gence ebinar · e 23 ket ce b l-C l- C y ∆ ∆ ∆ ∆ O Y Zone G -4.8% -6.6% 0.2% 0.0% t is well O -NE Hub 5.1% 8.5% 0.4% 1.9% W. id - ic ub - 4.3% - 6.0% -0.2% -0.6% expects

Energy Market Intelligence Webinar

December 19, 2018

Today’s Speakers

• Andrew Durante – Meteorologist

• Greg Kosier – Commodities Management Group

• Keith Poli – Commodities Management Group

• Brian Habacivch – Commodities Management Group

1© 2018 Constellation Energy Resources, LLC. The offerings described herein are those of either Constellation NewEnergy-Gas Division, LLC or Constellation NewEnergy, Inc., affiliates of each other and ultimate subsidiaries of Exelon Corporation. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted.

Today’s Webinar Agenda

• Weather: When will the cold return in January?

• Short-Term Market Fundamentals: Key Drivers (Production vs. Power Burns & Exports)

• Natural Gas and Power Price Review

• Year in Review


Weather

Short-Term Weather Drivers

4 © 2018 Constellation Energy Resources, LLC. The offerings described herein are those of either Constellation NewEnergy-Gas Division, LLC, Constellation NewEnergy, Inc., Constellation Energy Services - Natural Gas, LLC, Constellation Energy Services, Inc. or Constellation Energy Services of New York, Inc., affiliates of each other and ultimate subsidiaries of Exelon Corporation. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted.

• A warm pattern is expected for most of the nation during the 6-10 day period as mild Pacific air will dominate.

• Some minor cold will move into the interior west during the 8-14 day period, however most of the Arctic air should be limited to western Canada.

Source: NOAA

December Stats


• December is expected to come in around the 14th warmest since 1950. This is following the 9th coldest November since 1950.

• Gas weighted heating degree days are expected to come in around 793, which is much warmer than the 30-year normal of 874 and the 10-year normal of 837.

• Our initial winter analog years captured this warmth for December.

DECEMBER 2018 TEMPERATURE DEPARTURES (REALIZED + FORECAST)

ORIGINAL WEATHER TEAM WINTERANALOG YEARS

Source: Radiant Solutions

Stratospheric Warming

6 © 2018 Constellation Energy Resources, LLC. The offerings described herein are those of either Constellation NewEnergy-Gas Division, LLC, Constellation NewEnergy, Inc., Constellation Energy Services - Natural Gas, LLC, Constellation Energy Services, Inc. or Constellation Energy Services of New York, Inc., affiliates of each other and ultimate subsidiaries of Exelon Corporation. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted.

• The mainstream media has started to pick up on stratospheric warming events and how they could affect the rest of the winter.

• Without stratospheric warming, the polar vortex usually stays very strong and confined around the Arctic. This causes a very fast jet stream and tends to push mild Pacific air across the nation.

• Warming in the stratosphere near the Arctic can weaken the polar vortex, which can weaken the jet stream and cause pieces of the polar vortex to dive either into North America, Europe or even Asia.

• Not all stratospheric warming events cause blocking patterns, so caution is advised.Sources: Constellation and Radiant Solutions

WINTERS WITHOUT STRATOSPHERICWARMING EVENTS

WINTERS WITH STRATOSPHERICWARMING EVENTS

Stratospheric Warming

7

Sources: WSI and CWG

• The European model is showing a very strong stratospheric warming event starting next week. While these events can be a precursor to strong blocking, it can take some time for a blocking pattern to fully materialize (if at all).

• Sometimes blocking patterns develop, however, it may favor cold in other parts of the world like Europe and Asia.

• The European weekly model is starting to show some signs of blocking over northern Canada and Greenland by early/mid January.

STRONG STRATO WARMING EVENTSHOWN BY EURO (December 26th)

EURO WEEKLY MODEL WEEK 3 (TOP)AND WEEK 4 (BOTTOM)

© 2018 Constellation Energy Resources, LLC. The offerings described herein are those of either Constellation NewEnergy-Gas Division, LLC, Constellation NewEnergy, Inc., Constellation Energy Services - Natural Gas, LLC, Constellation Energy Services, Inc. or Constellation Energy Services of New York, Inc., affiliates of each other and ultimate subsidiaries of Exelon Corporation. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted.

