EFTA00606159

North America Credit Research J.P.Morgan 16 February 2012 Short Circuit IPP February Monthly This is our initial high yield utility monthly. In it, we update our thoughts on US Credit Research the HY utilities we cover, provide credit and industry data and graphs, and Dave Katz. CFA AC summarize recent company and industry news. Over the last month, the Utilities sector underperformed the high yield index, returning 1.37% to HY's 2.74%. In the present monthly, we include an estimate of key IPPs sensitivity to a Bayina Bashtaeva SI/MMBtu change in natural gas prices. Assuming constant heat rates, and due to their differing generation and hedge portfolio, we estimate that Edison is the most exposed, followed by GenOn and then NRG. Surprisingly, as a J.V. Mogan Securities LLC percentage of LTM EBITDA, TCEH is not as exposed as some other credits. • We estimate the impact on future revenues of changes in the PJM 2015/16 capacity auction prices. The most exposed credit (as measured by the revenue effect of a $25/MW-day price change divided by LTM EBITDA) is GEN (13%). GEN is followed by EME (8%), DYN (3%), CPN (2%), and NRG (<1%). • We reiterate our Overweight on NRG credit and update our NRG financial model in advance of earnings. We estimate that the company generated $384 million of EBITDA in 4Q11. We expect NRG will address the lower natural gas price environment and how it will impact, if at all, its timeline to refinance the 2017 notes and the company's shareholder friendly actions (i.e., dividends and share repurchases). We model a pick-up in shareholder friendly activities; this assumption may prove conservative if the company does not refinance the 2017 notes and given that NRG may flex the activities down to help guard cash. Despite these assumptions, and using the current natural gas forward price curve (NGA <CMDTY> <GO> CCRV <GO>), we expect gross recourse debt • leverage would increase from 4.2x to 5.3x at the end of 2013, before falling to 4.3x at the end of 2014. We believe NRG Energy is set up to survive an extended period of low power prices. We are downgrading our recommendation for Edison Mission Energy to Neutral. We also update our Edison Mission Energy financial model. We believe Edison Mission is one of the most exposed credits in the high yield IPP universe to natural gas price declines. Using the current forward, while assuming that natural gas price decreases result in heat rate increases, we estimate that the company generates $77 million of adjusted EBITDA in 2012, $309 million in 2013, and $582 million in 2014. We estimate that the company would have $580 million of liquidity at the end of 2014, but this presupposes a full refinance of both the EME credit facility and the Midwest Generation credit facility. It also assumes that the 2013 notes are successfully refinanced. Although we value Edison Mission's assets on a $/KW basis, we still believe that the recovery has likely fallen over the last few months and that the notes now trade ahead of recovery value whereas we believe they traded at or around recovery value just a few months ago. Further, over that period, given the fall in power prices, we believe the likelihood of a recovery scenario arising, has increased. These factors arc behind our downgrade of the credit. See page 58 for analyst certification and important disclosures. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this repot. Investors should consider this report as only a single factor in making their investment decision. EFTA00606159 Dave Kat. CFA North America Credit Research 16 February 2012 J.P. Morgan Table of Contents NRG Energy update 3 Edison Mission Energy update 6 Natural gas price sensitivity 9 PJM capacity auction 11 Industry news 13 Recent company news 14 In Case You Missed It: HY Utilities Reports 18 Utilities credit tracker — STW 19 Utilities credit tracker — YTW 20 Utilities credit tracker — dollar price 21 Comparative company analysis 22 Relative value analysis 23 Fuel Mix by Company 28 Domestic generation capacity rankings 30 Rankings 31 Individual bond trading history 32 Working Natural Gas Total Estimated Storage 42 Working Natural Gas Change in Estimated Storage Data...43 Natural gas futures prices ($/MMBtu) 44 Coal Production 49 Weekly Electricity Output 50 Electricity Output 51 Total Degree Days 52 Average Cooling Degree Days 53 Average Heating Degree Days 54 Generation Share Forecasts and Implied Capacity Factors 55 Estimated Generation by Fuel Type 56 Estimated Capacity Additions, 2007-2030 57 2 EFTA00606160 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan NRG Energy update We have updated our NRG financial model in advance of earnings. We estimate that the company generated $384 million of EBITDA in the fourth quarter of 2011. Based on the current forward curve, we estimate NRG will generate $1.75 billion in 2012. We expect a more modest EIBTDA of $1.5 billion in 2013 as the company's hedges fall off. We expect EBITDA of $1.8 billion in 2014. On the conference call, we expect the company will spend time laying out how, if at all, NRG's strategy has changed in the current low natural gas price environment. We expect management will address its plans to refinance the 2017 notes. The notes became callable on 15-Jan-12, and can currently be called at a price of 103.688. On prior conference calls, management stated that it would refinance the 2017 notes in early 2012 so that all of its senior notes would have essentially the same covenants. The non-2017 notes and the credit agreement have a restricted payment basket that grows by adjusted EBITDA minus 140% of interest expense. This should build much more rapidly than the calculation under the 2017 notes, which is based on 50% of net income. We believe the company is likely to be fairly interest rate sensitive with regard to any new debt issuance. As such, we expect the notes are only now approaching trading levels that imply the company would undertake a refinance. Although we believe that the company has over $3 billion of secured debt capacity, we do not think that NRG would issue secured debt to refinance the 2017 notes. We believe our model is conservative from the point of view of a credit investor. We assume that the company refinances the 2017 notes and then completes $400 million of share repurchases and $30 million of dividends in 2012. We assume $400 million of share repurchases and $80 million of dividends in 2013. We believe these assumptions are conservative because in a low natural gas price environment, we would expect management would pull back somewhat on shareholder friendly activities. However, even with these assumptions, we still estimate that the company's liquidity ends 2013 at $1.5 billion, down from $1.9 billion at 3Q11. We expect gross recourse debt leverage would increase from 4.2x to 5.3x at the end of 2013, before falling to 4.3x at the end of 2014. Net recourse leverage would increase from 3.6x at the end of 3Q11 to 4.8x at the end of 2013, before dropping to 3.9x at the end of 2014. We believe NRG Energy is set up to survive an extended period of low power prices. As we have indicated above, we believe the company has the relatively easy option of decreasing shareholder friendly activities to guard cash. As such, we reiterate our Overweight on NRG Energy. 3 EFTA00606161 EFTA00606162 fill king m 2l 1101 55 PE ®,« 4" "g xrd, an I ■ 1 it I: iv Igtia O els to9 *El I ig If ila RU A lig EC M.IE zlf EMI;It Egg 3 6. I iI I ill North America Credit Research 16 February 2012 J.P.Morgan NRG Energy, Inc. 414440.4/ )4W17,14.4 — his ANA — Bad 40 Ansi — Ma Ansi ACES Anal Aar Own DOM —a COON 4,01. Fstrie 5.4nor lino. Sine 100 Pr arn NO Sill "11 Arno We. ~Ma Man. mob AIM 'YEW Ili= ilia )IC.,-,) 14.4b.14 firer NSW I —1:17312 µIS so IS 11.0 12.13, µ1O lina 4/.1 col TV" PS/9 SI gi 1„n µT 144 PO U. 1. In V. 11 V 1,3 P1 4 In 445 1444 SW Po 141 so µ nix slois µM> WU CM Ilan Ono on 11014 SIAll SIN. Slab RN Urn COS *As pa CIO PAS Pa STAN U.N. UM 16/04 PM Pan a1µ PAS nAS UM lull 1µN Mat Kis 10.03 IWO PM OM PS, NM NAM Na Nab Kr INAS 11 V V N 1/ It 1,1 PI In4 IT/ PN tbl 112 411 SI PM WI INT DU SW PO CO MI 044 co co WI co Sc. IM SO Sc. WI WI 16 10 N SI * N 4 II 90 14 0 10 Sall Mil 10 SI 10 N SI * N N II N SUN VMS UM MU bill PIN SIM 91443 9.4 SIM PM SIM PM P.413 NM ION HMO HON 41/40 NUN um limn time Ions CCM WM SCAN MAW NMI SIP) Phi PM Inn 'LOS 1(04 UP. kW 540l, 1.14 424 VO0 NM PAS 11111 SA 04% IN NN 19.V• 2.11. bit MA VA On I n Mb in 41% /MI se 4 4. tit 52:4 Uft lb It. 2.1. 