Puerto Rico Electric

Power Authority
Company Overview and Project
Development

Eng. Miguel A. Cordero

Executive Director

February 26, 2010

 Disclaimer

Today’s presentation includes certain statements that are not historical in nature
but reflect forecasts and “forward-looking statements,” for example, statements
regarding anticipated future financial and operating performance and results,
including estimates for growth. Actual results may differ materially from those
expressed or implied by such forward-looking statements. These statements are
based on the Puerto Rico Electric Power Authority’s current beliefs regarding
future events, and are based upon a number of estimates and assumptions that
are subject to significant uncertainties, many of which are outside the control of
the Puerto Rico Electric Power Authority, Government Development Bank for
Puerto Rico, the Government of Puerto Rico and its agencies and
instrumentalities.

This presentation is not an Official Statement and does not constitute an offer to
sell or to purchase bonds, nor a solicitation of an offer to sell or to purchase
bonds in the Commonwealth of Puerto Rico, the United States, or in any
jurisdiction where such offer, solicitation or sale may be unlawful. This
presentation has been prepared solely for informational purposes, and should
not be construed as a recommendation to buy or sell any security or to
participate in any particular trading.
 Agenda

1 Overview

2 Financial Performance

3 Reconstruction Initiatives

4 Diversification Strategy
 PREPA
• The Puerto Rico Electric Power Authority, or PREPA, is a modern public
utility offering a full range of services: we…
– Produce
– Transmit
– Distribute, and
– Sell electricity
• PREPA is a public corporation of the
Government of Puerto Rico, and is
empowered to:
– Make contracts
– Acquire properties
– Borrow money, and
– Issue bonds
• Is also responsible for the establishment of an appropriate rate
structure for its services
 History

• PREPA is the first public corporation established in

Puerto Rico
• Created by Law 83, on May 2, 1941
• Over 60 years providing electric energy to the island
• PREPA has totally electrified the island of Puerto Rico
Characteristics of Our
Electric System
• PREPA’s system is isolated
• Not possible to purchase energy from
neighboring utilities
• Must maintain greater generating capacity
to guard against contingencies, and to
ensure service reliability
Characteristics of Our
Electric System
• Generating Capacity is 5,264 MW, of which,
 507 MW Natural Gas Fired –EcoEléctrica
 454 MW Coal Fired – AES
• Long term purchase agreement with
Cogenerators
• Output is fully integrated into the system
Puerto Rico Shines
 To provide electric services to
our clients in the most efficient,
economical and reliable way,
without harming the
environment

Mission
 To be competitive with
electric utilities at a
world-class level

Vision
 Agenda

1 Overview

2 Financial Performance

3 Reconstruction Initiatives

4 Diversification Strategy
 Who is PREPA? 2
Public Power Issuers by # of Customers

Million Customers
1.5
1
0.5

PREPA is one of the largest public power 0

PA

P
P
agencies

em A
PS
PA

UD

tin

L
is
W

SR

JE

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PR

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LA

at
M

Se
Total Revenues: $4.0 billion Public Power Issuers by Sales
50
Total Assets: $8.8 billion

Million mWh
40
30
20
Electric System: 10
0
Generating Capacity: 5,839 MW

D
PA
A

A
A
PS

PA
LA .

PP
SR

W
pr
YP

JE

R
E
C

LI

LC
D
C

N
PR
N
3,404 MW

ee
Peak Demand (in 8/09):

nt
Sa
Public Power Issuers by Revenues
Transmission and Distribution:
5

Billion Dollars
Transmission Lines: 2,419 miles 4
3
Distribution Lines: 31,156 miles 2
1
38 kV substations: 283 0

115 kV substations: 51

A
A

em D
A
nt PS
P
A

r.

is
YP
EP

U
SR

JE
P

Cp

ph
C

SM
LI

N
PR

ee
LA

M
Sa
Source: American Public Power Association. 2009-10
Annual Directory & Statistical Report
 Stable Revenue and Customer Base
PREPA is a monopoly selling an essential service.

 More than 1.4 million customers Large and Growing Customer Base

 Balanced mix of residential, commercial, 1.5

million customers
governmental and industrial customers 1.4

 No customer concentration risk 1.3

 Industrial customers, the only customer class that 1.2

realistically could self generate or purchase from an 1.1

independent power producer, only account for 15% of 2002 2003 2004 2005 2006 2007 2008 2009

revenues Residential Commercial Industrial Other

Revenues From Broad Based Economy No Customer Concentration Risk

5,000 Client Name Location % of Total Sales
4,500 PR Cement Ponce 0.57
4,000 Amgen Manufacturing Juncos 0.55
million dollars

