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Winter Outlook 2009-10 Cathy McClay EDF Energy

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Agenda Summer 09  Power and spreads  Plant running Winter 09  Fuel price movements  System margin  Power prices and clean spreads Implications 2

Summer 09 Power & Spreads Prompt prices were significantly lower than Prompt Power Prices last year  Summer 09 baseload out-turned at £34.3/MWh 160 Price (£/MWh) 140 down £49.9/MWh from last year 120  Summer 09 peaks out-turned at £41.5/MWh down 100 £64.20/MWh from last year 80 60 40 The sharp decline was in part driven by 20 underlying fuels and carbon Jun Jul Apr May Aug Sep  Summer gas down 36.3p/th year-on-year Baseload 2008 Baseload 2009  API2 coal prices down $107/t year-on-year Peak 2008 Peak 2009  Carbon prices down € 10.8/t year-on-year Marginal clean spreads have also declined Day-ahead Clean Spreads  Coal plant was at the margin for the entire summer with a clean baseload spread of 60 £1.85/MWh (£9.50/MWh peakload) Spread (£/MWh)  Lowest marginal clean spread since 2003 40 Key drivers of the reduction in spreads 20  Temperature corrected daily peak demand out- turned 2-3.5GW below normal 0  Output from the UK nuclear fleet has been at the Jun Jul Apr May Aug Sep highest level since 2005 Baseload Spark 2008 Baseload Spark 2009  New plant commissioned Baseload Dark 2008 Baseload Dark 2009 ● Immingham CHP (April 450MW) ● Marchwood CCGT (June 850MW) 3

Shifts in Generation Output Plant running has been significantly Gas Plant Running 14 different this summer compared to last 12 10  Gas plant output declined by 9% to TWh 8 6 64.6TWh 4 2  Coal plant output declined by 32% to 0 29.8TWh Apr May Jun Jul Aug Sep Gas - '08 Gas - '09 Combined fossil output decline of Opted in Coal Plant Running 20.3TWh 10 Opted-out coal plant running declined 8 sharply from 9.1TWh to 2.4TWh 6 TWh 4 Changes in plant running are primarily 2 0 driven by the recession and higher Apr May Jun Jul Aug Sep Coal - Opted in '08 Coal - Opted in '09 nuclear generation  Demand declined from 153TWh last Opted out Coal Plant Running summer to 145TWh 4  Nuclear output up by 10.2TWh from last 3 summer TWh 2 1 0 Apr May Jun Jul Aug Sep Coal - Opted out '08 Coal - Opted out '09 4

Winter 09 Gas, Coal & Oil price movements Prior to March 09 coal, gas, and oil prices were correlated relatively strongly  Oil price rally was fuelled by lower non- OPEC production, booming Asian demand, UK Coal and Gas Prices and a shortage of refining capacity  Delays to new UK LNG re-gasification 12 infrastructure and European oil-indexation, 10 pulled UK NBP gas prices higher Price (£/GJ) 8  Coal pushed to record highs ● A range of production problems 6 ● Port capacity limitations 4 ● Rallying non-energy commodities 2 Post March 09, gas and oil prices for the 0 Mar-08 May-08 Mar-09 May-09 Jan-08 Jul-08 Nov-08 Jan-09 Jul-09 Sep-08 Sep-09 front Winter have diverged significantly  NBP Winter 09 gas lost 35% of its value from March 09 to expire at 34.8p/th W09 Gas W09 Coal W09 Oil  Oil has rallied 50% from 2009 lows of $40/bbl  Coal has traded sideways in a range of $63-85/tonne 5

UK NBP Gas – The Changes Winter 09 gas price declined 75p/th from record highs seen in July ‘08 of 110.3p/th LDZ Gas demand and Temperature Compared with Seasonal Normal 350 35  Driven by a combination of falling oil prices and weaker fundamentals 30 300 Gas Demand (mcm/d) 25 Temperauture DegC 250 LDZ demand has declined by 12% year-on- 20 year and is at its lowest level since 2002 200 15  Driven by recession and higher prices 150 10  Latest NGT view is that LDZ demand will be flat on 100 5 last year with normal weather 50 0 Gas to power demand has declined by 0 -5 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 approximately 10% year-on-year LDZ Gas Demand Normal LDZ Gas Demand Effective Daily Temperature Normal Effective Daily Temperature UK storage facilities have filled in record time and currently stand at a record high of 4.4bcm  Up 0.25bcm year-on-year through the addition of Rough Storage Level Aldbrough MRS 4000 3500 Flows from UKCS are significantly lower than 3000 last year 2500 mcm 2000  Field decline and maintenance contributed to 1500 average flows of 146mcm/d ’09 vs 175mcm/d ’08 1000  Low prices encouraged swing field production to 500 drop sharply from July 09 onwards due to low prices 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Strong LNG flows have replaced declines from UKCS 5 Year Range 2008 2009 6