2k 14 14 lit O. IN ob lb vn Iltc IT, aft Olt It It I la le 1k 2A. Las lb 424 444 La lb lb ON lk lb 4 44 lb lb IN 1a lb 24. 22. /44 Ii, 444 411 IN 01 It lit 37.. in 9% n In lin In DI Of 44% en WI In µ% NI. AM In In SIN 15% M Kt In In A% a OK la 0 Wan CMS WIC CIIII VIZI µ1q CIS 031441 VANi PIA> MOO PAIN PAM 511110 NINO PTAS PAM SAM Man 4M9) 411)1 4µW SIND II 610.1 J 4 4.74 NM rani Mlle. MOM ▪ .,....•••”••••• it , Co......i.•••••••••••,•{4 1 Han noon IMAM out Sir nan cum444 ta camben mi abooran WI IMMO& PM Si Marl laraiaa SVC Star AlammanIMI now ltli 11111 lain we MGM 7 I/ 41 09) Mama N ltallAinmainas Na SIM boon µ 1/0007.44441W079 470 710.10•X .--717/. 1171.0400•07711. NM 47.44 Man INMOomenla DP µ'9 ifillrMainas72I PP) WM. Namrarprr MS Ulla h in•344 Am= Sem. Mb ila 3912 AV 4.4404 CM Mr LSO Tberal .474741.30 I'S 4.3.x.ioN co...ono tilo OAS Nona o.viare 0.10.2 Ilbandla Tattlealt. LLM ION MK IMO lb Meg nail lila awe tepee NAM *a ammlnabra P AVATWO.N4C.k. IrMbra440144 loon 3... Sow. V.I.. 445 lt, MO WM.* art 14) IIMM 74l Sr riot 5414 NN NAMPA& Pita XN VI 8444M4479 1%) Ilmlie WO PA4. JAYA. 444 004/740 44041 Wins V AA inn nomobb. MI Itatil St ni Was Ann _M. MMINair MON 0.41440100PO4. Pr/ myna.. 4ft 174104bin 744. bM AL non anionov1/474/4 EFTA00606163 Dave Kaiz. CFA North America Credit Research 16 February 2012 J.P.Morgan Edison Mission Energy update We updated our Edison Mission Energy financial model in advance of earnings and following the downward move in the natural gas forward price curve. As we indicate in the Natural gas price sensitivity section of this report, Edison Mission is the most notable credit in the high yield IPP space that does not provide an estimate of the effect of a $1/MMBtu change in natural gas prices. Further, we believe the company is unlikely to provide 2012 EBITDA estimates in conjunction with its earnings release/call given that the 2012 Southern California Edison General Rate Case remains open. As such, analysts am unlikely to have clarity into the impact of recent fonvard curve price changes in the short-term. Using the current forward curve (accessed in Bloomberg by NGA <CMDTY> <GO> CCRV <GO>) and assuming that natural gas price changes result in heat rate changes, we estimate that the company generates $77 million of adjusted EBITDA in 2012, $309 million in 2013, and $582 million in 2014. We estimate that the company would have $580 million of liquidity at the end of 2014, but this presupposes a full refinance of both the EME credit facility and the Midwest Generation credit facility. It also assumes that the 2013 notes are successfully refinanced. If the company were so inclined, it could likely refinance all three of these facilities as secured debt. Using 2013 EBITDA, this would imply secured gross leverage of 4.9x. Still, the ability to refinance has likely become more difficult as natural gas prices have fallen. Further, a refinance of all three as secured debt would layer the non-2013 notes. We value Edison Mission's assets on a $/KW basis (see our initiation linked here for our original valuation), and do not feel that valuations should move in anything approaching a 1:1 relationship to natural gas prices. However, we do feel that as natural gas prices fall, the recovery value of the company's assets falls as well. Recovery values also fall as it becomes more likely that the existing notes are layered. Thus, we believe it is more easily posited that Edison Mission's bonds now trade ahead of recovery value whereas we believe they traded at or around recovery value just a few months ago. Further, over that period, given the fall in power prices, we believe the likelihood of a recovery scenario arising, has increased. As such, we arc don ngrading our recommendation for Edison Mission Energy credit to Neutral from Overweight. 6 EFTA00606164 Dave Katz CFA North America Credit Research 16 Fetruary 2012 J.P.Morgan Edison Mission Energy X /044NOAL SU1101110 Mal /Na MYY 40.41 MW Ma/ /Nul Achd Admol miIu1 Mal Meta bond. NOK blets E•1444 0104 ANS Rate 5.4444 Dont« fil 04. FJ %se fa Va 4,4144 IN, 1010 3110 41% 015444 .00 230 »0 14104 554 444, fil rat f,4 ,4or MI VIT 7011 NE2109 V1041 000 H$011 WON.% NT Mt 3045511 100•11 1454el I 11.00in M3411 4002 ne MIS no 2,44 0 144511. Little 11040145% y4 2e( 10E2SCO 11514 12111 UR? 1451 1.13 101 Mt 1242) 1514 la 1411 1144 11.124 V MI 12214 by) 12111 12231 02% .Hit 4" .11 SIS ul YS .I4i 1Y% .151.4 an MN .10s. 4.0% n2)% • ls% 714.% .14% . 5 5% 14% lui 164 1142 17$ WU 01 Im 12)? UN 1%2 5174 Sen SPI Self 1124 Vit 1140 StOS SS0 1584 SNI 1511 08 CM 110 SIN 1614 142 SM) SIN 1110 $711 01 040 SiR SM SIN 416 1114 SM 114 14 IN Hf 101 114 Hé l$4 141 SITI sin MO vie sin en 1214 sut 104 fa Su 14 IN 1112 14 14 SN 144 $112 S01 SNI 105 SIN IO 18 SU 14 SO 0 as IO 141 Io ti If SI Si If SO V 151 UV SIAN $1.341 1115 101 la Mi ne Pu 1101 011 MI SIN SNI in Id» 1412 iW 1440.11111/04 VI% SOS% 411% Mi% Un 112% 45 Nt )IN MN NN 10% 131% 0 I% LOA Wh 01% 233% MN 41400 14 Nt 111 SN VI ii23 50 NI $10 VS NO MI Pl 0 VI S55 VO 1111 01044444 MUN 140 Nef V 111 1443 UN 1114 1/0 1114 1441 VO 511 le M Wb 1•4 01 ire Se VI% 342% 03% 31 I% 34.4% 41% 4111 814 210 MM 144 111% 118% INN Ori me zen Mi %me, Creneneurtmen fus file Mt Mn 939 ir IR nt NO 1/2 119 VI W 044 1311 SV VC0 MI 114) $114 1412 PA $0) VS 09 444 1141 VIT 1114) RI (1/11 N 11110 n144 161 W Er VI% 210% )13% Nt% 204% 41% NN i11 IV% 11 .10 I% 1N .19% 0% •111\ 45% en 2T %%Se Fin ratxne Pm incuenselenes 11.1. 'Mer 412S• 11,00, till) an ini) r ami lb Mn nin ntsi irl nIti Rei en in /0 If SO so so 10 bl 1) 13 I) Il SI so ss e W 14 irt4.5000440•540 newelehal IO 0040 *cn dta 444.01 e2) em, em em eei el) ni) 4'i en ni) Mil d» d» 1101 en su 0130 51941 40 .1211 1114 01 41) SO e 'Sb IV) IO le fi eh III RU id 110 0441105154 SM $273 1273 1234 n SN 1444 SM 14%) 10 VO SN W tel 1311 111 MN SNI 04441404514 SUS Pie 1) SO SO 10 10 9) 1) 10 I) II SI W If SO W IO 1. 0“.••••0•4"..rnend ont 10 Mie 46) .lib Me ez te SI ISsi 4h RU egé d» SI 10 11 0 1114 Onntominiaxreti egt UN 1114 SHI 00 IN IM Slif ri sus en en 131 CUI 001 111211 lien MN 1110 Er Tm creek.):«01 41 5216 LM it6 M Ire% ni 13 111 ge 11111 SM inli OUI .1312o asti 016:4 en 1) 14 SO 10 10 0'i d» 10 I) 11 SI 10 Si SO W ln Mati ibis% eo el) Ine4,11.4•444414.44eqs41•441 5.111 Ma SIN 1244 SM ru lin nui se 1114 dl» LU OUI 0421 (W11 I1114 44511 ON fleti RH 13 in 1) N W kla 144404044440 NA440411444/14. 11 04 Nim Mme 104 5414 3111 Ill W R10 10 1 1111) SIN 411 11121 SJI Ont 110 11101 1/199 011 11121 110 10 SNI 1314 VS 004 11.8 SOi SHI Ain 1110 131 d:1 .1171 .1171, 011 d211 Nb 1111 02 1114 SN W IN SM 141) NI 0 0 IN /325 IN) SM 146 mi SO 10 13 10 10 M 10 so PZ in SO Rn 537 re fil N W un un 1210 133 in? 542 5.5.2 ;Pa m . SIN 111 etai Mn isir ru .130, 00 (11444 110 1133 nee, 14, eV» $.33 0114 101 M1nn 011. Nt 117114I 1331 mu ssi i Si)), ifiesi. Mn 410 11L2 un 1511 Mi ne Inn 1414 114 SIM MI 1110 IRA 00 Stin art (IV* «Il Un n)50 es% em ISZU, Rat I sin eze, em ne» T11) diS4 41:.,Ii .114« 041, 1115:0 en !VIL IO 10 1) 9) SO SO 93 91 1) 10 13 li 3.'1 1.1i4 192 Pro es, If 01. 4/4) II IO so e SO 9i 1) 93 1) el s Sb Si N Sb 1) 110_ 119911 ri Illn 1134 rie fie 1120, Mln fi ii»0 1411 III 141 ni)1i Mis >ln tria EFTA00606165 North America Credit Research 16 Fetruary 2012 J.P.Morgan Edison Mission Energy Hka L1 nan i. il n MYM 441•4 Mnd Adel hagl Mod Agiad Mur Attal anal Anal And ~a høna Fllnb etatig aha Raa 0.4 1444, hån! ars , ' 1013 1310 1310 430 'ulet., , i11 2011 3011 431. Falla 'far AJra kaga 1.111 gana sbsiims Cabin. a/n...n. 124 Si Hl lefle! VS. 11Pl 91228 3 / 441, 11 50334 32.141.10 1307 »340.10 11.432 311:40•0 $1.3,5 2222 Si (45 ,,,,,,. ,t ST al in.pii 5433 nswil 11t15 Ill>.