Adding to the Fleet Ensuring SRP’s Long Term Generation Reliability May Millies, Manager - Power Generation Services

WAIT A MINUTE! If it’s a Project, When Will It End? April 10, 2013WUC - SD2

Salt River Project Federal Subdivision of the State Employees 956,756 Electric Customers Electric Service Area = 2,900 sq. miles Water Service Area = 375 sq. miles April 10, 2013WUC - SD3

Salt River Project Peak Power System (MW) – 7,072 Resources Available to Service – 8,284 April 10, 2013WUC - SD4

BACK TO THE REGULARLY SCHEDULED PROGRAM April 10, 20135WUC - SD

What Am I Going to Tell You? Background SRPs Generation Profile What We Bought How We Transitioned the Plant April 10, 20136WUC - SD

BACKGROUND What were we thinking? April 10, 20137WUC - SD

Background Economy and slow load growth have lead to excess merchant gas capacity in southwest Opportunity to purchase asset at depressed price SRP coal resources face challenges/uncertainty SRP has long-term need for new gas resources WUC - SD8April 10, 2013

Background - Request for Proposals Position SRP strategically to take advantage of currently depressed market values for generation assets to: –Hedge against the increased pressure and environmental mandates of Coal generating resources –Provide an economic alternative to future new generation construction Help establish how much is reasonable for SRP to spend on existing coal generation resource’s life extension WUC - SD9April 10, 2013

Background - Request for Proposal Gas Plant RFP Issued September proposals received from seven modern combined cycle gas plants Best purchase and tolling agreement proposals 10April 10, 2013WUC - SD

SRP’S GENERATION PROFILE Our Generation is Bigger Than Yours! April 10, 2013WUC - SD11

Coal Generation - Baseload Coronado Generating Station – 785 MWs Units 1 & 2 – Connects directly to SRPs 500kV Transmission System Navajo Generating Station – 21.7% Ownership – Plant Operator – 2,250 MW Total Plant Output Springerville – 417 MWs, Unit 4 April 10, WUC - SD

Gas Generation Agua Fria – 626 MWs Desert Basin – 581 MWs Kyrene – 410 MWs Santan – 1,219 MWs April 10, 2013WUC - SD13

WHAT WE BOUGHT It Wasn’t Shoes! April 10, 2013WUC - SD14

Mesquite Asset Purchase S empra’s Mesquite plant selected –2 power block combined cycle generating station –Plant went online 2003 –580 MW summer/ 625 MW winter capacity per block Key terms –$371 million purchase price for one block –SRP will operate the entire generating station –50% ownership of common facilities and water rights –Sempra will purchase back equivalent capacity from SRP for first three to seven years at market prices April 10, 2013WUC - SD15

Mesquite Strengths Best economic value in RFP with least performance risk –Premium plant design and well maintained –Option to sell capacity back to Sempra Sempra strong counterparty as co-owner Good location – Hassayampa delivery point Similar configuration to existing SRP GE turbine combined-cycle plants April 10, 2013WUC - SD16

Mesquite Plant 17 Mesquite Power Plant Elliot Rd Palo Verde Generating Station Wintersburg Rd April 10, 2013WUC - SD

Mesquite Water Property April 10, Mesquite Power Plant approx 2 mi Elliot Rd Solar Plant Water well and pipeline easement WUC - SD

THE TRANSITION SRP-izing the Plant April 10, 2013WUC - SD19

The Transition The Goal: A fully functional Power Plant staffed by SRP personnel. April 10, 2013WUC - SD20

The Transition Starting Line – What did we need? Reaching out – Building the team – Finding the LEADERs – Letting them LEAD What Did It Take? – Weekly meetings – Resolving the Speed Bumps April 10, 2013WUC - SD21

The Switch Over 11:59 p.m. February 28 th SRP assumed ownership of Block 1 and operations of Mesquite Generating Station April 10, 2013WUC - SD22

Thank you! May Millies Power Generation Services Salt River Project April 10, 2013WUC - SD23