Utilities Stock Presentation By Nitish Gupta, Veronica Groebner and Jiawei Hou

Outline Sector Recommendation Recap/Overview American Electric Power NextEra Energy, Inc NiSource Stock Recommendations and Conclusion

*Table taken from February 2018 SIM Portfolio Appraisal

HOLD (Underweight Relative to S&P 500) Sector Recommendation: Interest Rates Steady Revenue Business Models Defensive Sector

Recommendation Summary Company Current Basis Proposed basis Current Price Target Price Upside (Downside) Recommendation NextEra 257 $161.68 $173.98 7.60% Hold American Electric Nil $68.71 $68 -0.09% NiSource $24.09 23.94 -0.70%

American Electric Power Market Data: Current Price: $68.71 Target Price: $68 Market Capitalization: $33.71B Shares Outstanding: 492M 52 Week Range: $63.32–$78.07 YTD Change: -6.61% Beta: 0.37 P/E : 18.78 EPS : $3.68 Revenue : $15.42B (2017) AEP is one of the largest power generation, transmission and distribution company in the United States with presence in 11 states. Based in Columbus, OH, AEP operates about 60 generation stations representing approximately 26,000 megawatts of generation capacity. Company’s business is divided in four segments: Vertically Integrated Utilities; Transmission and Distribution Utilities; Generation and Marketing; and AEP Transmission Holdco

Key Business Drivers Revenue Visibility and Entry Barriers Focus on Core Regulated Business Attractive Dividend Capital Investments Investment in Renewable Energy

Valuation DCF Valuation Sensitivity Analysis Source: Analyst estimates

Valuation AEP, Xcel Energy Inc., Duke Energy Corp., Southern Co. P/E Ratio Operating Margin Return on Assets Debt to Equity

Key Business Risks Recommendation: HOLD Fluctuating Demand due to weather Volatile Commodity Prices Regulated Business Investment Recovery Interest Rate Hike Recommendation: HOLD

Company Information Performance History Ticker NEE Sector Utilities Industry Electric Closing Price 4/2/18 $161.68 Market Cap 76,442.8M Shares (diluted) 473.0M Avg. Daily Vol. 2,363,919 Started in 1925 as Florida Power and Light Headquartered in Juno Beach, Florida and serves over 30 states as well as Canada Main Subsidiaries Florida Power and Light (FPL) Main revenue source NextEra Energy Resources (NEER) Company growth opportunities Performance History 52-week low $127.09 52-week high $164.71 1-year return 26.89%

Market Comparison Name Market Cap (billions) 1-yr Return NextEra Energy 76.44 29.59% Duke Energy 54.02 -2.23% Dominion Energy 45.12 -10.23% Southern Co 44.57 -7.15% American Electric Power 33.61 5.29% Average 22.60 2.61% NextEra accounts for the largest share of the S&P500 Utilities sector at a market cap of $76B, holding 12% of the market share. Among the largest companies within the sector, NEE had the greatest return last year at almost 30%. NEE is continuing to grow and yield high return even though it is the largest in the sector.

Key Positives Competition is low—high entry barriers Leading Utilities companies cannot keep up with NEE’s growth Safety in the defensive dividend Security of a utility companies without giving up the high-yield returns Focus on renewable energy projects JinkoSolar contract—Florida-based solar panel factory Provide 7M solar panels (2,750 mW) to NEE Not done utilizing Tax Cut benefits Moving assets back from Canada to United States to repatriate 10-year contract to still operate Canadian plants Strong company values Commended for CSR and ethical business practices

Concerns Interest Rate Hikes Conservative investors shift to Treasury Bills/Notes/Bonds, taking money out of utilities sector Dividends become less valuable when accounting for a higher discount rate SIM specific: Fund allocation Risk investing in NextEra instead of investing in a company that ends up with greater returns Risky Projects JinkoSolar Canadian withdrawal Geographic growth is hard because of variations in regulations

Valuation Notes: Terminal Free Cash Flow Growth Rate is high for a utility company. Most utility companies would reflect a growth rate of 3%-3.5% Terminal Discount Rate is high in order to reflect the risk of assuming high growth. Federal Interest Rate is very low currently and utilities are less risky than other sectors.

If You Don’t Believe Me

Individual Portfolio: LONG-TERM BUY Recommendation Individual Portfolio: LONG-TERM BUY Diversifies the portfolio while still yielding high returns Good stock to have and “forget about” SIM Portfolio: HOLD Utilities Sector Recommendation is to HOLD at underweight position NEE is the only utilities stock held by the SIM portfolio

NiSource Belongs to the Utilities sector of the S&P 500 One of the largest fully regulated utility companies in the

Key Business Drivers Demand Growth Capital Expenditures

Financial analysis & Valuation Shares Outstanding 332 Current Price $24.11 Implied equity value/share $23.94 Upside/(Downside) to DCF -0.7% Debt 14,621 Cash 26 Cash/share 0.08 Economic analysis: defensive and commodity Financial forecasts: Tax Reform

Sensitivity & Peers NiSource Industry S&P 500 PE Ratio 61.83 16.76 15.7 Forward PE 18.73 15.46 18.8 PB Ratio 1.88 1.59 2.77 PS Ratio 1.64 1.66 1.49 EV/EBITDA 12.38 10.17 /

Risks Regulation Change: deregulation, environmental regulators Technology Change: solar panel, renewable energy

Recommendation: HOLD

Recommendation Summary Company Current Basis Proposed basis Current Price Target Price Upside (Downside) Recommendation NextEra 257 $161.68 $173.98 7.60% Hold American Electric Nil $68.71 $68 -0.09% NiSource $24.09 23.94 -0.70%