3,500 Ayerst Wyeth Guayama 0.52

3,000 Lilly del Caribe Carolina 0.48
2,500 Wyeth Ayerst Lederle Carolina 0.30
2,000 San Juan Cement Dorado 0.29
1,500 Pfizer Manati 0.28
1,000 McNeil Consumers Prod Las Piedras 0.26
500 Pfizer Vega Baja 0.26
0 Merck Sharp Dohme Barceloneta 0.24
Bristol Myers Squibb Manati 0.22
2002 2003 2004 2005 2006 2007 2008 2009

Residential Commercial Industrial Government Other

 Strong Reserve Margins as Confirmed by
Palo Seco Outage
Reserve margins are adequate in the short to medium term.
• Fleet of 31 major generating units in 20 facilities located throughout the island
• Palo Seco outage (602 MW) demonstrated island has adequate reserve margin
– All units operating as of December 2009 (3 out of 4 units were in service by July 2009)
– Substantially all repair costs and incremental replacement power covered by insurance

Even with Outage, Stable Availability & Forced Outage

Strong Reserve Margins
Rates
Avg Equivalent Avail. Equiv. Force Outage Reserve Margin Palo Seco
6,000
Fiscal (with AES and (without AES and (with AES and Outage
Year Ecoelec.) Ecoelec.) Ecoelec.) 5,000
2000 78% 9% 56% 4,000 Reserve Margin ~ 50%

MW
2001 80% 8% 53% 3,000
2002 80% 7% 49%
2,000
2003 81% 9% 59%
1,000
2004 82% 9% 53%
0
2005 85% 6% 49%

D
00

01

02

03

04

05

06

07

08

09
2006 87% 4% 46%

YT
20

20

20

20

20

20

20

20

20

20
10
20071 84% (89%) 10% (3%) 32% (49%)

20
20081 80% (88%) 15% (3%) 34% (51%) Peak Load Reserve Margin
20091 76% (82%) 16% (8%) 57% (75%)

1 - Figures in parenthesis include Palo Seco availability.

 M-kwh

1,500
1,550
1,600
1,650
1,700
1,750
1,800
Nov-07
Dec-07
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
MKWH Sales

Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
12 Month Rolling Average

Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
Nov-09
Dec-09
 Sales

Sales are Up Each Month in (FY 2010)

5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
July Aug Sept Oct Nov Dec Jan

Increase in Sales, FY 2009 to FY 2010

 Operating Expenses
Operating Expense are Down in FY 2010 ($000’s)
7/2008- 7/2009- % Change
1/2009 1/2010

Other production 38,658 35,514 -8%

Transmission and distribution 103,685 91,803 -11%

Maintenance 140,035 116,607 -17%

Customer accounting and collection 69,278 63,633 -8%

Administrative & general 138,754 119,289 -14%

Total O&M, excl. fuel & purch. 490,410 426,846 -13%
power
 Historical and Projected Operating
Results and Coverage
Historical Projected
Years Ended June 30 2006 2007 2008 20091 2010 2011 2012 2013 2014
Electricity Sales (mwh) 20,620 20,672 19,602 18,516 17,929 17,739 17,667 17,700 17,827
Average Rate (cents/kwh) 17.99 17.76 22.19 21.53 19.90 21.85 23.94 24.86 25.40

Revenues $ 3,732 $ 3,687 $ 4,369 $ 4,007 $ 3,605 $ 3,945 $ 4,299 $ 4,470 $ 4,597
Expenses
Fuel 1,666 1,717 2,303 1,920 1,530 1,804 2,102 2,230 2,362
Purchased Power 603 625 661 672 712 716 735 756 728
Fuel Extra Expense - (114) (96) - - - - - -
Other Current Expenses 765 787 820 786 700 686 684 682 681
Total Expenses 3,034 3,015 3,688 3,378 2,942 3,206 3,521 3,668 3,771

Net Revenues $ 698 $ 672 $ 681 $ 629 $ 663 $ 739 $ 778 $ 802 $ 826
Total Power Rev. Debt Service2 $ 449 $ 455 $ 420 $ 435 $ 471 $ 459 $ 493 $ 538 $ 575
Power Rev. Bond Coverage2 1.55 1.48 1.62 1.45 1.41 1.61 1.58 1.49 1.44

Revenues, Debt Service and Coverage

5,000 1.70
4,500
1.60
4,000

Debt Coverage
Million Dollars

3,500 1.50
3,000 1.40
2,500
2,000 1.30
1,500 1.20
1,000
1.10
500
- 1.00
2006 2007 2008 2009* 2010 2011 2012 2013 2014
1 – Audited
2 – After 2010 transactions Revenues Expenses Power Revenue Bond Coverage
 Agenda

