AMEREX ENERGY SERVICES

PRESENTED BY

STEVEN WILLETTPHONE: 484-885-8345

SWILLETT@AMEREXENERGYSERVICES.COM

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AMEREX HISTORY

Amerex Energy Services Established:Formed to provide energy advisory services to end- use client retail

Amerex purchased by GFI Group (NYSE: GFIG):•2000 employees•Serves 24,000 institutional clients: financial institutions, FERC, retail suppliers, and utilities in 12 countries

AES acquired CETX Energy Agency:Increased Texas client base and added key team members

AES acquired Philadelphia based Energy Choice Solutions:Increased Northeast and Midwest client base and expanded team footprint

Amerex Brokers, LLC Founded in NYC: Commodities Brokered: •Heating oil •Gasoline•Fuel oil

1978 2011200920062004

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AMEREX: INDUSTRY LEADERS Amerex Brokers (Wholesale)

– Pre-eminent wholesale energy brokerage platform in North America– Facilitate large trading volumes across most U.S. regions:

• Electricity- 7.5 million MWh per day• Natural gas- 170 Bcf per day

Amerex Energy Services (Retail)– Leverage wholesale presence to advise end-use retail clients on energy procurement &

management• Commercial• Industrial• Institutional• Governmental

– Assist clients in all deregulated markets for both electricity and natural gas– Seasoned team with experience on both the supplier and consulting sides

Industry Awards• Ranked No. 1 Energy Commodity Broker for Energy Risk and Risk Magazine’s for 2010 , 2011, and

2012• Only energy brokerage firm invited to join Committee of Chief Risk Officers

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OUR PROCESS Phase I Orientation & Education Phase II Data Collection & Analysis Phase III Strategic Planning Phase IV Client Risk/Reward Assessment Phase V Supplier Evaluation & Selection Phase VI Execution Phase VII Monitor & Manage Phase VIII Track Data

Diligence and Devotion to each step prevents mistakes and eliminates errors

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PRODUCT OPTIONS

MostRisk &

Opportunity

LeastRisk &

Opportunity

LMP Index

Block & Index

Heat Rate

Fixed Price with

Bandwidth

Fixed Price with

Full Swing

Real Time Market Prices• Available to most clients• Prices set real time &

only known afterwards• Volatile• Relatively easy to

manage• Price spikes likely

coincide with peak usage• Can capture lower/avoid

higher prices with load shifting• Potentially low pricing

over extended periods of time

Portfolio Managed Strategy• Available to mid to large

clients• Requires management• Disaggregate components

to allow wholesale purchasing dictated by market conditions• May yield lower pricing

than fixed prices if forward natural gas prices continue to drop• Can provide budget

forecasting via hedges and caps

Fixed Price• Not available for all

clients• Price certainty• Set it and forget it• Relatively easy• Market near 10 year

lows• Probable savings

against current rate (hero status)

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ELECTRICITY PRICING

Market Conditions

Supplier Specific

Regulated Tariffs

Wholesale Supply• Heat Rate• Energy• LMP• NG - NYMEX

Retail Supply• Ancillaries/Losses• ISO fees• Load shaping• Supplier Margin• Capacity &

Transmission

Utility Supply & Tax• Transmission• Distribution• GRT/PUC• State/City

Generator & Fuel Costs

Retail Costs Utility Costs and Taxes

Total Cost ($/kWh)

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REPRESENTATIVE CLIENTSDiningRetailersGovernment

& Non-ProfitHealthCareIndustrialHigher

EducationK-12 Real Estate

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CASE STUDY : CHILDREN’S NATIONAL MEDICAL

Hospital, Power – 75,000,000 KWh/yr- Challenge:• Currently paying well above market rates in a supplier contract with 1.5 years of term remaining•Establish long term energy procurement strategy to include all primary / secondary accounts and 20% green REC’s

- Solution:•Provide various strategy options for management review & consideration•CNMC staff educated for greater understanding & input.

