The Sale of Vero Electric to FPL

Why are we selling and what is the delay?

Update on State Legislature regarding the audit of the FMPA.

Why FMPA valuation is essential to public transparency and understanding FMPA exit costs.

Why are We Selling?• Because Vero Beach Electric cannot compete with FPL.

• Vero rates are currently 27% higher than FPL and are soon to be 31% higher in May 2015

• We lose over $20 million per year because Vero can’t compete with FPL.

• The electric business is not an essential service of government, creating unnecessary bureaucracy.

The Public has already voted to SELL to FPL

Referendum  to Lease Power Plant to FPL fall 2011 Vero Beach voters (inside ratepayers)  66% in favor

Referendum  to Sell to FPL spring 2013 Vero Beach voters (inside ratepayers) 64% in favor

Customer Survey to Sell to FPL Spring 2013 ALL Customers (inside and outside) vote 84% in favor

What is the Delay to the Sale?The FMPA

A government bureaucracy that Vero Beach helped create over 30 years ago.

Vero Beach must sell or otherwise dispose of its FMPA power entitlement assets in order to sell to FPL.

What has the public learned about the FMPA?

TheFMPA

\ ·---------------.-nville Beach

Starke

• Satellites of the FMPA 20 Entitlement Member "Owners"

Key West

State Auditor General Auditsthe FMPA

Operational audit by the State Auditor General reveals many issues including: Hundreds of millions in losses from unusual hedging and interest rate swap 

practices. Questionable executive and employment perks. “FMPA has the sole discretion in determining the actual severance amount and 

the substantial cash payment due on withdrawal, in effect, represents a compelling case against the decision for members to withdraw.”

Joint Legislative Audit Committee (JLAC) 3/30/15 Legislators furious that FMPA top bureaucrats did not show up to answer 

questions from the public’s elected representatives. Some legislators discussed a 2nd follow up audit. Some discussed unwinding or dissolving the FMPA. Some talked about having reasonable exit costs.

Florida TaxWatch Recommends: Exit costs should be reasonable and predicable. Exit cost should not be the sole discretion of the FMPA to interpret and apply.

“They got us held hostage “

Oct 2007 GREEN COVE SPRINGS , Don Bowles City Manager 

http://www.lakeworthmedia.com/modules.php?name=News&file=print&sid=133

"...they got us held hostage“ says city manager Don Bowles concerning FMPA. Green Springs Cove has announced they are exiting from FMPA but got slapped with a $53,000,000 penalty. Green Cove Springs has also discovered that lower cost power supply exists right in their county ‐‐ the CLAY COUNTY ELECTRIC COOP that offered them power at a rate 30% below FMPA rates. "But they don't want anyone leaving them," said Mr. Bowles, and they have set it up so its too expensive to consider for most municipalities." 

How should FMPA exit costs be determined?

In order to understand if exit costs are reasonable, the members cities must FIRST understand the

FAIR MARKET VALUE of their investment in the FMPA.

After over 30 years of ownership in the FMPA, the pubic has a right to know.

Power Generation Sources of the FMPA per 2014 Fact Sheet and Website

Description Below is a list of the generation assets in which the FMPA is involved, the FMPA's fractional ownership share in those assets and the potential sale va lue, on the basis of fuel type, of the FMPA's ownerhsip share based on the price input on the "Variables" worksheet.

Year Fuel Asset FMPA FMPA MW

Project Asset Owner Operator Built Source MW Share MW %

5%

Stanton I SEC Unit I ouc ouc 1987 Coal 441 14.8193% 65 4%

Stanton II SEC Unit II ouc ouc 1996 Coal 453 23.2367% 105 7%

Tri-City SEC Unit I ouc ouc 1987 Coal 441 5.3012% 23 1%

All Requirements (ARP)

SEC Unit I ouc ouc 1987 Coal 441 11.3253% 50 SEC Unit II ouc ouc 1996 Coal 453 5.1724% n an River Unlfs A & B R&llant ouc 1989 Gaa 82 51.2000% ndlan River Unlfs C & D Reliant ouc 1992 Gas 224 21.0000%

Stanton Unit A Southern Co Southern Co 2003 Gas 656 7.0000%

Cane Island Units 1 FMPA Kissimmee UA 1995 Gas 40 100.0000% 40

Cane Island Units 2 FMPA Kissimmee UA 1995 Gas 120 100.0000% 120

Cane Island Units 3 FMPA Kissimmee UA 2002 Gas 275 100.0000% 275 Cane Island Unit 4 FMPA Kissimmee UA 2011 Gas 300 100.0000% 300

Treasure Coast Center FMPA FPUA 2008 Gas 300 100.0000% 300

Key West Units 1 FMPA Keys Energy 1978 Oil 18 100.0000% 18

Key West Units 2 & 3 FMPA Keys Energy 1999 Oil 28 100.0000% 28 Key West Stock Island Unit 4 FMPA Keys Energy 2006 Oil 44 100.0000% 44 Total ARP 1333 83%

Total FMPA 1614 100%

SEC means Stanton Energy Center MW By Source Owner

FMPA 1125 70%

ouc 17% 6%

5%

3% 1614 100%

ARP Fuel Mix FMPA Fuel Mix

Gas 1170 88% Gas 1170 72%

Coal 73 6% Coal 267 17%

Nuke 0 0% Nuke 87 5%

Oil 90 7% Oil 90 6% 1333 100% 1614 100%

FMPA Project Value Based on Asset Sale

2014

Description Below shows the 5 FMPA generation projects. In yellow is the possible sale value driven by the values input on the lead "Variable" worksheet. The sale value in yellow was calculated on the "FMPA Generation" worksheet. Cash and other assets, per the 9/30/14 FMPA Balance Sheet, are then added to the generation sales price less liabilities to arrive at positive or negative equity position per project.

