presented by The Coal Rush Revisited: R. W. Beck, Inc. IPED COAL POWER CONFERENCE January 18-19, 2007 St. Petersburg, FL Nicholas P. Guarriello An Economic Overview of the Continued Interest in the Power Industrys Old Stand-By

Coal Today Total 2005 Generating Capacity 988,000 MW 32% Coal* 10% Nuclear 41% Gas 13% Renewables 4% Oil Total 2005 Generating Capacity 988,000 MW 32% Coal* 10% Nuclear 41% Gas 13% Renewables 4% Oil * More than 50% of electricity consumed Coal (32%) Natural Gas (41%) Renewables (13%) Nuclear (10%) Oil (4%) Source: Energy Information Administration

The Aging Coal Fleet 0% 25% 50% 75% 100% >50 Years Old >40 Years Old >30 Years Old >20 Years Old >10 Years Old Source: Energy Information Administration 98% 88% 71% 52% 29%

Coals Future Generating Capacity Additions Total: 246,000 MW 42% Coal (102,000 MW) 47% Natural Gas 9% Renewables 2% Nuclear Generating Capacity Additions Total: 246,000 MW 42% Coal (102,000 MW) 47% Natural Gas 9% Renewables 2% Nuclear Coal (42%) Natural Gas (47%) Renewables (9%) Nuclear (2%) Source: Energy Information Administration

Energy Needs Retail Electricity Sales by Sector 1970 – 2025 (billion kilowatt hours) HistoryProjections Source: Energy Information Administration Average Annual Percent Growth Rate : Commercial 2.2 Residential1.6 Industrial1.0 Total ,000 1,500 2,000 2, Electric Sales (TWh) Commercial Residential Industrial

Coals Drivers High Natural Gas Costs Security Abundant Made in the USA 2005 EPACT High Natural Gas Costs Security Abundant Made in the USA 2005 EPACT Conclusion: Coal will remain 50% of the energy mix

Low Cost Electricity From Coal Over 50% of the Electricity Comes from Coal Source: Energy Information Administration NH12.53¢22% RI11.97¢ 0% CT12.06¢14% NJ10.89¢16% MA12.18¢23% VT10.95¢ 0% DE 7.76¢54% MD 8.13¢56% ¢ = average retail price per kilowatt hour for 2005 % = percent of total generation from coal for ¢ 31% 6.72¢ 64% 5.92¢ 94% 5.87¢ 10% 5.87¢ 69% 5.16¢ 96% 7.64¢ 78% 6.34¢ 9% 6.55¢ 75% 7.51¢ 88% 9.02¢ 51% 11.63¢ 1% 5.92¢ 94% 6.60¢ 44% 9.14¢ 39% 6.69¢ 85% 6.61¢ 65% 6.85¢ 61% 6.13¢ 85% 6.95¢ 47% 7.79¢ 42% 7.48¢ 70% 6.30¢ 50% 8.03¢ 26% 7.23¢ 61% 5.88¢ 94% 7.08¢ 92% 10.57¢ 3% 13.95¢ 17% 7.54¢ 44% 6.46¢ 56% 7.43¢ 63% 6.72¢ 40% 5.01¢ 92% 6.64¢ 50% 8.27¢ 56% 5.15¢ 98% 7.19¢ 58% 6.31¢ 60% 5.12¢ 0% 11.72¢ 8% 18.33¢ 15%

Fuel Prices to Electricity Generators Source: Energy Information Administration * Includes average cost of transportation Natural Gas Coal Nuclear Projection Actual 2004 $/MMBtu*

Coal CC IGCC 2005$/MWh Fixed Cost Variable Cost Levelized Cost for New Power Plants in 2012 Based on projected capital costs reported by EIA increased by 20% and fuel prices and O&M costs reported by EIA Source: R. W. Beck, Inc.

Coal CC IGCC 2005$/MWh Fixed Cost Variable Cost Potential CO 2 Costs Based on projected capital costs reported by EIA increased by 20% and fuel prices and O&M costs reported by EIA * Cost of CO 2 emissions at $7 per ton in 2010 – Source: National Commission on Energy Policy Levelized Cost for New Power Plants in 2012 Including the Cost of CO 2 Emissions* Source: R. W. Beck, Inc.

Risk Profile Reflects Fuel Price Volatility Coal Unit Range Combined Cycle Range Total Power Costs ($/MWh) Combined Cycle Mean Coal Unit Mean Source: R. W. Beck, Inc.

Risk Profile Reflects Fuel Price and Emissions Volatility Total Power Costs ($/MWh) Combined Cycle Mean Coal Unit Mean Coal Unit Range Combined Cycle Range Source: R. W. Beck, Inc.

U.S. Production vs. Consumption Source: Energy Information Administration Note: Natural gas statistics excludes natural gas plant liquids. 25% 50% 75% 100% 125% Prod. Btu (% of Cons. Btu) Coal Petroleum Natural Gas

Total U.S. Coal Consumption for Power and U.S. Criteria Emissions, Coal Consumption Criteria Emissions 1970 Level Equals 100 Source: Energy Information Administration 2003

Global Fossil Fuels Outlook 85% of incremental energy from fossil fuels Carbon emissions to grow by 60% India, China will account for 67% of the total increase in coal use worldwide 85% of incremental energy from fossil fuels Carbon emissions to grow by 60% India, China will account for 67% of the total increase in coal use worldwide

Coal Challenges Transmission Transportation Technology Emissions

Co-op Industry IOU Municipal Other Co-op Industry IOU Municipal Other Currently Proposed, Planned & Under Construction Coal Units Source: Global Energy Decisions CFB IGCC PC CFB IGCC PC New Entrants - Type Unit Type

Co-op Municipal Co-op Municipal Currently Proposed, Planned & Under Construction Coal Units by Municipals/Cooperatives Source: Global Energy Decisions CFB PC CFB PC New Entrants - Type Unit Type

Questions Nicholas P. Guarriello R. W. Beck, Inc. (407) IPED COAL POWER CONFERENCE