Texas Clean Energy Project: Coal Feedstock Poly-generation Plant with CCUS

Presentation To:

Japan Meeting, Global CCS Institute June 8, 2012

Disclaimer

This presentation contains confidential information, the use and disclosure of which is governed by a nondisclosure agreement between Summit Power Group, LLC (“Summit”) and the recipient. No other use or distribution is permitted. This presentation is not intended to form the basis of any investment decision and does not contain any recommendation by Summit, or any of its shareholders, subsidiaries, directors, employees, agents, or advisors (“Summit Parties”). This presentation does not constitute an offer to sell or a solicitation of an offer to buy any securities in the United States or any other jurisdiction. Although the information contained in this presentation is believed to be accurate as of the date presented, Summit and the Summit Parties make no representations or warranties (express or implied) regarding its contents. Some information contained in this presentation is based on forecasts and projections that may change or prove to be incomplete or inaccurate. Summit and the Summit Parties do not undertake any obligation to provide the recipient with additional information, to update this presentation, or to correct any inaccuracies that may become apparent. Nothing in this presentation should be considered to be legal, tax, or investment advice. Recipients considering any involvement with TCEP should consult their own professional advisors prior to making any business decisions relating to the project.

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Introductions: Summit Power Group, LLC

Founded twenty-one years ago by former U.S. Secretary of Energy Donald Paul Hodel & Chief Operating Officer of Department of Energy Earl Gjelde Summit’s Traditional Business is Power Project Development • Developed over 7,000 MW of large, clean energy projects • Over 1,000 MW in development or under construction

Summit’s Principal Business Lines/Live Projects • Wind power—Cedar Creek 120MW, Fire Island 20MW • Solar power—NorthStar Solar 90MW PV • Natural Gas-fired Power Plants--Encino • Carbon Capture including from Coal Gasification—TCEP 400MW

We don’t have a particular technology favorite or bias. But we sure don’t pick permitting

fights! These remarks are my personal views and are not Summit Power’s positions.

Previous SPG Power Projects

Main Points

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•Conventional pulverized coal plants are dead or dying in U.S. Cheap, but an environmental nightmare

•Conventional IGCC does not feature carbon capture, though it is clean as to conventional pollutants

•Gasification of the type typically used in chemical plants (with a shift reactor and Rectisol or Selexol system) can create a high-hydrogen feedstock for either power or chemicals, plus a pure CO2 stream

•If the pure CO2 stream can be used for Enhanced Oil Recovery:

• The space created by removing oil is perfect for permanent storage of CO2 • The highly profitable extraction of oil makes the CO2 valuable, creating a non-mandated commercial CO2 market

• Proven, technically and commercially, with 40+ years of experience in West Texas

•Our project is getting a variety of government incentives, tax and cash, upfront and ongoing. Some of these work better than others

By Any Measure TCEP will Save a Lot of CO2 Emissions

TCEP CO2 Emissions vs. (i) Gas-based Power and Urea Plants Making Same Output or (ii) Conventional Coal Power Plant Using Same Inputs

Case Examined Annual short tons of CO2 emitted

TCEP annual CO2 emissions (no coal is burned; it is turned into clean gases and almost all the CO2 is captured)

300,000 tons

Power and Fertilizer, same product quantities as TCEP, made with natural gas

1,200,000 tons—4x TECP

Conventional coal plant, burning same amount of coal feedstock as TCEP

3,600,000 tons—12x TCEP

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Emissions for Alternative Plants Making Same Product

Product Process TCEP Annual Output to the Grid

Industry Alternative CO2 Emissions per unit output

Industry Alternative Annual Emissions tons CO2

Power Combined Cycle Gas Turbine

1.5 x 106 MWh 1,100 lbs / 0.55 ton*

825,000 tons

Granular Urea

H2->NH3, CO2 added to get Urea

400,000 tpy NH3-> 700,000 tpy Urea

1 ton CO2 per ton** NH3 used in urea

400,000 tons

1,225,000 tons

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*NREL—includes direct emissions at plant and fugitive wellhead and pipeline methane (converted to GWP) **Natural Resources Canada—average for seven Canadian ammonia/urea plants

TCEP’s annual CO2 emissions are about 300,000 tons. So having TCEP running saves about 900,000 tons of CO2 emissions per year. Actual capture and sequestration is 2.5 mm tpy.

