Arizona Electric Power Cooperative Annual Meeting 6/13/12 Arizona Electric Power Cooperative Annual Meeting 6/13/12 Life After Restructuring

Arizona Electric Power Cooperative Annual Meeting 6/13/12 Oglethorpe Power Corporation Oglethorpe Restructured Member “choice” for future power supply Responsibility for existing commitments locked in Oglethorpe retained generating assets Today 1.8 million consumers Own / operate ~ 8,400 MW Total assets = $8.1 billion Total revenue = $1.4 billion New Business Model (Restructuring 2)

Arizona Electric Power Cooperative Annual Meeting 6/13/12 Challenges Right After Restructuring Member trust very low (of Oglethorpe and among other Members) Relationship between Oglethorpe and Members not unified; Members wanted different things Key new business model challenges: −What services can Oglethorpe effectively provide to subsets of Members? −Use of Oglethorpe credit for subsets of members (since all members are jointly liable) −Complexity resulting from restructuring / choice 3

Arizona Electric Power Cooperative Annual Meeting 6/13/12 Oglethorpe Guiding Principles Transparent Customer (Member) Oriented Collaborative Fair and Equitable Professional Focused on Creating Value 4 Objective To change culture and to restore trust between Members and Oglethorpe

Arizona Electric Power Cooperative Annual Meeting 6/13/12 Specific Examples of Issues & Resolution Oglethorpe’s credit valuable and could support various new business endeavors (beyond existing commitments) All members jointly & severally liable for payment of Oglethorpe’s obligations (i.e., if one can’t pay, the others are required to cover the shortfall) Potential uses of Oglethorpe credit −Building or acquiring new generation −New power purchases −Energy trading 5 Use of Oglethorpe’s Credit Issue

Arizona Electric Power Cooperative Annual Meeting 6/13/12 Specific Examples of Issues & Resolution Use Oglethorpe credit for things that benefit the vast majority of members Generally speaking, certain approval thresholds must be achieved for use of Oglethorpe’s credit for new commitments −75% of board −75% of members based on number (1 member / 1 vote) −75% of members based on patronage (effective in 2003) Also, a conflict of interest must not exist 6 Use of Oglethorpe’s Credit Solution

Arizona Electric Power Cooperative Annual Meeting 6/13/12 Specific Examples of Issues & Resolution In 1997 Oglethorpe no longer the “all-requirements” supplier Power supply needs largely taken care of through 2005 Significant shift of responsibility to members In 1999 – 2001 Members entertained options offered by choice in planning for 2005 and beyond Oglethorpe’s role unclear… viewed as competitor versus partner with members Ultimately resulted in undesirable situation 7 Power Supply Planning & Procurement Issue

Arizona Electric Power Cooperative Annual Meeting 6/13/12 Specific Examples of Issues & Resolution Oglethorpe retreated in 2003 as part of the “New Business Model” restructuring On their own, members entered into long-term supplemental power supply contracts (most “requirements based”) Oglethorpe “opportunistic” with respect to future power supply Developed a process with the members to screen attractive opportunities, assess interest, and ultimately subscribe resource (get firm commitments) if sufficient interest Oglethorpe leads negotiations / manages development of resource if subscribed 8 Power Supply Planning & Procurement Solution

Arizona Electric Power Cooperative Annual Meeting 6/13/12 Member Supplemental Power Supply Contracts Projected Contribution to 2012 System Peak 9

Arizona Electric Power Cooperative Annual Meeting 6/13/12 Specific Examples of Issues & Resolution 10 Power Supply Planning & Procurement Members realizing value of Oglethorpe’s balance sheet Members also seeking to minimize contract renewal risk in their third party contracts through owning more generation Recent new generation initiatives −Joint owner in new nuclear project (660 MW / $4.2 billion) −Three acquisitions (2,000 MW / $900 million) Some members now building in flexibility to take potential future Oglethorpe resources into their supplemental power supply contracts Today

Arizona Electric Power Cooperative Annual Meeting 6/13/12 Members’ Forecasted Requirements and Identified Sources 11

Arizona Electric Power Cooperative Annual Meeting 6/13/12 Specific Examples of Issues & Resolution By resource Choice complexity All members have different cost profiles! Customized bills, budgets and forecasts (monthly bill went from 3 pages to over 150!) Examples of more challenging allocations: −A&G −Margin increase −Liquidity −Energy settlement (when another member uses someone else’s resource because it is cheaper for the system) 12 Cost Allocation

Arizona Electric Power Cooperative Annual Meeting 6/13/12 Successes Improved trust and communication Oglethorpe’s role is better defined and understood Creative solutions / customization −Optional natural gas hedging program −Optional rate management programs −Optional prepayment of power bills program −Pre-approval of use of credit for limited purposes/ timeframes One member withdrew and re-joined again several years later Members seeking Oglethorpe involvement! 13

Arizona Electric Power Cooperative Annual Meeting 6/13/12 Continued Challenges Enhancing efficiency of system operations / dispatch Proliferation / changes in composition of member groups based on evolving power supply strategies Cost allocation… there will always be different opinions! All-requirements supplier again? Some members quietly asking… 14