October, 2015 PREPA’s Transformation A Path to Sustainability

2 Early 2015 Developed 10 year business plan, integrated resource plan, and rate study Agreed to economic terms of debt restructuring with ad-hoc group and fuel line lenders Stabilized PREPA through forbearance framework with creditors Implemented comprehensive operational and organizational transformation Developed comprehensive safety improvement program Today On a track to significantly strengthen PREPA for the long-term …But There Is Much To Be Accomplished Significant Progress Has Been Made PREPA’s Transformation

Making the New PREPA a Reality 3 Implemented Comprehensive Operational, Organizational Plans Foundation of Transformed PREPA Key Elements of Ongoing Transformation With Support From All Stakeholders, We Can Create a Modern, Fair & Equitable PREPA Forbearance Framework with Creditors Debt Restructuring with Ad-Hoc Group, Fuel Line Lenders 10-Year Business Plan, Resource Plan, Rate Study Balanced Solution New Rate Structure Operational Improvements Investment in Critical Projects New Governance PREPA’s Transformation Developed Safety Improvement Program

New Governance Will Enhance Oversight 4 Taking the Politics Out of PREPA to Ensure Meaningful Reforms Take and Remain in Place PREPA’s Transformation Refreshment of the Board  Board to include a majority of independent, non political members, identified by search firm  Staggered terms beyond the four-election cycle, replacement mechanics to ensure continued stability  Specified Experience to be required Professional Management Team Merit compensation for employees

Operational Improvements Will Reduce Expenses 5 Operational improvements will result in $ M of recurring expense cuts, including… Already Achieved $106M Recurring Savings; $80M in One-Time Savings Forecasting Inventory Control Sourcing and Supply Chain Fuel Improvements Streamlined collections Implementation of changes to CILT legislation Improved customer service Customer Management Improvements Reviewing footprint and optimizing assets Reducing inventory levels Increasing fleet utilization and developing fleet renewal program Indirect Procurement Improvements PREPA’s Transformation

Investing in Employee Standards at Every Turn 6 Asking for Changes To Make PREPA a Modern Utility Implementing changes to work rules Bringing benefits in line with norms across Puerto Rico and industry peers Productivity Enhancements Restructuring the organization and delineating clear lines of accountability Emphasizing merit based promotions Developing succession plans Employee Related Hired industry leading firm to assess current situation and develop program to improve Development of standard health and safety dashboard to track implementation of improvement program Safety PREPA’s Transformation

Investing $2.4 Billion In Critical Projects 7 PREPA’s Transformation Construction of Aguirre Offshore Gas Port to improve fuel diversity Building new units at Palo Seco Improve systems reliability to increase capacity to service distributed generation Increase maintenance capex to $300M per year Upgrade fleet to improve efficiency at Costa Sur and Aguirre Will Not Raise Additional Debt to Support Improvement Projects; Will Bring PREPA’s Systems to Industry Standards Invest to meet MATS Improve system reliability PHASE ONE Improve energy efficiency Upgrade existing fleet PHASE TWO PREPA’s Plan

8 Historical all-in rate $.24$.28$.26 $.21 Est. rate required $.29$.36$.30$.33$.28 Est. historical gap $.05$.08$.04$.07 Per kWh Rate gap calculation driven by operating expenses (incurred but not accounted for) and by not keeping up with normal maintenance capex PREPA’s Rates Artificial and Unsustainable PREPA’s Transformation

“Burden Sharing” Needed for Equitable, Fair Solution Government & Municipalities Timely payment of energy bills Reduction of CILT Creditors Sustainable Capital Structure and Liquidity Employees Savings, efficiencies and flexibility Ratepayers Transparent rate structure that covers reasonable costs Eliminate Rate Deficit 9 PREPA’s Transformation

Preliminary and Confidential Draft Subject to Material Change - Prepared at the Request of Counsel Legislative Reforms Necessary for Success 10 Improve collections process with payment plans, more authority Enforce CILT cap, established by Act 57, for each municipality Implement flexible, modern, transparent, simple line item rate structure Provide Energy Commission process to approve/reject restructuring rates Simplify rate review process Implement employee changes to bring labor costs, productivity levels in line with transformation initiatives Authorize PREPA to explore Public-Private Partnership options through RFP Process allowing for modernization of facilities PREPA’s Transformation Legislative Reforms Will Facilitate a Balanced Solution

Making the New PREPA a Reality 11 Implemented Comprehensive Operational, Organizational Plans Foundation of Transformed PREPA Key Elements of Ongoing Transformation With Support From All Stakeholders, We Can Create a Modern, Fair & Equitable PREPA Forbearance Framework with Creditors Debt Restructuring with Ad-Hoc Group, Fuel Line Lenders 10-Year Business Plan, Resource Plan, Rate Study Balanced Solution New Rate Structure Operational Improvements Investment in Critical Projects New Governance PREPA’s Transformation Developed Safety Improvement Program

The Time For Change Is Now 12 Actions Required to Implement PREPA’s Transformation Pass legislation enabling PREPA’s transformation Finalize deals with creditors Implement operational changes at PREPA Invest in critical infrastructure projects Depoliticize PREPA