-»i 11233 ',ran' 11233 [Yr ?vit sat —1911 _aua MM Lzris tu ss is4 Sal'' , na meg $1» N. $3 10 10 li) 10 40 /4 li) P 41 $3 10 se Itgaiel 411 $0 193 /16 Re 115 11 H PO Pl $41 111 114 $.1 fa $13 NS na" Ml 42314. SOPI KRI Sal 14.729 lag KM KM »Si 14213 KIM kW FOR Ral Ria MM ia* 14.501 Ia» 14.101 nal 1/143 11457 Ia» 14111 111•1 nal lill) 1011 nne SUN ldM 11111 144.00 venn 141 SO 5I3 IN Id IS IS 14 14 14 13 12 13 52 12 12 52 11 3040043e 400 $2142 112123 RIR SZMI $2.321 Ral Sta MP' 12 1112 SEM 11731 61N1 4204 12114 11111 Raf RIN 52/11 taptiftg034 lan 144// Reel PAR VAR PAR 1034 17.173 PM RIM 17.1.1 Pal sym IRR RIO Moa 1044 0440.0 RO) $11101 P654 PM 007 U911 121,1% $11,4 61M 41124 24241 P731 11el 14074 10042 SART am aeglag, fCF ege iset tty Regi 31% 0.70 I 2% 31% 34 Ml X14 Pill 114 1q LIT 144 M 1411 00440/ 11111 21.4/1 11.35. 11216 11.1e Reel Reie 41.114 11.774 11331 14231 12221 41.114 Ral 1 .921 Cm»~agg' ankar, 0040. Ln • Se 21. 1b 013 64 SM 1.,;. esnA• rc° ~tir", lex 2 24 li la 044 084 01. 01. KU etg 144 444 INN 144 IIN PM Recon,o,wscry4 241x 43. e. 5.44 Re 624 01t ai 341 la etg 114 In III 1214 Tx 001Cgategglie 443 •24 1. 644 Y& 111. 1314 74 at Daa Me 4.5x lee 344 2b ;f. ta la 644. Sie 6,40 4gh et ax Sle S4 413 eig 444 Mig lata 1314 ela SM Ran»C0100. 14% Sit 57% 51% SS% Sl% 541 51% 54% 54% 52% Ha SN 41% 54,1 000,444010 21% 16% R% Q% 43% H% Ca 41% 44% (115% On II% 71% 17% Dasieggi Sa Slt 41% Sa 41% SI% 53% 54% 49% 51% 13% tanharaIRRA CAPITailAION 1.131.111Y dall 44.40 Inni. , (Sn* Anal » II %nat, talnazeM11.1 T.h Sala. rases» el Rana, ta, 10 Ga tri411040<oetilnaia .4.3312 1544 Parar. 11 eVE gra la4 el ~sa I) *Sn: tesot~aS3 ff*? welbaroissenci on istsi It"): :cso ~MI $5» sis sm 303% inc.roe a Ml ST », ?Sos fim..ida a 21111 Pr» /14 24040anågrecralaltarganel es la» 15» 000% al cg gag 0• 2017 li» Oalv.g I) 4.1.4%1~4~.444a5.40414044,041kges.342016 k» 144~4 I) lbeas da Me» illa 0~5401404044 tea {itl Nei0034•4040 __ia 1141 1417 1g131 RiOg *fø /OS i14 11.231 Mary ans 1/ Sguet CeesaAregag aatran Eat Ra! Tal C 4/Igiw• Pag .tect~ mws M.1 111,4144.enoxe Cagearle4N..411~444 404204111114 COVERA« (1181 441044e4nOwie0iza n I I.YYY a efiaa =Oil »San runda .. IM UROA UR 22'2 114 a 11.133 23'1 1411 Ml 543034 SPI 1233 14.1 le) os* ~av on izters ie ass% ~Naiv 131% San Ifflie a«Canta Ihne 8 EFTA00606166 Dave Katz CFA North America Credit Research 16 February 2012 J.P.Morgan Natural gas price sensitivity Natural gas prices have fallen substantially over the last two years. The curve as of 31-Dec-11 averaged roughly $4.37 per MMBtu, compared to $6.96 per MMBtu as of 31-Dec-09, for the roughly six-year period from February 2012 through the end of 2017. However, following the end of the year, prices fell further and now average $4.10 per MMBtu over the same 2012 — 2017 period. The forward curve currently does not move above $4.00 per MMBtu until December 2013. Figure 1: RPM capacity sold in PJM base residual auction • price per MW•day POD, 19 CO SOW srm 11100 SOW $4 00 aeu am 0 ,00 0M tet yy # 41„04/ 1 0Ntetet ytlinnt, 314Deo20I 1 31.0eb.1010 —304n4010 - • 31.00e-200D Source: Company reports. Given the rapid and substantial decline in natural gas prices, we believe many investors will want to know the extent to which IPP's are exposed to natural gas price moves. There tends to be an inverse relationship between natural gas prices and heat rates. As natural gas prices fall, off-peak market heat rates rise as gas plants displace coal plants. As Calpine indicated on its conference call, some of its competitors' coal plants are now cycling daily while the company's combined cycles are now running baseload in several regions. In on-peak hours, a higher market heat rate is required to cover generators fixed charges incurred for starting and running plants. We believe that most IPPs do not account for this inverse relationship, instead providing sensitivities as if heat rates were fixed. As such, following the current fall in natural gas prices, we would expect IPPs to decrease their sensitivities to further equal moves in natural gas prices. We believe this was to some extent behind the a EFTA00606167 North America Credit Research 16 February 2012 J.P.Morgan decline in the sensitivity for a $1/MMBtu change in natural gas prices as disclosed in Calpine's 3Q1I and 4QII conference call slides. However, we also believe the decline was more pronounced than it would be at other 1PPs given Calpine's natural exposure to greater generation volumes as natural gas prices fall. Table 1: Calpine's estimated effect of a $11MMBtu decrease in natural gas prices (S mn) Sensitivity for SUMNIBtu decrease As of 3Q11 As of 4Q11 2012 $149 $61 2013 $340 $224 2014 $366 $271 Source: Company reports and . Morgan animates. GenOn, NRG and TXU provide data on their 3Q I I conference call presentations indicating the extent to which they are exposed to swings in natural gas prices. We have estimated Edison Mission Energy's sensitivity given that the company does not provide the data. As we have indicated, we believe the numbers below, especially for Edison Mission, likely overstate true exposure. In our models, we have attempted to adjust for heat rate effects. For example, our Edison Mission model does not show the same EBITDA sensitivity as indicated below. Table 2: Estimated effect of a 11/MMBtu decrease in natural gas prices ($ mn) from 3O11 data Sensitivity for SUMPrIBtu change EME GEN NRG TCEH 2012 $487 $97 $56 $15 2013 $561 $202 $344 $245 2014 $576 $230 $430 $395 2015 $455 $550 Source: Company reports and. Morgan estmates. Noe: NRG is for beset ad penmen senstentyon?/. We can then compare the data to the company's LTM EBITDA and liquidity. We note that the CPN data is from 4Q11 while the other credits are from 3Q1I. Differing methodologies may make intercompany comparisons a bit apples-and-oranges, but we believe it is still a useful starting point. Table 3: Implied change in LTM EBITDA and liquidity for a S1IMMBtu change in natural gas prices Change in LTSI EBITDA as %or CITE EBITDA EME GEN NRG TCEII CPN 2012 83% 14% 3% 0% 4% 2013 95% 29% 18% 7% 13% 2014 98% 33% 23% 11% 16% 2015 24% IS% Change in Liquidils as *A or 1:161 EBITDA EDE GEN NRG 'WEN CPN 2012 22% 4% 3% 1% 3% 2013 25% 9% 18% 10% 11% 2014 26% 10% 22% 16% 13% 2015 24% 22% Source: Company newts ands Morgan esirreles Non: NIG is for baseioad generation senvowty only. TCEH equated 6131704 is as per the maintenance =want. CPN data is from 4011. Other company data is horn 3011. 10 EFTA00606168 Dave Katz. CFA NorthAmericaCreditilesearch 16 February 2012 J.P.Morgan PJM capacity auction As winter winds its wily way through our weary souls wailing its abnormally tepid laments, we believe investors will look forward to that which awaits on the vernal horizon. The PJM Reliability Pricing Model ("RPM") Base Residual Auction is set to open on 7-May-12 and close on 11-May-12. The results are scheduled to be posted on 18-May-12. The RPM capacity period runs from 1-Jun to 31-May of the following year. The May-12 auction will be for the period running from I-Jim-15 to 31-May-16. In the past few years, prices have varied substantially from one period to the next and within PJM's regions. As we illustrate for Edison Mission in the figure below, a producer with multiple plants can face drastically different prices from one year to the next and from one plant to the next, depending on the settlement price within PJM's regions. Figure 2: RPM capacity sold in PJM base residual auction • price per MW-day S250 S200 S150 S100 J Soo 2 SO rn 0 0 0 r r r Al Al Al o o 0 et et et in 7 47 ea M" U — Midwest Generation Homer City Source: Company repots. We believe investors will likely want to know key high yield IPP's exposure to 2015/2016 the auction. In the below table, using data from the 2014/15 auction, we estimated the effect of a $25/MW-day change in the PJM RPM capacity clearing price on Calpine, Dynegy, Edison Mission, GenOn, and NRG Energy (TXU does not have PJM exposure). We sort the table for relative exposure. 11 EFTA00606169 Dave Katz. CFA North America Credit Research 16 February 2012 J.PMorgan Table 4: Estimated revenue effect of a $25.1MWday change in PJM capacity 2015116 auction price sensitivity Sensitivity (Smn) for a as a % of S25/MW-day LTM LTM EBITDA (Smn) move EBITDA NRG Energy Inc $1.