Nuke Coal Coal Coal Mixed

St Lucie Stanton I Stanton II Tri City ARP Owner FPL ouc ouc ouc FMPA Year built 1983 1987 1996 1987 Various

Total generation at site plant 2014 984 441 453 441 Various

FMPA share 8.8060% 14.8193% 23.2367% 5.3012% Various

FMPAmWs 87 65 105 23 1333 $ Sale price per kW 0 0 0 0 0

Sale value of Generation Asset $ $ $ $ $ $ ADD:

Cash & Investments 248,573,000 30,358,000 51,912,000 8,819,000 289,874,000 Other Assets 103,538,000 527,000 23,786,000 755,000 320,437,000

LESS:

Total

1614

629,536,000

449,043,000

Long term Debt (342,867,000) (39,310,000) (157,975,000) (15,771,000) (1,168,198,000) (1,724,121,000)

Other Liabilities (98,373,000) (24,514,000)

FMPA Equity OR (Negative Value) $ (89,129,000} $ (32,939,000}

Veres mW Share 15.2% 32.5%

Vero's Equity (Negative value) $ (13,542,978) $(10,718,246)

Cash, Investments, Other assets, Debt and Liabilities per 9/30/14 FMPA CAFR Does not include Agency Fund

(24,079,000) (6,802,000) (306,989,000) (460,757,000)

$ (106,356,000) $ (12,999,000) $ (864,876,000) $ (1,106,299,000)

16.5% 0.0% 0.0%

$ (17,512,434) $ $ $ (41,773,658)

Date

Fuel

Price

mW

kW

$per kW

Seller

Locations

Date

Fuel

Price

mW

kW

$per kW

Seller

Locations

Recent Generation Power Plant Sales

Dec-13

Gas

$ 625,000,000 1,050

1,050,000

$ 595

Min Tex Power

$

$

TX

Dec-14

Coal

12,400,000

202

201,500

62

Dayton P&L

Kentucky

Apr-14 Aug-14

Gas 60% Gas 40% Coal

$ 1,570,000,000 $ 3,450,000,000 3,498 6,357

3,498,000 6,357,000

$ 449 $ 543

Calpine ECP

Southeast & Northeast

Midwest Midwest

Estimated

Dec-14 Jan-15

70% Nuke, 30% Coal Coal & Gas

$ 1,200,000,000 $ 3,600,000,000 700 7,923

700,000 7,923,000

$ 1,714 $ 454

NCEMPA AEP

NC Northeast

Aug-14

Gas &Coal

$ 2,800,000,000

$

6,143

6,143,000

456

Duke

Northeast

Midwest

Estimated

Jan-15

Coal & Gas

$ 2,800,000,000 7,923

7,923,000

$ 353

AEP

Northeast

FMPA Project Value Based on Asset Sale

2014 Description

Below shows the 5 FMPA generation projects. In yellow is the possible sale value driven by the values input on the lead "Variable" worksheet. The sale value in yellow was calculated on the "FMPA Generation" worksheet. Cash and other assets, per the 9/30/14 FMPA Balance Sheet, are then added to the generation sales price less liabilities to arrive at positive or negative equity position per project.

Nuke Coal St Lucie Stanton I

Owner FPL ouc Year built 1983 1987 Total generation at site plant 2014 984 441

FMPA share 8.8060% 14.8193% FMPAmWs 87 65 $ Sale price per kW 2246 450

Sale value of Generation Asset $ 194,618,236 $ 29,408,901 ADD:

Cash & Investments 248,573,000 30,358,000 Other Assets 103,538,000 527,000

LESS:

Long term Debt (342,867,000) (39,310,000) Other Liabilities (98,373,000) (24,514,000)

FMPA Equity OR {Negative Value) $ 105,489,236 $ (3,530,099)

Veros mW Share 15.2% 32.5%

Vera's Equity (Negative value) $ 16,028,884 $ (1,148,683)

Cash, Investments, Other assets, Debt and Liabilities per 9/30/14 FMPA CAFR

Does not include Agency Fund

Coal Coal Mixed

Stanton II Tri City ARP

ouc ouc FMPA 1996 1987 Various

453 441 Various

23.2367% 5.3012% Various 105 23 1333 450 450 555

$ 47,368,013 $ 10,520,231 $ 739,485,395

51,912,000 8,819,000 289,874,000 23,786,000 755,000 320,437,000

(157,975,000) (15,771,000) (1,168,198,000) (24,079,000) (6,802,000) (306,989,000)

$ (58,987,987) $ (2,478,769) $ (125,390,605)

16.5% 0.0% 0.0%

$ (9,712,881) $ $

Total

1614

$ 1,021,400,776

629,536,000

449,043,000

(1,724,121,000) (460,757,000)

$ (84,898,224)

$ 5,167,319

But what if the FMPA has a positive value?

Then why would an exiting member city need to pay a penalty to exit?

Why should a member be stripped of its 30 year investment in the FMPA and pay a penalty?

If other member cities were to exit the FMPA, who ultimately would receive all the assets and penalty proceeds?   The last city standing?

Transparent, Fair and Equitable Members Cities ought to know what their 30 year investment in the FMPA is worth.

Member cities ought to book FMPA equity at Fair Market Value on the member cities’ CAFRs so that the public is better informed.

After 30 year of ownership, the public ought to have the right to the return of its capital invested in the FMPA.

The FMPA should sell exiting members FMPA assets outside of the agency.  Such a sale should not harm members who wish to remain with the FMPA as that remaining member’s FMPA assets would remain in tact.  Nor would it harm bondholders as their loans would be repaid.

Such a sale of exiting members assets, outside of the agency, would be fair to ALL including bondholders, member cities wishing to remain at the FMPA and the public who wishes to leave the FMPA.

Thank you

Discussion or questions?

Next steps?

