UNITING THE NATIONS ELECTRIC POWER GRID Pure Energy

UNITING THE NATION’S ELECTRIC POWER GRID Pure Energy Conference & Expo Clovis Civic Center July 18, 2012

Uniting The Nation’s Electric Power Grid The Tres Amigas Transmission Superstation will utilize high voltage direct current (HVDC) technology to link the Eastern, Western, and Texas U. S. Interconnections at a single location in Curry County, near Clovis, New Mexico and will be strategically positioned in proximity to the junction of these three grids Western Interconnection Eastern Interconnection 166 GW Peak Load 585 GW Peak Load Clovis, NM Texas Interconnection 64 GW Peak Load 2

Proximity to Wind Power The principal economic rationale for transmission investment is that it allows power to be moved from where it is most cost effectively produced to where it is most valuable. • The Need for Transmission Infrastructure: while growth in electricity demand investment in generation has continued unfettered over the past four decades , investment in the transmission grid has not kept pace. • Moving Electricity to Where it is Most Valued: the Eastern, Western and Texas Interconnections each have a different mix of generation /demand characteristics. There is scarce connection between these grids and little coordination. This results in regular, sizable price differences. • Structural Price Differences: an analysis of historic market prices indicates evidence of material structural price differences, due to the timing of demand, availability of local supply resources, and asynchronous price patterns in gas markets due to transmission bottlenecks. • Access for Renewables : the US is experiencing significant and growing demand for renewable electricity, and there is substantial wind and solar power potential in the vicinity of the Tres Amigas site, as demonstrated in the figure at left. Tres Amigas is well-positioned to capture the value associated with linking renewable energy supply to multiple markets. © 2012 Tres Amigas. All rights reserved. Confidential and proprietary. 3

Voltage Source Converters – The Key to Smart Grid · Mature technology with a proven track record · Key technology for smart transmission grids and for integrating renewables · Provides a more precise and fast reactive power control and increased stability of the power system · Tres Amigas has partnered with Alstom Grid, a leading provider of this technology It operates a 25 MW demonstrator plant providing customers a unique opportunity Regularly picked for major projects by advanced utilities such as in Sweden

Scope of the Business The Tres Amigas Transmission Superstation can be mapped against the NIST Smart Grid Conceptual Model to illustrate the scope of the Tres Amigas business. Transmission: The fundamental offering of Tres Amigas is transmission service. From this base it is possible to offer other services, both to support stable system operations, in the interconnected grids, and to facilitate commercial transactions. Operations: Tres Amigas Operations will serve as the hub for both the transmission operator and market/exchange services. It will ensure reliability and interchange coordination, and it will carry out a number of core market functions necessary to support robust markets © 2012 Tres Amigas. All rights reserved. Confidential and proprietary. 5

Revenue Structure and Business Model Point-to-Point Transmission Service • Will be sold in blocks ranging from 1 to 20 years in duration and on shorter-term basis (seasonal, monthly, weekly, daily and hourly) 20 years Anchor Tenant Agreements Firm Capacity Sales – up to 50% of firm capacity Annual Open Season Auctions Monthly Daily Hourly Spot Sales (via Portal) Remaining available firm capacity after Anchor Tenant Agreements All non-firm capacity and secondary trading of previously purchased capacity Target Customers • • Retailers / Load-Serving Entities (Utilities) Existing Generators New Generation Projects (especially Renewable) Power Merchants / Traders

Revenue Structure and Business Model (continued) Power Exchange and Other Services • By linking the three electric interconnections of the United States, Tres Amigas is firmly positioned to be a natural trading hub • Tres Amigas will provide an exchange facility for the trading of electricity and various other electricity-related physical and financial products (e. g. RECs) providing liquidity and transactional efficiency through price transparency and robust financial clearing processes Target Customers • Financial Traders • Execution Brokers • OTC Brokers • Futures Commission Merchants • Transmission Service Customers Ancillary Services • Tres Amigas will also offer ancillary services, including – spinning reserves and supplemental non-spinning reserves that transmit increased output in response to major generator or transmission outage to maintain system frequency – frequency regulation that rapidly injects/withdraws energy to correct unintended fluctuations in generator output

Development Plan – Phased Approach Tres Amigas’ development strategy emphasizes a phased approach to growth, building the Superstation overtime using 750 MW VSC block increments. The phases are designed to add VSCs as needed, dictated by customer demand, as follows: © 2012 Tres Amigas. All rights reserved. Confidential and proprietary. 8

Development Plan 2012 Phase I 2013 2014 2015 2016 2017 Construction 2018 2019 2020 2021 Operation Incremental Capacity: 750 MW for WECC and SPP Expected Cost: ~$500 mm Phase II Construction Operation Incremental Capacity: 1, 500 MW for ERCOT and SPP Expected Cost: ~$400 mm Phase III Incremental Capacity: 3, 000 MW for ERCOT and SPP Expected Cost: ~$1. 0 billion + Construction Operation

Development Plan – FERC Filings and Status As a merchant transmission facility, Tres Amigas requires FERC approval to sell transmission service at negotiated rates, which has been granted in March 2010, and Tres Amigas is in the process of making additional filings at FERC. • Market-Based Rates: in March, 2010, Tres Amigas obtained all of the necessary FERC approvals to sell transmission service at negotiated, or market-based, rates. FERC approvals apply to all phases of the development plan. Occidental has appealed the FERC approval in DC Circuit court, but should be resolved shortly. • Jurisdiction: FERC declined to disclaim jurisdiction over prospective transmission facilities to interconnect Tres Amigas and the Electric Reliability Council of Texas ("ERCOT"), stating it did not have the information necessary to grant the request. The Commission went on to state that upon receipt of a valid application (210/211 process), the Commission could issue orders to allow Tres Amigas to proceed and interconnect with ERCOT without conferring FERC jurisdiction over ERCOT utilities. • Open Access Transmission Tariff (OATT): Tres Amigas is developing an OATT filing which is expected to filed during the second quarter. As part of the filing, Tres Amigas will provide an ancillary services plan, and seek market-based rates for those services. • Anchor Tenant: Tres Amigas is negotiating with anchor tenant prospects and has ongoing discussions with local wind generators, gas producers, CAES developers, and trading companies. We are also working on plans related to ‘open season’ auctions. • Interconnection Agreements: Tres Amigas is negotiating IA’s with PNM and SPS/SPP. These studies are nearing completion with exchanged drafts. We expect to file with FERC in third quarter 2012. © 2012 Tres Amigas. All rights reserved. Confidential and proprietary. 10

Funding – Tres Amigas Merchant Transmission Unlike traditional transmission facilities, merchant transmission project owners assume all market risk. Tres Amigas has been successful in receiving significant capital through investors and private placements. Phase II – III ~$1. 5 B Private Placement Raises $15 Million Phase I ~$500 Million Phase II-III: construction & operations, Texas node, additional HVDC converters, facilities, and business infrastructure Preconstruction Startup Phase I: construction & operations, East/West transmission node, including HVDC converters, buildings and business infrastructure Preconstruction: detailed engineering, vendor selection/contracts, product development, additional filings and detailed business plans. Startup: research, regulatory and local filings, ROW, preliminary engineering, environmental, economics and business plan. concept © 2012 Tres Amigas. All rights reserved. Confidential and proprietary. 11