Welcome to First Hydro

1. Welcome to First Hydro 16 July 2010

2. Approximately 200 employees across four sites Dinorwig largest pumped storage plant in Western Europe commissioned 1983 total plant capacity 1,728MW 6 reversible pump/turbines reservoir capacity ~10GWh Ffestiniog UK’s first major pumped storage station Commissioned 1963 total plant capacity 360MW 4 separate turbines & pumps reservoir capacity ~1.3GWh Electric Mountain visitor centre Bala House trading office Owned by International Power (75%)/Mitsui & Co, Ltd (25%) since December 2004 First Hydro overview

3. Pumped storage principle Pump water overnight Generate electricity during the day Typical cycle efficiency ~70 - 75% Closed hydraulic system Generating Power import Pumping Power export

4. Asset features Originally designed and built to support grid system management Extremely high reliability and availability Rapid speed of response Dinorwig full output in ~16 seconds Ffestiniog full output ~60 seconds ~25,000 mode changes per year Asset capabilities provide for a diverse range of trading and marketing opportunities Dinorwig mode transition times <30s <12s Spin Gen Generate 6m 6m <90s 3m Shut Down 8m 6m 6m 7m Spin Pump Pump <30s <30s Typical start-up times (minutes) 90 85 80 70 60 60 50 40 30 20 10 2.5 1.5 0 Dinorwig Ffestiniog CCGT (hot) Coal (hot)

5. The role of First Hydro • Energy arbitrage - peak/off-peak • valuable peaking capacity • enables efficient running of steam plant overnight • Reserve provision • range of timescales (focus on fast) • but, limited storage • Frequency control • fast response to plant trips, TV pickups etc. • Roles underpinned by plant reliability and dynamic capabilities • Buying fuel and selling power exports via the same market • Diversity of revenue streams

6. Optimising value 2088 MW Capacity Energy limited Market features First Hydro competitive advantage

7. TV pick up: England vs USA 12th June National Grid FHC Output over same period:

8. Dinorwig physical layout

9. Dinorwig physical layout

10. Underground caverncross section Power station/unit cross-sections Generator/motor Pump/Turbine

11. Market review • Significant market volatility Winter 05/06 and throughout 2008 • Positive impact of additional storage on utilisation/value in 2008 • Less stress on system in 2009/10 • Impact of new build and recession-led demand reduction • But, some intraday volatility • Retain ability to capture value during ‘system shocks’

12. Market outlook • EU’s 2020 targets & UK commitments • Large Combustion Plant Directive • Industrial Emissions Directive • Increased EU market integration • Material levels of wind generation, new nuclear • Closure of 11 GW thermal plant by 2016 • Limited hours operation on most remaining fossil plant from 2016 • Greater levels of interconnection with EU Projected New Build DECC – Updated Energy and Emissions Projects, June 2010 • GB plant mix to change radically in next 10-15 years • Security and balancing challenges • Significant impact of wind intermittency • Increased spot market volatility • Premium on flexibility and reliability • Increased reserve requirement • Potential for reforms to market framework

13. Ancillary services developments • Demand for reserve services to increase • Impact of increased wind generation • Intermittency increases system risks across a range of timescales • Frequency response requirements to be revised upwards • To be consistent with increased wind generation, new generation nuclear reactors, and large offshore wind connections • New providers expected to enter these markets • Dynamic demand response • New OCGT plant • FH well positioned, with diverse capabilities Source Data: National Grid “Future Requirements” Slide 13

14. Plant investment strategy Assess changing market environment • Opportunities and challenges Preserve competitive advantage Invest to maintain assets • Maintain current levels of performance • Focus on quality of core maintenance • Replace or refurbish ageing/obsolescent equipment • Retain expertise within business • Engineering integrity and plant life Enhance capabilities Invest to improve assets • Improve reliability/availability • Increase quality or range of products New runner Increased automation Additionalstorage

15. Dinorwig additional stored energy • Extension of MarchlynMawr planned 2005/6 • Permissions granted 2006 • Completed October 2007 • Increased storage by approximately 8% • Short payback period

16. Plant automation % Instructions • First Hydro despatch is already extremely accurate • 99% of instructions are delivered within one minute of required time • Engineers manually accept instructions from grid and despatch the plant • Aiming to automate majority of despatch instructions • Improve despatch precision to maintain/enhance competitive advantage • Target 99% within 15 seconds • Automate progressively from 2011 to 2014 Seconds early/late Based Jan-Jun 2010. >13000 instructions. 14 not delivered

17. Turbine runner • 2008 record utilisation; pumping costs >£100m • Re-established project to look at improving cycle efficiency • Turbine design optimised in 2007/8 via computational and physical modelling • Currently replacing a turbine with completion targeted for Q3 2010 • Unit efficiency gain > 2% • Short payback period Slide 17

18. Summary First Hydro remains highly relevant to the UK system Future market developments will increase the need for response and reserve Providing critical reserves to support intermittent generation Ability to “time-shift” excess wind generation off peak Complement new nuclear build Historic investment in plant has maintained integrity/longevity Current investment program improves market position Increases competitive advantage Enhances ability to capture current and future value