Purpose

Test

VARIABLEFMPA Project Fuel Source $ per kWSt Lucie Nuclear 2,246.00$     Stanton I Coal 450.00$        Stanton II Coal 450.00$        Tri City Coal 450.00$        ARP Gas 600.00$        ARP Oil 50.00$           

Notes:Sale Pricerequired toBreak Even

St Lucie ‐ Nuclear 1,028.59$     Stanton I ‐ Coal 504.02$        Stanton II ‐ Coal 1,010.39$     Tri City ‐ Coal 556.03$        ARP ‐ Gas 647.67$        ARP ‐ Oil 647.67$        

Potential Fair Market Sales Value of FMPA Generation AssetsPrice per kW

2014The purpose of this workbook is to use sensitivity analysis to test the potential value of the equity positions of the 20 member‐owner cities in the FMPA. 

By  inputting various possible sale price values (below in yellow) that a 3rd party willing buyer might pay for the generation assets held at the FMPA, the user of this workbook can follow the effect of these generation asset prices on FMPA member equity.  Again, these values would be the possible realistic fair market value of FMPA generation assets if these FMPA generation assets were sold on the open market to ANY willing electric utility buyer.  

Test various FMPA equity positions by changing the sales value per kW of generation, by fuel source, in the variable boxes shown in YELLOW below then follow the effect on equity in the proceeding worksheets contained in this workbook.  As the user inputs different sale prices per kW, the amount will flow to each proceeding worksheet testing and demonstrating the effect on FMPA member‐owner equity.

Description

Year Fuel Asset FMPA FMPA MW $/kW AssetProject Asset Owner Operator Built Source MW Share MW % FMV Value

St. Lucie Unit II FP&L FP&L 1983 Nuclear 984 8.8060% 87 5% 2246 194,618,236$       

Stanton I SEC Unit I OUC OUC 1987 Coal 441 14.8193% 65 4% 450 29,408,901            

Stanton II SEC Unit II OUC OUC 1996 Coal 453 23.2367% 105 7% 450 47,368,013            

Tri-City SEC Unit I OUC OUC 1987 Coal 441 5.3012% 23 1% 450 10,520,231            

All Requirements (ARP)SEC Unit I OUC OUC 1987 Coal 441 11.3253% 50 450 22,475,058            SEC Unit II OUC OUC 1996 Coal 453 5.1724% 23 450 10,543,937            Indian River Units A & B Reliant OUC 1989 Gas 82 51.2000% 42 600 25,190,400            Indian River Units C & D Reliant OUC 1992 Gas 224 21.0000% 47 600 28,224,000            Stanton Unit A Southern Co Southern Co 2003 Gas 656 7.0000% 46 600 27,552,000            Cane Island Units 1 FMPA Kissimmee UA 1995 Gas 40 100.0000% 40 600 24,000,000            Cane Island Units 2 FMPA Kissimmee UA 1995 Gas 120 100.0000% 120 600 72,000,000            Cane Island Units 3 FMPA Kissimmee UA 2002 Gas 275 100.0000% 275 600 165,000,000          Cane Island Unit 4 FMPA Kissimmee UA 2011 Gas 300 100.0000% 300 600 180,000,000          Treasure Coast Center FMPA FPUA 2008 Gas 300 100.0000% 300 600 180,000,000          Key West Units 1 FMPA Keys Energy 1978 Oil 18 100.0000% 18 50 900,000                 Key West Units 2 & 3 FMPA Keys Energy 1999 Oil 28 100.0000% 28 50 1,400,000              Key West Stock Island Unit 4 FMPA Keys Energy 2006 Oil 44 100.0000% 44 50 2,200,000              Total ARP 1333 83% 554.62          739,485,395          

Total FMPA 1614 100% 1,021,400,776$    

SEC means Stanton Energy Center MW By Source OwnerFMPA 1125 70%OUC 267 17%Reliant 89 6%FP&L 87 5%Southern 46 3%

1614 100%

ARP Fuel Mix FMPA Fuel MixGas 1170 88% Gas 1170 72%Coal 73 6% Coal 267 17%Nuke 0 0% Nuke 87 5%Oil 90 7% Oil 90 6%

1333 100% 1614 100%

Power Generation Sources of the FMPA per 2014 Fact Sheet and Website

Generation

Below is a list of the generation assets in which the FMPA is involved, the FMPA's fractional ownership share in those assets and thepotential sale value, on the basis of fuel type, of the FMPA's ownerhsip share based on the price input on the "Variables" worksheet.

Description

Nuke Coal Coal Coal MixedSt Lucie Stanton I Stanton II Tri City ARP Total

Owner FPL OUC OUC OUC FMPAYear built 1983 1987 1996 1987 VariousTotal generation at site plant 2014 984 441 453 441 Various

FMPA share 8.8060% 14.8193% 23.2367% 5.3012% VariousFMPA mWs 87 65 105 23 1333 1614$ Sale price per kW  2246 450 450 450 555

Sale value of Generation Asset 194,618,236$     29,408,901$   47,368,013$        10,520,231$   739,485,395$       1,021,400,776$   ADD:

Cash & Investments 248,573,000       30,358,000      51,912,000          8,819,000        289,874,000          629,536,000         Other Assets 103,538,000       527,000           23,786,000          755,000           320,437,000          449,043,000         

LESS:Long term Debt (342,867,000)      (39,310,000)    (157,975,000)      (15,771,000)    (1,168,198,000)     (1,724,121,000)    Other Liabilities (98,373,000)        (24,514,000)    (24,079,000)         (6,802,000)       (306,989,000)        (460,757,000)       

FMPA Equity OR (Negative Value) 105,489,236$     (3,530,099)$    (58,987,987)$      (2,478,769)$    (125,390,605)$      (84,898,224)$       

Veros mW Share 15.2% 32.5% 16.5% 0.0% 0.0%

Vero's Equity (Negative value) 16,028,884$       (1,148,683)$    (9,712,881)$        ‐$                  ‐$                        5,167,319$           

Cash, Investments, Other assets, Debt and Liabilities per 9/30/14 FMPA CAFRDoes not include Agency Fund

FMPA Project Value Based on Asset Sale2014

Below shows the 5 FMPA generation projects.  In yellow is the possible sale value driven by the values input on the lead "Variable" worksheet.  The sale value in yellow was calculated on the "FMPA Generation" worksheet.  Cash and  other assets, per the 9/30/14 FMPA Balance Sheet, are then added to the generation sales price less liabilities to arrive at positive or negative equity position per project.

