Global Utility White Paper CONFIDENTIAL =" Leverage to higher power prices can be substantial. For example, in the US every $1/mmbtu improvement in natural gas prices increases Exelon’s long-term earnings by more than 20%, whereas for pure generators such as NRG the leverage exceeds 30%. = In Europe, where power is generated at close to cash production cost in many markets, even a modest (e.g. 10%) combination of changes in coal, carbon and Euro prices can have a 25-50% earnings impact on several European utilities. o Global utility capex (ex-US) is rebounding after a recession-driven slowdown: =" System-enhancing transmission capex is accelerating in Europe and Asia and is firm in the US. =» US, European and Asian utilities are building much of the infrastructure needed to capitalize on the global shale gas boom underway. = In emerging markets, infrastructure spending is occurring across the entire value chain. e Substantial alpha opportunities follow periods of underperformance (Section 5). o Current MSC! World Utility Index underperformance against the MSCI World Index is the deepest (-67%) and longest (4 years) of the modern utility era, caused by a perfect storm of factors (see page 15). o Despite the strong rally in equity markets since the depths of the financial crisis, the global utility sector is still down -11% in absolute terms and has underperformed the second-worst sector (telecom) over the same period by -23%. Previous periods of underperformance have set the stage for substantial alpha opportunities driven by fundamental investors re-entering the sector. o The global utility sector does not need to outperform for Electron to generate solid performance; 80% of our 7-year return (10.3% per annum) is from alpha (Jensen’s alpha calculation). e Investing in the global utility sector does not mean taking undue interest rate risk (Section 6). o The interest rate sensitivity of the sector has declined steadily since the modern utility era began in the