1. Cinergy’s Perspective on the Climate Challenge
William F. Tyndall
Vice President, Corporate Development and Strategy
Cinergy Corp.

2. The Challenge Cinergy Faces
Cinergy owns 32 coal-fired generation units
Coal fuels vast majority of power we provide customers
Cinergy consumes 30 million tons of coal per year
2000 CO2 emissions were approximately 74 million tons
Climate Issue is but one facing coal – as further SO2, NOx and mercury emissions reductions on horizon
Coal is the fuel of choice for more than 50% of U.S. (and 80% of Midwest) power generation – economic consequences if this fuel option is lost

3. Who is Cinergy? Regulated Platform PSI CG&E Commercial Platform
Market Capitalization
$7.3 billion
Electric sales*
65.2 million MWh
Electric trading*
175.2 million MWh
Gas sales*
1,516,150 Mcf
Gas Trading*
58.2 Bcf/d
Generating capacity
13,331 MW
Energy Services Projects
56 projects /
5,357 MW
Electric
Gas
Combination
Commercial Platform p
* Preliminary 2004
Legend
Generation
Supply Basins
Wholesale Gas
End-Use Customers
Gas Storage Areas
Gas Marketing
Operations
Energy Services

4. Cinergy’s Generation Fleet
Total capacity
Total PSI (Reg.)
7,358.8 MW
Total CG&E (Reg.)
5,498.6 MW
Merchant (Non-Reg.)
1,031.4 MW
Total
13,888.8 MW

5. Cinergy’s Generation Fuel Mix (13,331 MW)
Cinergy Generation Fuel Mix (13,331 MW)
Coal
73%
Oil 4%
Nat Gas
23%

6. Cinergy and the Environment
About 35% of generation is fitted with SO2 controls and 50% with NOx controls
In the last five years, spent more than $1 billion on SCR’s for NOx
Between 1990 and 2004, total emissions of NOx and SO2 have declined despite a 47% increase in electric generation over the period
Additional $1.8 billion construction program underway to add SO2 and NOx controls, as well as mercury and fine particulate controls, to more units
Key reality: No “bolt-on” machine available to reduce CO2 emissions from existing coal-fired power plants

7. What is Cinergy Doing on Climate?
Disclosure –2004 AIRS Report
GHG Reduction Commitment
Building the Generation Fleet of the 21st Century

8. Air Issues Report to Stakeholders (“AIRS Report”)
Purpose: To describe the potential impact on Cinergy, the region it operates in, and the U.S. economy, if mandatory greenhouse gas (GHG) limits are imposed (along with tighter restrictions on NOx, SO2 and Mercury)
Process: Prepared in-house with extensive collaboration with a major stakeholder (Presbyterian Church USA), as well Ceres, Environmental Groups and other independent experts
Endorsed by Cinergy’s Board of Directors
Report available at:

9. AIRS Report – Key Points
Legislative and regulatory uncertainty is the major difficulty in planning capital expenditures to meet growing demand for electricity
Cinergy does not expect Congress to constrain GHG’s before 2008
Longer term, prudent to assume a carbon constrained world; therefore, we will assume CO2 limitations in making long-term investment decisions
Most existing coal plants will remain economically viable under any reasonable GHG program
Focusing additional controls on largest and newest units that remain economic under a “Kyoto” scenario

10. In Cinergy’s View, Any U.S. GHG Program Must:
Preserve coal as a major energy source
Include market-based cap and trade principles – no mandated technology or restrictions on flexibility
Gradually and predictably reduce GHG emissions
Provide incentives to develop new technologies
Minimize distortions and irrational wealth transfers
Involve all sectors of the economy, not just the energy industry
Work toward inclusion of China and India

11. Cinergy’s Voluntary GHG Reduction Commitment
In 2003, Cinergy agreed to stabilize CO2 emissions at 5% below 2000 levels during the time period
Based on levels in pending federal legislation
Review commitment and determine new target for period after 2012
Spend at least $21 million from on GHG reduction projects and offsets
Commitment designed with Environmental Defense and subject to third party verification

12. GHG Expenditures To Achieve Goal
Cinergy will spend $21 million from on GHG reduction and offset projects
Fund ensures progress towards 2010 goal without specific interim reduction targets
Cinergy will spend 2/3 of the fund for on-system projects
Cinergy can count BAU expenditures that meet criteria such as ongoing sequestration projects, natural gas distribution improvements, DSM, CHP, technology investments, etc.

13. Cinergy GHG Status Report
2000 Cinergy Baseline
Legacy Units
69,768,000
Merchant
Natural Gas
409,000
C S
3,454,000
Vehicles
36,000
SF6
176,000
Total
73,843,000
Cinergy Corporate 2000 Baseline Calculation
Includes legacy units, merchant units, natural gas, vehicles, Cinergy Solutions, SF6
Ownership and operation

14. How Will Cinergy Get There?
Many reduction and offsetting initiatives already underway or planned
Efficiency improvements at plants
CHP
End-User Conservation
Renewable Energy
Sequestration
Materials Recycling
All reductions and offsets subject to independent 3rd party verification

15. Building 21st Century Generation Fleet
Cinergy already invested in many “next-generation” power sources
Fuel cells
Industrial combined heat and power
Biomass
Considering major expansion into wind due to new favorable wind maps for Indiana and Ohio

16. Coal Gasification –The Best Hope for the Future?
Many environmentalists and industry players have focused on coal gasification as the best central plant technology for the future
Utilizes abundant U.S. supply of coal
CO2 separation and sequestration more feasible
Cinergy signed a letter of intent in October 2004 with General Electric and Bechtel to start initial planning for building a commercial, Integrated Gasification Combined Cycle (IGCC) power plant
It was the first plant of its kind announced under the proposed GE-Bechtel alliance

17. How IGCC Works
Coal gasification system converts coal into a synthesis gas (syngas)
The hot syngas is processed to remove sulfur compounds and particulate matter
Syngas fuels a combustion turbine generator
The heat in the exhaust gases from the combustion turbine is recovered to generate steam, which then drives a steam turbine generator

18. How IGCC Works

19. IGCC Costs
Capital costs for IGCC are estimated to be 10 – 20% higher than for conventional PC
But IGCC may be more attractive due to permitting delays and opposition that conventional PC faces in some regions
Financial incentives will play a key role in getting the “next generation” of commercial IGCC plants deployed
Incentives need to create momentum in both States with regulated utilities and in States with deregulated systems
Incentives need to address long lead times, huge scale, operational risks