Nuclear Power:Nuclear Power:The Ages of Reformation,The Ages of Reformation,The Ages of Reformation, The Ages of Reformation,

Renaissance and RealpolitikRenaissance and Realpolitik

January 2008January 2008

John J. ReedJohn J. ReedChief Executive OfficerChief Executive Officer

Discussion Topics Discussion Topics

Introduction to Concentric Energy Advisors

Industry Consolidation and the Emergence of “Super Operators”y g f p p

Nuclear Generation’s Role in the US Energy Portfolio and the New Nuclear Movement

The Politics of Carbon

Capital Consequencesp q

Critical Success Factors

2

About Concentric Energy AdvisorsAbout Concentric Energy Advisors

Concentric Staff has served as financial advisor to companies on energy industry/utility M&A transactions in excess of $30 billion.

Concentric is the leading financial advisor on nuclear assets (existing and new) in North America.

In addition to M&A financial advisory services, Concentric provides regulatory advisory services and strategic consulting services including merger integration and market forecasting services to energystrategic consulting services, including merger integration and market forecasting services, to energy industry clients.

Concentric Staff has more that 250 appearances as expert witnesses before the Federal Energy Regulatory Commission, National Energy Board of Canada, state regulatory agencies and state courts in civil proceedings.

Concentric Principals have more than 200 years of cumulative energy industry experience, includingConcentric Principals have more than 200 years of cumulative energy industry experience, including senior and executive level positions with management consulting firms, utility companies, regulatory agencies, investment banking firms, competitive market participants, and universities.

3

Concentric Experience in the Nuclear AreaConcentric Experience in the Nuclear Area

$373,000,000$373,000,000 $380,000,000$380,000,000 $924,000,000$924,000,000$429,000,000

A wholly owned subsidiary of

$429,000,000

A wholly owned subsidiary of

FPL Energy Duane Arnold, LLC

Has sold Its Share of the Duane Arnold Energy Center

To

FPL Energy Duane Arnold, LLC

Has sold Its Share of the Duane Arnold Energy Center

To

Entergy Palisades, LLC

Has sold Palisades Nuclear Power Plant

To

Entergy Palisades, LLC

Has sold Palisades Nuclear Power Plant

To

FPL Energy Point Beach, LLC

Has sold Point Beach Nuclear Power Plant

To

FPL Energy Point Beach, LLC

Has sold Point Beach Nuclear Power Plant

ToHas sold

R.E. Ginna Nuclear Power PlantTo

Rochester Gas & Electric Corporation

Has sold R.E. Ginna Nuclear Power Plant

To

Rochester Gas & Electric Corporation

The undersigned acted as exclusive financial advisor to the Sellers in this

transaction

The undersigned acted as exclusive financial advisor to the Sellers in this

transaction

The undersigned acted as exclusive financial advisor to the Sellers in this

transaction

The undersigned acted as exclusive financial advisor to the Sellers in this

transaction

The undersigned acted as exclusive financial advisor to the Sellers in this

transaction

The undersigned acted as exclusive financial advisor to the Sellers in this

transaction

The undersigned acted as exclusive financial advisor to the Sellers in this

transaction

The undersigned acted as exclusive financial advisor to the Sellers in this

transaction

Currently Advising:January 2006January 2006 April 2007April 2007 October 2007October 2007June 2004June 2004

Currently Advising:FPL on Turkey Point 6 & 7Dominion on North Anna 3Major financial investor on billion dollar plus nuclear plant investments

4

Major financial investor on billion-dollar plus nuclear plant investments

Nuclear Power’s Renaissance Builds on the ReformationNuclear Power’s Renaissance Builds on the Reformation

The reformation has been marked by …

• Consolidation

• Improved performance

• Improved safety

• Emphasis on uprates and life extension

And has occurred during a period of …

• Rapidly rising fuel and power prices

• Far greater concern about air emissions

• Greater concern about energy independence

• Nuclear regulatory reform

5

Nuclear Plant Ownership Consolidation Has Been DramaticNuclear Plant Ownership Consolidation Has Been Dramatic

27 sales of a nuclear units to a “fleet” owner/operator have occurred over the past decade.

