ERCOT Market Update: May 2016 Market Dynamics and Energy Price - PowerPoint PPT Presentation

ERCOT Market Update: May 2016 Market Dynamics and Energy Price Trends Andrew Elliott – Director Supply & Portfolio Management GDF SUEZ Energy Resources NA GDF SUEZ Energy Resources NA will rebrand under the ENGIE name in 2016 ENGIE Privileged and Confidential 1

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Safe Harbor Announcement:  Disclaimer . The views and opinions expressed herein are for informational purposes only. No reliance may be placed on such information and GDF SUEZ makes no representation as to accuracy, completeness, suitability, or validity of any information therein. In no event shall GDF SUEZ or its directors, principals, agents, employees or representatives be liable for any loss or damage whatsoever arising out of the use of such information. ENGIE Privileged and Confidential 3

GDF SUEZ Energy Resources GDF SUEZ Energy Resources NA is a licensed provider of retail electricity and related services to industrial and commercial customers in the United States  One of the largest national energy providers, licensed to serve 14 deregulated markets, with customers in TX, CT, A world leader in energy DE, IL, NY, NJ, MA, MD, ME, PA, OH RI, NH & DC Operational strength  Ranked #3 by DNV GL in June 2015 Financial responsibility and  Serves over 8,000 customers and over 60,000 accounts historical stability  Represent almost $4 billion in contract value Informational leader  The first retail supplier to publicly guarantee on-time Provides decision making tools enrollment Hassle-free services  Recognized by customers and energy partners as a leader in quick problem resolution, execution on price Simplified products & services quotes and on-time, accurate billing Complete Energy  We also provide residential energy: Management ™ 00/00/2015 4

Trusted Supplier to Over 50% of Fortune 100™, Including Oil & Gas Majors & Pipeline Companies. 00/00/2015 5

Electric Reliability Council of Texas (ERCOT) • About 90% of Texas load • 24 million consumers • Competitive-choice customers: 75% of load • More than 7 million electric-service IDs (premises) • More than 46,500 circuit miles of high-voltage transmission • More than 550 generating units • More than 79,000 megawatts (MW) of expected available generation capacity for summer peak demand • One megawatt of electricity can power about 200 Texas homes during periods of peak demand. • Record peak demand: 69,877 MW • Energy used in 2015: 347 billion kilowatt-hours Up 2.2 percent compared to 2014 • Market participants: More than 1,400 active entities that generate, move, buy, sell or use wholesale electricity Source: ERCOT and PUCT ENGIE Privileged and Confidential 6

Reserve Margin Forecasts (Excess Available Generation vs. Expected Peak Demand) • 2017 reserve drop reflects delay in 700 MW CC gas unit and 416 MW of Mothballed units ERCOT Reserve Margin Estimates • Does not include coal plant retirements in the future due to 30.0% Regional Haze and CPP (ERCOT may revise the Target 25.0% Reserve Margin upwards based on wind availability calculations) Reserve Margin % ERCOT Target 20.0% ERCOT Target Reserve Margin Reserve Margin 15.0% 13.75% 13.75% 10.0% 5.0% SARA (Summer ) Estimates: 2014 Seasonal Assessment; 0.0% •2012: 9.4% Hottest 2014 2015 2016 2017 2018 2019 2020 2021 Summer Forecast Summer in •2013: 8.8% ERCOT, May 2016 CDR Forecast 18.2% 25.4% 23.2% 22.4% 21.6% 106 Years ERCOT, Dec 2015 CDR Forecast 16.5% 20.7% 25.7% 22.9% 21.8% 21.1% UBS Estimates, Dec 2015 16.5% 22.7% 26.7% 23.8% 21.4% SARA (Summer ) Estimates: SARA Estimate Summer Effective Reserve Margin 11.2% Hottest 13.8% 11.1% •2012: 9.4% Summer in ERCOT Target Reserve Margin 13.75% 13.75% 13.75% 13.75% 13.75% 13.75% 13.75% 13.75% •2013: 8.8% 106 Years Sources: Electric Reliability Council of Texas (ERCOT), UBS & GDF SUEZ ENGIE Privileged and Confidential 7

Summer Peak Load History and Future Forecasts Summer Load Actual Summer Load Forecast Summer Load 76,000 74,288 New Demand Record 73,663 74,000 72,277 71,416 72,000 70,588 69,783 70,000 Recession 68,379 67,245 66,548 68,000 65,776 66,000 66,427 63,400 ERCOT Target 64,000 62,171 62,339 62,130 Reserve Margin Flat Demand Growth – Weather? 62,000 60,214 13.75% 60,000 58,000 56,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Y on Y Actual Growth Percentage Year on Year Load Growth Hottest Y on Y Forecast Growth Summer 6.00% 5.00% in 106 4.00% Years 3.00% SARA (Summer ) Estimates: SARA Estimate 2.00% •2012: 9.4% 1.00% 0.00% 2% Load Growth •2013: 8.8% -1.00% from 2011 -2.00% -3.00% -4.00% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Y on Y Actual Growth 2.92% 3.53% -0.34% 0.07% 1.98% 3.75% 3.96% -2.68% 1.05% -1.22% 5.05% Y on Y Forecast Growth 1.15% 1.17% 1.21% 1.92% 0.85% Source: ERCOT Source: ERCOT and GDF SUEZ ENGIE Privileged and Confidential 8

