ADAPTING TO A NEW WORLD ORDER Investment and Risk Evaluation in Difficult Economic Times ZIN SMATI,

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ADAPTING TO A NEW WORLD ORDERInvestment and
Risk Evaluation in Difficult Economic
TimesZIN SMATI, President CEO GDF SUEZ
Energy NA

• June 9, 2009
• Montreal, Canada

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Contents

• GDF SUEZ around the world
• GDF SUEZ in North America
• Challenges ahead
• Government intervention
• Cost of new capacity
• Role of LNG in North America
• Climate change impact on industry
• Current recession, drop in demand
• How is GDF SUEZ NA positioned for the future?

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GDF SUEZ AROUND THE WORLD
Key Figures and Workforce by Region
2008 revenues 83.1 billion 2008 EBITDA 13.9
billion Global workforce 200,000
employees Worldwide Generating Capacity 68,400
MW
E u r o p e Revenue 71.4 bn 181,920 emp.
A s i a P a c i f i c Revenue 3.3 bn 6,200
emp.
N o r t h A m e r i c a Revenue 5 bn 5,300 emp.
A f r i c a Revenue 0.8 bn 3,530 emp.
S o u t hA m e r i c a Revenue 2.6 bn 3,050
emp.
.

• Leader in LNG
• Trans-Atlantic leader in LNG value chain, biggest
  LNG tanker fleet
• 1 importer buyer in Europe
• 2 LNG terminal operator

• Leader in Electricity
• Worlds largest IPP
• 2 French power producer
• 5 power producer in Europe

• Leader in Natural Gas
• 1 supplier in Europe
• 1 transporter in Europe
• 2 operator of European storage

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GDF SUEZ Energy in North America

• GDF SUEZ Energy North America is a leading
  integrated energy company that manages North
  American (USA, CAN, MEX) power, gas, and retail
  positions
• Member of the GDF SUEZ group, worlds largest
  international utility company. (2007 Rev 74 B)
• Headquartered in Houston, Texas w/ 2,000
  employees
• Capital Employed 8.0 billion
• Operation of 72 power, renewable and thermal
  energy facilities with capacity totaling
  approximately 8,000 MW
• LNG receiving and regasification terminal in
  Boston that meets approximately 20 of New
  Englands annual natural gas demand.
• 3 ranked U.S. electricity retailer servicing
  commercial industrial clients
• Bringing clean, reliable energy to local
  communities
• Strongest credit rating in our sector, uniquely
  positioned to create value for our customers

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Key Challenges Ahead for the Energy Sector

• Government intervention (State local) creeping
  trend towards re-regulation

• Current electricity prices do not justify new
  build

• Drop in demand for natural gas power, how and
  when is recovery?

CLEAN, RELIABLE, AFFORDABLE ENERGY SUPPLY

• Role of LNG in NA, given the growth of
  Unconventional Gas

• Cost of renewable generation, and government
  incentives

• Potential GHG legislation and its impact on the
  energy industry

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Re-regulation of the electricity industry?
Key Challenges in Energy Sector
Retail Deregulation

• In the 1990s and early 2000s, a series of
  Federal and State initiatives restructured the US
  electricity gas markets
• Wholesale FERC
• Supports deregulated power gas
• Market based pricing
• Efficient RTO/ISO
• Retail State Commissions
• Varying degrees of open access, and varying
  degrees of customer migration
• Recent Energy Re-regulation
• Maryland narrowly escaped (4/2009) legislation
  that would regulate new construction and end
  retail competition.
• Michigan utility plan to procure renewables
  (3/2009)
• Massachusetts Deal between NU and Nstar
  (1/2009) tries to avoid open access
• Virginia ceased retail choice (12/2008)
• Connecticut Commission allowance of
  non-bypassable peaker unit (8/2008)
• Long Term Procurement CT, DE, MD, NY, PA, OH
  all considering utility procurement, with cost
  recovery (re-ratebase)

Wholesale Deregulation
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Electricity prices too low /or/ Cost of new
build too high?