In d ep en d e n t V s F lee t P la n ts in U SIn d ep en d e n t V s . F lee t P la n ts in U S

4 0 3 3 3 1 3 1 3 0 2 9 2 8 2 5100

120

nits

4 4 4 5 4 8

3 0 3 03 0

3 0 3 0 3 0 3 0 3 0 3 0 3 1

4 8 4 6 4 0 3 3

40

60

80

ng U

S N

ucle

ar U

n

O the rN o n-B ig 5B ig 5

2 5 2 7 3 3 4 0 4 2 4 2 4 3 4 4 4 5 4 8

0

20

1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7

Ope

rati

Consolidation has provided the platform for substantial improvement in nuclear power economics.

Big 5 Fleet = Exelon, Entergy, FPL, Dominion, and ConstellationNon-Big 5 Fleet = Duke, First Energy, Progress Energy, Southern Energy, TVA, and PSEG

6

Consolidation has provided the platform for substantial improvement in nuclear power economics.

The Big Five Fleets Show Far Better Operating PerformanceThe Big Five Fleets Show Far Better Operating Performance

“Super Operators” significantly outperform the rest of the industry.

6 Y e a r A ve r a g e C a p a c ity F a c torg p y

89 96%

92 .99%

9 2 .0 0 %

9 4 .0 0 %

87.92%

89.96%

8 6 .0 0 %

8 8 .0 0 %

9 0 .0 0 %

8 0 .0 0 %

8 2 .0 0 %

8 4 .0 0 %

For 1 000 MW re tor 5% higher p it f tor eq ls bo t $250 million in PV

Ind e pe nd e n t O the r F le e t B ig F iv e F le e t

7

For a 1,000 MW reactor, a 5% higher capacity factor equals about $250 million in PV.

Safety Measures Have Also Dramatically ImprovedSafety Measures Have Also Dramatically Improved

0.90

Significant Events at U.S. Nuclear Plants Annual Industry Average, Fiscal Year 1988-2006

0.77

0.450.40

0.25 0.260.21

0.17

0.08 0.100 04 0 03 0 04

0.07 0.05 0.070 04 0.050.04 0.03 0.04 0.05 0.04 0.05

0.01

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

8

Source: NEI, NRC Information Digest, 11/07

Uprates Will Add the Equivalent of Seven Large UnitsUprates Will Add the Equivalent of Seven Large Units

7,000

8,000Expected Applications 1,473 MWe

Applications Under Review 1,017 MWe

5,000

6,000Approved 4,900 MWe

Projections

3,000

4,000

0

1,000

2,000

0

1977-1999

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

9

Nearly all of this has occurred during the nuclear reformation.

License Renewals Have Been One of the Theses of This ReformationLicense Renewals Have Been One of the Theses of This Reformation

85% of the units either have or are in the process of securing another 20 years of license life.

P e n d in gg1 3 .4 %R e n ew ed

4 6 .2 % L O I2 5 %

N o A c tio n1 5 .4 %

%

L ife E x te n s io n S ta tu s

10

The Nuclear Renaissance Is Still Taking ShapeThe Nuclear Renaissance Is Still Taking Shape

The emergence of new nuclear development as a cornerstone of the global power portfolio and carbon mitigation strategyUnprecedented regulatory and public support for nuclear powerNRC ESP and COL processes reduce federal regulatory risksFederal Loan guarantee, insurance, tax credit programs may provide meaningful economic boostState regulatory programs are emerging, which look to be supportiveNuclear construction and operating costs are difficult to pin down

Nuclear development risk is still high, but the results appear to justify the risk

11

Growth, Portfolio Standards And GHG Initiatives Point To New NuclearGrowth, Portfolio Standards And GHG Initiatives Point To New Nuclear

Causes: Effects: New Nuclear:Causes:Demand GrowthRenewable Resource LimitationsAnticipated GHG LegislationDSM Li i i

Effects:Growing resource needRegulatory and Legislative InitiativesPublic Support

New Nuclear:5 COLs filed to-date for 8 unitsAt least 20 additional applications anticipated by 2009Construction could start in 2010DSM Limitations

Viability and Total Cost of Various ResourcesInterest in Fuel Diversity

Public SupportSupport of Wall StreetEmergence of New PlayersDevelopment Consortia

Construction could start in 2010

12

Emerging State Regulatory Policies Favor Nuclear PowerEmerging State Regulatory Policies Favor Nuclear Power

Numerous states have enacted legislation or regulations supporting nuclear plant construction. Others have policies which support major capital-intensive projects.