Description

St Lucie Stanton I Stanton II Tri City ARP TotalKissimmee 9,863,929         (431,457)        (19,484,988)      (30,825,068)     (40,877,583)        Ocala (27,066,392)     (27,066,392)        Jacksonville Beach 7,671,944         (16,506,770)     (8,834,825)          Key West (5,863,264)        (1,355,060)      (13,356,548)     (20,574,872)        Fort Pierce 16,028,884      (862,913)        (9,712,881)        (561,854)          (10,176,885)     (5,285,650)          Lake Worth 26,303,809      (571,540)        (8,449,660)       17,282,609         Leesburg 2,465,982         (9,725,451)       (7,259,469)          Vero Beach 16,028,884      (1,148,683)     (9,712,881)        5,167,319            Clewiston 2,328,983         (2,414,189)       (85,206)                Green Cove Springs 1,917,986         (2,571,209)       (653,223)              Homestead 8,767,936         (431,457)        (4,856,441)        (561,854)          2,918,185            Starke 2,328,983         (84,050)           (710,699)           (1,491,694)       42,541                 St Cloud (8,646,833)        (8,646,833)          Fort Meade 410,997            (942,122)           (531,125)              Newberry 136,999            (736,033)           (599,034)              New Smyrna Beach 10,411,925      10,411,925         Bushnell ‐                     (579,013)           (579,013)              Havana ‐                     (549,571)           (549,571)              Alachua 410,997            410,997               Moore Haven 410,997            410,997               

Total 105,489,236    (3,530,099)     (58,987,987)      (2,478,769)      (125,390,605)   (84,898,224)        ‐                       ‐                     ‐                        ‐                      ‐                       ‐                          

FMPA Value per Owner Members

Below describes the equity or (negative equity) each member city of the FMPA has in each project based on the "Project Value" worksheet on the basis of the mWs of generation each member city has in each of the 5 FMPA projects.  Each member mWs ownership share is detailed in the "Member % Ownership" worksheet included in this excel workbook

Purpose

AdditionalMonthlyCost

FMPA 2011 to pay off Negative Annual in one yearValue Consumption Per 1000 kWh

Fort Pierce (5,285,650)            530,089                  9.97                    Lake Worth 17,282,609           387,343                  (44.62)                Starke 42,541                   70,467                    (0.60)                  Kissimmee (40,877,583)          1,378,478               29.65                 Clewiston (85,206)                  99,867                    0.85                    Key West (20,574,872)          700,865                  29.36                 Fort Meade (531,125)                40,607                    13.08                 Green Cove Springs (653,223)                116,745                  5.60                    Bushnell (579,013)                24,135                    23.99                 Jacksonville Beach (8,834,825)            740,822                  11.93                 Newberry (599,034)                32,296                    18.55                 Havana (549,571)                25,219                    21.79                 Ocala (27,066,392)          1,245,772               21.73                 Leesburg (7,259,469)            501,380                  14.48                 Vero Beach 5,167,319              743,803                  (6.95)                  Homestead 2,918,185              435,703                  (6.70)                  Moore Haven 410,997                 15,052                    (27.31)                New Smyrna Beach 10,411,925           399,780                  (26.04)                Alachua 410,997                 122,507                  (3.35)                  St Cloud (8,646,833)            ?? ??

Total (84,898,224)         

‐                           

FMPA Value per Owner MembersEffect on member ratepayers per 1000 kWh

The following estimates the amount an average ratepayer using 1,000 retail kWs per month would pay each month to payoff (if negative), in one year, a possible FMPA underwater position.  This amount would be in ADDTION to the ratepayer's current monthly city provided electric bill.

20 Entitlement members cities

St Lucie Stanton I Stanton II Tri City ARPKissimmee 7.2 7.7 32.9 314.1Ocala 275.8Jacksonville Beach 5.6 168.2Key West 9.9 12.3 136.1Fort Pierce 11.7 15.4 16.4 5.1 103.7Lake Worth 19.2 10.2 86.1Leesburg 1.8 99.1Vero Beach 11.7 20.5 16.4Clewiston 1.7 24.6Green Cove Springs 1.4 26.2Homestead 6.4 7.7 8.2 5.1Starke 1.7 1.5 1.2 15.2St Cloud 14.6Fort Meade 0.3 9.6Newberry 0.1 7.5New Smyrna Beach 7.6Bushnell 5.9Havana 5.6Alachua 0.3Moore Haven 0.3

Total 77.0          63.0          99.6          22.5          1,277.7   

Kissimmee 9.4% 12.2% 33.0% 24.6%Ocala 21.6%Jacksonville Beach 7.3% 13.2%Key West 9.9% 54.7% 10.7%Fort Pierce 15.2% 24.4% 16.5% 22.7% 8.1%Lake Worth 24.9% 16.2% 6.7%Leesburg 2.3% 7.8%Vero Beach 15.2% 32.5% 16.5%Clewiston 2.2% 1.9%Green Cove Springs 1.8% 2.1%Homestead 8.3% 12.2% 8.2% 22.7%Starke 2.2% 2.4% 1.2% 1.2%St Cloud 14.7%Fort Meade 0.4% 0.8%Newberry 0.1% 0.6%New Smyrna Beach 9.9%Bushnell 0.5%Havana 0.4%Alachua 0.4%Moore Haven 0.4%

Total 100% 100% 100% 100% 100%

FMPA Owner MembersPer Website 2014

mWs of Generation

% share of FMPA generation per member

Calpine to buy large power plant near San Antonio Collin Eaton 'iot urnl gas Texa.