$73 S9 0.5% Calpine 51.726 S37 2.1% Dyncgy Holdings $399 S14 3.4% Edison Mission S707 S58 8.2% GenOn Energy $698 S$9 12.8% Source: Company repals and t Morgan esomales. As can be seen, as a percentage of company EBITDA, GenOn has the most exposure to swings in the settlement price, followed by Edison Mission. We believe NRG Energy has very little exposure to the PJM auction. We believe Calpine also has relatively modest exposure. t2 EFTA00606170 North America Credit Research 16 February 2012 J.P.Morgan Industry news On 26-Jan-12, FirstEnergy announced that its generation subsidiaries would retire six older coal-fired power plants with total capacity of 2,689 MW located in Ohio, Pennsylvania and Maryland by 1-Sep-12. The company attributed its decision to close the plants to the EPA's Mercury and Air Toxics Standards (MATS), which were recently finalized, and other environmental regulations. On 3-Feb-I2, TVA said that it elected to accelerate the idling schedule of the four units at its Johnsonville plant, with total capacity of 576 MW, "due to operational issues on the remaining units at Johnsonville and to reduce costs." On 7-Feb-12, the Midwest ISO said new clean air rules will force a shift from a primarily coal-driven generation base to one with more gas-fired power plants and renewables. MISO estimated $31 billion of retrofit and replacement costs that would place significant upward pressure on prices of up to $5/MWh, excluding potential pressure on gas prices. MISO said that in the medium-term, gas infrastructure in the Midwest would require $2 billion investment to meet resource adequacy needs (as much as 10 GW by 2016) in addition to harmonizing with the electricity markets. On 8-Feb-I2, FirstEnergy announced that its Monongahela Power Company subsidiary would be retiring three older coal-fired power plants with total capacity of 660 MW located in West Virginia by 1-Sep-12, citing high cost of compliance with the EPA's mercury rule and other environmental regulations. On 9-Feb-12, the U.S. Nuclear Regulatory Commission approved Southern Co.'s plan for the first licenses to build two nuclear reactors in Georgia. This is the first approval of a new U.S. nuclear project in more than 30 years. In 2010, the Energy Department in 2010 awarded Southern and its partners conditional approval for an $8.3 billion loan guarantee for the project. On 12-Feb-12, Public Utility Commission of Texas Chairman Donna Nelson said that the low cost of natural gas and power is removing the incentive to build baseload generation units in ERCOT, creating uncertainty as to whether Texas will have enough power to keep the lights on during peak periods of demand. 13 EFTA00606171 Dave Ke CFA North America Credit Research 16 February 2012 J.P.Morgan Recent company news • The AES Corporation (AES) On 3-Jan-12, AES announced that its subsidiary, AES Eastern Energy, had filed for Chapter II bankruptcy protection. AES Eastern Energy operates over 1,000 MW of capacity at four facilities in New York. AES Corporation did not expect the bankruptcy filing to impact its previously disclosed FYI I guidance metrics. On 5-Jan-12, Moody's said the DPL acquisition had strengthened AES global portfolio by improving the scale, diversity and cash flow quality of its existing North American asset base and was a factor in Moody's upgrade of AES' Corporate Family Rating to Ba3 from B1 on 28-Nov-11. Moody's commented that AES' Ba3 corporate rating reflected its high leverage, the structural subordination of its recourse debt to the significant amount of non-recourse debt in its consolidated capital structure, and the risks associated with the regulatory and legal regimes in the company's countries of operation. These factors were partially offset by AES' large number of subsidiaries, the subsidiaries' wide geographic distribution, the significant proportion of the subsidiaries' cash flows that were subject to stable regulation or long-term contracts, and the company's good liquidity prospects for the next twelve months. The stable rating outlook reflected Moody's expectations for predictable parent operating cash flows over the next several years as the company integratcs the DPL acquisition and completes certain construction projects, and that shareholder rewards programs would be neutral to the parent's credit quality. Moody's saw limited prospects for a rating upgrade, but said an upgrade was possible if AES' ratio of parent operating cash flows to parent level recourse debt exceeded 14% and cash coverage of parent interest expense was above 3.0x on a sustained basis. The rating could be downgraded if AES' parent level operating cash flow to parent level recourse debt fell below 10% for an extended period of time and a more aggressive financial policy focused on further increasing shareholder rewards was undertaken. On 3-Feb-12, The Valor Economico newspaper reported that Dobreve Energia SA, a Brazilian renewable energy developer, may sell wind projects with 205 MW of total capacity to utilities AES Corp, Energisa SA or EDF SA, citing unidentified financial market participants with knowledge of the negotiations. The newspaper said AES was at the most advanced stage of negotiations. The article also mentioned that the wind farms may receive investments totaling billion reais (around US$581 million). On 6-Feb-12, a Bloomberg article, citing radio Horizont in Sofia, said that Bulgaria's Maritsa East coal mines suspended production as the overflowing Maritsa river had flooded access to the mines. According to the radio/article, the three power plants that are serviced by the mines — AES Galabovo AD (run by AES Corp), Maritsa East-2 and ContourGlobal Maritsa East-3 — had reduced their output. • Calpine Corporation (CPN) On 27-Jan-12, Santa Rosa Press Democrat reported that Calpine's workers at The Geysers voted against union representation. 14 EFTA00606172 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan On 3-Feb-12, Calpine filed comments with the EPA, objecting to a proposed settlement agreement between the EPA and a group of Demand Response providers that, according to Calpine, would allow emergency backup diesel generators to quadruple their allowed operating hours without having to install appropriate air emissions controls. Calpine asserted that in addition to the direct adverse impact on air quality, allowing these dirtier units to participate in the market as capacity resources would displace investment in far cleaner and more reliable generation. On the same day, the Sacramento Business Journal reported that Calpine had said it would have to shut down its Yuba City, CA gas-fired power plant if it does not secure financial help because it could not get a contract to sell power to a utility this year. CISO said it could not let the plant retire because it's need for capacity reasons. On 10-Feb-I2, Calpine reported 4Q11 adjusted EBITDA of $379 million, slightly above consensus' forecast of $373 million. Production increased 22% from the prior year to about 25 GWh. Total GWh generation declined 6% yly in the West region. Generation was up 48% yly in Texas, 5% yly in the Southeastern region, and 81% yly in the North region. We calculate free cash flow bum was $52 million after a $119 million stock repurchase during the quarter. Liquidity decreased $93 million sequentially to $2.0 billion. We estimate gross and net leverage ratios remained steady at 6.0x and 5.3; respectively. The company tightened its FYI2 adjusted EBITDA guidance to $1.6 billion to $1.725 billion from the previous $1.55 billion to $1.75 billion and adjusted free cash flow to $425- $550 million from the previous $375-$575 million. The new EBITDA guidance was in-line with consensus' forecast of $1.66 billion. • Dynegy Holdings LLC (DYN) On I 1-Jan-12, The U.S. Trustee appointed Susheel Kirpalani, a lawyer at Quinn Emanuel Urquhart & Sullivan LLP as an examiner to investigate the reorganization of Dynegy Inc. The appointment of the examiner followed a hearing last month in which U.S. Bankruptcy Judge Cecelia