Source: Perspective on Public Opinion, NEI, May 2007

St t r l ti h f ll d th hift i p bli pi i b t thi hift d r ti t

13

State regulation has followed the shift in public opinion, but this shift needs more time to become durable and reliable.

Nuclear Power Has Avoided Significant Emissions Already Nuclear Power Has Avoided Significant Emissions Already

Year

Sulfur Dioxide (Million Short

Tons)

Nitrogen Oxides (Million Short

Tons)Carbon Dioxide (Million

Metric Tons)

1995 4.19 2.03 670.60

1996 4.16 1.89 645.30

1997 3.97 1.76 602.40

1998 4.08 1.76 646.40

1999 4.13 1.73 685.30

2000 3.60 1.54 677.20

2001 3.41 1.43 664.00

2002 3.38 1.39 694.80

2003 3.36 1.24 679.80

2004 3.43 1.12 696.60

2005 3.32 1.05 681.92

2006 3.12 0.99 681.18

Source: NEI summary of emissions avoided by nuclear power are calculated using regional fossil fuel emissions rates from the

Environmental Protection Agency and plant generation data from the Energy Information Administration

14

Environmental Protection Agency and plant generation data from the Energy Information Administration

Updated: 4/07

The Economics of New Nuclear Look Favorable, But …The Economics of New Nuclear Look Favorable, But …

180

You must truly believe in de-carbonizing our generation mix.

138

115

180

140

160

180

98

115106

85

109

60

80

100

120

$/M

Wh

0

20

40

60

Pulverized Coal*

IGCC* Natural Gas - CC

Nuclear Wind Solar Biomass

* Life Cycle Power Costs with CCS of $10/ton (2012$). Source: S&P and Black and Veatch; assumes new nuclear at

15

$4,000 (2006$)/KW.

The Cost Reality for New Nuclear Is Just Beginning To Be EstablishedThe Cost Reality for New Nuclear Is Just Beginning To Be Established

2,200 MW 3,040 MW

Case A Case B Case C Case A Case B Case C

Total Overnight Costs($/kW, 2007$) $3,596 $3,108 $4,540 $3,596 $3,108 $4,540($/kW, 2007$) $3,596 $3,108 $4,540 $3,596 $3,108 $4,540

Escalation @2.5% $892 $764 $1,139 $892 $764 $1,139

AFUDC @11.04% $1,837 $1,573 $2,345 $1,837 $1,573 $2,345

Preconstruction Cost Adjustment $47 $47 $47 ($19) ($19) ($19)

Project Total ($/kW) $6,372 $5,492 $8,071 $6,306 $5,426 $8,005Project Total ($/kW) $6,372 $5,492 $8,071 $6,306 $5,426 $8,005

Project Total ($B) $14.0 $12.1 $17.8 $19.2 $16.5 $24.3

How many companies can realistically be expected to commit to projects of this

16

How many companies can realistically be expected to commit to projects of this magnitude?

The Age Of Realpolitik …The Age Of Realpolitik …

The Reality of Capital Markets…And The Politics of Carbon

17

How Will We Achieve National Targets?How Will We Achieve National Targets?

50 new nuclear plants by 2030 is the most viable carbon reduction program.

Source: “The Power to Reduce CO2 Emissions The Full Portfolio” Electric Power Research

18

Source: The Power to Reduce CO2 Emissions, The Full Portfolio , Electric Power Research Institute Energy Technology Assessment Center, August, 2007

The Capital Consequences Are UnprecedentedThe Capital Consequences Are Unprecedented

If these plans materialize, in excess of a half a trillion dollars will be invested. No utility is gong to be willing to make a “bet the company” decision.Equity and debt markets, while supportive, must feel secure in their investments.