Key Challenges in Energy Sector
Construction Cost for New Plant
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Energy Capacity Market NEMAB / ALGQ
Current Generic Capital Cost (/kW)
Source FERC June 2008 (updated GDF SUEZ May
2009)
CT
Deficit of 5.49/KW-Mth
Forward SS (10) 16.01
CCGT
WIND
COAL
GEO
1,274/KW
SOLAR
FCM 3.75/kW-mo
NUCLEAR
/kW
Source CERA Capital Cost (May 2009)
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Role of LNG in NA, given the growth of
non-conventional gas?
Key Challenges in Energy Sector
Source Wood Mackenzie (May 2009)
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Climate Change legislation What will the impact
be?

Key Challenges in Energy Sector

• Waxman Markey Proposal HR 2454 American
  Clean Energy And Security Act of 2009
• Reduce carbon emissions from major U.S. sources
  by 17 by 2020 and over 80 by 2050 compared to
  2005 levels
• Electric utilities at least 20 from renewable
  energy sources and energy efficiency by 2020
• Invest in new clean energy technologies and
  energy efficiency.
• Mandate new energy-saving standards for
  buildings, appliances, and industry.
• Protect consumers from energy price increases.
  Use of phased in targets, free allowances.
• Intended Consequences
• Mitigation of carbon price, via use of allowances
  will distort Coal response
• Program has social implications, 15 of
  allowances destined to low moderate income
  families
• International competitiveness special carve-outs
  granted
• Unintended consequences
• Large utility allocations of allowances,
  significant physical curtailment unlikely

INTENTION
RENEWABLES
CLEAN TECH
EFFICIENCY
CONSUMERS
CONSEGUENCES
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Government Incentives towards renewables
Key Challenges in Energy Sector
American Recovery Reinvestment Act 09 787
BUSD 1
Energy Efficiency and Renewable Energy Funds 38
BUSD 2

• Current administration highly favorable towards
  renewable generation
• Providing financial incentives to reduce
  construction cost, lower operational cost, and
  finance construction
• Do these incentives provide economic signal to
  increase production?

1 As approved/and signed Feb 17, 2009, American
Recovery and Reinvestment Act of 2009, focus -
job preservation and creation, infrastructure
investment, energy efficiency and science,
assistance to the unemployed, and State and local
fiscal stabilization. 2 Not including Federal
Loan Guarantees (6 B)
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Government policy towards renewables?

Key Challenges in Energy Sector
Levelized Technology Cost (inc 30/T CO2e,
Trans)
Trans
272
CO2
255
PTI
VOM
/MWh
FOM
127
117
110
98
Capital
Solar
Gas GT
Wind
Coal
Nuclear
Gas CC
Role for Energy Efficiency in Clean Energy
Source McKinsey Co Abatement Curve
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Current Economic Recession Drop in gas power
demand

Key Challenges in Energy Sector
Business As Usual
Efficiency Gains
Source Wood Mackenzie (Feb 2009)
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GDF SUEZ NA Positioning for future

• Based on economic circumstances Buy and not
  Build
• There are a number of good opportunities in the
  energy sector (eg FirstLight, Ventus)
• Build renewables
• Improve the carbon position of our fleet
• take advantage of stimulus package in US and RFPs
  in CAN and MEX
• LNG a global player, a local market leader
• The need for ownership of regas capacity in
  todays market, with flexible supply
• Positions on both sides of the Atlantic, provide
  arbitrage opportunity
• Premium location _at_ Everett, MA
• Study nuclear
• Build on our strength in Europe
• Could be part of the Climate Solution
• Diversified Markets Global Footprint
• With assets in Gas Power
• Operational in Competitive and PPA markets
• Retail and Wholesale energy sales

Buy vs Build
Renewables
LNG Regas Ownership
Clean Base Load Fuel
Diversify Locally think Globally