Morris in Poughkeepsie, New York, agreed that a probe into transactions leading up to the bankruptcy filing, and into whether creditors were harmed, was required. On 18-Jan-12, U.S. Bankruptcy Judge Cecelia Morris granted a motion by the court-appointed examiner in the Dynegy Holdings LLC bankruptcy to issue wide- ranging and expedited subpoenas. The examiner, Susheel Kirpalani, chairman of Quinn Emanuel Urquhart & Sulllivan LLP's bankruptcy and restructuring group in New York, has until March 12 to complete his report. On 13-Feb-I2, The Wall Street Journal reported that the U.S. trustee, Tracy Hope Davis, was objecting to Dynegy's disclosure statement, which must provide lenders and creditors the information they need to make an informed vote accepting or rejecting the Chapter II plan, saying "the examiner has not yet completed his investigation and issued his report, without which, the debtor cannot provide adequate disclosure." The trustee said there was not enough information about the reasons for retaining equity holders' interests when creditors were not receiving full payment, the impact on creditors of pending litigation with U.S. Bank and the reason for releasing the liabilities of Dynegy affiliates not in bankruptcy. 15 EFTA00606173 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan • Edison Mission Energy (EIX) On 23-Jan-12, Edison Mission announced commissioning of the Pinnacle Wind Farm located on Green Mountain, near the Maryland-West Virginia border. The 23-turbine wind farm has a maximum generating capacity of 55 MW. The company said that the project would sell two-thirds of its output to the Maryland Department of General Services and one-third to the University of Maryland system. On 6-Jan-12, Edison Mission's subsidiary, Midwest Generation entered into a multi-year agreement for the transport of coal with the Union Pacific Railroad for a specified minimum amount of tons, effective 1-Jan-12. The company did not provide additional information on the agreement's details, which were expected to be provided in EME's 2011 10-K. In 2011, Midwest contracted to ship slightly over 17 million tons of coal around 1,200 miles from PRB mines. Our equity Surface Transportation analyst, Tom Wadewitz, estimates that costs could have increased around 50%, from $ I3.77/ton to $20.40/ton implying around a $115 million increases in the company's expenses. This was in-line with the estimates in our published EME model. On 14-Feb-I2, The Pittsburgh Post-Gazette reported that a coalition of five environmental groups filed notice on 13-Feb-12 that it would sue Edison International, citing unhealthy concentrations of sulfur dioxide emissions from the Homer City plant. The groups also released a Sierra Club report that questioned whether the $700 million in pollution controls that the company announced for the plant would reduce emissions enough to meet federal health- based limits. It called on Edison to instead invest in renewable wind and solar energy production facilities in central Pennsylvania. The 60-day notice of intent to sue was required by the U.S. Clean Air Act prior to the filing of a lawsuit in federal court and was delivered to the power plant owners Monday. • GenOn Energy, Inc. (GEN) On 11-Jan-12, GenOn announced that its board of directors had appointed former Secretary of Energy Spencer Abraham and former Federal Energy Regulatory Commission chair and Deputy Secretary of Energy Betsy Moler to serve as directors. On 6-Feb-12, the New Jersey Environmental Protection Department filed a motion in federal court to intervene in GenOn's challenge to the federal Clean Air Act permit regarding the company's Portland, PA plant. • NRG Energy (NRG) On 18-Jan-I2, NRG said that MidAmerican Energy Holdings Company had completed an acquisition of a 49% interest in NRG's 290 MW Agua Caliente solar project. On 2-Feb-12, NRG through its subsidiary, Louisiana Generating, entered into definitive agreements for an 11-year contract extension through 2025 to provide power to the Washington-St. Tammany Electric and Claiborne Electric cooperatives. Both cooperatives filed applications with the Louisiana Public Service Commission on I-Feb-12 seeking approval of the agreements. Together, the two contracts are for more than 450 MW of electrical load at peak demand. On 7-Feb-12, GCL-Poly Energy Holdings Ltd., China's biggest polysilicon 16 EFTA00606174 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan maker, set up a venture named Sunora with NRG Solar LLC to build sun- powered projects as it seeks to diversify from producing raw materials. Sunora will build projects using GCL-Poly's photovoltaic system equipment. 17 EFTA00606175 Dave Nat. CFA North America Credit Research 16 February 2012 J.P.Morgan In Case You Missed It: HY Utilities Reports Date Title 3-Dec- I I NRG Energy: Initiating Credit Coverage with an Overweight - A Christmas Treat 04-Nov- I I Edison Mission Energy: The Timc Is Nigh to Adjudicate 2I -Sep- I I Edison Mission Energy: Go, EME, Go: Initiating with an Overweight la EFTA00606176 Dave Katz. CFA North America Credit Research 16 Fettuary 2012 J.P.Morgan Utilities credit tracker — STW ranked by Am/m Tlghtened(wldened)by Bond and J P1lorgan 11Y Index STM 31-Dee-10 13-Jan-12 14-Feb-I2; Absolute Ragen: Absoluta-RYTEI EFH 6.500%2024 1,664 1,519 1,405 1 115 I 259 AES 7.750%2015 419 -170 367 103 I 52 AES 8.000% 2017 a 506 420 I 87 I 26 F111 10.875%. 2017 1.655 1506 1.4321 74; 223 EFH 6.550%2034 1,261 usa I 731 301 AES 5.0«0% 2020 397 484 415 70 (I8) NRG 7.625%20)8 749 681 I 67 I CPN 7.250% 2017 534 563 499 65 35 AES 7.375% 2021 446 387 1 59 A ES 9.750%2016 496 482 424 54 72 EFH 12.000%2017 1,794 1,507 1,449 I 58 I 345 AES 7.750%2014 425 377 323 : 54 102 EFH 10.000%2020 667 776 723 I 54 (56) EFII 10.000%2020 667 776 7'3 ; 54 ; (56) EIX 7.750%2016 a3 1,783 1,753 j 30 I (839) EIX 7.000% 2011 935 1.807 1.778 1 29 I (843) EFH 9.750%2019 856 831 j 25 I (121) EFH 9.750%2019 711 856 831 ; 25 : (121) NRG 8.500% 2019 756 734 22 I (188) CPN 7.500% 2021 442 531 510 : -1 (68) EIX 7.625%2027 1,277 1,256 I 21 1 (478) NRG 7.375 -017 496 590 5,_ 17' (76) NRG 8250%2020 714 697 17 ; (186) EIX 7.200% 2019 863 1.615 1.602 13 (739) CPN 7.875%2023 529 517j 131 EFH 7.480%2017 877 960 949 : 11 ; (71) NRG 7375% 202 I 698 690 9I EFH 7.460%2015 780 702 696 7 84 GEN 7.625%2014 775 751 I 4I (192) NRG 7.625°- 2019 722 724 : i2); GEN 9125%2031 2 ~IE~P 791 796 I (5) (251) CPN 7.875% 2020 498 554 560 1 7 ); (62) CPN 8.000%2019 IEES 558 574 I ( 16)I (431 GEN 8.500% 2021 516 774 821 : (47) (304) GEN 7.875%2017 an 818 947 I (128) (3361 GEN 9.500% 2018 689 86-1 9981 1134) (310) GEN 9.875%2020 5 845 985 i (140) (314 TXU 11.250% 2016 2.236 3,781 3.930 s 1149) 11.694) TXU 10.250%2015 agER __5,50S 5,6591 (151) (7009 TXU 10.250% 2015 2,489 5.508 5.659 ; (3.170) TXU 11.500%2020 ,462 (198)I _~; TXU 15.000%2021 1.435 2,602 3.514 ; (912); (2.079) Max 2189 5.508 5.659 115 345 Mln 397 377 323 (912) (3,170) Mediae 671 776 774 19 (98) Averan 881 1.198 1,220 (22) (415) HY Overall Index 583 710 652 57 (69I 111 Utility 644 /48 724 23 (80) HY - IPPs 763 941 935 5 (172)I 111. Integtated IJtililis 353 409 365 43 (12) HY Split BBB 422 375 47 111? BB 416 479 438 42 (22) HY Split BB 572 523 HY B 588 734 671 63 (83) HY Split B 922 879 (1s2)1 HYCCC 1.009 1.270 1.167 103 (158) Sontos: 19 EFTA00606177 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan Utilities credit tracker — y-rw ranked by Arnim Tightened by Bond and JPAlorgan Index YEW 30-Dee-11 13-Jan-12 14-Feb-12 4. lute A Absolute A yly EFH 6.500% 2024 17.46% 17.20% 16.14% 106 132 AES 7.750% 2015 5.17% 15'.. 4,251 1(X) 92 AES 8.000% 2017 5.93% 6.02% 5.17% 85 EFII 10.875% 2017 16.15% 16.02% 15.31", 85 AES 8.000% 2020 6.44% 6.36% 5.70% 66 NRG 7.6255.2018 7.849. 65 CPN 7.250%2017 5.76% 6.18% 5.57% 62 El-II 6.z>0% 2034 16.06% 15.15% 14.55.. 60 151 EFH 12.000%2017 15.58% 16.03% 15.47% 56 AES 9.750% 2016 4.91% 56 95 AES 7375%2021 6.21% 5.67% 54 EFII 10.000% 2020 51 47 EFH 10.000%2020 8.91% 8.96% 8.45% 51 47 AES 7.750% 2014 3.51% 50 32 CPN 7.875%2020 6.39% 6.44% 6.15% 30 25 E1X 7.7,0% 2016 16.57:4. 15.51 h 23 . 