PF40010_v1

1. Public Power as an InvestmentHow Does Public Power Stack Up to Other Sector Investments in These Changing Credit Markets? Panelists Karl Pfeil III, Managing Director, Fitch RatingsGary Krellenstein, Managing Director, J.P. MorganLonnie Carter, Chief Executive Office, SanteeCooper PF40010_v1

2. NFMA Annual Conference How Does Public Power Stack Up to Other Sector Investments in These Changing Credit Markets? Karl H. Pfeil III, Fitch Ratings May 7, 2009

3. The Credit Drivers of the Current Market Environmental • The Basic Pillars of Public Power Credit • New Rating Considerations • Economic Issues • Financial Considerations • Environmental Credit Considerations • Fitch Ratings’ Public Power Outlook - How Does it Stack to other Sectors? www.fitchratings.com

4. Primary Credit Factors www.fitchratings.com

5. Location, Location, Location • Each region has distinct characteristics affecting the utilities’ credit profile • Fuel supply • Water supply • Environmental • Regional politics • Service territory characteristics • New Developments www.fitchratings.com

6. www.fitchratings.com

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9. Financial Considerations www.fitchratings.com

10. Financial Ratios • Coverage (How much cash flow cushion is there to pay the utility’s fixed obligations?) • Debt Service Coverage • Debt/Funds Available for Debt Service • Liquidity (How much cash does the utility have relative to its operating expenses?) • Days cash on hand • Days liquidity on hand (includes CP capacity & lines of credit) • Free Liquidity to support variable rate debt. • Leverage (How much equity has the utility built up relative to its asset base?) • Equity/Capitalization • Debt/Funds Available for Debt Service • Other • Variable rate exposure as % of capitalization. • Annual capital additions • Five- year capital improvement plan and financial projections www.fitchratings.com

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12. Greenhouse Gas/Carbon Reductions CO2 Regulation: Not if but when • Fitch Ratings believes that there will be a carbon law at the federal level • Increasing number of state regulators are placing a cost on carbon in ratemaking proceedings • More traditional Wall Street investors are now looking at carbon issues www.fitchratings.com

13. Public Power Outlook www.fitchratings.com

14. For a Stable Sector – The Issues are Very Complex Increasing Capital Costs Fuel Costs Utility's Credit Environmental Regulation New Generation Economy and Housing Declines Rates /Regulation www.fitchratings.com

15. Fitch Ratings Public Power Credit Outlook for 2009 • The Outlook into 2009 is Stable with near-term pressures on individual credits that could result in increased negative rating actions • The longer term Outlook reflects increasing negative cost pressures • While our near-term Outlook for the sector is Stable, if current pressures such as limited capital market access together with increasing economic stress that persists long into 2009 a change in Outlook to Negative may be warranted • Public power has historically proven itself to be a very solid investment despite past complexities facing the industry such as deregulation, fuel price volatility, and the corporate credit crisis www.fitchratings.com

17. MAY7,2009 NFMATWENTY-SIXTHANNUALCONFERENCE SEATTLE,WASHINGTON P U B L I C   P O W E R   V S   T A X   B A C K E D   B O N D S UTILITIESMAYOFFERBETTERRETURNS&SAFETYINTODAY’SRISKADVERSEMARKETS Gary Krellenstein, Managing Director J.P. Morgan’s Energy and Environmental Group G.O. v Pub Pwr STRICTLYPRIVATEANDCONFIDENTIAL

18. This material is not a product of the Research Departments of J.P. Morgan Securities Inc. ("JPMSI") and is not a research report. Unless otherwise specifically stated, any views or opinions expressed herein are solely those of the authors listed, and may differ from the views and opinions expressed by JPMSI's Research Departments or other departments or divisions of JPMSI and its affiliates. Research reports and notes produced by the Firm’s Research Departments are available from your Registered Representative or at the Firm’s website, http://www.morganmarkets.com. PUBLICPOWERVSTAXBACKEDBONDS 1

19. Electricity is the “premium” form of energy today because of its versatility, essentiality and low cost relative to value • Demand growth for electricity is outstripping other types of energy and is expected to continue growing at a faster rate in the long-term • 1940 - 10% of total U.S. energy consumption • 1970 - 25% of total U.S. energy consumption • 2004 - 40% of total U.S. energy consumption • Almost all new technological innovations run on electricity • Current prices are far below actual value - The average American household pays under $4/day* for electricity (despite being up 14% from 2007)! * Source: www.eia.doe.gov/bookshelf/brochures/rep: average costs – 10.99 cents/kWh; average usage is 934 kWh/month: Given the NFMA’s analysts general demographics, the average is probably closer to $7 day – still cheap PUBLICPOWERVSTAXBACKEDBONDS Even at triple the price, electricity would still be a bargain! 2