1 Overview

2 Financial Performance

3 Reconstruction Initiatives

4 Diversification Strategy
 Objectives and Strategies

Energy Objectives for Strategies to Achieve the

Puerto Rico Objectives

• Reduce operating expenses

• Increase efficiency
• Reduce energy cost • Minimize energy theft
• Develop a proper fuel mix
• Protect the environment diversification
• Add renewable energy
• Maximize use of advanced
technology
PREPA Reorganization
• Directorates reduced from 12 to 6
• Secondary supervision positions greatly reduced
• Redundant administrative positions eliminated
• Management units merged
• Personnel reduced or re-trained for other tasks

Executive
Director

2008 Organization Vice-Director

12 DIRECTORATES

Executive
2009 Organization Director
6 DIRECTORATES
 Stabilization Plan is Reducing Fixed O&M
Cost Reductions Implemented
Operating Costs (Excluding Fuel & Purchased Power)
(million dollars) Annual Savings
$139 million 416 Positions $26
800
Reduced overtime and misc 23
net reduction1 Changes to retiree health plans 46
million dollars

700
Total $95
600

500

400 FY 2010 Cost Reductions Planned

300 (million dollars) Annual Savings

Attrition (250) 15
99

01

03

05

07

09

11

13

Total 15
19

20

20

20

20

20

20

20

Impact of the Stabilization Plan Year to Date

Future Cost Reductions Planned

 14% reduction in non-fuel and purchased power O&M thus far (million dollars) Annual Savings
in FY 2010 compared with similar period in FY 2009 Attrition (750 over three years) 46
Total 46
 Reductions in each O&M category (see Page 34)

1 – Difference between FY 2008 actual and FY 2013 projected.

 Reducing Theft
The PREPA revenue protection program is designed to increase
revenues and discourage clandestine connections.
Historical System Performance Efficiency
• Address theft via
– Increased unannounced door-to-door monitoring 91 25

Avg Rates (cents/kwh)

90
– Automated meter reading 20

(sales/generation)
89
– Geographic information system

Efficiency %
88
15
87
– Special meter seals 86 10
– Social awareness campaign 85
84 5
– Administrative Judge to settle disputes 83
82 0
• “Smart grid” being implemented

83

86

89

92

95

98

01

04

07
– With smart meters, will be able to show areas

19

19

19

19

19

19

20

20

20
where theft is prevalent Net Efficiency Average Rates

– Will allow remote turn on and shut off

– First smart meter replacements to start in early
2010

 Initiative expected to generate $50 million Article from the Daily Sun
improvement in operating margin February 17, 2010
– $16 million improvement budgeted in this year
– $17.6 million billed in CY 2009
 Operating Expenses
95,000,000

90,000,000

85,000,000

80,000,000

75,000,000
2008
70,000,000

65,000,000
2009
60,000,000

55,000,000

50,000,000
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DIC

*Excludes fuel and purchased power

 Increased Energy Production
with Reduced Costs
2500.0

2009*
2000.0
2008
MWH X 1,000

1500.0
*7% Increase
1000.0

500.0

0.0
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DIC
2009 1791.9 1629.0 1760.2 1814.3 1898.0 1961.7 2075.0 2098.0 2021.0 2082.8 1906.9 1950.0
2008 1856.8 1758.4 1864.3 1889.7 2028.8 1973.6 1994.8 2108.0 1956.7 2016.7 1849.5 1818.3
 Agenda

1 Overview

2 Financial Performance

3 Reconstruction Initiatives

4 Diversification Strategy
 Fuel Diversification
Generation In order to stabilize electric prices, we have developed a fuel diversification plan that
includes the reduction in fuel oil dependency. The use of oil will be cut in half from
2000 to 2015.

2000 2009 20151 Long-Term

Renewables, Hydro Natural
and Others Gas Natural
1% 15% Gas Natural Oil
24% Gas 26%
30%

Coal
15% Oil
48%

Coal
Renewables, 16%
Hydro Oil
Renewables,
and Others 69%
Hydro
Oil 1% Renewables, Coal and Others
99% Hydro 29% 15%
and Others
12%

Drop in Oil Consumption

100%
80%
60%
40%
20%
0%
2000 2009 2015 Long Term
Oil as a Percentage of Fuel
Needs
1 - Conversions will allow PREPA to burn either LNG or fuel-oil depending on the commodity price.
 PREPA’s Generating System