January and February

8

Sources: Radiant Solutions and Constellation

• Our view supports cold returning sometime in early/mid January, with most of the Midwest, East and South coming in below normal.

• While there may be a brief warm break late in January, we feel that cold could return for most of the nation during the month of February.

• One wild card: If El Niño gets too strong, the northern tier of the U.S. may come in warmer than the maps shown above.

FAVORED JANUARY YEARS FAVORED FEBRUARY YEARS


Snowpack Year Over Year: December 17th

9

Source: National Ice Center


2018 2017

• Snowpack is important in winter months because it acts as a conduit for arctic air to move south. This can sustain cold fronts for longer periods of time versus when cold air meets warm ground; it generally loses some of its energy.

Supply & Demand Fundamentals

Weather Likely to Tip the Market Balance this Winter

11© 2018 Constellation Energy Resources, LLC. The offerings described herein are those of either Constellation NewEnergy-Gas Division, LLC, Constellation NewEnergy, Inc., Constellation Energy Services - Natural Gas, LLC, Constellation Energy Services, Inc. or Constellation Energy Services of New York, Inc., affiliates of each other and ultimate subsidiaries of Exelon Corporation. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted.

Source: Constellation

Customer Takeaway: Given the growth in gas demand and the ensuing gas storage deficits heading into the winter of 2018/19, weather will be a key driver of natural gas prices for 2019.

Record Natural Gas Production

Storage Deficit & Record Exports

Lower Prices Higher Prices

Coldest Start to Winter

U.S. Natural Gas Market Balance

$3.78

2017: Return to growth2018: Record production, record demand

2019: Narrowing gas storage deficit?

NYMEX

Recent Weather Trends: Impact on Demand

Customer Takeaway: Widespread below normal temperatures in the eastern half of the nation kept residential-commercial heating demand elevated above year-ago levels last week, while power burns have been mixed due to higher fuel prices year-on-year. Forecasts are calling for a warm up in the second half of December, which should reduce heating demand.

Sources: EIA, NOAA

© 2018 Constellation Energy Resources, LLC. The offerings described herein are those of either Constellation NewEnergy-Gas Division, LLC or Constellation NewEnergy, Inc., affiliates of each other and ultimate subsidiaries of Exelon Corporation. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted.12

W-o-W Change in Temp Departure

Temp Departure for week ending Dec 6th

Storage Deficit at +700 Bcf, But Will it Narrow?

Customer Takeaway: Storage inventories finished November at their lowest level since 2002 but current 11-15 day forecasts continue to point to a delay in a return of cold weather, which would reduce the storage deficit.

• Storage stands at 2,914 Bcf, or -704 Bcf (19%) below year-ago levels and -725 Bcf (19.5%) below the five-year average. Underground storage was below 3.0 Tcf at end of November for the first time since 2002.

• The six weeks of December 15th –January 19th, 2019 saw a draw of 1,330 Bcf; so the current 15-day forecast could result in the year-over-year storage deficit narrowing in the next four to six weeks.

• The Energy Information Administration’s (EIA) December Short-Term Energy Outlook (STEO) forecasts end of March underground storage to be 1.35 Tcf, in line with last year’s 1.35 Tcf but below the five year average of 1.7 Tcf.

Sources: EIA, Constellation


Production Growth Continues

• Per Energy Information Administration (EIA) preliminary data, dry gas production has averaged above 87 Bcf/day the past four weeks, with November averaging close to 87.5 Bcf/day. Third party estimates put production at approximately 86.25 Bcf/day.

• For the week of December 12tth, production year-over-year was 87.6 (+11 Bcf/day) higher but on an annual average was up only ~6.5 Bcf/day.

• The Northeast saw the largest growth in production at ~3.5 Bcf/day, while Texas is higher by ~2.5 Bcf/day. Both were driven by new pipeline capacity this year (e.g., Rover & NEXUS in the Northeast and new projects from Texas to Mexico)

Customer Takeaway: Dry gas production continues to break records, ending 2018 at likely over 86 Bcf/day. Despite record production, the persistent storage deficit has supported prices as both the NYMEX prompt-month contract and the 12-month strip have seen large upside moves since early November.