28 -166 E1X 7.000% 2017 17.26% 18.93% 18.66% 28 -140 CPN ROW:1.2019 6.76% 6.71% 6.4r. 24 29 EFH 9-750%2019 9.74% 9.51% 9.28% 23 46 EFII 9.750% 2019 9.74% 9.5I% 9.25% 23 46 NRG 8300%2019 8.157E 8.87% 8.6876 19 a. -53 CPN 7.5(X)% 2021 6.23% 6.30% 19 -7 NRG 8.250%2020 8.15% 8.71% 8.58a 12 IMF -44 E1X 7.625% 2027 14.27% 14.80% II -52 NRG 7.375%2017 4.80% 5.99% 5.8991n1 -109 E1X 7.200% 2019 16.06 4- 1,354, 10 -129 EFH 7480% 2017 10.42% 10.38% 10-2a 14 CPN 7.875%2023 6.73%. 6.64% 9 NRG 7.875%2021 8.71% 8.6 EFII 7.460% 2015 7.43°0 7.40% 3 3 GEN 7.625%2014 7.62% 7.85% 7.86% -23 NRG 7.625% 2019 8.5I":. 5.56% -6 GEN 9.125%2031 10.26% 10.26% 10.43% -17 -17 E1X 8.560% 2016 8.26%. 5.87% -38 -61 GEN 8.500%2021 9.58% 9.54% 10.06% -52 -48 GEN 7.87555 2017 8.69'„ 10.367, -130 -167 GEN 9.500%2018 9.24% 9.80% um. -137 -193 GEN 9.875% 2020 9.56% 11.49% -1.1) -193 TXU 11.250%2016 35.50% a. 38.56% 40.07% -151 -457 TXU 10.250%2015 49.13% 55.64% 57.18% -15.1 -805 TXU 10.250% 2015 49.13% 755.64% 57.18% -154 -805 TX11 11.500% 2020 16.20% 15.23% -203 ,EIX 7-500% 2013 9.77% 16.3714 -369 T -660, TXU 15.000% 2021 27.72% 36.89!% -917 Max 49.13% 55.64% 57.18% 106 151 Min 3.84% 4.02% 332% -369 -805 Median 9.24% 8.96% 8.87% 19 -7 Average 1236% 12.74% 1222% -8 -84 HY Overall Int 8.14% 7.94% 7.36% HY 8.73%. 5.8(91:, 5.66% 20 7 HY - IPPs 10.38% 10.70% 10.67% 3 -29 HY - Integrated Utilities 5.74% 5.61% 5.13% 38 5I HY Split BB11~I r— SA9% 5.35% 4.89% 46 60 HY 1313 5.88% 5.7394 5.34% 39 5-1 HY Split BB 6.67% 6.51% 5.96% 55 71 HI B 8.08'!::, 7.444. 6-1 8-1 HY Split B 10.50% 10.05% 9.59% 46 91 HY CCC 14.00% 12.46% 102 154 Source:~ 20 EFTA00606178 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan Utilities credit tracker — dollar price ranked by Arnim Price Increased by IbM Bond dollar price 30-Dee-II 13-Jan-12 14-Feb-12 Absolute a mtnt Absolute AV TI) AES 8.000%2020 $110.00 $110.50 $115.00 $4.50 $5.00 AES 6.<XX1 4. 201 t 51 1u.lX) 5109.50 5113.75 54,25 S3.75 AES 7.375%2021 S107.75 $108.25 $112.25 $4.00 $4.50 EIll 12.000"4.2017 S84.00 582,50 586.00 $3.50 52.(X) AES 7.750%2015 $108.75 $108.38 $111.75 $3.38 $3.00 EIJI 6 50(8'4.2024 544.50 $45.25 548.50 53.15 $4.0 NRG 7.625%2018 $100.00 $96.00 $99.00 $3.00 (51.00) EIII 10.000%2020 5105.00 5104.75 S107.38 $2.63 $2,38 EFH 10.000%2020 $105.00 $104.75 $107.38 $2.63 $2.38 EFH 10.875%2017 550.50 $81.00 S83.50 $2.50 5310 EFH 6.550%2034 $42.50 $45.25 $47.25 $2.00 $4.75 CPN 7.250% 2017 $105.00 $103.50 5105.50 Si®. S0.50 AES 9.750%2016 SI 14.50 $116.00 $118.00 $2.01) S3.50 CPN 8.000% 2019 $106.50 5106.75 5107.58 51.13 $1.38 EFH 9.750%2019 MINA» $101.00 $102.00 $1.00 $2.00 EFH 9.750%2019 S100.00 $101.00 SI 02.00 $1.00 52.(X) NRG 8.500%2019 5101.50 $98.00 599.00 ~"Yrn ($2.50) ED( 7.000% 2017 565.00 561.00 562.00 51.00 i 53 010 E1X 7.750%2016 $73.00r $68.50 $69.50 I $1.002- ($3.50) CPN 7.500% 2021 5107.00 $105.50 $106.50 $1.00 '50 50i CPN 7.875%2020 $I07.752- $107.50 $108.50 $1.00 $0.75 NRG X.251Y% 2020 5100.50 597.25 598.00 $0.75 IS2 50) AES 7.750%2014 $108.00 $107.50 $108.25 $0.75 $0.25 FAX 7.625% 2027 $59.00 556.50 557.00 50.50 152.001 EIX 7.200%2019 S62.50 $58.50 559.00 $0.50 (33.50) CPN 7.575% 2023 5107.50 $107.00 $107.50 $0.50 50.00 EFH 7.480%2017 $88.77 $88.99 $89.44 $0.45 $0.66 NFU, 7 M. ...O.] 597.50 $94.75 )95.00 $0.25 152501 EFH 7.460% 2015 $100.08 $100.08 $100.15 $0.07 $0.07 NRG 7.375 17 5103.75 S I 03.63 5103.63 50.00 i50 13i GEN 7.625%2014 $100.00 $99.50 599.50 $0.00 (50.50) NRG 7.625%2019 598.00 $95.25 595.00 (50.25) i 5300i TXU 10.250%2015 $35.50 $31.00 530.50 ($0.50) ($5.00) Dal 10.'50%'015 535.50 531.00 530.50 (50.50) S8001 TXU 11.250%2016 535.75 $32.00 $31.00 (51.00) (34.75) GEN 9.125% 2031 590.50 590.50 589.25 151.25/ 31.251 EIX 8360%2016 $101.00 $100.25 $99.00 ($1.25) ($2.00) GEN 8.500% 2021 593.25 593.50 590.50 153.00) 152751 EIX 7.500%2013 597.EO $93.50 589.75 ($3.75) ($7.25) GEN 7X75% 2017 596.50 595.00 590.00 155.00) iS6.50i GEN 9.500%2018 $101.25 $98.50 $92.25 ($6.25) (39.00) TM1 11.500% 2020 584.101 $78.25 571.00 157.25/ (513 86) GEN 9.875%2020 $101-50~$99.® 591.25 ($7.75) (510.25) TXU 15.000% 2021 555.00 $58.00 543.00 15150X) 1512.001 Max S4.50 $5.00 Min IS15.00) ($13.88) Median 50.75 ($030) Average i$0.031 ($133) Source a Morgan. 21 EFTA00606179 Dave Ka. CFA North America Credit Research 16 February 2012 J.P.Morgan Comparative company analysis Texas Energy Competitive GeriOn Edam Future Marie Energy. Inc. Cempany as Cap COPS Dynasty Mission' Holdings Holdings ' NRG Energy Eguty Mier AES CPN DYN Prat' Prhale) Node GEN PPG Bondi/dim AES CPN DYN EIX Ent TCEH GEN ham Income statement (LTII) Revamps $18003 $6.800 $1.798 $2259 $7.308 $7308 $3077 $8.783 EMMA $1645 $1.726 $399 $589 $5111 $3.488 $698 $1.873 EBITDAmegn 20% 25% 22% 26% 70% 48% 23% 21% Interest emense $1.554 $760 $376 $3:6 $3927 $3.441 $395 $667 Nel rr.orne l$1001 ($189) ($4321 ($32) (11.616) ($1.4591 (5737) $282 Cash Flow (LTIN CapEs $2614 $683 $248 $772 $503 $481 $418 $1.380 CFO $3402 5775 ($1971 $559 $1.095 $1.312 $131 $1.150 FCF $578 I$27) 44451 ($2031 $593 $831 ($287) ($8081 Catalafestiort Cash $3,392 $1252 $768 $1235 9330 $202 $1.746 $1.127 Resteled cash $2089 $194 $797 $15 $0 9) SO $441 Remune senke &el $1.050 $7.762 $5.614 54.160 536335 $30.172 $3237 $7.924 Remune Oat $6227 $7.762 SEW $4.150 $36235 $30.172 $4.087 $7.924 To:tide« $20.913 $10.425 $5.814 $5,034 $36235 $30.172 $4.087 $9.243 PAM:ely inlwest $3,624 5613 $0 $2 $92 WO SO SIM Prelerred equ $248 Shama:idea egaly $6,233 $4.301 $2.487 $2.732 e7±16 (7.602) $5.164 $7.770 Captaloalon $30,770 $14789 $0,301 $7,768 $28.671 $22,670 $9251 $17.478 Enterprise vale and Muldlty Stock pipe $13.43 $1536 $1.50 Prirale Patte P4,115 $226 $16.93 Catty /Terkel taptalaslon $10.502 $7293 $184 Prirate Partite Penh $1.744 $3.893 EnI&ptw vdue $31.647 $16.628 $5.230 $4.123 $35.777 $24.416 $4.085 $12.474 Lictadta $2877 $2013 $1.069 $2231 $3097 $2.461 $2282 $1.919 Creed Sbtria EBITDAtnteteu Ermine 2.3a 2.3x 1.1x 1.9x 1.3a MA 1.8x a& EBITDA • CmEx 1 Inkrest Erma 0.71 14x 0.4x 411 12t 001 0.7x 0.7x Reettne terry ertt Icier:pc 0.3a 4.5x 14.1x 71x 7.11 IN 4.8x 42( Recoste ertt Icier:pc 1.7a 4.5x 1494 71x 7.11 8.7x 5.9x 42( Total Mt( itierage 57a 6.0x 1494 8.5x nu 8.7x 5.9x SCa Net deb:Icier:4e 4.87 5.3x 12.64 6.44 6.9x 8.11< 3.4x 4.44 Remote seers &tots, 3% 52% 68% 54% 127% 133% 35% 45% Hexane &temp 20% 52% 70% 54% 127% 133% 44% 45% RES &tee» 68% 70% 70% 65% 127% 133% 44% 53% Net tlehficap 57% 82% 61% 49% 124% 132% 25% 47% EV/EMMA 8.71 9.8x 13.1x 7.0x Ikla 7.Cot 5.9x 67x Taal DebliEV 66% 83% 111% 122% 102% 124% 100% 75% EVAMerats 176% 245% 291% 162% 450% 334% 133% 142% Bend One ClescraPon 9030 Sr Ms INS Sr MI SI MS Sr Ns Sr NO &Ms Coupon 8.CCO% 7.500% 7.750% 7.200% 9.750% 1$ 1.1660 0% 9.93)% 7.625% Maluty 6/1/2020 91512021 9112019 9192019 101152019 10/112020 10150018 51152019 abating $825 $1.100 $800 cial $11135. $875 $800 Ran 84308. NRIO CaM/EP 82CCC 83fB INIEI6 Wet ptee 14115.00 9:9 :06.:50 $20 893. 63.75 59£0 102.00 9225 95.00 VS 510% 8.30% 16.46% 160 7.35% u 928% 18. 71; 1) 3% 11.17% 8.56% STY COP 8311» Mc 724bp Bond Two Cescrip1on Sr Ms Sr Ms &Mt Sr Mt Sr Ms Sr Ms SNO &Ns Coupon 7275% 7.875% 7.625% 7.625% 10.00)% 10.250% 9.875% 7275% Meaty 7/1/2021 1/15/2023 tonsrion 51542027 1852020 11/72015 101512033 5852021 ablaxIng $1.000 $1200 $175 ,4" $700 $1.232 $550 Rath; 84383- B128- C89133. Cane BIB $B11.9200 6 011en rime 112.25 1079) 63.00 57£0 Cial$ 101.7°6 3801. 29.75 91.25 9500 Veld 567% 864% 1347% 14.80% um 56.38% 11.49% 8.67% STY 3371) 5170 GM 125514 736bp 5719tp 9899 65019 Note EBI1DA is Adjusted EBITDA. Interest Expenses babe.: on UM vain. 1. NICIMMI Generation peasant* eamenams assumed reamrso Is Ginn Miasma 2 MOO M8,51,»InD841.313,01808» International. Enterprise alinne Mated us® e 70x EINTDA ~We 3. Energy Fume Hetdegs entorpme value eumated 'ega 7.0x EMMA multiple. 4. Teas Cormeithe Dade H0/0008 enterprise verve 0811M000CI t41110 a 7 Ox EB1TDA mul1834, 6. Genen Energy tobl does nog include GenOn Marsh Landing dom. Sources: Canary repors and JPAbrgan. 