AES Trans-Elect

Presentation to

WIA Board & State Transmission Authorities

July 1-2, 2008

Independent Transmission Development in Independent Transmission Development in Support of State Transmission Authorities

Independent Transmission Development in Independent Transmission Development in Support of State Transmission Authorities

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Mission Statement

Trans-Elect, with the support of AES, is committed to expanding America’s electric transmission grid in the furtherance of public policy, increased reliability, and

access to remote resources.

As an independent transmission owner, Trans-Elect promotes the regulatory objectives of open, non-

discriminatory access to the nation’s electricity system, while providing cost-effective, reliable service and

electric grid expansion.

Introduction to AES Trans-Elect

• AES TE – The Partnership Company

– Path 15 with Western Area Power Administration and PG&E

– Wyoming Colorado Intertie with Wyoming Infrastructure Authority

– High Plains Express with 9 public and private stakeholders

• TE – Financed over $1 billion in transmission projects

• TE – Owned and/or Operated nearly 13,000 miles of high voltage transmission

Trans-Elect Development Company LLC

• The nation’s 1st independent transmission company• 2002: Acquired METC (Michigan) and an interest in AltaLink (Alberta)• 2004: Developed Path 15 in California• 2005: Wyoming-Colorado Intertie Public/Private Partnership

– Wyoming Infrastructure Authority & Western Area Power Authority

• 2006: Partnership with AES to develop/acquire transmission• 2007: High Plains Express Project: WY-CO-NM-AZ

• Current Projects:– Wyoming-Colorado Intertie

– High Plains Express

– Other unannounced projects focused on renewable development

• Active in public policy development: WREZ, CREZ, WGA• Offices in Bethesda, Chicago, and Denver• www.trans-elect.com

Path 15 Project Summary

• Public-private partnership with Western (DOE), PG&E, and Trans-Elect

• 83-mile, 500-kV line to eliminate a long-standing transmission constraint between N-S California

• Total development cost $250 M for a new 500-kV transmission line and substations

• FERC approved ROE 13.5% and CAISO is sole customer

• Construction started in September 2003 with commercial operation December 2004

• Trans-Elect’s share of project costs of $194 million were under budget

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Tesla

Oregon

California

Lake

MalinCaptain Jack

COTPAC

INTERTIE

Tracy

DC

Vincent

Olinda

Table Mountain

Round Mountain

Los Banos

GatesPath 15

INTERTIE

Midway

Tahoe

San Francisco

Michigan Electric Transmission Company

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• Purchase price - $288 million May 1, 2002

• Assets - 5,400 miles of transmission lines in Michigan

• Investors - Trans-Elect as general partner with equity investment from GE Capital. Debt raised by Deutsche Bank and CIBC

• Seller’s rationale - Strengthen balance sheet and use sale to focus strategy

AltaLink Summary

• Purchase price - $570 million (C$860 million) on April 29, 2002

• Assets - 7,200 miles of transmission lines in Alberta, Canada

• Investors – Trans-Elect and SNC-Lavalin as 50/50 general partners with equity investments from Ontario Teacher’s Pension Plan Board and Macquarie Bank

• Seller’s rationale - Become a pure generating company (previously divested distribution assets)

7

TAUC

APL

EP

TRANSALTA UTILITIES

ALBERTA POWER

TAUC

APL

EP

TRANSALTA UTILITIES

ALBERTA POWER

Mildred Lake

Deerland Marguerite Lake

Whitefish Lake

Louise Creek

Mitsue

Sturgeon

Lamoureux

E. Edmonton

Jenner

Metiskow

Empress

AC-DC-AC Link

Mc Neill

Ware Jct.Brooks

LethbridgePeigan

LangdonJanetSarcee

Bickerdike

Benalto

Red Deer

Ellersie

Genesee

Sagitawah

Barrhead

KeephillsBrazeau

ALBERTA

ALBERTAPOWER

TRANSALTAUTILITIES

Mildred Lake

Deerland Marguerite Lake

Whitefish Lake

Louise Creek

Mitsue

Sturgeon

Lamoureux

E. Edmonton

Jenner

Metiskow

Empress

AC-DC-AC Link

Mc Neill

Ware Jct.Brooks

LethbridgePeigan

LangdonJanetSarcee

Bickerdike

Benalto

Red Deer

Ellersie

Genesee

Sagitawah

Barrhead

KeephillsBrazeau

ALBERTA

ALBERTAPOWER

TRANSALTAUTILITIES

Trans-Elect’s Partner: AES Corporate Overview

28 countries on 5 continents28 countries on 5 continents

121 generation plants • 13 utilities121 generation plants • 13 utilities

Alternative Energy leaderAlternative Energy leader

30,000 people worldwide 30,000 people worldwide

25 years of project development experience25 years of project development experience