Source: EIA


Regional Focus: New England Gas & Power Price Relationship

Customer Takeaway: The correlation between regional natural gas supply (Algonquin pipeline) to the New England cost of power in real-time is undeniable (94%). The cost of Algonquin pipeline gas may be the best indicator of current power prices in New England.

Sources: EIA, NYMEX, Constellation


Liquefied Natural Gas (LNG) Imports Help Balance the New England Gas Market

Customer Takeaway: Current global liquefied natural gas (LNG) prices show an imbalance internationally vs. U.S. price points. While not a factor in non-winter months, during heating demand months, New England must compete for imports vs. other demand hubs (i.e., Europe and South America). Winter Algonquin City Gate (ALGC) forwards at $9-10/MMBtu means higher New England higher ISO-NE forward power prices. Sources: FERC, EIA, Constellation


Northeast Gas Pipelines Limited Pipeline

Capacity into NE

Everett, LNG,

Boston

Regional Focus: SoCal Gas Facing Limited Pipeline Capacity

17

Sources: EIA, SoCal, Platts

Customer Takeaway: SoCal Gas is facing limited imports this winter and will have to rely on drawing gas from three smaller storage facilities that used to supplement Aliso Canyon (currently 34 Bcf). Limited gas supply would introduce volatility into both gas and power prices, as we saw this summer.

© 2018 Constellation Energy Resources, LLC. The offerings described herein are those of either Constellation NewEnergy-Gas Division, LLC or Constellation NewEnergy, Inc., affiliates of each other and ultimate subsidiaries of Exelon Corporation. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted.

• SoCal Gas outages have restricted inflows on its system from SoCal Border to City Gate of only 2.5 Bcf/day, down from +3.5 Bcf/day of design capacity

• Flow across the Southern zone have been restricted to 784 MMcf/day or only 65% of capacity since April.

• As import capacity has been reduced this year, Southern California Edison Day-Ahead locational marginal pricing have reflected the volatility in the gas prices at the SoCal City Gate.

• SoCal maintenance will likely continue into Q2 2019.

Natural Gas and Power Pricing Trends

NYMEX Drops on Warm Up in December

Sources: EIA, Reuters

Customer Takeaway: NYMEX prompt-month broke key $4/MMBtu technical support as milder temperatures in the near-term keep pushing back the return of colder forecasts for January. Weather will hold the key to price direction against a backdrop of record gas production and a 700 Bcf storage deficit.

19© 2018 Constellation Energy Resources, LLC. The offerings described herein are those of either Constellation NewEnergy-Gas Division, LLC, or Constellation NewEnergy, Inc., affiliates of each other and ultimate subsidiaries of Exelon Corporation. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted.

NYMEX Natural Gas 12-Month Rolling Strip

Customer Takeaway: The NYMEX 12-Month strip has pulled back briefly below $3/MMBtu on mild weather in late December. How the storage deficit narrows or doesn’t narrow (currently -19%) will likely be a key driver of where the strip either strengthens or weakens in Q1 and Q2 of 2019.

20 © 2018 Constellation Energy Resources, LLC. The offerings described herein are those of either Constellation NewEnergy-Gas Division, LLC or Constellation NewEnergy, Inc., affiliates of each other and ultimate subsidiaries of Exelon Corporation. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted.

Sources: Constellation, NYMEX; Prices as of COB 12/17/18

Forward Power Price Trends (6-Month History)

21


Note: These energy-only power prices are an indicative, non-transactable snapshot of the wholesale market as of COB 12/17/18.

Customer Takeaway: The storage deficit and early cold has spurred a rally in near-term prices, while record gas production has kept pressure on the outer years. Backwardation in many markets favors extended contract terms.

© 2018 Constellation Energy Resources, LLC. The offerings described herein are those of either Constellation NewEnergy-Gas Division, LLC, Constellation NewEnergy, Inc., Constellation Energy Services - Natural Gas, LLC, Constellation Energy Services, Inc. or Constellation Energy Services of New York, Inc., affiliates of each other and ultimate subsidiaries of Exelon Corporation. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted

New England Texas Northern CA

Mid-AtlanticNorthern Illinois NYC (NY)

Index Power Prices (6-Month History)

22


Note: These energy-only power prices are an indicative, non-transactable snapshot of the wholesale market as of COB 12/17/18.