20. In a modern society, electricity, not water, is the essential commodity • Airport Closed Inconvenience • Water Main Breaks Inconvenience • Telephone Outage Inconvenience • Power Outage Blackout - All economic activity stops ! PUBLICPOWERVSTAXBACKEDBONDS Unlike many services provided by tax-back entities, electricity cannot be “furloughed’ or asked to take every other Friday off without pay 3

21. But isn’t public power facing extremely challenging risks from “new” environmental and climate-related issues? – No!!! • Current environmental and climate-related issues facing the electric utility industry have been known for years • Investors and the rating agencies have already factored most of them into their relative yields and ratings • The vast majority of utility issuers have already conducted sensitivity analyses showing the impact of CO2 and more restrictive Hg, SOx, NOx, particulate and RPS (renewable portfolio standards) regulations • This is not true for tax-backed bonds • The current economic depression is still relatively new and market levels and ratings of tax-backed bonds are still adjusting • Further downgrades and increasing yield spreads are likely outcomes PUBLICPOWERVSTAXBACKEDBONDS S&P Index 4

22. Comparable Yield Curves — Generic G.O. “A” Rated Credit Versus Public Power “A” Rated Credit; typically a 35 bp spread Generic G.O. Yield Curve Vs. Generic Electric Utility Yield Curve “A” Rated G.O. – MMD + 90bp “A” rated Pub Power – MMD + 125bp PUBLICPOWERVSTAXBACKEDBONDS Indicative Yields 5

23. What kind of public power utilities are likely to do best in the current environment? Each credit will have to looked at on an individual basis but some common characteristics of utilities likely to do well over the next few years will probably include: • Minimal capital requirements and/or limited construction risk to meet new load growth (construction to meet existing load and reduce spot market exposure is a positive) • Moderate growth service areas that have not seen large swings in housing prices and employment (e.g., college towns, state capitals, etc.) • A diversified fuel mix including nuclear • Rate setting ability • Management that has already factored in potential CO2 regulations in future planning • Natural (geographical) monopolies with minimal potential for competition • Flexible capital needs that can be deferred 1 -2 years without impacting reliability • Use of/or contemplation of fuel hedge programs to lock in today’s low prices • Minimal use of bank facility and/or renewal risks over the next 2 – 3 years • Utilities that have already committed to alternative energy sources and efficiency programs or are closely evaluating these options PUBLICPOWERVSTAXBACKEDBONDS 6

24. What kind of public power utilities are likely to share in to problems facing tax-backed bonds • Involved in major construction/capital programs to meet projected future growth • Entities that have a large fleet of older, less efficient coal-fired plants with minimal pollution control equipment • Utilities that have troubled municipal customers as the major clients • Utilities subject to large increases in their PILOT transfers to help the tax-backed service area(s) offset looming budgetary problems • Management that has not sufficiently factored in potential CO2 regulations in future planning • Companies with little or no diversification in fuel/energy sources (“shaft diversification”) PUBLICPOWERVSTAXBACKEDBONDS 7

25. Conclusion: Public Power bonds should outperform “tax-backed” bonds for the next several years Tax-Backed Bonds • Relatively new adverse environment of greater severity than originally anticipated • Major budget shortfalls and cash flow problems anticipated • High possibility of downgrades and/or widening of credit spreads • Moody’s recently placed a “negative outlook” on all local governments Public Power bonds • Challenges concerning “greener” power sources have been around for years and already factored into ratings and yields • Current economic problems may actually delay or reduce anticipated new restrictions • Provides cheap essential service and most are not rate regulated • Several entities could be upgraded upon completion and operation of new facilities PUBLICPOWERVSTAXBACKEDBONDS 8

26. Question • If you were financially strapped and didn’t have your local taxes held in escrow by your mortgage company, which would you pay first? • A - $5,000 local property tax bill • B - $150 electric utility bill ? PUBLICPOWERVSTAXBACKEDBONDS 9

27. Investing in Public Power: What You Need to Know

28. GDP Growth Annual Growth % forecast Source: US Economic Research Service

29. China: GDP vs. Electric Sales 2006 as a % of 1997 China GDP 283% China kWh sales 257% Source: US Economic Research Service

30. India: GDP vs. Electric Sales 2006 as a % of 1997 India GDP 173% India kWh sales 150% Source: US Economic Research Service

31. U.S.GDP vs. Electric Sales 2006 as a % of 1997 US GDP 159% US kWh sales 116% Source: US Economic Research Service

32. Source: NERC 2008 Long-term Reliability Assessment

33. WE’RE RUNNING OUT OF POWER NERC 2008 Long-term Reliability Assessment

34. Santee Cooper Capacity Requirements

35. Summer Nuclear Station Pee Dee Energy Campus • KEEPING THE LIGHTS ON • base load • renewables • conservation Landfill Generating Station Wind Energy Research