Texas Genco — Investor Presentation (January 2003)
24 slides from Texas Genco's investor presentation, Jan 27, 2003
Slide 1: Texas Genco Overview
ome 7. @) TexasGenco Texas Genco Overview January 2003
Slide 2: Special Note Regarding Forward-Looking Statements
Special Note Regarding Forward-Looking Statements @€ GenterPoint Some ofthe statements inthis presentation are “Yormard looking statements" within the meaning of the Private Seourtis Ltigation Reform ‘Actof 1098. These statement relate to future events, our future financial performance or ou project
Slide 3: Company Presenters
Company Presenters @ David McClanahan, CNP CEO / TGN Chairman and Director @ David Tees, TGN President and CEO, Director @ Gary Whitlock, CNP CFO/TGN CFO @ Joe McGoldrick, CNP Planning VP / TGN Planning VP @ Marianne Paulsen, CNP Director, Investor Relations
Slide 4: Background and Overview
eam Background and Overview = TexasGenco
Slide 5: Business separation and restructuring timeline
Energy uvsescury Energy Delivery Reliant Energy's: Expected Business Separation lor Texas Genco} | monetization Plan approved of Texas Genco Texas Adopts Reliant Expected Restructuring Resources Stranded Cost (RR) IPO ‘Securitization
Slide 6: TGN 19% Distribution
TGN 19% Distribution ® Critical first step that puts in place the mechanism to establish the public market value for common stock of TGN * CNP to utilize the partial stock method to determine market value of TGN * Market value used will be calculated based on the average daily closing price of TGN f
Slide 7: TGN Business Overview
> TexasGenco TGN Business Overview @ LenterPoint Energy
Slide 8: TGN Management and Governance
TGN Management and Governance (al TexasGenco @ Following the distribution, Board will include at least 7 directors ® Three directors will be independent directors @ Independent directors will comprise audit and compensation committees @ Various Accounting, Finance, Legal and Planning Officers at Cen
Slide 9: Electric Reliability Council of Texas (ERCOT)
'y Council of Texas (ERCOT) (al TexasGenco @ ERCOT is one of the nation’s largest power markets; ERCOT is not synchronous with any other U.S. power grid @ ERCOT represents approximately 85% of demand for power in Texas @ TGN’s facilities provide approximately 20% of ERCOT’s capacity @ ERCOT is curre
Slide 10: Power and Money Flow Overview
> Power and Money Flow Overview ww TexasGenco ERCOT MARKET?) —. “h Auctions! Contracts me Fee weer” om * Utility atiieted + PUC auctions (15% * Retail Electric TOU cOnipafies of + Industrial generation canacty requrement) Providers (REPS) Texas ret companies + Generator secondary + Municipal ities *
Slide 11: TGN Portfolio Overview
TGN Portfolio Over Current net generating capacity of 14,175 MW located in ERCOT Attractive, low-cost, solic-fuel base- load portfolio Flexible, load following gas fleet 3,400 MW of gas capacity “mothballed” (except during summer peak) due to unfavorable market conditions oe ¢ @ CAPACITY BY DISPATCH
Slide 12: TGN Business Plan / Strategy
TGN Business Plan / Strategy (al TexasGenco TGN will seek to operate its assets in a manner that will maximize earnings and cash flows ° ° ° Maintain high levels of availability in lower cost solid fuel generating units through proactive scheduling and maintenance programs Maintain high operating ef
Slide 13: Primary Market and Operating Risk Factors
ary Market and Operating Risk Factors (al Primary Risk Factor Pricing () Gas price fluctuations (ii) Fuel supply risk Surplus capacity ¢ Operations (i) Major forced outage (ii) Transmission disruption TexasGenco Mitigation Response ¢ Pricing (i) Fuel recovery mechanism for all fuels (ii) Long term f
Slide 14: Auction Overview
> Auction Overview A] TexasGenco @ Since 1/1/2002, substantially all capacity sold through state mandated (PUC) and contractually mandated (TGN) auctions ® Firm entitlements to capacity and ancillary services are sold on a forward basis @ TGN continues to refine auction products pursuant to market a
Slide 15: TGN Financial Performance
> TexasGenco TGN Financial Performance omy
Slide 16: Key Business and Financial Drivers
Key Business and Financial Drivers @ Gross margin is almost entirely attributable to three factors: (1) (2) (3) Capacity auction revenues Represents the largest component of gross margin Base-load products provide majority of capacity revenues Opportunity sales Margin produced as backup 1250 MW are
Slide 17: Capacity Auction Comparison
Capacity Auction Comparison 2002 2003 ‘Available Peak Capatity Sold in Auctions (KW) Total 12925,000 12,925,000 Base-load, 4,102,000 4,102,000 Average Forward Strip Natural Gas Price (SiamBtu) © $299 $391 One Year Base-load Strip Price - PUC Auction $659 $9.02@Howten) Gk month)” $11.45¢ert) $16.50(G
Slide 18: Capacity Auction Illustration
Capacity Auction Illustration @® Base-load capacity auction prices are highly impacted by movement in natural gas prices Fuel costs for TGN's base-load units are largely fixed under long term contracts; these fixed prices form the basis of the prices paid by the entitlement holders for the energy sc
Slide 19: Dividend Policy, Capital Requirements and Capitalization
TexasGenco Dividend Policy > Dividend policy considers TGN eamings and cash flow, contractual restrictions and other factors our Board of Directors deems relevant > Expect to pay an intial quarterly dividend of $0.25 per share > TGN expects to cover its 2003 dividend from free cash flow after capita
Slide 20: Capital Program
Capital Program TexasGenco 10 Environmental 1 Other 2002 2003» 2004 = 20052006 © Majority of forecast capex relates to NOx reduction program "Steady-state" capex forecast is approximately $60 MM per year Estimates for 2005 and 2006 environmental capex not yet finalized 20
Slide 21: 2003 Guidance
2003 Guidance A] TexasGenco Key Sensitivities: (1) Capacity auctions - Remaining 2003 auctions (January, March and July) based on $4/mmbtu gas price - A50¢ change in gas prices in 2003 could impact gross margin by approximately $50 million (2) Opportunity sales - 1250 MW (750 MW base-load) of backup
Slide 22: Conclusion
Conclusion > TexasGenco
Slide 23: Investment Highlights
Investment Highlights (al TexasGenco @ 14,175 MW of diverse, well-maintained generating assets ¢ Attractive, low-cost, solid-fuel base-load portfolio ¢ Flexible, load following gas fleet ¢ South Texas nuclear plant among top performing in U.S. ¢ Majority of environmental capital expenditures relatin
Slide 24: Texas Genco Overview
ome 7. @) TexasGenco Texas Genco Overview January 2003
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