Customer Takeaway: In November, cold weather and volatile gas prices have already put upward pressure on index power prices. Given the size of the gas storage deficit, energy buyers should prepare for the possibility of volatility if cold weather returns. A mix of forward purchases and real-time index can diversify market risk.

© 2018 Constellation Energy Resources, LLC. The offerings described herein are those of either Constellation NewEnergy-Gas Division, LLC, Constellation NewEnergy, Inc., Constellation Energy Services - Natural Gas, LLC, Constellation Energy Services, Inc. or Constellation Energy Services of New York, Inc., affiliates of each other and ultimate subsidiaries of Exelon Corporation. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted

Texas SoCal

Mid-AtlanticNYISO (NYC)

Weekly Forward Power Price Update

23

Market Price Hub

Cal-19, RTC Cal-21, RTC News and Commentaryw/w ∆ m/m ∆ w/w ∆ m/m ∆

NYISO NY Zone G -4.8% -6.6% 0.2% 0.0% NYISO’s assessment of winter preparedness finds that the state’s electric grid is well positioned to meet demands of a cold winter with a reserve margin of 11.4 GW.ISO-NE MassHub -5.1% -8.5% -0.4% -1.9%

PJM Mid-Atlantic West Hub -4.3% -6.0% -0.2% -0.6% PJM expects to have 185.6 GW of resources available to meet its forecasted winter peak demand of 135.5 GW. This compares to PJM’s all-time winter peak of 143.3 GW set on February 20, 2015 and last winter’s peak of 137.5 GW on January 5, 2018.

PJM Ohio ADHub -3.5% -3.4% -0.5% -0.7%PJM Illinois NIHub -3.5% -2.4% -0.4% -0.7%MISO Illinois IndyHub -2.9% -3.0% -0.2% 0.0% MISO anticipates it will have 140 GW of capacity available to meet its forecasted winter

peak load of 103 GW. MISO’s all-time winter peak of 109 GW was set on January 6,, 2014.MISO Michigan MichHub -2.8% -2.3% -0.2% 0.7%

ERCOT North -8.7% -8.9% -2.4% -3.9% ERCOT’s latest CDR report shows a planning reserve margin of 8.1% for summer 2019, a decrease of 2.9% versus its May CDR, due to higher demand and fewer new builds.ERCOT South -8.7% -9.4% -2.3% -4.0%

CAISO SP15 -4.3% -3.9% -0.3% -0.2% CAISO day-ahead LMPs averaged near $100/MWh last week as colder than normal temperatures increased demand amid on-going natural gas supply constraints.CAISO NP15 -4.2% -2.5% -0.3% 0.1%

Prices as of COB 12/17/18

© 2018 Constellation Energy Resources, LLC. The offerings described herein are those of either Constellation NewEnergy-Gas Division, LLC, or Constellation NewEnergy, Inc., affiliates of each other and ultimate subsidiaries of Exelon Corporation. Brand names and product names are trademarks or service marks of their respective holders. All rights reserved. Errors and omissions excepted.

Updated: December 18, 2018

Demand Caught Up with Supply in 2018

24

Source: EIA


Customer Takeaway: There were three key drivers of demand in 2018: pipeline exports, liquefied natural gas exports and higher power generation demand as new gas fired generation capacity came online. The growth in demand (5.9 Bcf) helped to offset the 6.5 Bcf/day of growth in supply.

2018 – The Year In Review

25

Source: EIA


Natural Gas Supply & Demand Scorecard

Dec-17 Dec-18Price Impact for Natural Gas

Natural Gas Production Soars 79.5 86 BearishStorage Deficit at 15 Year Low 3.6 Tcf 2.9 Tcf BullishNew Pipeline Projects Winter '18/'19 +11 Bcf Bearish

Key Demand Drivers (2017 vs. 2018 YTD)Power Generation Demand 26.2 28.1 NeutralIndustrial 20.8 21.2 NeutralExports to Mexico 4.1 4.5 BullishLNG Exports 2.2 3.3 BullishR&C Demand 19 20.7 Neutral

Market Impact"Backwardation" in Forwards: 2019 trading at premium to '20 BullishCrude Oil Prices Recover in 2018; drive "Associated" gas Growth BearishForward Power Markets:

New Gas fired Generation Capacity Added in 2018 +22 GW BullishContinued Growth in Renewable Capacity +14 GW BearishWeather 2018 Winter 2017/'18 Heating Degree Day (HDD) BullishSummer 2018 Cooling Degree Day (CDD) Bullish

Until Next Time… January 23rd

Thank you for your participation.