Calpine's Magic Valley project near Edinburg, Texas (Photo: Calpine)

HOUSTON- Calpine Corp. is buying a natural gas-fired power plant near San Antonio for $625 million, another acquisition in Texas as it looks to build its footprint in the state, the company said Monday.

The Houston-based power generator said it's buying the 1,050 megawatt, combined-cycle power generating facility from MinnTex Power Holdings, a private equity-backed power company. The plant sits on a 11 0-acre site in Guadalupe County about 30 miles northeast of San Antonio.

It's a larger grab than Calpine' s $432 million power plant acquisition in Central Texas last year and it has more capacity than two plants it bought in Califomia in recent months. Calpine is making moves in Texas as electricity demand is increasing and reserve margins are tightening, CEO Jack Fusco said in a written statement.

The deal is slated to close in the first quarter.

"Acquiring this modem, flexible and efficient plant in ERCOT's south zone at a discount to replacement cost furthers our strategic objectives in this key market," Fusco said.

Apart from its recent acquisitions, Calpine also has made some expansions in two energy centers in the Houston area.

During a third-quarter earnings conference call, Fusco said the combination of a growing economy and proposed regulatory changes "could make Texas one of the best places to invest in the sector, even while the debate continues around what the final modified market construct will be."

Fusco said the company is focusing on single-plant acquisitions.

Calpine shares inched up about 1 percent to $19.10 in early trading Monday.

419/2015 Calpine to Sell Six Southeast Power Plants for $1 .57 Billion - WSJ

THE WALL STREET JOURNAL. This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://v.w..v.djreprints.com.

http://www.wsj.com/articJes/SB 1 000142405270230481 0904579509642272718218

DEAL JOURNAL

Calpine to Sell Power Plants to LS Power for $1.57 Billion Calpine Seeks to Focus on Texas, California and Mid-Atlantic States

By CASSANDRA SWEET And ANNA PRIOR

Updated April18, 2014 4:36 p.m. ET

Calpine Corp. will sell six U.S. power plants in the Southeast and Midwest to LS Power for $1.57 billion in cash, as the company focuses on its electricity sales businesses in Texas, California and mid-Atlantic states.

Together, the power plants have the capacity to generate as much as 3,498 megawatts of electricity and are scattered across the middle of the country where Calpine doesn't operate many other electricity-generating facilities. Two of the plants being sold are in Alabama, with one each in Oklahoma, Louisiana, Florida and South Carolina.

Calpine spokesman Brett Kerr said the company planned to sell the six power plants for some time, and wanted to sell additional plants in Alabama, Arkansas and Florida but wasn't able to get the price it needed for those assets.

The LS Power deal is expected to close in the second quarter, and Calpine said it plans to use proceeds to pay down debt, buy back shares and possibly buy new generation. Calpine is consolidating in its three main power markets-Texas, California and the mid-Atlantic, which includes New York, New Jersey, Pennsylvania, Virginia, Delaware and Maryland.

The company operates 77 natural-gas-fired power plants across the U.S., including 24 in California, 20 in mid-Atlantic states and 14 in Texas. Calpine also has geothennal power plants in California.

Owners of electrical generation that sell power into wholesale markets have struggled

http:llwww.wsj.comfarticles/SB10001424052702304810904579509642272718218 1/2

Calpine Sheds Six Power Plants in $1.68 Deal ByCiaire PooleFollow 04/21/14- 11:58 AM EDT Get TheStreet Quant Ratings' exclusive 5-page repcrt for (CPN)- FREE.

HOUSTON ( The Deal) -- Privately held power and energy infrastructure owner LS Power Equity Advisors said Monday it agreed to pick up six natural gas-fired, combined-cycle power plants in the southeastern U.S. fromCalpine (CPN -Get

Report) of Houston for $1.57 billion in cash.

The plants are in Gabriel, La.; Calhoun County, S.C.; Decatur, Ala.; Mobile, Ala.; Coweta, Okla.; and Pace, Fla., and

generate 3,500 megawatts. They feed power to investor-owned utilities, municipal utilities, cooperatives and other market players.

Analysts at Tudor, Pickering, Holt & Co. Securities Inc. wrote in a note that the region is oversupplied and utility dominated, leading to subpar returns for independent power plant generators in the area. They think LS Power wants the plants

because their value could increase after 2015 when coal retirements begin to be driven by the Environmental Protection Agency's Mercury and Air Toxics Standards. The analysts wrote that Calpine would rather use the proceeds to invest in

competitive wholesale power markets such as California, Texas and the mid-Atlantic U.S.

Dynegy Buying Duke and Energy Capital Partners Assets Zacks Equity Research

DYN DUKAEE CMS

Houston-based power company Dynegy Inc. (DYN) has struck two separate deals to acquire several coal and gas power generation plants from Duke Energy Corp. (ouK - Analyst Report) and private-equity firm Energy Capital Partners to enhance its foothold in two less regulated eastern U.S. markets. These transactions, worth a combined $6.25 billion, pushed Dynegy's shares by 8. 75% in Friday's trading session to close at $32.32.

The Deals

Dynegy will pay $2.8 billion in cash for 11 power plants in the Midwest and a retail business owned by Duke Energy. These include Killen, Stuart, Conesville, Miami Fort, Zimmer, Hanging Rock, Washington, Fayette, Lee and Dicks Creek. The company is also buying ownership interests in plants in New England, Pennsylvania and the Midwest from Energy Capital Partners for $3.45 billion in cash as well as stock.

Holding a market cap of $3.24 billion, Dynegy has plans to issue about $5 billion in new unsecured bonds and $1.25 billion in equity and equity-linked securities to fund the acquisitions. The deals are slated to wrap up by the end of the first quarter of 2015.

