HVDC Transmission Line for Wind Energy Delivery Southeast Clean Power Summit New Orleans – February 16, 2012 Pattern and Market Background Pattern Energy Pattern is Committed to Renewables and Transmission •  An independent, fully integrated energy company that develops, constructs, owns, and operates clean energy and transmission assets in the United States, Canada and Latin America •  Formed in June 2009 by Riverstone and a premier management team with a proven track record Riverstone Holdings LLC •  Energy focused private equity firm with the largest renewable energy fund in the world •  Committing a significant amount of capital to support and expand Pattern’s business •  Pattern is the sole wind energy platform for Riverstone in North America Growth Projected Strong & Steady •  520 MW of installed capacity operational within first 18 months •  Over 1000 MW expected in construction in next 12 months •  Pipeline projects diverse in geography and markets •  Transmission is a key growth area for Pattern 2 Renewable Energy Market Drivers •  Despite a lack of federal or state renewable mandates, renewables procurement is advancing in the Southeast due to attractive pricing and providing fuel and environmental risk hedges •  TVA and Southern Company have contracted for long-term wind energy purchases from the Midwest (Iowa, Kansas, North Dakota, etc.) •  TVA ‘s board approved an IRP calling for 1000+ MW of additional renewables •  Louisiana utilities are conducting an LPSC mandated renewables RFP, and SWEPCO has presented a PPA for LPSC approval •  Texas has outstanding wind resources and leads the nation in installed capacity, with available resources likely exceeding in-state demand •  CREZ transmission development that is underway will allow access to additional very high capacity wind resource areas •  All CREZ lines projected to be installed by end of 2013 3 Wind Energy Resource Map: Limited Options for the Southeast Source: National Renewable Energy Laboratory, 2010. 4 Limited Transmission Development to Support Importing Renewables into SERC Source: Ventyx 2011 and other public announcements 5 Southern Cross Project Overview Project Development Background •  •  Pattern teamed with Burns & McDonnell in 2008 to study transmission routes eastward from the central United States wind resource areas: –  Wind resources in Kansas, Oklahoma, Texas and all of the Southeast –  Studied SPP, ERCOT, and SERC transmission systems –  Cost and load flow analyses on many combinations of source points (Central Plains, ERCOT), sink points, size (1000 – 3000 MW) and technologies (500 kV, 765 kV, HVDC) Based on those studies, Pattern concluded: –  There are very limited economically efficient wind resources in SERC –  Capability for delivery via existing SPP networks is limited –  Dedicated transmission lines from Central Plains are substantially longer, more expensive and technically challenging –  Utilizing Texas wind resources transmitted via the ERCOT transmission system provides significant cost advantages over other alternatives 7 Preliminary Southern Cross Map Project Overview ERCOT transmission utilized Proposed 500-kV DC Transmission Line 8 Proposed Southern Cross Project Overview •  Western Interconnection: New 345 kV ERCOT Switchyard in Rusk County, Texas •  Eastern Interconnection: One or more Existing 500 kV Switchyards in Northeastern Mississippi •  Technology: Conventional HVDC Bipole •  Sizing: –  Initially targeting 1500 MW with Anchor Tenants –  Expandable up to 3000 MW (subject to reliability study and to Open Season subscriptions) •  Target Markets: TVA, Southern Company, Entergy, Others in SERC or FRCC •  Target Online Date: 2016 9 ERCOT Interconnection Overview Texas Louisiana New Rusk Switchyard Interconnection 10 ERCOT Interconnection Overview New 345-kV AC Line(s) Louisiana New HVDC Converter Station New 345-kV AC Switching Station New 345-kV Rusk County AC Switching Station Existing ERCOT 345-kV AC Lines Texas New HVDC Line To Mississippi Converter Station Oncor - Owned Facilities GP&L – Owned Facilities Southern Cross - Owned Facilities -  ERCOT Facilities -  PUCT Siting -  PUCT Rate Recovery -  CCN Exempt -  ERCOT Facilities -  Private ROW acquisition -  Private Funding -  CCN Exempt -  LA, MS State Siting -  FERC Regulated -  Merchant OATT (Bilateral shippers) Points of Interconnection (Two Separate Interconnection Agreements) sian Loui AC Switchyard Texa s a ERCOT Interconnection Overview DC Transformers And Converter Benefits to ERCOT from the Southern Cross Project •  FERC disclaimer of jurisdiction •  Expand Texas’s traditional role as an energy supplier •  Economic development of incremental wind investment in Texas •  Better utilization of CREZ transmission investment •  Reliability benefits from access to diverse SERC generation resources •  Cost of 345kV AC line and HVDC line will not be included in ERCOT transmission rates •  Export charges paid by Southern Cross shippers •  Facilitates economic dispatch between the two markets 13 Benefits to SERC from the Southern Cross Project •  Access to the highest capacity factor wind resources in the country, providing stable low cost electricity that is also a hedge against higher fuel prices and future environmental regulations •  Closest and most robust path for large scale delivery of renewable energy •  Materially cheaper than local renewable options, and competitive with conventional generation options •  Economic development in Louisiana and Mississippi from HVDC line and converter stations •  Project funded through transmission charges to shippers and not broad region-wide ratepayers •  Facilitates economic dispatch between the two markets •  Allows access to diverse ERCOT generation resources for added reliability 14 Southern Cross Project Development Status Development Status – General •  Obtained FERC 210/211 order to ensure ERCOT regulatory status quo •  Established project configuration, technology (HVDC) and endpoints •  Selected optimal project sizing based on evaluation of available technologies and scale efficiencies •  Selected primary and alternative route corridors after comprehensive corridor study •  Developed feasible target schedule based on permitting, land acquisition and construction constraints •  Met with numerous stakeholders throughout Texas and the Southeast •  Commenced transmission interconnection studies in ERCOT and SERC •  –  RPG Introduction August 2011, Initial Economic Study Complete November 2010 –  Oncor Reliability Studies Underway Ongoing discussions with potential Southeastern shippers 16 FERC 210/211 Order Overview •  Response to Offer of Settlement from Pattern, Garland Power & Light, and Oncor •  Substantive comments offered by PUCT, TIEC •  Order issued in December 2011 incorporating PUCT and some TIEC comments •  Garland Power & Light – Interconnect Southern Cross to ERCOT system at Louisiana border •  Oncor – Provide transmission service into and out of ERCOT across its network •  Contains clear Disclaimer of Jurisdiction confirming actions of ERCOT market participants does NOT change status quo or increase FERC jurisdiction •  Order will be final upon completion of definition of interconnection facilities 17 FERC Negotiated Rate Order •  FERC regulates rates for interstate transmission, including Southern Cross •  Approval for Southern Cross to charge negotiated rates •  Approval to subscribe up to 1500 MW with anchor tenants •  Committed to make additional capacity available through open season •  Demonstrated that we will satisfy four tests: –  Just and Reasonable Rates –  Prevention of Undue Discrimination –  No Undue Preference and Affiliate Concerns* –  Regional Reliability & Operational Efficiency (transmission planning, etc) •  * Will commit that no affiliate of Southern Cross Transmission LLC will be an anchor tenant •  Merchant transmission framework not affected by FERC Order 1000 (national transmission planning and cost recovery) 18 Development Status – Road Ahead •  Complete ERCOT and SERC transmission planning studies and interconnection agreements •  Complete anchor tenant marketing and/or open season to establish tenants •  Finalize line routing within selected corridor and acquire right of way •  Complete all necessary local, state, and federal permitting •  Build it! 19 Questions? Contact Information Kellie Metcalf, Director of Marketing (713) 308-4200 [email protected] David Parquet, Executive Sponsor (415) 283-4000 [email protected] Matt Dallas, Media Relations (917) 363-1333 [email protected] 21