Pulverized Coal Plants and IGCC without CCS are Dead in U.S.

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The Physical Volume of CO2 Created by Pulverized Coal (“PC”) Plants is Staggering

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100 Watt Light Bulb

Running for 1

year

876 kWh

(i.e. about 1 MWh)

950 pounds coal (bituminous coal

like PRB)

1 ton CO2 or about ½

million liters—around 225 scuba tanks

worth

Old PC Plants are Really Big Sources of CO2 and Conventional Air Pollutants

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One1970s era PC plant (~1,000 MW) running one year @ 90% base load:

• Burns 10 million tons coal a year • Emits annually:

• 120,000 tons sulfur dioxide • 22 million tons CO2 • 4,000 pounds mercury= ½ million toxic doses

Why “Cleaning” Conventional Coal so Hard

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Diagram: Tennessee Valley Authority

130 foot high wall of flame with some

metal tubes around it.

Massive flow of exhaust gases (~10,000 tph in 1,000MW plant)

Another Picture of a Conventional Coal Boiler

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~130 feet

There have been many proposals for doing “post-combustion capture” at new-build (Trailblazer, USA) or retro-fit (Longannet, UK) pulverized coal plants. No one yet has overcome (at scale*) the fundamental challenge of sweeping a small amount of CO2 out of a giant hot gas flow. That is, fast-moving flue gas is mostly comprised of N2 (i.e., 3 tons a second of hot gas that is only 1/8th comprised of CO2).

*For example, the Aker CleanCarbon amine capture system that was supposed to be used at Longannet retro-fit is just now being tested at a capture rate of 80k tpy. It would have needed to work at rate of ~3mm tpy (about 40 x bigger) to be full-scale.

Old Style IGCC is Probably Also Dead

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• “Old Style” IGCC made no attempt to capture CO2. • Basically most of the carbon molecules contained in the original coal input

end up as carbon monoxide in the raw syngas that ultimately feeds the power turbine. As example, raw syngas from one common technology is 34% H2, 45% CO, 16% CO2)*

• Hence, old style IGCC’s CO2 emissions profile is not much different than

the best pulverized coal plants. Some existing old style IGCC plants are now attempting to retrofit (see box below).

“Pilot with CO2 capture -- Nuon has started a pilot at the Willem Alexander power plant in Buggenum to capture CO2. Because the Willem-Alexander Power Plant uses gasification technology, it is the ideal location to test pre-combustion CO2 capture. Coal gasification enables CO2 to be captured before the combustion process. This enables a better environmental performance, meaning coal can be used in a cleaner and more efficient way.”

*Source: SAIC, NETL paper on IGCC citing example of Conoco Phillips gasifier. Remaining components 2% methane, 3% nitrogen.

Tightening U.S. Federal Regulation and State Laws Pressure Old and New Coal Plants

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• New Years 2011 USEPA added CO2 as regulated pollutant for future air permits, with recent April 12, 2012 proposed limit of 1,000 lbs CO2/MWh.

• July 2011 Cross-State Air Pollution Rule—applies to states east of Dakotas/New Mexico; basically creates limits and allowance trading markets for:

• NOX • SOX • Small Particulates (PM10)

• December 2011 Mercury and Air Toxics Standards (MATS)/National Emission Standards for Hazardous Air Pollutants—existing and future plants

• States (for instance California and Oregon) passed laws limiting new

thermal plant to 1,100 pounds/ MWh—far better than pulverized coal or conventional IGCC capabilities.

Coal Gasification w/ CCUS will Thrive

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Coal Gasification with CCUS Will Succeed

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•Gasify. Clean small, pressurized gas volume. Then burn. •Five standardized “modules”. Rare in U.S., but basis of much of China’s chemical industry.

•TCEP’s big difference is the last step—selling the CO2 to users who will permanently sequester

•Use every single chemical constituent of coal to make money •As consequence, emit negligible air pollution

•As a consequence, can get permitted without fatal opposition

What is Coal Gasification with CCUS? PC: Grind-> Break -> Burn -> Clean Gasification: Grind-> Break -> Clean ->Burn

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Pulverized Coal Gasification w/ CCUS Grind coal Grind Coal Break carbon bonds by adding heat, & Burn simultaneously, adding atmospheric air in four story high fireball in a box.