Steam Plants (#6 Fired) Coal

Aguirre Units 1&2 Costa Sur Units 3,4,5,6 Palo Seco Units 1,2,3,4 San Juan 7,8,9,10 Guayama (A.E.S)
Rated: 900 MW Rated: 990 MW Rated: 602 MW Rated: 400 MW Contracted: 454 MW
Available: 900 MW Available: 990 MW Available: 386 MW Available: 300 MW Available: 454 MW
Heat Rate: 10.3, 10.2 Heat Rate: 11.6, 11.5, 10.7, 10.9 Heat Rate: 10.9, 11.0, --, 10.4 Heat Rate: 11.2, 11.6, 11.5, 11.6 Heat Rate: 9.8
In Service: 1975 In Service: ’62,’63,’72,’73 In Service: ’60,’61,’70 In Service: ’65,’68,’69 In Service: 2002

Combined Cycle Units (#2 Fired) Combustion Turbines (#2 Fired) Comb.Cycle (NG)

Aguirre CC Units 1&2 San Juan Units 5,6 Cambalache Mayagüez Peñuelas (EcoElectrica)
Rated: 592 MW Rated: 464 MW Rated: 247 MW Rated: 110 MW Contracted: 507 MW
Available: 458 MW Available: 440 MW Available: 236 MW Available: 110 MW Available: 507 MW
Heat Rate: 10.3, 10.2 Heat Rate: 8.5, 7.9 Heat Rate: 11.6, 11.7, 11.6, 11.7 Heat Rate: 10.2, 10.1 Heat Rate: 7.5
In Service: 1977 In Service: 2008 In Service: 1997 In Service: 2008 In Service: 2000

 In addition, PREPA has 70 MW of available capacity from 21 hydroelectric units and 9 MW from 7 Diesel Generators
Notes: Red Indicates purchased power. Heat rate in thousand Btu/kWh.
 Generation Plans
PREPA plan is to reduce fuel cost volatility, increase fuel
diversity and improve generation facility efficiency.
Near Term (0 to 12 months) Mid-Term (1 to 3 years) Long Term (more than 3 years)

• Enter into fixed price #2 and
#6 fuel supply contracts
• Enter into contracts for
renewable capacity
• Begin development of Costa
Sur combined cycle and
Aguirre coal fired units
 Install infrastructure and begin  Operation begins at Costa Sur
operation to permit natural gas use at combined cycle and Aguirre coal fired
major #2-fired facilities units
– San Juan and Costa Sur combined
cycle and Cambalache and
Mayaguez gas turbine facilities
 Begin construction of Costa Sur
combined cycle and Aguirre coal fired
units
 Major Planned Transmission
Improvements Through 2014
Isla Grande TC San Juan GIS
Vega Baja – Vega Palo Seco GIS
$24 million $62.5 million
Alta UG Circuit $65.7 million
In Operation Construction
$10.5 million In Operation
In Operation
Martin Peña TC
$27.4 million
In Operation

Hato Tejas TC Canóvanas TC

$6.9 million $5.3 million
Construction Construction

Costa Sur – San Juan UG

Cambalache Circuit
$74.0 million $195.8 million
Evaluation In operation

Mayagüez UG
Circuit Juncos TC
$17.7 million $9.3 million
In Operation In Operation

Costa Sur – Aguas Las Cruces TC

Ponce TC Buenas $6.3 million
(230/115 kV) $6.0 $99.0 million Construction
million Construction
Evaluation

GIS – Gas Insulated Substation

TC - Transmission Centers and
Switchyards
UG Circuit – Underground Circuit
 Reduce Fossil Fuels Dependency
• We signed five renewable energy source contracts
 Waste to Energy
 Caguas 50MW
 Arecibo 55MW
 Wind Projects
 Guayanilla 40MW
 Arecibo 50MW
 Naguabo 40MW
• Other Projects under consideration
 Windmill Projects in various locations 50MW
 Solar - Guayama 50MW
 Biodiesel Project
 20 Additional Proposals in evaluation
• Energy Wheeling in development – Renewable
energy private companies accessing PREPA’s
transmission system
 Disclaimer
Today’s presentation includes certain statements that are not historical in nature
but reflect forecasts and “forward-looking statements,” for example, statements
regarding anticipated future financial and operating performance and results,
including estimates for growth. Actual results may differ materially from those
expressed or implied by such forward-looking statements. These statements are
based on the Puerto Rico Electric Power Authority’s current beliefs regarding
future events, and are based upon a number of estimates and assumptions that
are subject to significant uncertainties, many of which are outside the control of
the Puerto Rico Electric Power Authority, Government Development Bank for
Puerto Rico, the Government of Puerto Rico and its agencies and
instrumentalities.

This presentation is not an Official Statement and does not constitute an offer to
sell or to purchase bonds, nor a solicitation of an offer to sell or to purchase
bonds in the Commonwealth of Puerto Rico, the United States, or in any
jurisdiction where such offer, solicitation or sale may be unlawful. This
presentation has been prepared solely for informational purposes, and should
not be construed as a recommendation to buy or sell any security or to
participate in any particular trading.