Please join us on Wednesday January 23rd, at 2 p.m. ET for our next webinar – we will update viewers with the winter 2018/2019’s impact on gas storage levels along with a review of Energy Information Administration’s projections for 2019. These will include forecasts for growth in gas production and key demand drivers (i.e., power generation and exports).

Feel free to reach out to the Commodities Management Group (CMG) with questions/requests at [email protected]. We look forward to and appreciate your feedback.


Appendix

NYMEX Natural Gas Calendar Strips

Customer Takeaway: Despite a sharp rally in winter NYMEX contracts due to the cold weather and storage deficit, record gas production levels have kept deferred calendar strip prices within 5% of all-time lows.


Sources: Constellation, NYMEX; Prices as of COB 12/17/18

China is Now the World’s Largest Natural Gas Importer

Customer Takeaway: Growth in global LNG demand should continue to incent robust U.S. LNG exports. Sources: EIA, WSJ


• In the past six months, China has overtaken Japan as the world’s largest importer of gas via pipeline and liquefied natural gas (LNG).

• China’s natural gas imports have averaged 11.4 Bcf/day in the first nine months of 2018, a 34% increase over the same period a year ago and more than double the country’s 2014 import average.

• Growth in China’s gas imports has been driven mostly by LNG imports. China is the world’s second largest LNG importer and itsimport capacity is expected to grow from 8.6 Bcf/day to 11.2 Bcf/day by 2021.

• U.S. LNG supplied ~5% of China’s LNG imports in 2018 year-to-date, but only two cargoes have gone to China since a 10% tariff was imposed on September 24th (versus 13 cargoes during the same period last year).

ERCOT’s Tightening Reserve Margin

• The decline in the reserve margin from 11% May 2018 to 8.1% for December 2018 was driven by a combination of growth in peak load (Far West Zone load and ERS) on the demand side. On the supply side, cancelled renewable and gas projects as well as a lowering of capacity rating on existing gas units contributed to a lower reserve margin.

• Reserve Margins remain below the North American Electric Reliability Corporation’s (NERC) 13.75% target for foreseeable future, highlighting reliability concerns.

Customer Takeaway: The December Capacity, Demand and Reserves (CDR) continued to highlight the tightening reserve margin driven by strong load growth and low power prices that have reduced the queue of new thermal builds to a trickle.

Source: ERCOT


Disclaimer

The information contained herein has been obtained from sources which Constellation NewEnergy, Inc. and/or Constellation NewEnergy-Gas Division, LLC (collectively, “Constellation”) believes to be reliable. Constellation does not represent or warrant as to its accuracy or completeness. All representations and estimates included herein constitute Constellation’s judgment as of the date of the presentation and may be subject to change without notice. This material has been prepared solely for informational purposes relating to our business as a physical energy provider. We are not providing advice regarding the value or advisability of trading in “commodity interests” as defined in the Commodity Exchange Act, 7 U.S.C. §§ 1-25, et seq., as amended (the “CEA”), including futures contracts, swaps or any other activity which would cause us or any of our affiliates to be considered a commodity trading advisor under the CEA. Constellation does not make and expressly disclaims, any express or implied guaranty, representation or warranty regarding any opinions or statements set forth herein. Constellation shall not be responsible for any reliance upon any information, opinions, or statements contained herein or for any omission or error of fact. All prices referenced herein are indicative and informational and do not connote the prices at which Constellation may be willing to transact, and thepossible performance results of any product discussed herein are not necessarily indicative of future results. This material shall not be reproduced (in whole or in part) to any other person without the prior written approval of Constellation.


Documents

gence ebinar · e 23 ket ce b l-C l- C y ∆ ∆ ∆ ∆ O Y Zone G -4.8% -6.6% 0.2% 0.0% t is well O -NE Hub 5.1% 8.5% 0.4% 1.9% W. id - ic ub - 4.3% - 6.0% -0.2% -0.6% expects