Break carbon bonds by adding heat—but only a bit of oxygen, so can’t burn completely. (Gasifier and CO Shift) Clean the dirty gas (which is pressurized in a small pipe)—easy to grab CO2 and H2S

Clean: Then try to grab sulfur, ash, SOx and NOx out of the massive volume flowing through stacks.

Then burn the clean gas (mostly H2 & little CO in ~20:1 ratio) in a combustion turbine

Air Pollutants: Gasification vs. “Incinerate and Clean Up Later”

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2007 Permitted Pulverized Coal

(1,720 MW)

2010 Permitted TCEP

(400 MW) TCEP /

Pulverized Coal

SO2 (lb/MWh) 2.01 0.14 7%

NOx (lb/MWh) 0.84 0.13 16%

PM10 (lb/MWh) 0.42 0.22 52%

Hg (millionths of lb/MWh)

96 7 7%

CO2 (lb/MWh) 2,203 228 10%

Currently Operating Installation of Five SFG-500 Gasifiers at Shenhua Plant, Ningxia, China

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Newer Gasification Plants Have Five Typical Major Subcomponents, and We Add One New Revenue 1. Air Separation Unit (need pure oxygen for controlled gasification)—typical

providers Linde, AirLiquide, Airproducts, etc.

2. Gasifiers to gasify coal or pet coke—typical providers Siemens, ConocoPhillips, Mitsubishi Heavy, GE, Chevron. Output is mixed gases, heavily weighted towards CO.

3. CO Shift Reaction*—add steam and eliminate most CO, while raising CO2 and H2. (CO+H20CO2+H2)

4. Acid Gas Removal including Carbon Capture (take H2S and CO2 out of gas stream to concentrate high BTU syngas)—typical providers Linde or AirLiquide (Rectisol), UOP (Selexol)

5. Syngas Users “Inside the Fence”

6. Commercial Sale of Captured Carbon

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*Gas components (ex nitrogen and water) out of gasifier are 65% CO, 30% H2, 5% CO2. After shift reaction 3% CO, 57% H2, 40% CO2.

TCEP Gasification CCS Schematic: Same 5 “Modules” plus a New Revenue Source

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Coal 1.8mm

tpy

#2 Gasifiers

H2O

CCGT

2/3

5/6

NH3/Urea

EOR

[Brackish Water Purified via Reverse Osmosis]

* Remaining 5% of revenue from other byproduct sales

O2

#1 ASU

#3 CO Shift & #4 Acid

Gas Removal

#5 Syngas

Users 1/3

#6 CO2

1/6

H2SO4

Raw Syngas

Key: Using, not Venting, Industrial Quality CO2

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Korean Gasification Plant (same Acid Gas Treatment as TCEP from Linde), label numbers correspond to steps in prior slide

#6 Yellow box says “Vented CO2”—to

OSBL. OSBL means “Outside Battery

Limits”, which is nice way to say “into atmosphere”.

#1

#5

#2

#3 #4

A Few Recent Asian Coal Gasification Plants Total Capacity Last Decade is ~20x TCEP

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Plant Name Year Country Technology Name Feed Class Product

Syngas Output

Inner Mongolia Chemical Plant 2011 China Shell Gasification Process Coal Methanol 3373

Ningxia Coal to Polypropylene Project (NCPP)

2010 China Siemens SFG Gasification Process

Coal Polypropelene 1912

Perdaman 2013 Australia Shell Gasification Process Coal Chemicals 1283

Tianjin Chemical Plant 2010 China Shell Gasification Process Coal Ammonia 1124

Jincheng Project 2012 China Siemens SFG Gasification Process

Coal Ammonia 874

Coal to UREA Project 2013 Australia Siemens SFG Gasification Process

Coal Ammonia 765

Guizhou Chemical Plant 2010 China Shell Gasification Process Coal Ammonia 562

Hebi 2012 China Shell Gasification Process Coal Chemicals 546

Datong 2013 China Shell Gasification Process Coal Chemicals 546

Sinopec, Anqing 2006 China Shell Gasification Process Coal Ammonia 509

Dong Ting Ammonia Plant 2006 China Shell Gasification Process Coal Ammonia 466.2

Hubei Ammonia Plant 2006 China Shell Gasification Process Coal Ammonia 466.2

Yuntianhua Chemicals, Anning 2007 China Shell Gasification Process Coal Ammonia 465