Diverse technologies and fuel mixDiverse technologies and fuel mix

Entrepreneurial learning cultureEntrepreneurial learning culture

AES 2006 Financials

Revenues Gross marginNet cash from operating activities

$0

$4,000

$8,000

$12,000

$16,000

2004 2005 2006

Dollars in Millions

$0

$1,000

$2,000

$3,000

$4,000

2004 2005 2006

Dollars in Millions

$0

$400

$800

$1,200

$1,600

$2,000

$2,400

$2,800

2004 2005 2006

Dollars in Millions

$12.6 billion $3.6 billion $2.4 billion

28 countries5 continents

The capacity to serve 100 million people

116 generation plants13 distribution businesses

42,000 MW installed generation capacity annual distribution sales of over 73,000 GWh

Broad global footprintBroad Global Footprint

DC Ties (all ~ 200 MWexcept ERCOT-E @ 600 MW)

Interconnection Boundary

Transmission Authorities fill Gaps in RTO Coverage

WECC Transmission Projects Under Development

Palo Verde–Devers II

Green Path ProjectIV-San Felipe

Indian Hills - Upland

Sunrise Powerlink

En-ti (Ely-Harry Allen)

Harry Allen-Robinson Summit

Montana AlbertaTie Line

TransWest Express Project

Northern Lights

West Coast Cable

Canada –Northwest - California (CNC) Project

Juan de Fuca Cable

White Pine-Midpoint

Lake ElsinoreAdvanced PSP

Palo Verde – North Gila IIProject

Navajo TransmissionProject Segment 1

Miracle Mile-Ault

SunZia

High Plain Express

Colorado-New MexicoInterconnection Project

Wyoming-Colorado Intertie Project

Eastern Plains

Mountain States

PacifiCorp Energy GatewayHemingway to Boardman

BPA transmission

Tehachapi Project

Central California CleanEnergy Transmission Project

Southern Crossing

(courtesy of the Wyoming Infrastructure Authority)

Wyoming Transmission ProjectsIncluding Two Public/Private Partnerships involving Trans-Elect

WIND

New Lines Under Development

Existing Lines

Wyoming-Colorado Intertie (WCI) Project

180 miles 345 kV 850 MW

75 miles230 kV 425 MW

• Recommended by RMATS– TOT3 Constraint

– 6 Lines w/ 1,600 MW Capacity

• Public/Private Partnership – Wyoming Infrastructure

Authority, Trans-Elect & WAPA

• Feasibility Studies Complete– Phase 1 WECC path rating

• Open Season Process– July 31 Auction Date

• ~2013 on-line date

$3.00

$3.50

$4.00

$4.50

$5.00

$5.50

$6.00

$6.50

0 500 1,000 1,500 2,000 2,500 3,000

WCI Bidding Concept

FIRM TRANSMISSION CAPACITY (MW)

1st Round2nd Round

3nd Round4nd Round

5th Round

6th Round

7th Round

8th Round

9th Round

Capacity Available 850 MW

BID

PR

ICE

S (

$/K

W-M

O)

PR for WCI

SOLAR

SOLAR

WIND

WIND

WIND

WIND

WIND

WIND

WIND

WCI (TE/WIA/WAPA)

EPTP (Tri-State/Xcel/WAPA)

NM Wind Collector (PNM)SunZia

High Plains Express

SOLAR

• MOU involving 6 utilities, 3 State agencies & Trans-Elect

– Co-Managers: Xcel & Trans-Elect

• Feasibility study completed

– Stage 2 Feasibility Underway

• Major renewable component

• 3,500 MW – 500 kV AC

– $5 billion

• 1,300 miles across favorable terrain from Wyoming to Arizona

• Improved reliability in Eastern WECC

• Benefits to participating states, including consumers

Transmission – A Snapshot

• After years of under-investment, there’s a resurgence in interest in transmission expansion, driven by...

– Replacement of aged infrastructure/improved reliability

– Accessing remote resources, especially renewables

– Availability of low-cost money

• Impediments

– Absence/inconsistent public policy & regional planning

– Utility/regulatory focus on serving native load

– Cost allocation & recovery uncertainties

– Long permitting timelines & complications

Solutions for Regional Transmission Expansion

• Public Policy

– National: siting/routing, financial incentives, open access protocols

– Regional & State: multi-state cooperation, transmission authorities

• Professional Transmission Development

– Independent transmission’s exclusive focus on transmission development

• Commitments needed to build transmission

– Traditional Model: Utilities to own and/or contract for capacity

– Emerging Model: Renewable developers, transmission authorities, and customer beneficiaries

› Facilitated by supportive public policy & regionalized power markets

Perfect Storm

• Change in Fundamentals

– Rapid inflation in energy prices

– Carbon-constrained energy economy

– Price-competitive renewables

– Utilities have few incentives for expanding transmission

• Change/Chaos = Opportunity

– Transmission authorities are uniquely positioned to effect change

– Multi-state cooperation in non-RTO areas

› Western REZ process

– Take the lead in facilitating transmission expansion

› Supported by independent transmission developers & public policy

Shared Risk for Transmission Development

• State Transmission Authorities

– Focused on renewables

– Bonding & eminent domain authority

– Seeding transmission development

• Business Model

– State Authorities: political support

– Trans-Elect: lead development efforts

– Shared funding and risks, with funds repaid (with uplift) upon project financing

• Opportunities

– Short-Term: generator leads & collector systems

– Longer-Term: trunk lines & regional lines