The Synergies

The acquired assets will add 12,500 megawatts (MW) of generating capacity, doubling Dynegy's total output to about 26,000 MW. The addition of these portfolios will enable Dynegy to have a significant hold in the PJM (Pennsylvania, New Jersey, Maryland) and New England markets. Of the new generating capacity, 5,053 MW will comprise gas-fueled plants, while another 3,793 MW of capacity will come from environmentally compliant coal generation units.

The deals are expected to boost Dynegy's portfolio in the Northeast and New England to comprise about 60% of total megawatts versus 18% presently.

Financially, the company expects the deals to triple its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2015 while lifting its free cash flow to $4 a share per share in 2015 and beyond. Dynegy also expects the deals to provide $500 million in tax savings, $200 million in related efficiencies and cost savings of more than $40 million per year.

The acquisitions will also help Dynegy to reduce its overhead costs by 34% to $1.10 per MW hour of electricity produced.

Looking Back

Dynegy suffered a major setback in 2011 when the booming shale drilling created a supply glut of natural gas that depressed prices and led to losses. In 2012, gas prices deceased to a 1 0-year low, below $2 per million British thermal units.

Burdened by costly power plant leases, Dynegy finally came out of bankruptcy in 2012. Since then the company took the inorganic route to spur growth, acquiring five coal-fired power plants in Illinois from Ameren Corp. (AEE - Analyst Report) in December last year.

Conclusion

The proposed buyouts will increase Dynegy's risks associated with the supply of the industry's major fuel - natural gas. Moreover, the unregulated electricity operations are exposed to descending prices as well as demand in the U.S.

That said, in a deregulated electricity business, utility companies are consolidating and shifting toward more gas-fired power production given stringent environmental regulations. Global concerns about the pitfalls of green-house gas emissions supported by increasing restrictions on fossil-fuel usage have brought a wide array of fuel sources like gas into the limelight.

Increased demand for gas-fueled generation is helping to push up gas prices. Hence, the deals are a strategic fit giving a much needed boost to Dynegy's fuel mix from its predominantly coal-based fleet now.

Dynegy buys coal-, gas- and oil-fired power plants from Energy Capital Partners

(NYSE: DYN) finalized the acqttisition ofEquiPower Resources Corp and Brayton Point Holdings LLC from Energy Capital Partners (ECP).

The acquisition includes I 0 power plants with a capacity of 6.3 GW for the New England and PJM power markets. The originaJ acquisition price was $3.45

billion including $3.25 billion in cash and $200 million of common stock issued to ECP at closing. Dynegy and ECP on March 30 amended the purchase

and sales agreements to increase the cash consideration to $3.35 bill ion and reduce the common stock by 50 percent based on the settlement price of$28.90 per share.

The power plants included in the deal are:

The 1,493-MW Brayton Point coal-fired power plant in Massachusetts, scheduled for closing on June 1, 2017.

The 187-tvfW Dighton gas-fired plant in Massachusetts.

The 856-MW Lake Road gas-fired power plant in Connecticut.

The 280-MW Masspower gas-fired power plant in MassachusettS.

l11e 579-MW Milford gas-fired power plant in Cmmecticut.

The 788-MW Elwood gas-fired power plant in Ill inois.

The I, 108-MW Kincaid coal-fired power plant in lllinois.

The 600-MW Liberty gas-fired power plant in Pennsylvania.

The 447-MW Richland gas-fired power plant in Ohio.

1l1e 19-MW Stryker oi l-ftred power plant io Ohio.

Dynegy's other acquisition, of Duke Energy

expected to close on April2.

's commercial generation and retail assets in the Midwest, has received all approvals and is

Duke buys rest of East Bend power plant Associated Press and The Enquirer

fPnoto Enawrer 1i:e_l

FRANKFORT- The Kentucky Public SeNice Commission has approved a transaction that makes Duke Energy the sole owner of

the East Bend Station electric power plant in Boone County.

The PSC says Duke Energy Kentucky purchased the minority interest in the plant that was held by Dayton Power & light Co. of

Ohio. The commission authorized Duke Kentucky to purchase DP&L's 31 percent interest in the plant for $12.4 million. The 650-

megawatt coal-fired plant is about 10 miles west of Florence, across the Ohio River from Rising Sun, Indiana.

Duke stated in its application that the purchase will offset the loss of generating capacity with next year's expected retirement of

the coal-fired Miami Fort unit in North Bend.

As part of a settlement with the Kentucky Attorney General's office, Duke agreed that it will not file for a rate increase before

2016.

4/9/2015 North Carolina Eastern Municipal Power Agency (NCEMPA)

NC Public Power Energy Empowering North Carolina City Owned Electric SeNice

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Home > About Us > NCEMPA

North Carolina Eastern Municipal Power Agency (NCEMPA)

NCEMPA consists of 32 cities and towns in eastern North Carolina, including some of the largest cities in the region, that own and operate their electric systems. NCEMPA was formed in 1982 and provides wholesale power to its 32 participants.

Governance NCEMPA is governed by a Board of Commissioners (SOC), which consists of 14 members elected from throughout North Carolina. Each participant appoints a Commissioner and an Alternate Commissioner to the Board. The SOC meets at least three times a year. The ElectriCities Board of Directors (BOD) provides oversight of NCEMPA operations.

Plant Ownership

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NCEMPA owns a portion of five generating units. All units are operated by Progress Energy Carolinas. NCEMPA staff oversees operations and is heavily involved in operations at the plants. Staff regularly attends owners' meetings and is included in all capital improvement planning.

PLANT TYPE OF UNIT DATE OPERATIONS BEGAN

Roxboro Unit 4 Coal 1980

Mayo Un~ 1 Coal 1983

Brunswick Un~ 1 Nuclear 1977

Brunswick Un~ 2 Nuclear 1975

Harris Un~ 1 Nuclear 1987

Power Supply

The majority ofNCEMPA's energy requirements are provided by its ownership in the plants. The remaining energy is purchased through long-term supplemental contracts with Progress Energy.