22 EFTA00606180 Dave Kate. CFA North America Credit Research 16 February 2012 J.P.Morgan Relative value analysis 1600 Recourse 6:00114, Debit Mood?. !bend (Naga 17W Neu Coll Dote EMTDA lateral Ellr7DA MI6 Coos Ka Ibe ad S&P Carron Offer Vkld Spina Dote Dam him LUI LTM LTM EVE N.". Corp 7.7S(t. FA NI. SR Idelm-14 11.1.1141 1500 1108.25 332% 32Mp 141014 ne pc 11.645 23a 1.7. 20% 7.750% Se Ni. SR 15-0.1.15 11.1.131. $500 1111.71 4-25ti 3670 15-0.615 ne nt $3445 2.3a 1.7a 20% 9.750% 5. NU NR 15-Apt-I6 8.1.1317. $535 1118.00 4.91% 4240 15-Apr-I4 se 0 $3445 2.3. I.7a 20% 4.000% Se Nit NR 0-00.17 Hayti'- 51500 $113.75 5.17% 4200 160o.17 nc 0 $3415 2.36 1.7. 20% v emZet St Nu NR I.1w20 80.0.16 $625 $115.00 5.70% 41%p 1.1uni20 0 0 55415 2.3. 1.7. 20% e 377.16 St Nit NR I 491.21 8.6118- 51000 $112.25 167% 3870 1-01.21 ne ite S5.445 2.36 1.7. 20% Calploe Cap. 7.250% Sr See Nu i I 61 Lien, NR IN0.7-17 DUBS- 11200 1105.50 157% 4990 15.0.1.15 15-Ott-13 $103.03 11.726 2.3a 4.1% 47% 14000% Sr See Nuilia Lien, NR 15-60-19 Blest 1400 1107.81 647% 1748/ 15-08-16 16.10-15 SI 04.00 11.726 2.3a 4.5% 47% 7.875% Sr See Nu i III Lien, NR 311u1-2.0 BliBli- 11100 1108.50 614% 5600 31.61-15 31-01-I5 110.94 11.726 2.3a 4.5% 47% 7.500% Sr Sec 1010 Lien/ NR 160021 01080 52000 5190.50 630% 5100 1-Nov-I8 1.Novi11 1103.75 $1.26 20 4.5. 47% 6875% SrSec Na NR 11.4823 0 lissi 51200 1107.50 46474 317tp 1601-20 15-1tml 7 $103,50 0726 2.3. 4.5. 4714 &thee Mimi& 7.00% St Nit HMO If .h6.113 Culla. $500 $89.75 16.37% 16Iffp 13i/urrI3 0 0 $707 2.0 6.014 lid% 8.160% INT CM* NR 21arie 175.10. 5404 199.0 6.87% 8250 24ani 16 0 ne $707 2.0 6.0. 65% 7.750% Se Nu IWO 154un-16 Coalia- 1500 169.50 16.23% 17550 IS-Joss-16 se ne 1707 24* 6.0. 65% 7.000% Se Nu 1MM 1.5.66-17 Ca PR. 11200 16200 11166% 17780 11-10 -17 se 0 1707 24* 6.0. /5% 7.200% Se Nu 1MM 15-Mum19 CosliB. 1800 15901 17.35% 16029p 11-10--19 se 0 1707 24* 6.0. /5% 7.621% Se Nu 1MM 15646, 27 Caelia- 1700 157.0 1410% 12500 11-10--27 se At 1707 24* 6.0. SS% Celia Para 7.625% Sr Nit NR 114014 BNB 1175 0970 7.804 75Itp I3iffor 14 nc ne $6.1 1.0 3.9. 101% 7.875% Sr Nit NR 1540.17 BNB 025 MAO 10.36% 9471p 141m-17 nc 0 UM 1.0 1.9% 10)% 9.500% Ss Nu NR 15-0.618 BNB 1675 19225 11.17% 9980 15-0.7-18 se ne 160 LA 5.9. 10)14 9.871% Ss Nu NR 15-06-20 BNB 1550 191.25 11.49% 9850 15-0.7-20 15-Ott-15 1104.94 OAS 1St 5.9a 100% 8.500% Ss Nu NR 1.11:421 B1016 1450 190.9) 10.06% 8210 10.621 se 0 1698 It. 5.9. 100% 9.125% Ss Nu NR 1.34y-31 BLEB- 1400 18925 10.43% 7961p 1-760-3I se se 169$ It. 5.9. 100% NRC Elmo. lee 6375% St Nit Had 16180 7 BUBO $1100 $107.61 5.89% 572tp 1600-13 is-me.to $102.40 $14]3 2.0 4.2. 63% 7.625% St Nit Ilm 15ibmI 8 MO 51100 59910 $. 7.114 68: 6810 15.14•11 ne se 0.673 20 4.2% 63% 8.500% Se Nu Da ISJun-19 BIMO 1700 700 IS-Nts-I9 15-ha-14 S104.23 11673 21. 4.1. 63% 7.625% Se Nu Ilm 15-1.10-19 BUBO 1800 195.00 136% 7240 15-114y-19 1544Ley-I4 $10311 11673 21. 4.1. 63% 8150% Com Nis Ilm 1-Sep-20 BUBO 11100 198.00 133% 6970 1-10-20 I -Sep-15 1104.13 11.173 20 41. 63% 187,-. Se Ni. Ilm I5-M4'.21 RI/BO 11200 19500 167% 6900 15-11421 1544Ley-I6 1103.94 11.173 20 4.2a 63% 'Ion Competitive Iltellic IllailInZ Company Lit, 102 it/. AM. NR 1-Nov-I5 Coa) 11/73 130.9) 57.18% 56590 1-Nov-15 se 0 13.01 .0. 8.7a 124% 111.250'. 5. Ni. NR 1-Nov-I5 Coal) 11292 129.75 5138% 57790 1-Nov-15 I-Non12 1102./6 1640 .0. 8.7a 124% 11,250'• Sr TonleMs NR 1+0, 16 CloND $1567 $31.00 $71.0 '7C10r 1$.13%7 ,36 9;, 0 9 1-trev-16 1.NoviI 2 110515 53.08 (It 11.7. 124% 11,509 . Sr Sec Ms I I 0 Lain/ NR itire20 02.teC S1750 1470.20 66016 $I 0.75 S3688 (It 11.7. 124% 15.00 . Sr Sec Nts(hd Lim) NR 3-Aar-21 Caelte $1186 0390 3488% 35140 1.60.21 14)et-I5 110770 0688 0 11.7. 124% Ean8y Femme Illoldbio Corp: 3.5fiee St Na NR 15-0014 CaD $398 17701 19.12% 18700 15ittoe-I4 0 nc $5.11 7.1. 102% 7.460% See Nei ( bit Lies) NR 1-lan-IS CottleCC $14 1100.15 7.40% 696tp 149n-I5 se nc $5.11 7.1% 102% 12.00)% & TenleNbi NR I-Nom17 CsO 1399 18601 11.47% 1449tp 1-Nov-17 1-Nov-I2 110563 $5.11 7.1% I01% 10.875% Se Nit NR Idder617 CsO 1181 183.50 1330% 14120 1-Nov-17 1-Non12 $105.44 $5.11 7.1% 102% 7.480% See Ne*(10 Lies) NR 1-lan-17 0.07NR 155 18944 10.29% 949tp 14en-17 lie ne $5.11 7.1% I01% 9.730% *Sec Na NR 15-Ck1-19 Cbs10. SI 15 1102.00 9.28% 8310 160017 1100.14 1104.18 35.11 Jx 7.1. I01% 10.00)% *Sec Na NR 15ber20 C800 $1001 5107.0 139% 736tp 15.148.68 IS-1011 110501 35.11 Jx 7.1. 102% e6500% Sr Nis NR 1670, 24 Cate 040 000 1614% 140Mp 15ttoe-24 0 nc 35.11 Jx 7.1* 102% 6.550% Se Nit NR 15-Not-34 CaCC 1744 147.25 14.55% 11880 15-Nue-34 se nc $5.11 7.1x 102% Note. EBITDA w AdyeseoltlIITDA Mortea Esimme i1tuella LIM naIun. I. Esteem.: metes eakulool so mu, Ms vales mama ducembetmeame debt. 2. For tdiere mission. ei armone 7 Ox 1.17EIVIDA muluple was mod rairSeaCiencranonpasreihrougherreficaier ree reorune to Mena Massa. 3. For Irv. CoroNedeve timers Ilebliop Cusp's.' Lit etteserim main abused mins u 70x HMOS multipk. 4. For Lotto least lloWings tmterense value masted ;meg a 7.0. EBITDA mulliple Sources: Company reports and Attain. 23 EFTA00606181 Dave Nat. CFA North America Credit Research 16 February 2012 J.P.Morgan Relative value analysis: ranked by YTW LTM Enterprise UNION Debt/ Debt/ Issuer Coupon Maturity Outstanding Moodys Price YTW STW YTW Date EBITDA Value Interest EBITDA EV Texas Competitive Electric Holdings 10.250% 1-Nov-15 1.292 Caa3 D 29.75 58.38% 5.779bp 1-Nov-15 $3.488 $24.416 1.0x 8.7x 124% Texas Competitive Electric Holdings 10.250% 1-Nov-15 1.873 Caa3 D 30.50 57.18% 5.659bp 1-Nov-15 $3.488 $24.416 1.0x 8.7x 124% Texas Competitive Electric Holdings 11.250% 1-Nov-16 1.567 Caa3 D 31.00 40.07% 3.930bp 1-Nov-16 $3A88 $24.416 1.0x 8.7x 124% Texas Competitive Electric Holdings 15.000% 1-Apr-21 1.186 Caa3 CC 43.00 36.88% 3.514bp 1-Act-21 $3A88 $24.416 1.0x 8.7x 124% Energy Future Holdings 5.550% 15-Nov-14 398 Ca D 72.00 19A2% 1.870bp 15-Nov-14 $5.111 $35.777 1.3x 7.1x 102% Edison Mission 7.000% 15-May-17 1.200 Carl 8- 62.00 18.66% 1.778bp 15-May-17 $589 $4.123 1.9x 7.1x 101% Texas Competitive Electric Holdings 11.500% 1-Oct-20 1.750 82 CCC 71.00 18.23% 1.660bp 1-Oct-20 $3A88 $24.416 1.0x 8.7x 124% Edison Mission 7.750% 15-Jun-16 500 Carl 8- 69.50 18.23% 1.753bp 15-Jun-16 $589 $4.123 1.9x 7.1x 101% Edison Mission 7.200% 15-May-19 800 Carl 8- 59.00 17.3.5% 1.602bp 15-May-19 $589 $4.123 1.9x 7.1x 101% Edison Mission 7.500% 15-Jun-13 500 Carl 8- 89.75 16.37% 1.617bp 15-Jun-13 $589 $4.123 1.9x 7.1x 101% Energy Future Holdings 6.500% 15-Nov-24 740 Ca CC 48.50 16A4% 1.405bp 15-Nov-24 $5.111 $35.777 1.3x 7.1x 102% Energy Fine Holdings 12.000% 1-Nov-17 399 Ca D 86.00 15.47% 1.449bp 1-Nov-17 $5.111 $35.777 1.3x 7.1x 102% Energy Fine Holdings 10.875% 1-Nov-17 181 Ca D 83.50 15.30% 1.432bp 1-Nov-17 $5.111 $35.777 1.3x 7.1x 102% Edison Mission 7.625% 15-May-27 700 Carl 8- 57.00 14.80% 1.256bp 15-May-27 $589 $4.123 1.9x 7.1x 101% Energy Future Holdings 6.550% 15-Nov-34 744 Ca CC 47.25 1435% 1.188bp 15-Nov-34 $5.111 $35.777 1.3x 7.1x 102% GenOn Energy 9.875% 15-Oct-20 550 83 8 91.25 11.49% 985bp 15-Oct-20 $698 $4.077 1.8x 5.9x 100% GenOn Energy 9.500% 15-Oct-18 675 83 8 92.25 1117% 998bp 15-Oct-18 $698 $4.077 1.8x 5.9x 100% Mirant Americas Generation 9.125% 1-May-31 400 83 88- 89.25 10A3% 796bp 1-May-31 S698 $4.077 1.8x 5.9x 100% GenOn Energy 7.875% 15-Jun-17 725 83 8 90.00 1036% 947bp 15-Jun-17 S698 $4.077 1.8x 5.9x 100% Energy Future Holdings 7.480% 1-Jan-17 55 Caa3 NR 89.44 10.29% 949bp 1-Jan-17 $5.111 $35.777 1.3x 7.1x 102% Mirant Americas Generation 8.500% 1-Oct-21 450 83 88- 90.50 10.06% 821bp 1-Oct-21 S698 $4.077 1.8x 5.9x 100% Energy Future Holdings 9.750% 15-Oct-19 115 Caa3 8- 102.00 9.28% 831bp 15-Oct-17 $5.111 $35.777 1.3x 7.1x 102% Midwest Generation 8.560% 2-Jan-16 404 8a3 8+ 99.00 8.87% 825bp 2-Jan-16 S589 $4.123 1.9x 7.1x 101% NRG Energy Inc 8.500% 15-Jun-19 700 81 88- 99.00 8.68% 734bp 15-Jun-19 $1.873 $12.495 2.8x 4.2x 63% NRG Energy Inc 7.875% 15-May-21 1.200 81 88- 95.00 8.67% 690bp 15-May-21 $1.873 $12.495 2.8x 4.2x 63% NRG Energy Inc 8.250% 1-Sep-20 1.100 81 88- 98.00 8.58% 697bp 1-Sep-20 $1.873 $12.495 2.8x 4.2x 63% NRG Energy Inc 7.625% 15-May-19 800 81 88- 95.00 8.56% 724bp 15-May-19 $1.873 $12.495 2.8x 4.2x 63% Energy Future Holdings 10.000% 15-Jan-20 1.061 Caa3 8- 107.38 8.39% 736bp 15-Jan-18 $5.111 $35.777 1.3x 