ERCOT and US Generation Capacity Source: ERCOT ENGIE Privileged and Confidential 9

Renewable Generation Growth: Wind and Solar • Wind Output record 14,023 MW, Feb 18th 2016 • Solar 288 MW • 15,764 MW Total Installed • 1,000 MW installed by end of • 3,000 MW planned by 2018 2016? Source: ERCOT and PUCT ENGIE Privileged and Confidential 10

New Generation Fuel Types: ERCOT and US Source: AWEA U.S. Wind Industry Annual Market Report Year Ending 2015 ENGIE Privileged and Confidential 11

North Hub July-August (Summer) On–Peak Heat Rates Heat Rate = Power Price / Natural Gas Price Power Price = Natural Gas Price X Heat Rate 2016 - 2018 Summer Heat Rates 26 24 22 20 2012 18 16 14 2013 2014 2015 ENGIE Privileged and Confidential 12

Cal 2017: Natural Gas Price & Heat Rate; Houston Hub HR remain relatively steady, recent drop attributable to stabilizing/rising gas prices ENGIE Privileged and Confidential 13

Cal 2017: Natural Gas Price & Heat Rate; North Hub HR remain relatively steady, recent drop attributable to stabilizing/rising gas prices ENGIE Privileged and Confidential 14

Cal 2019: Natural Gas Price & Heat Rate; Houston Hub HR remain relatively steady, recent drop attributable to stabilizing/rising gas prices ENGIE Privileged and Confidential 15

Cal 2019: Natural Gas Price & Heat Rate; North Hub HR remain relatively steady, recent drop attributable to stabilizing/rising gas prices ENGIE Privileged and Confidential 16

Cal 2017: Natural Gas Price & Power Price; Houston Hub Power and Natural Gas making a move off the lows, but still near 13-year lows ENGIE Privileged and Confidential 17

Cal 2017: Natural Gas Price & Power Price; North Hub Power and Natural Gas making a move off the lows, but still near 13-year lows ENGIE Privileged and Confidential 18

Cal 2019: Natural Gas Price & Power Price; Houston Hub Power and Natural Gas making a move off the lows, but still near 13-year lows ENGIE Privileged and Confidential 19

Cal 2019: Natural Gas Price & Power Price; North Hub Power and Natural Gas making a move off the lows, but still near 13-year lows ENGIE Privileged and Confidential 20

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Federal Environmental Regulations Summary Table 1: Environmental Regulations Impacting ERCOT Generation Regulation Compliance Date Description Impacts Mercury and Air Toxics April 2015 Sets limits on hazardous Owners of coal units Standards (April 2016 with air pollutant emissions without sufficient extension) at power plants controls will need to retrofit to comply Cross-State Air January 2015 Addresses cross-state Most fossil fuel-fired Pollution Rule air pollution through generators in ERCOT are limits on annual subject to CSAPR; nitrogen oxides (NOx) resource owners may and sulfur dioxide (SO2) need to purchase emissions, and ozone allowances to comply season (summer) NOx emissions Regional Haze Three to five years after Requires controls on air Owners of certain coal final Federal Plan was emissions to improve units are required to issued (2019 - 2021). visibility in national retrofit with scrubbers, Stay requests have been parks or upgrade existing filed. scrubbers (3,000 – 8,000 MW) Clean Power Plan Stay by the Supreme June 2, 2016 Court of Rule has implications for Court will delay original Appeals review. Sets most fossil-fuel fired implementation time carbon dioxide generation in ERCOT, as frame: 2020-2029 emissions limits for well as for renewable (interim goal); 2030 existing units energy and energy onwards (final goal) efficiency programs Source: ERCOT & GDF SUEZ 22 ENGIE Privileged and Confidentiel

US Coal Plants Subject to Clean Power Plan Regulations 23 ENGIE Privileged and Confidentiel

Texas Coal Plants Subject to Environmental Regulations Martin Lake – 2,455 MW, Old Scrubbers Monticello – 1,955 MW, One Scrubber Big Brown – 1,200 MW, No Scrubber Total: 5,610 MW at Risk 24 ENGIE Privileged and Confidentiel

Texas Coal Plants: Short Term Generation Economics Look Bleak? Assumes no forward hedges: • Most plants will have a portion of the output hedged through 2017 • Monticello operates seasonally • Maybe not quite as bad as it looks but will coal units retire prior to environmental regulation deadlines? 25 ENGIE Privileged and Confidentiel