UK NBP Gas – The Changes Cumulative UK LNG Deliveries UK LNG infrastructure has expanded 4.0 and Milford Haven is a key supply hub 3.5 LNG Delivered (bcm)  South Hook started commissioning April 09 3.0 2.5 ● Operating at c.20mcm/d since July 09 2.0 ● Phase II scheduled for Q1 2010 1.5  Dragon started commissioning August 09 1.0 and has started commercial operation 0.5 0.0 2009 LNG deliveries up 3.3bcm on 2008 May Jul Nov Jan Feb Mar Apr Jun Aug Sep Oct Dec  Demand weakness in major LNG markets 2006 2007 2008 2009 ● Asian markets 8bcm lower across S09  New liquifaction facilities 2009 Year-on-Year Change in LNG Imports 1.5 Key uncertainties for gas this winter 1.0 Yr-on-Yr Change (bcm)  How much LNG will come to UK? ● Price of US gas market relative to UK 0.5 ● The level of demand recovery in Asia 0.0 ● New liquifaction -0.5  Continental appetite for UK gas through IUK -1.0 ● Current flows suggest that long-term -1.5 contract holders have little flexibility to take Jan Feb Mar Apr May Jun Jul Aug UK gas due to ToP or full storage Japan S.Korea Taiwan  Weather - W08 was cold 7

Coal Price Drivers Coal prices for Winter 09 have declined API 2 Coal Prices from record highs in July 08 of $218/t 120 110  Coal stocks at ARA are at record highs at 100 Price ($/t) 95% full (8.2mt) 90 80 ● Spread of spot coal to forward contracts 70 has encouraged stockpiling 60 50  UK coal stocks are reported to be at the 40 highest levels since 1995 Jan-09 Mar-09 May-09 Jun-09 Jul-09 Feb-09 Apr-09 Aug-09 Sep-09  Russian coal production costs, estimated at around $60/t, have supported spot prices Q4 09 Cal-10 Cal-11 Cal-12 Demand from China has also acted as a Chinese Coal Net Imports - 2008 - 2009 support for coal prices 15 300  China net imported a record 15mt in June09 13 ● Net swing of 20mt from last year 250 11 ● UK coal consumption in 2007 was 49mt 200 9  Fiscal spend of $580bn to shield the 150 7 $m/te $m/te economy from the global slowdown 5 100 3  International coal prices have been 50 1 competitive relative to domestic production 0 -1 Mar May Jan Feb Apr Jun Jul Aug Sep Nov Oct Dec -50 -3 -5 -100 2008 Production 2009 Production 2008 Net Import 2009 Net Import 8

Winter 2009-10 UK System Margin Demand destruction unlikely to wane Winter 2008 Vs Winter 2009 Demand Forecast  No major recovery in the economy is (NGT) currently projected 60  Industrial demand is likely to be similar to 55 the end of Winter 08 GW 50  Domestic energy saving likely to continue  Embedded wind generation is increasing 45 NGT estimate that around 66GW of 40 44 46 48 50 52 2 4 6 8 10 12 14 16 18 77GW available to generate over peak Week Number  Higher availability of nuclear generation 2009 Forecast 2008 Forecast  New plant online Winter 2008 Vs Winter 2009 Available Capacity Forecast (NGT) Forecast system margin significantly 80 higher than last year 75  Downward pressure on power prices 70  Cold weather unlikely to tighten margin GW enough to get price spikes 65 60 How will opted out coal fleet optimise their remaining running hours? 55  Will they be available if dark spreads 50 44 46 48 50 52 2 4 6 8 10 12 14 16 18 deteriorate further? Week Number  Coal stock levels are high ● Will this force running? 2009 Forecast 2008 Forecast 9