Welcome to First Hydro 16 July 2010

First Hydro Slide 2  Approximately 200 employees across four sites  Dinorwig –largest pumped storage plant in Western Europe –commissioned 1983 –total plant capacity 1,728MW –6 reversible pump/turbines –reservoir capacity ~10GWh  Ffestiniog –UK’s first major pumped storage station –Commissioned 1963 –total plant capacity 360MW –4 separate turbines & pumps –reservoir capacity ~1.3GWh  Electric Mountain visitor centre  Bala House trading office  Owned by International Power (75%)/ Mitsui & Co, Ltd (25%) since December 2004 First Hydro overview

First Hydro Slide 3 Pumped storage principle  Pump water overnight  Generate electricity during the day  Typical cycle efficiency ~ %  Closed hydraulic system Generating Pumping Power import Power export

First Hydro Slide 4 Asset features  Originally designed and built to support grid system management  Extremely high reliability and availability  Rapid speed of response –Dinorwig full output in ~16 seconds –Ffestiniog full output ~60 seconds  ~25,000 mode changes per year  Asset capabilities provide for a diverse range of trading and marketing opportunities Shut Down Generate Pump Spin Gen Spin Pump <30s 6m 7m 6m 3m <12s 6m <90s 8m 6m <30s DinorwigFfestiniogCCGT (hot)Coal (hot) Typical start-up times (minutes) Dinorwig mode transition times

First Hydro Slide 5 The role of First Hydro 1.Energy arbitrage - peak/off-peak –valuable peaking capacity –enables efficient running of steam plant overnight 2.Reserve provision –range of timescales (focus on fast) –but, limited storage 3.Frequency control –fast response to plant trips, TV pickups etc.  Roles underpinned by plant reliability and dynamic capabilities  Buying fuel and selling power exports via the same market  Diversity of revenue streams

First Hydro Slide 6 Optimising value Trading Bilateral, OTC, Power exchanges Half-hourly resolution shape and standard products Ability to deliver any half-hourly shape, and notify up to gate closure Expertise in prompt/spot trading Balancing Mechanism Bids and offers accepted on a minute-by-minute basis Adjusts final traded positions to match supply and demand Attractive, fast dynamics Ideally suited to covering plant trips, TV pickups etc. Ancillary Services System services procured by National Grid Facilitate system security, and power quality on a second- by-second basis Wide range of offered services including reserve, response, black start, reactive High quality offering, uniquely dynamic capabilities 2088 MW Capacity Energy limited 2088 MW Capacity Energy limited First Hydro competitive advantage Market features

First Hydro TV pick up: England vs USA 12 th June National Grid FHC Output over same period: Slide 7

First Hydro Slide 8 Dinorwig physical layout

First Hydro Slide 9 Dinorwig physical layout

First Hydro Underground cavern cross section Pump/Turbine Generator/motor Power station/unit cross-sections Slide 10

First Hydro Market review Slide 11  Significant market volatility Winter 05/06 and throughout 2008 –Positive impact of additional storage on utilisation/value in 2008  Less stress on system in 2009/10 –Impact of new build and recession-led demand reduction –But, some intraday volatility –Retain ability to capture value during ‘system shocks’

First Hydro Slide 12 Market outlook Projected New Build DECC – Updated Energy and Emissions Projects, June 2010 EU’s 2020 targets & UK commitments Large Combustion Plant Directive Industrial Emissions Directive Increased EU market integration EU’s 2020 targets & UK commitments Large Combustion Plant Directive Industrial Emissions Directive Increased EU market integration  Material levels of wind generation, new nuclear  Closure of 11 GW thermal plant by 2016  Limited hours operation on most remaining fossil plant from 2016  Greater levels of interconnection with EU  Material levels of wind generation, new nuclear  Closure of 11 GW thermal plant by 2016  Limited hours operation on most remaining fossil plant from 2016  Greater levels of interconnection with EU  Security and balancing challenges  Significant impact of wind intermittency  Increased spot market volatility  Premium on flexibility and reliability  Increased reserve requirement  Potential for reforms to market framework  Security and balancing challenges  Significant impact of wind intermittency  Increased spot market volatility  Premium on flexibility and reliability  Increased reserve requirement  Potential for reforms to market framework GB plant mix to change radically in next years

First Hydro Ancillary services developments  Demand for reserve services to increase –Impact of increased wind generation –Intermittency increases system risks across a range of timescales  Frequency response requirements to be revised upwards –To be consistent with increased wind generation, new generation nuclear reactors, and large offshore wind connections  New providers expected to enter these markets –Dynamic demand response –New OCGT plant  FH well positioned, with diverse capabilities Source Data: National Grid “Future Requirements” Slide 13

First Hydro Slide 14 Plant investment strategy Assess changing market environment Preserve competitive advantage Enhance capabilities Invest to maintain assets Invest to improve assets – Opportunities and challenges – Improve reliability/availability – Increase quality or range of products – Engineering integrity and plant life – Maintain current levels of performance – Focus on quality of core maintenance – Replace or refurbish ageing/obsolescent equipment – Retain expertise within business Additional storage Increased automation New runner

First Hydro Slide 15 Dinorwig additional stored energy  Extension of Marchlyn Mawr planned 2005/6  Permissions granted 2006  Completed October 2007  Increased storage by approximately 8%  Short payback period

First Hydro Plant automation  First Hydro despatch is already extremely accurate –99% of instructions are delivered within one minute of required time  Engineers manually accept instructions from grid and despatch the plant  Aiming to automate majority of despatch instructions –Improve despatch precision to maintain/enhance competitive advantage –Target 99% within 15 seconds  Automate progressively from 2011 to 2014 Slide 16 % Instructions Seconds early/late Based Jan-Jun >13000 instructions. 14 not delivered

First Hydro Turbine runner  2008 record utilisation; pumping costs >£100m  Re-established project to look at improving cycle efficiency  Turbine design optimised in 2007/8 via computational and physical modelling  Currently replacing a turbine with completion targeted for Q –Unit efficiency gain > 2% –Short payback period Slide 17

First Hydro Slide 18 Summary  First Hydro remains highly relevant to the UK system  Future market developments will increase the need for response and reserve –Providing critical reserves to support intermittent generation –Ability to “time-shift” excess wind generation off peak –Complement new nuclear build  Historic investment in plant has maintained integrity/longevity  Current investment program improves market position –Increases competitive advantage –Enhances ability to capture current and future value