“It is no longer a matter of debate whether there will be new nuclear plants in the industry’s future. Now, the discussion has shifted to predictions of how many, where and when.” Fitch Ratings, Wholesale Power Market Update, March 13, 2006.

“Investors are open and interested but still need to be convinced. The financial community has long memories. They lost tens of billions of dollars during the 1980s and 1990s when utilities built the current reactors.” Nuclear News, High Cost Seen as Roadblock to New Nuclear Plants, March 28, 2007.

“…we look for a regulatory framework that provides for a fair opportunity to recover prudently incurred costs, even through changing regulatory commissions. Without such a framework, a utility’s financial condition may rapidly deteriorate… In the absence of a framework that allows for cost and capital recovery, a company’s financial profile is likely to weaken.” S&P Ratings Digest, Why US Utilities are Seeing Nuclear Power in a New Light, January 9, 2007.g

“The issue of storing nuclear waste is not getting as much attention as the construction of new plants. Effective nuclear waste disposal and storage are crucial aspects in solidifying nuclear plants as viable resource alternatives on a large scale… It is contradictory for the federal government to provide incentives for new nuclear generation on one hand and not delivering on its commitment to provide long-term storage on the

19

nuclear generation on one hand, and not delivering on its commitment to provide long term storage on the other. ” Id.

A New Paradigm Is Required For New Nuclear To Be Successful A New Paradigm Is Required For New Nuclear To Be Successful

The Owner and Operator:• Superior operator

The Drivers/Hurdles:• New state regulatory compact

• Market capitalization of $15 billion+• Expansion of an existing site preferable

• Economics of carbon• Capital costs and availability

The Industry:• Coalescence around 2 or 3 designs• SNF• Skilled workforce

Minority Investors:• Co-investment is criticalCo investment is critical• Genuine interest from financial investors• Viable government programs

20

Supporting Data Slide Supporting Data Slide –– New Nuclear PlansNew Nuclear Plans

Company Site(s) Design, # of Units Early Site Permit (ESP)Construction / Operating License

Submittal

Alternate Energy Holdings Bruneau, ID EPR - FY 2009

Amarillo Power Vicinity of Amarillo, TX EPR - FY 2009

AmerenUE Callaway, MO EPR - FY 2008

Constellation (UniStar) Calvert Cliffs, MD plus two other sites

EPR (3) Will go to COL but submit siting information early

First submittal - FY 2008

Detroit Edison Fermi, MI Not yet determined Not yet determined FY 2008

Dominion North Anna, VA ESBWR (1) Approved November 2007 November 2007

Duke William States Lee, Cherokee County, SC

AP1000 (2) - December 2007y,

Duke Davie County, NC Not yet determined Under consideration Not yet determined

Duke Oconee County, SC Not yet determined Under consideration Not yet determined

Entergy River Bend, LA ESBWR (1) - FY 2008

Entergy (NuStart ) Grand Gulf, MS ESBWR (1) Approved April 2007 FY 2008

Exelon Clinton, IL Not yet determined Approved March 2007 Not yet determined

Exelon Victoria County, TX ESBWR (1) - FY 2008

Florida Power & Light Turkey Point, FL Not yet determined (2) Not yet determined FY 2009

NRG Energy / STPNOC Bay City, TX ABWR (2) - September 2007

PPL Corp. Susquehanna, PA EPR - FY 2009

Progress Energy Harris, NC; Levy County, FL AP1000 (2); AP1000 (2) - Harris - FY 2008; Levy County, FL - FY 2008

South Carolina Electric & Gas Summer, SC AP1000 (2) - FY 2008

Southern Company Vogtle, GA AP1000 (2) Under review, Approval expected early 2009

FY 2008

21

Texas Utilities Comanche Peak, TX APWR (2) - FY 2008

TVA (NuStart ) Bellefonte, AL AP1000 (2) - October 2007

Source: NEI, Nuclear Regulatory Commission Updated 12/07