Yunzhanhua Chemicals, Huashan 2007 China Shell Gasification Process Coal Ammonia 465

Puyang Plant 2008 China Shell Gasification Process Coal Methanol 463

Revenue and Output Contracts

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Emitting Less Pollution, Emitting More Revenue

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Process Product Use

Air Separation Unit Argon Gas, Nitrogen Gas Trucked to industrial gas users (We only need O2 and some N2)

Gasifiers Inert, vitrified, non-leachable slag

Environmentally friendly component for Cement

Gas Cleanup Hydrogen Sulfide Gas Make Sulfuric Acid to Sell

Gas Cleanup CO2 EOR and Urea, both

Gas Cleanup Syngas Power and Urea

Plant Wide Water Zero Discharge

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Components of External Sales Revenues (after eliminating all intra-plant transfer pricing) – 2020

Revenue components

Urea1

• 710k tons / year

• US 2010 demand 12mm tons / year

• US 2010 imports 7mm tons / year

• 97% capacity utilization

• Contracted under a 15-year offtake agreement with a price floor

Power

• 400 MW gross output

• On-site power use includes ASU, ammonia production and CO2 compression

• ~195 MW net to CPS Energy

• ERCOT 2011 peak demand 68,379 MWs

• Fully contracted under a 25-year Tolling Agreement with a ‘AA’ rated counterparty

CO2

• 2.5mm tons / year captured and sold

• 90%+ capture rate

• Market in Permian Basin is massive in comparison – and short of supplies

• 37mm tons / year market for new CO2

• Will qualify for carbon credits (VERs) on American Carbon Registry and other registries

53%

21%

18%

8%

Urea Electricity CO2 Other

(1) Source: Fertecon

Key Profit Drivers (Spot/Indicative Prices)

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Item Volumes/Units Price (spot)

Revenue mm$/yr

Coal Consumed 1.8mm tpa $50/ton delivered

($90)

Natural Gas Consumed

4 mm MCF/yr ~$3 ($12)

Urea Produced 710,000 tpa $400 $284

Power Produced for External Sale

~1.5 mm MWh/yr $80 $120

CO2 Produced 2.5mm tpa $30 $75

$377

CO2 for Enhanced Oil Recovery: Inject, Extract, Re-cycle, Cap

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Closed loop for valuable CO2

One ton CO2 pushes up about 2-3 barrels of oil!

Not “fracking.”

More analogous to CO2 dry cleaning.

When done, cap well, and CO2

stays in the space where the oil used

to be.

In Oilfields CO2 is a Scarce Product, Not a Disposal Problem • Texas’ Permian Basin is

40-year old CO2 market for Enhanced Oil Recovery

• 3,000 miles of CO2 pipelines (Cortez pipeline in red/top left = 500 miles)

• TCEP within 100 miles or less of 72% of all existing EOR-using fields

• We are ~7% of 37mm TPY market

• CO2 demand 3x supply --all existing sources of supply (geologic and man-made)

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U.S. Government Support in Absence of Carbon Price/Tax

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U.S. Government Support: TCEP Received $450 Million Grant From U.S. Department of Energy Largest single award under President Obama & U.S. Energy Secretary Steven Chu Only IGCC project & “new start” in this round of the DOE’s Clean Coal Power Initiative

•On December 4, 2009, Secretary Stephen Chu of the U.S. Department of Energy announced that TCEP would receive a $350 million award

•The award is basically “equity” that does not require a dividend or receive tax benefits •This award is the largest yet made under the Department of Energy’s Clean Coal Power Initiative, enacted and funded by Congress.

•The U.S. DOE made an additional $100 million award to TCEP in August 2010 •The funding does not require any further Congressional action—it is already appropriated and committed, subject to project fulfilling its contractual commitments under the executed Cooperative Agreement.