-Results:•Provide multi level / term fixed rate to include all accounts to secure budget certainty and alignment through 2017•Achieved annual savings of ~ $3M/yr inclusive of green REC’s with options for longer term extensions

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CASE STUDY: BAYLOR UNIVERSITY

Power: 100,000 MWh/yr, Gas: 30,000 Dth/yr– Challenge

• Control escalating energy prices for as long as possible allowing university to focus on capital program

– Solution• Leveraged university's investment grade credit to support financing of

west Texas wind farm• Sleeved university credit through major investment bank, thus

decreasing developer’s financing costs• In exchange, university obtained 10 year fixed price contract at

below-market rate

– Results• 35% savings, resulting in $2M+/yr in savings• Received 2007 Innovation Award by the National Association of

College and University Business Officers• Energy Risk Magazine recognized the contracts as a 2007 Deal of the

Year

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CASE STUDY: LARGE PJM INDUSTRIAL

Large Multi-National, power: 425,000,000 kWh/yr PJM

– Challenge• Need to Secure Savings vs. Lowered Target while Mitigating Risk• Leverage Buyer Sophistication and Secure Contract Flexibility

– Process• Evaluated Fixed, Block & Index, Managed Heat Rate Options• Developed Qualified Supplier List of Those Willing to Provide• Evaluated Pricing , Contracts, Optionality Gained• Priced Subs Together, but Contracted Separately

– Results• 24 month Load Following Heat Rate Contract, Cap & Trans P.T.

– Block & Index Value vs. Risk Deemed Insufficient– Fixed Rejected Due to Bearish Gas Bias

• Savings vs. Contract Executed 3 Years Ago = $10/MWh & Improving• Total Energy Cost Under $0.04/kWh

– 2013 Strategy• Lock Additional Heat Rate at Opportune Time

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VALUE ADD EXAMPLESProducts: Facilitated and manage numerous heat rate structure

contracts in PJM (PA & IL) allowing clients to capitalize on falling gas prices

10 year power contract using I-bank for commodity and REP sleeve for QSE and billing resulting in $2 MM annual savings

Designed commodity product structure to capitalize on demand response load resulting in 30% increase in demand response revenues

In discussions with several clients on financial products in both deregulated and regulated markets

Pricing: Captured below-market heat rate (~$13/MWh)

supported by Letter of Credit in a specific market yielding 22.5% savings for client

Analyzed and recommend contract restructure to avoid LMP exposure after cap increase and secure budget certainty, lowering overall fixed price and potentially avoiding ~$300,000 increased spend

Currently represent ~30 clients who have secured energy prices <$45 per MWh in 2012

Contracts: Negotiated with multiple suppliers to provide 100%

bandwidth at no premium with no recourse for a large institutional client that had previously been subject to usage limitations

Negotiated with multiple suppliers to provide customized language limiting change in law utilization regarding ERCOT LMP price cap increases

Additional Services: Negotiating development of a natural gas pipeline in a

rural market to allow client to convert from propane to gas, which is expected to save ~$300,000 annually after CAPEX

Provide 4CP notifications to ERCOT clients, providing potential savings of ~$20,000 per MW

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THE ROAD AHEAD Depressed economy does not incentivize building new

generation fleets in states like Ohio, New Jersey, Pennsylvania, Illinois, and Texas

As long as EPA allows hydraulic fracking, natural gas resources will be plentiful, presumably keeping prices low.

Additional fields likely to be developed Additional infrastructure to supply markets New EPA emissions regulations could create an

uneconomic environment for older coal generation Purchasing managers will continue to be overwhelmed by

a market that is increasingly competitive Utilities want expanded capacity payments because they

do not want to take the market risk others deem normal Be aware of PJM capacity price increase for 2013-2014

– PECO: $139.73 vs. $245.00/MWday

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GETTING THE MOST Develop a Long Term View

and Strategic Purchasing Plan– When to buy– What components to buy– How long to buy for– What terms/conditions

most appropriate– What’s negotiable– Explore opportunities for

“value adds”

The optimum strategy strikes

the best combination of balancing: cost minimization

capturing opportunities, and mitigating

risks and uncertainties.