to permitting and rate issues.

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Fuel Diversity

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Exhibit 2: Natural Gas Futures vs. MMBtu Equivalent CAPP Coal Futures Prices

U.S. Electricity Net Generation by Fuel, 1990-2035

Trillion kilowatt hours per year

Economic Market Drivers

Reduce Variable Costs Natural gas ($2.50 - $4 per MMBTU is competitive with coal

($3.00 per MMBTU). Combined cycle gas turbine technology heat rate is 30%

more efficient than steam boiler technology.

Reduce Fixed Costs Real estate taxes, labor, maintenance

Minimize Capital Expenditures CCGT new build cost of $750 - $1000 per KW is comparable

to retrofit cost of $450 – 750 per KW. Third party capital for merchant power plants Balance sheet financing for retrofit control technology

CONFIDENTIAL 9

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Incremental Capital and Operating Expenditures for Scrubbing Old Plants vs. New Gas Turbines

Investment Incremental CapitalIncremental

Operating Cost

Flue Gas Desulfurization $300 – 500 per KW $0.43 / MWHr

Selective Catalytic Reduction

$150 – 300 per KW $0.47 / MWHr

Activated Carbon $5 – 10 per KW $0.30 / MWHr

Incremental Labor 0 $2,000,000 / year

Total Retrofit $450 – 800 per KW $3.40 / MWHr

New Build Combined Cycle Gas Turbine

$750 – 1000 per KW 0.47 / MWHr for SCR

RE POWER Regulatory Drivers

Utility MACT Compliance Final 1 Hour NAAQS Rule for SO2 and NOx Mercury and Toxic Substances Rule (“MATS”) Issued November

2011 – Three Year Compliance Period Best Technology available for cooling water intake structures§316(B) Coal Combustion Residue Management (rules pending).

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Making the Right Decision - Playbooks

Business Objective for Deregulated Generators Maximizing shareholder return Positive cash flow and IRR > cost of capital

Economic Growth Revenue potential in particular market Competitive cost profile

Environmental Excellence Compliance with current rules Compliance with pending or likely rules

Corporate Responsibility Generating reliable power at competitive rates

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Retirements – Sell It or Demolish?

Engineering During Decommissioning Pre-demolition surveys for asbestos, hazardous materials,

structures, utility relocations, asset and real estate valuation, permitting and future use

Contract plans and specifications

Abatement, Decommissioning and Demolition Pre-qualified bidders, procurement and construction support

Remediation and Restoration to Suit Future Use

As-is, where is sales May involve substantial cash plus the plant Watch out for the boomerang!

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Retrofits

Fuel Switching Coal to low-sulfur coal and coal to gas

switching are popular options. May address SOx, but not NOx Cooling Water 316(b) issue remains

Tweaking Existing Scrubbers May address MATS but not SOx and NOx

Scrubbing Old Coal Plants Hard to justify investing up to $700/KW in

50 year old coal fired steam turbine plants with high heat rates

2,651 MW of clean coal plants were recently sold for $400,000,000 or $151/KW.

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Replacements

Current EIA reserves indicate that closed plants do not need to ve replaced in kind. Load pockets, CALISO, ERCOT and NYISO may be exceptions.

New CCGTs are competitive in power auctions and capture base load market.

Gas turbines with SCRs for NOx removal

Air cooled condensers to avoid cooling water regulations

Merchant power or PPAs

Waterside Station

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Hunter’s Point, San Francisco

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Austin Energy Holly Street

Glenwood Landing and Rockaway NY

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Astoria Energy Center, New York City

Permitting of the old NYPA Poletti and the new NYPA 500 MW Plants

NYPA Poletti – Engineering During Decommissioning

Astoria Energy I & II Siting, Licensing and Permitting

Astoria Energy II (Suez and SNC Lavalin) Environmental Oversight

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Questions?Ed MalleyP: 646.522.6488 | E: emalley@trcsolutions.comwww.trcsolutions.com