This document outlines a strategy to acquire and develop power generation assets in the United States, with a focus on the Western US market. Key points of the strategy include acquiring natural gas peaker plants below 250MW in size, capitalizing on distressed asset sales, and focusing on transmission-constrained regions like California where reserve margins are tight. The goal is to generate revenues from capacity payments and energy/ancillary services sales while hedging market risk through contracts with creditworthy counterparties.

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Expanding a Growth Focused
Power Generation Company
For Illustrative Purposes Only

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 Focus on acquiring electricity assets in the $300 billion U.S. power generation
market
• Focus on sub $100MM equity commitment per transaction
• Utilize third party capital and co-investment agreements to expand assets
• Primarily focus on quick start natural gas “peaker” plants to compliment mid
merit and base load assets
 Many deep value acquisition opportunities exist in the sub-250MW asset class with
over 1,500+ power plants across US
• ~700 plants in CA, AZ, and NV alone
• Assets characterized by fragmented ownership
• Capitalize on forced liquidity events w/turmoil in financial markets and non-
core dispositions
 Actively seeking new acquisition and development opportunities primarily in
Western US to compliment and hedge against Midwest based asset portfolio
Overview
New acquisitions, development and re-powering initiatives should generate substantially
greater revenues and cash flows.

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CAISO
367 Plants
ERCOT
87 Plants
MISO
213 Plants
PJM
170 Plants
NYISO
126 Plants
ISO-NE
99 Plants
Targets Transmission Constrained Regions
 Focus on regions where:
• High energy demand and tight supply
• Transmission congestion
• Peaker services can be sold at a premium
• Natural gas price is the primary fuel
 Over 700 sub-250MW natural gas plants in CA, NV & AZ alone
AZNV
93 Plants

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Focus Expansion on California and Southwestern US
 The Department of Energy
has identified Southern
California as a Critical
Congestion Area
 Two-thirds of California
residents live in Southern
California
 In 2005, Southern California
reached 98% of the
forecasted peak demand
• Well below 10-yr average
temperatures
 In 2006, peak load in
California increased 11%
from pre-2006 levels
Source: Department of Energy, 2006 National Electric Transmission Congestion Study.

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Southern California is Dependent on
Imported Electricity
Source: US Department of Energy

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Demand in WECC Region is Growing
Source: Northern Lights proposal to California Energy Commission’s Strategic Transmission Investment Plan

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Tight Reserve margins – California and
Southwest U.S.-Renewable Energy Adding More
Volatility to Transmission System
California Southwest*
Summer
Peak Demand
50,270 42,227
Summer reserves 6,077 6,040
Summer Reserve
Margins
12% 14%
**Peak day reserve
margin
<5% 9%
**Transmission system very vulnerable
Source: Federal Energy Regulatory Commission, Northwest Power and Conservation Council, California Independent System Operator
*Southwest Power Pool

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 Within the California region, there are load pockets where
transmission constraints affect local reliability
• San Diego, Los Angeles, and San Francisco are all heavily dependent on imported
electricity to meet peak demand
 Arizona, Southern Nevada and New Mexico areas are experiencing
strong growth in both demand thus limiting available supply to
California
 Transmission constraints limit the ability of hydro and coal/nuclear
resources to meet energy and reliability needs within the sub-region
Many areas of Western U.S. are Transmission
Constrained – Despite Recession

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Can’t Ignore California Market-Just too Large
 Southern California is one of the most congested transmission corridors in
the US –Thus one of the premium markets in the U.S.
 Very tight reserve margins during peak summer season, a good example
is July of 2006, reserves were almost non existent (<5%)
 Generally takes 5-7 years to permit and build new transmission lines
 Very difficult to obtain right of way for new transmission
 Power plants in CA are old - many of them are 40+ years old and need to
be re-powered and expanded
 New plants are difficult to construct, hard to get the necessary permit
approvals, water rights, transmission connection and emission credits
 Going green (renewable) strategy presents numerous practical challenges
balancing a transmission load with intermittent resources such as wind,
increasing dependence on base load natural gas facilities, which will not
be built on time
 Given heavy dependence on electricity imports, and neighbors (AZ/NV)
now experiencing load growth themselves, increased prices of the imports
as well as reduced volume of imports available is expected

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Source Assets Through Multiple Channels
Asset Universe Transaction Sources
Distressed Assets
Distressed energy companies; Selling assets to create liquidity
Utilities selling non-core assets or forced regulatory
dispositions
Financial investors seeking to sell assets

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Western US (WECC) Power plants by State
Table lists Natural Gas plants with capacity of 250MW and below.

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Revenue Sources
Revenue earned for “plant availability,” with no-call on energy
• Utilities are required to meet resource adequacy requirements
• Reserve margins (excess of supply over peak demand) of 15-
20% deemed prudent by ISOs
Revenues bid in a daily market for providing:
• Quick start power (10 minute ramp time)
• Black start power (when grid goes down)
• Other supporting services to grid
Generated from supplying actual power to grid (turbines running)
• Spark Spread: gross margin from power sales net of fuel and
variable maintenance cost
• Toll: renting of the facility in exchange for fixed revenue stream
serving as a hedge on spark spread
• Heat Rate Call Option: financially settled synthetic toll
Capacity
Ancillary
Energy

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Target
acquisition
Target Optimizing Cash Flow and Reducing
Market Risk
Contracted Revenue Market Revenue
Post acquisition risk reduction
Swap market risk for credit risk
 Target undervalued assets with no contracts for revenue
• Revenue is “at-risk” due to market exposure
 Swap market risk for credit risk by contracting some or all of the revenue,
depending on the asset
• Provides stabilized cash flows for a portion or all of the potential
revenue streams
 Most contracts are signed with parties that have investment grade credit
Less Risk More Risk

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Maintain a Lean and Scalable Commercial
Structure
Fuel/Water Supply
Operations and
Maintenance
Energy Management
Services
Interconnection Contracts
to the Transmission
Grid/Pipelines
Internal Engineering
External Engineering
Services
Capacity, Ancillary
Services and Energy
Contracts with
Investment Grade
Counterparties
North America
(Asset Company)
Holding Company