Puerto Rico Electric Power Integrated Resource Plan: A vision of New Infrastructure Development for PREPA’S Transformation December 15th, 2015

Core Objective and Agenda This presentation provides a summary of the key recommendations of the Integrated Resource Plan (IRP) proposed for PREPA for the period from 2016 to 2035 and the underlying analysis and assumptions, especially focused in: The IRP report at PREPA’s website (http://www.aeepr.com/Aeees/ley57.asp) also includes: Generation expansion plan Transmission expansion plan Renewable penetration for multiple years, transmission study details, distributed generation. Complementary Studies: Demand Forecast Fuel Forecast Fuel Infrastructure Demand Response Environmental Compliance 2

What is an Integrated Resource Plan? An Integrated Resource Plan (IRP) is: A long term planning assessment, typically covering a 20 year period, by which an electrical service company finds the optimal plan to: Supply the current and forecasted electrical demand Meeting regulatory requirements Reliability criteria The least cost possible Usually subject to public review and final regulatory approval. Essential to effectively plan any decision to replace, retire, or build new generation. 3

PREPA’s IRP PREPA’s IRP: A requirement of Act 57 – 2014: PREPA must present an IRP to the Puerto Rico Energy Commission (PREC) by July 2015. An essential part of the restructuring process that PREPA is currently undergoing. 4

PREPA’s IRP According to Act 57 – 2014, PREPA’s IRP shall include the following, among others: Evaluation of supply resources to satisfy Puerto Rico’s energy demand over a 20 year planning horizon Current generation system evaluation, including improvements, replacements, and retirements, if necessary Interconnection of renewable energy projects to meet law requirements, including distributed generation and utility scale producers Compliance with environmental regulations Energy source diversification, stabilize energy costs, improve system reliability and stability Electric transmission system capacity and reliability Evaluation of energy efficiency (EE) and demand side management (DSM) programs 5

PREPA’s IRP Main issues affecting PREPA’s IRP: Environmental compliance: MATS Rule Clean Power Plan (CO2) Regulatory compliance PREC rules, as per Act 57-2014 PREPA’s restructuring process Forbearance Agreement with creditors Business Plan System costs, reliability, and safety Renewable sources integration Generation, transmission and distribution infrastructure Fuel diversification Energy demand forecast 6

Portfolio Selection Metrics The performance of the portfolios under various futures was assessed based on the following main metrics: Cost Metrics Capital Cost Total System Costs (Fuel, O&M, annualized CapEx, Purchased Power) Operations Metrics Reliability (LOLH / Reserve) Curtailment (inability to accept renewable generation) Environmental and Compliance Metrics CO2 (Clean Power Plan and GHG New Source Standard) Other pollutants (SOX, NOX, FPM) 7

PREPA’s IRP Recommended Main Projects 1st Five Years Driver Site Project COD Fuel Cost MATS Compliance AOGP and related Gas Port Jul-17 -- 373.6 Aguirre Steam 1 Conversion Oct-16 Gas 38.4 Aguirre Steam 2 Conversion Aguirre CC 1 Dual Fuel Conversion Gas/Diesel 24.1 Palo Seco New Palo Seco F Class (359MW) Jan-21 Diesel 369.3 Unit Retirements FY21, FY27, FY31 135.6 Additional T&D Investments FY16-FY20 262.4

PREPA’s IRP Recommended Main Projects Next 10 Years Driver Site Project COD Fuel Cost Energy Efficiency, CPP & Improvements Aguirre Aguirre CC 1 Repowering Jul-21 Gas 185.2 Aguirre CC 2 Repowering Jul-22 New Aguirre 1 H Class (393 MW) Jul-26 397.7 New Aguirre 2 H Class (393 MW) Jul-27 Costa Sur New Costa Sur 5 H Class (393 MW) Jul-30 New Costa Sur 6 H Class (393 MW) Jul-31

Puerto Rico’s Electrical System G 602 Palo Seco Power Plant 400 San Juan Power Plant San Juan Combined Cycle 440 115 kV G 247 Cambalache G 42 Vega Baja 38 kV 230 kV 1400 MW G 2 Culebra G 220 Mayagüez G 42 Daguao 1500 MW 1900 MW G 42 Yabucoa G 6 Vieques G 990 Costa Sur Power Plant G 507 Ecoeléctica Power Plant G 42 Jobos G 900 Aguirre Power Plant G 454 AES Power Plant Aguirre Combined Cycle G 592

Renewable Energy Portfolio Standard Compliance 20% Penetration A 20% RPS Sensitivity was carried out for 2035 under all Futures: This implies 23% renewable penetration and that 68% of the peak could be supplied from renewable for Future 1 to 3. Futures 1 to 3 11

Renewable Integration Curtailment If nothing is done to renew PREPA’s generation fleet, the situation is much worst, paying up to $250 million in curtailment penalties in a year for power NOT served. 12

PREPA’s IRP Benefits Environmental compliance: MATS Rule Clean Power Plan (CO2) 20% Renewable energy integration Fuel diversification through use of natural gas and significant reduction in oil fuel dependency Modern, highly efficient and flexible generation fleet Modern and Reliable T&D System Stable electricity cost and reliable power 6

PREPA’s IRP Benefits Main issues affecting PREPA’s IRP: Environmental compliance: MATS Rule Clean Power Plan (CO2) 20% Renewable energy integration Fuel diversification through use of natural gas and significant reduction in oil fuel dependency Modern Generation Fleet and T&D System More stable electricity cost and reliable power 6

Thank You!