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At a 2009 hearing of a key Congressional committee, witnesses unanimously agreed that the United States and the world cannot meet current climate goals without the implementation of carbon

capture and sequestration (CCS) technology.

In July 2010, the then U.S. DOE Assistant Secretary for Fossil Energy James Markowsky said of TCEP: “It is one of the key carbon capture and storage projects essential to gaining the integration

and operating experience necessary for commercial CCS deployment.”

• TCEP benefits from three separate Federal tax incentives, the combined benefit of which is worth approximately $1.35 billion. The ITC had to be applied for and competitively selected. The other two benefits are available to any similarly situated taxpayer.

• $313 mm Advanced Coal Program investment tax credit (“ITC”) at or before COD (awarded)

• $195 mm Carbon Sequestration tax credits possible over first 10 years

• $757 mm MACRS accelerated depreciation tax benefits over first 5 years ~$1.265 bn undiscounted total

• If DOE Award is taxed (likely to change), taxes on that are about $157mm. So net undiscounted tax benefit is about $1.1bn

• $1.1bn is about NPV of $700 million1 at COD

• Sadly, only a big taxpaying corporation that invests as a partner in TCEP can benefit from these tax programs. That restriction leaves out all pension funds, non-profits, foreign companies, sovereign wealth funds, most U.S. energy companies, U.S. corporations with existing tax losses, etc. Wonderful support, but financially complex to use.

Tax Benefits are a Significant Factor in Returns

1 at 15% discount rate from date of project completion

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TCEP Capitalization

Operating/Project Company funding (as of 10/14/2011 in USD) • DOE Award $ 0.45 billion • Senior Secured Debt $ 1.30 • Investment from Holding Company $ 1.10 • Total estimated project costs: $ 2.85 billion

Grants 16%

Holdco Investment

38%

Sr. Secured Debt 46%

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Value of tax benefits @ ~$700mm = about 2/3 of

needed equity.

TCEP Gets Large incentives (in Absolute $$) — Highly Efficient in $$/ton CO2 not Emitted

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Solar Project Wind Project

Grant Wind Project w/

PTC TCEP vs. Gas

CCGT TCEP vs. Coal

Plant

Size MW (Nameplate) 100 100 100 400 400 Cost $mm $ 300.00 $ 200.00 $ 200.00 $ 2,900.00 $ 2,900.00 Annual Operating Ratio 20% 30% 30% 90% 90% Annual Energy 175,200 262,800 262,800 3,153,600 3,153,600 20 year Energy 3,504,000 5,256,000 5,256,000 63,072,000 63,072,000

Carbon Out lb per MWh 0 0 0 200 200 Gas Plant or Coal (Last Column) 800 800 800 800 2200

Tons CO2 Saved 1,401,600 2,102,400 2,102,400 18,921,600 63,072,000

Cash Grant $ 90.00 $ 60.00 $ 450.00 $ 450.00 Tax On Grant $ - $ (157.50) $ (157.50) Production /Sequestration Tax Credit $ 52.56 $ 100.00 $ 100.00 Investment Tax Credit $ 313.00 $ 313.00 Basis Reduction for ITC /Grant (%) 50% 50% 0 100% 100% Basis Reduction for ITC /Grant ($) $ (16) $ (11) $ - $ (110) $ (110) Total incentives $ 74.25 $ 49.50 $ 52.56 $ 595.95 $ 595.95

incentive per Ton CO2 Not Emitted 52.98 23.54 25.00 31.50 9.45

• Success Factors • Low emissions profile meant no environmental opposition and community support. Also no

local fresh water use was important in this arid region of the USA.

• Flexibility of uses for high hydrogen syngas—multiple possible power and chemical applications

• Basically zero investment in CO2 pipeline infrastructure, combined with large and profitable CO2 sales market

• Low technology risk because we use well-tested components and because “integration” has been proven in multiple Asian plants (i.e., Shenhua’s)

• Strong US government support, especially the cash grant

• Settled legal framework relating to underground CO2 injection for EOR in Texas.

• Challenges • Impossible to get fixed price long term contracts for urea and CO2

• Difficulty of efficiently using tax incentives provided by U.S. government

• No government mandate: neither national Renewable Portfolio Standards (for power generation) nor carbon tax on emissions of CO2.

Key Success Factors and Challenges

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