Resources Download EA Fact Sheet

LICENSED UNTIL

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2034

2036

2046

Supplemental Purchases

Reliable Electricity. Excellent Local Customer Service. Prompt Restoration. That's the Public Power Advantage.

http:/twww.ncpublicpower.com/aboutus/NCEMPAaspx 112

419/2015 Duke Energy Progress receives FERC approval for plans to purchase NCEM PA generation assets- Duke Energy

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Duke Energy Progress receives FERC approval for plans to purchase NCEMPA generation assets Dec. 10, 2014

Investors

RALEIGH N.C. - Duke Energy Progress has receive:l approval from the Federal Energy Reyulatory Commiss1on (FERC) to proceed with plans to purchase lhe North

Carolina Eastem Munic1pal Power Agency's (NCEMPA) generating assets.

The FERC ruling, issued late yesterday. was based e-n a filing made by Duke Energy Progress on Ocl. 10. 2014

The ruling is an 1mpor1ant milestone of the approximately S1 2·blllion transaction With NCEMPA, announced July 28, 2014.

NCEMPA currently mamtams partial ownership 1nterest in several Duke Energy Progress plants, mcludulQ Brunswick Nuclear Plant Units 1 and 2 (Brunswick County), Mayo

Planl (Person County) Roxboro Plant Unit 4 (Person County) and the Harris Nuclear Plant (Wake County) .

The Power Agency's ownership interest 111 these plants represents approximately 700 megawatts of generating capac1ty. NCEMPA members' distribution assets are not part

of the agreement. and will continue to be owned and maintained by those members.

·we are pleased to receive lhese approvals toward our goal of completing this purchase and providing poslllve beneflts for both Duke Energy Progress customers and

NCEMPA members," said Paul Newton. Duke Energy president- North Carolina. ·we will now tum our attent1on to securing the state approvals necessary to close the transaction."

"ThiS is a positive development for NCEMPA and is good news for eastern North Carolina " ElectnCihes CEO Graham Edwards said. "We still face additional regulatory

approvals before the tmnsac11011 can be closed. We continue to be optimistic lhat we will finalize the agreement and secure a long-term. reliable and competitively priced PQ'M'lr supply for NCEMPA members."

FERC approval of the asset purchase agreement (APA) was necessary for Duke Energy Progress 10 acquire the PO'M!r Agency's ownership interest in the utility's pl11nts as

Y.ell as associated fuel111ventories and spare parts In add1tion. FERC approval was requ1red for Duke Energy Progress to enter into a 30-year wholesale pov.oer supply

agreement \-.ilh NCEMPA to continue meeting the needs of NCEMPA customers currently served by the Povo~P.r Agency's interest in Duke Energy Progress' plants. FERC also approved inclus1on of the transaction in power supply contracts for certain other oMl

4/9/2015 Duke Energy makes $1.28 deal for municipal shares in power plants- Charlotte Business Journal

From the Charlotte Business Journal :http://www.bizjournals.com/charlotte/blog/energy/2014/07/duke-energy-makes-1-2b-deal-for-municipal-shares. html

Duke Energy makes $1.28 deal for municipal shares in power plants Jul 28, 2014, 12: 12pm EDT Updated: Jul 29, 2014, 7:23am EDT ~

John Downey Senior Staff Writer- Charlotte Business Journal Email I Twitter I Google+

Duke Energy (NYSE:DUK) has agreed to pay the N.C. Eastern Municipal Power Agency $1.2 billion to purchase shares in several power plants owned by the agency in the eastern part of the state.

Duke will purchase about 700 megawatts worth of capacity owned by the 32 municipal power companies that belong to the agency.

Duke Energy Progress will sign a 30-year contract to sell the power produced by that capacity to the agency for distribution to its municipal power company members.

Rebecca Agner, spokeswoman for ElectriCities of North Carolina, which operates NCEMPA, says once that agreement is made, Charlotte-based Duke will provide essentially all of the power used by its eastern N.C. members.

Regulatory approvals

The agency purchases a small amount of solar energy from an independent producer.

The deal is expected to close by the end of 2016. But both sides hope it can be completed earlier.

The uncertainty of that timeline involves the length of necessary federal and state approval proceedings. The most important of those will be proceedings before the Federal Energy Regulatory Commission.

Cost savings i\f.;;u;_

The power capacity Duke is purchasing consists of a 16.2 percent share in the Harris Plant; an

http://www .bizjournals.com/charlottelblog/energy/2014/07/duke-energy-m akes-1-2b-deal-for -muni ci pal-shares.htm l?s= print 1/3

4/9/2015 Duke Energy makes $1.28 deal for municipal shares in power plants - Charlotte Business Journal ~v~L w~

18.3 percent share in the Brunswrck 1 and 2 plants; a 16.2 percent share in the Mayo Plant; and a 12.9 percent share in the Roxboro Plant.

Cag-t--

There will be cost savings for customers of the municipal power companies and Duke Energy Progress, the two sides say.

There has been a long battle over what to do with the municipals' share of those plants - and the $2 billion or so in debt they carried. That dispute led several eastern N.C. cities to challenge Duke's purchase of Progress Energy Inc. in 2012.

Merger delay

That challenge, which took the form of questions about Duke's wholesale market dominance after the merger, delayed the merger by at least six months. The FERC rejected Duke's initial proposals to address those market issues, delaying the closing of the deal to July 2, 2012, from its original target of Jan. 1, 2012.

The big savings for the municipal power eompanies and their customers will be in savings on , those interest costs. The P.l:lrchase price will be applied to the debt, which currently totals about $1.9 billion. Jllat will reduce the interest costs, which had been driving the rates for the eastern N.E.:. municipal power companies significantly higher than the utility prices.

Varied impact

The l.lWuld allow the agency to eliminate the debt ..by as much as 70 percent. 1

"We've been investigating options to lower our costs for several years while preserving the benefits of public power," says Graham Edwards, ElectriCities chief executive. "Selling our generation assets is a significant way we can achieve that goal and strengthen (public power's) future in eastern North Carolina."

Agner says the impact on customers will vary from municipality to municipality. The agency has not yet been able to calculate exactly what those savings will be. But the savings are expected to be noticeable.

Fuel costs

The savings to Duke customers will not be as dramatic. But the fuel costs for the plant shares owned by the municipalities is lower than Duke's average fuel costs.

That is because the vast majority of those capacity shares are in nuclear plants, which have very low fuel costs~

If the 30-year power purchase contract is signed, the municipalities will be paying the average fuel costs for the system. That will spread those fuel costs over a greater number of customers, making for fuel savings for Duke Progress' direct customers.

"We have been providing electric service to NCEMPA members for more than 100 years, and

http:/lwww.bizjournals.com/charlottelbloglenergy/2014/07/duke-energy-makes-1-2b-deal-for-municipal-shares.html?s=print 213

4/9/2015 Duke Energy makes $1.28 deal for municipal shares in power plants - Charlotte Business Journal

we look forward to beginning this new chapter in our ongoing commitment to the communities of eastern North Carolina," says Paul Newton, Duke's N.C. president.

John Downey covers the energy industry and public companies for the Charlotte Business Journal.

http://www .bizjournal s.com/charlottelblog/energy/2014/07/duke-energy-makes-1-2trdeal-for-municipal-shares.htrnl?s=print 3/3

4/9/2015 Printer Friendly: Exclusive: American Electric Power taps Goldman for power plant sale - The Deal Pipeline (SAMPLE CONTENT: NEED AN ID?)

Exclusive: American Electric Power taps Goldman for power plant sale by Published January 6, 2015 at 10:32 AM ET

American Electric Power Co. (AEP), the Columbus,

Ohio-based electric utility with a $29 billion market

capitalization, has retained Goldman, Sachs & Co. to

explore options for its 7,923 megawatt merchant

generation business

The investment bank's hiring had been reported to The

Deal by three sources familiar with the matter.

When reached on Tuesday, an AEP spokeswoman

confirmed that Goldman had been retained. She said

that no timeframe has been set and the company has

yet to determine whether a sale will occur. Calls to Goldman were not returned.

The power plant portfolio likely will fetch $350 to $450 per kilowatt hour, which could result in a sale price ranging

from approximately $2.8 billion to $3.6 billion, according to three industry sources.

The portfolio is situated in the PJM, or Pennsylvania, New Jersey, Maryland Power Pool and AEP fully owns and

operates 69% of the fleet. It has three coal facilities, consisting of Gavin (2,665), Cardinal 1 (595 MW), and

Conesville 5, 6 (810 MW), and two gas plants, including Waterford (840 MW) and Darby (507 MW). AEP also

operates 4% of Conesville 4, a 339 MW coal plant; it has a 12% non-operating interest in Zimmer and Stuart , two

coal-fired facilities with 330 MW and 603 MW of capacity, respectively; and it has a 15% stake in Lawrenceburg, a

1, 186 MW gas facility.

The merchant business does not fit with the company's profile, as AEP is a regulated utility at its core, said one of

the industry sources. It has a $12 billion capital expenditure program for 2015 to 2017, with 96% of its capital

allocated to its regulated businesses: $2.7 billion for regulated generation, $3.6 billion for regulated distribution, and

$4.8 billion for regulated transmission.

"The company has a much cleaner story with the merchant business gone," said an industry source.

AEP is among a number of electric utilities trying to reduce their exposure to the competitive power markets

through merchant power plant divestitures.

http:l/www.thedeal.com/content/2015101/exclusive_american_electric_power_taps_goldman_for_power_plant_salelprinV 1/2

419/2015 Printer Friendly: Exclusive: American Electric Power taps Goldman for power plant sale - The Deal Pipeline (SAMPLE CONTENT: NEED AN ID?)

Regulated power plants are owned by regulated utilities with rates negotiated between the utility and state utility

commission and set at levels to fund plant maintenance and operating costs and provide a return.

Merchant power plants, on the other hand, are unregulated and sell power into the competitive market, and a return

is not guaranteed.

A sale or spin of this business makes sense now as PJM has made a filing with the Federal Energy Regulatory

Commission to propose some rule changes. If FERC approves the changes, it could have significant ramifications

for the May 2015 capacity auction, which could, in turn, improve the pricing of AEP's assets.

"Everyone in the industry expected AEP to sell or spin the merchant business because of the volatility associated

with it so this is not a surprise," said a second industry source, noting that a couple of its peers recently completed

similar deals.

For example, in June PPL Corp. (PPL) and Riverstone Holdings LLC announced an agreement to combine their

unregulated power generation businesses into a new, standalone, publicly traded company called Talen Energy

Corp.

Duke Energy Corp. (DUK), the Charlotte, N.C.-based electric utility, opted for an outright sale, announcing on Aug.

22, that it had sold its Midwest power generation assets to Dynegy Inc. (DYN), the Houston-based independent

power producer, in a transaction valued at $2.8 billion. Duke Energy had announced back in Feb. 17 last year that it

had retained Morgan Stanley and Citigroup Inc. to shop the assets.

However, a third industry source said it is far from clear whether a transaction will ultimately occur as pricing could

be an issue. AES Corp. (AES), based in Arlington, Va. , tried to exit its merchant business , but then announced on

July 14 that it was pulling the sale of Dayton, Ohio-based subsidiary DPL Inc.'s (DPL) generation and retail

businesses. That business had been expected to gamer $1.5 billion to $2 billion in a sale AEP is one of the largest

electric utilities in the U.S., serving more than five million customers in 11 states. It has nearly 38,000 MW of

generating capacity and 40,000 miles of electric transmission.

http:/!Www.thedeal.com/content/2015/01/exclusive_american_electric_power_taps_goldman_for_power_plant_sale/print/ 212

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