7.1x 102% GenOn Energy 7.625% 15-Jun-14 575 83 8 99.50 7.86% 751bp 15-Jun-14 $698 $4.077 1.8x 5.9x 100% NRG Energy Inc 7.625% 15-Jan-18 1.200 81 88- 99.00 7.84% 681bp 15-Jan-18 $1.873 $12.495 2.8x 4.2x 63% Energy Future Holdings 7.460% 1-Jan-15 14 Caa3 CC 100.15 7.40% 696bp 1-Jan-15 $5.111 $35.777 1.3x 7.1x 102% Calpine 7.875% 15-Jan-23 1.200 81 88- 107.50 6.64% 517bp 15-Jan-20 $1726 $16.597 2.3x 4.5x 47% Calpine 8.000% 15-Aug-19 400 81 NR 107.88 6.47% 574bp 15-Aug-16 $1726 $16.597 2.3x 4.5x 47% Calpine 7.500% 15-Feb-21 2.000 81 88- 106.50 6.30% 510bp 1-Nov-18 $1726 $16.597 2.3x 4.5x 47% Calpine 7.875% 31-Jul-20 1.100 81 88- 108.50 6A4% 560bp 31-Jul-15 $1.726 $16.597 2.3x 4.5x 47% NRG Energy Inc 7.375% 15-Jan-17 1.100 81 88- 103.63 5.89% 572bp 15-Jan-13 $1.873 $12.495 2.8x 4.2x 63% AES 8.000% 1-Jun-20 625 8a3 88- 115.00 530% 415bp 1-Jun-20 $3.645 $31.628 2.3x 1.7x 20% AES 7.375% 1-Jul-21 1.000 8a3 88- 112.25 5.67% 387bp 1-Jul-21 $3.645 $31.628 2.3x 1.7x 20% Calpine 7.250% 15-Oct-17 1.200 81 88- 105.50 5.57% 499bp 15-Oct-15 $1.726 $16.597 2.3x 4.5x 47% AES 8.000% 15-Oct-17 1.500 8a3 88- 113.75 5.17% 420bp 15-Oct-17 $3.645 $31.628 2.3x 1.7x 20% AES 9.750% 15-Apr-16 535 8a3 88- 118.00 4.91% 424bp 15-Apr-16 $3.645 $31.628 2.3x 1.7x 20% AES 7.750% 15-Oct-15 500 8a3 88- 111.75 425% 367bp 15-Oct-15 $3.645 $31.628 2.3x 1.7x 20% AES 7.750% 1-Mar-14 500 8a3 88- 108.25 3.52% 323bp 1-Mar-14 $3.645 $31.628 2.3x 1.7x 20% Sources: Compaq reports and Mugu). 24 EFTA00606182 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan Relative value analysis: ranked by Debt/EV LTM Enterprise EBITDA? Debt/ Debt/ Issuer Coupon Maturity Outstanding Moodys Price YTW STW YTW Date EBITDA Value Interest EBITDA EV Texas Competitive Electric Holdings 10.250% 1-Nov-15 1.873 Caa3 0 30.50 57.18% 5.659bp I -Nov-15 $3,488 $24,416 1.0x 8.7x 124% Texas Competitive Electnc Holdings 10.250% 1-Nov-15 1.292 Caa3 0 29.75 58.38% 5.779bp 1-Nov-15 $3.488 $24,416 1.0x 8.7x 124% Texas Competitive Electnc Holdings 11.250% 1-Nov-16 1.567 Caa3 0 31.00 40.07% 3.930bp 1-Nov-16 $3.488 $24,416 1.0x 8.7x 124% Texas Competitive Electnc Holdings 11.500% 1-Oct-20 1.750 82 CCC 71.00 18.23% 1.660bp 1-Oct-20 $3.488 $24,416 1.0x 8.7x 124% Texas Competitive Electnc Holdings 15.000% 1-Apr-21 1.186 Caa3 CC 43.00 36.88% 3.514bp 1-Apr-21 $3.488 $24,416 1.0x 8.7x 124% Energy Future Holdings 5.550% 15-Nov-14 398 Ca 0 72.00 19.12% 1.870bp 15-Nov-14 $5,111 $35.777 1.3x 7.lx 102% Energy Future Holdings 7.460% 1-Jan-15 14 Caa3 CC 100.15 7.40% 696bp 1-Jan-15 $5.111 $35.777 1.3x 7.lx 102% Energy Future Holdings 12.000% 1-Nov-17 399 Ca 0 86.00 15.47% 1.449bp I -Nov-17 $5,111 $35.777 1.3x 7.lx 102% Energy Future Holdings 10.875% 1-Nov-17 181 Ca 0 83.50 15.30% 1.432bp 1-Nov-17 $5.111 $35.777 1.3x 7.lx 102% Energy Future Holdings 7.480% 1-Jan-17 55 Caa3 NR 89.44 1029% 949bp 1-Jan-17 $5,111 $35.777 1.3x 7.lx 102% Energy Future Holdings 9.750% 15-Oct-19 115 Caa3 8- 102.00 9.28% 831bp 15-Oct-17 $5,111 $35.777 1.3x 7.lx 102% Energy Future Holdings 10.000% 15-Jan-20 1.061 Caa3 8- 107.38 8.39% 736bp 15-Jan-18 $5,111 $35.777 1.3x 7.lx 102% Energy Future Holdings 6.500% 15-Nov-24 740 Ca CC 48.50 16.14% 1.405bp 15-Nov-24 $5,111 $35.777 1.3x 7.lx 102% Energy Future Holdings 6.550% 15-Nov-34 744 Ca CC 47.25 14.55% 1.188bp 15-Nov-34 $5,111 $35.777 1.3x 7.lx 102% Edison Mission 7.500% 15-Jun-13 500 Caal 8- 89.75 16.37% 1.617bp 15-Jun-13 $589 34.123 1.9x 7.lx 101% Midwest Generation 8.560% 2-Jan-16 404 Ba3 8+ 99.00 8.87% 825bp 2-Jan-16 $589 34.123 1.9x 7.lx 101% Edison Mission 7.750% 15-Jun-16 500 Caal 8- 69.50 1823% 1.753bp 15-Jun-16 $589 34.123 1.9x 7.lx 101% Edison Mission 7.000% 15-May-17 1.200 Caal 8- 62.00 18.66% 1.778bp 15-May-17 $589 34.123 1.9x 7.lx 101% Edison Mission 7.200% 15-May-19 800 Caal 8- 59.00 17.35% 1.602bp 15-May-19 $589 34.123 1.9x 7.lx 101% Edison Mission 7.625% 15-May-27 700 Caa1 8- 57.00 14.80% 1.256bp 15-May-27 $589 34.123 1.9x 7.lx 101% GenOn Energy 7.625% 15-Jun-14 575 83 8 99.50 7.86% 751bp 15-Jun-14 $698 34.077 1.8oc 5.5x 100% GenOn Energy 7.875% 15-Jun-17 725 83 8 90.00 10.36% 947bp 15-Jun-17 $698 34.077 1.8oc 5.5x 100% GenOn Energy 9.500% 15-Oct-18 675 83 8 92.25 11.17% 998bp 15-Oct-18 $698 34.077 1.8x 5.5x 100% GenOn Energy 9.875% 15-Oct-20 550 83 8 91.25 11.49% 985bp 15-Oct-20 $698 34.077 1.82 5.5x 100% Want Amencas Generation 8.500% 1-Oct-21 450 83 BB- 90.50 10.06% 821bp 1-Oct-21 $698 34.077 1.8oc 5.5x 100% Want Amencas Generation 9.125% 1-May-31 400 83 BB- 89.25 10.43% 796bp 1-May-31 $698 34.077 1.8oc 5.5x 100% NRG Energy Inc 7.375% 15-Jan-17 1.100 81 BB- 103.63 5.89% 572bp 15-Jan-13 $1,873 $12,495 2.8x 4.2x 63% NRG Energy Inc 7.625% 15-Jan-18 1.200 81 BB- 99.00 7.84% 681bp 15-Jan-18 $1.873 $12,495 2.8x 4.2x 63% NRG Energy Inc 8.500% 15-Jun-19 700 81 BB- 99.00 8.68% 734bp 15-Jun-19 $1.873 $12,495 2.8x 4.2x 63% NRG Energy Inc 7.625% 15-May-19 800 81 BB- 95.00 8.56% 724bp 15-May-19 $1.873 $12,495 2.8x 4.2x 63% NRG Energy Inc 8.250% 1-Sep-20 1.100 81 BB- 98.00 8.58% 697bp 1-Sep-20 $1.873 $12,495 2.8x 4.2x 63% NRG Energy Inc 7.875% 15-May-21 1.200 81 BB- 95.00 8.67% 690bp 15-May-21 $1.873 $12,495 2.8x 4.2x 63% Calpine 7.250% 15-Oct-17 1,200 81 BB- 105.50 5.57% 499bp 15-Oct-15 $1,726 $16.597 2.3x 4.5x 47% Calpine 8.000% 15-Aug-19 400 81 NR 107.88 6.47% 574bp 15-Aug-16 $1,726 $16.597 2.3x 4.5x 47% Calpine 7.875% 31-Jul-20 1.100 81 BB- 108.50 6.14% 560bp 31-Jul-15 $1,726 $16.597 2.3x 4.5x 47% Calpine 7.500% 15-Feb-21 2.000 81 BB- 106.50 6.30% 510bp 1-Nov-18 $1,726 $16.597 2.3x 4.5x 47% Calpine 7.875% 15-Jan-23 1.200 81 BB- 107.50 6.64% 517bp 15-Jan-20 $1,726 $16.597 2.3x 4.5x 47% AES 7.750% 1-Mar-14 500 Ba3 BB- 108.25 3.52% 323bp 1-Mar-14 $3,645 $31.628 2.3x 1.7x 20% AES 7.750% 15-Oct-15 500 Ba3 BB- 111.75 4.25% 367bp 15-Oct-15 $3,645 $31.628 2.3x 1.7x 20% AES 9.750% 15-Apr-16 535 Ba3 BB- 118.00 4.91% 424bp 15-Apr-16 $3,645 $31.628 2.3x 1.7x 20% AES 8.000% 15-Oct-17 1,500 Ba3 BB- 113.75 5.17% 420bp 15-Oct-17 $3,645 $31.628 2.3x 1.7x 20% AES 8.000% 1-Jun-20 625 Ba3 BB- 115.00 5.70% 415bp 1-Jun-20 $3,645 $31.628 2.3x 1.7x 20% AES 7.375% 1-Jul-21 1.000 8a3 BB- 112,25 5.67% 387bp 1-Jul-21 $3,645 531,628 2.3x 1.7x 20% Sources: Company reports and t lAorgan. 25 EFTA00606183 Dave Has. CFA North America Credit Research 16 February 2012 J.P.Morgan Relative value analysis: STW vs debt/EV Sources: Calumny reports and a Mayan. 26 EFTA00606184 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan Relative value analysis: STW vs debt/EBITDA TXU 10.250% 5200 4200 TXU 11.250% ■ TXU 15.000% • 23200 2 2200 TAP 5.5 MX 7,M% TXU 11.500% BX 10009i • TXU 6.500% ■ EIX 7.625% ■ 1200 GEN 9. TXU 7.480% TXU *000% AE§ Paz . AES 21:C 1 Ox 2.0x 3.0x 4.0x 5.0x 6.0rx 7.0x 8.0x 9 Ox DAUEBITOA Sources: Company reports and. Horgan. 27 EFTA00606185 Dave Kali. CFA North America Credit Research 16 February 2012 JPMorgan Fuel Mix by Company Domestic • eneration ca • acit MW b fuel t pe (30•Sop•11) Generation Capacity (MW) CPN GEN NRG TCEH DYN EME Coal 7,513 7.300 8.000 3,502 7.056 Nuclear 1.175 2,300 Natural gas 23.483 8.725 11,090 5.100 6,606 964 Oil 12 1.454 4.015 1,488 305 Renewable 729 520 1.856 Dual 3.910 6.544 Total 28,134 24,237 24,100 15,400 11,596 10,181 farce SNL Energy. Gorrony reocas and. Morgan 28 EFTA00606186 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan Domestic generation capacity rankings Calpine (CPN) GenOn (GEN) Edison Mission (EME/EIX) Oil Rencwabk 3% Rcncwabk Dual Coal 18% 14% 69% Natum ps Oil 83% 3% Naturalgas 10% Naturalgas 36% Dynegy (DYN) NRG Energy (NRG) LurninantaCEll (TXU) Nature Isas 46% Oil 17% Natumlps Oil 57% 13% Renewable 2% Nuckar Coal 5% 30% Sauce: Company repeat aid. Morgan estmatee Note: As et 30-Sep-I t. 29 EFTA00606187 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan Domestic generation capacity rankings Total generation capacity (MW) Coal - generation capacity (MW) 30,000 111 9.000 25,000 8.000 7.000 20,000 6.000 1 15,000 5.000 4.000 10,000 3.000 2.000 5,000 1.000 CPN GEN tRG Tan OYN EME TCEH GEN NRG EM_ DYN CF% Natural gas - generation capacity (MW) Oil - generation capacity (MW) 25,000 4.500 4.000 20,000 3.500 3.000 15,000 1 2.500 2.000 10,000 1.500 1.000 5,000 500 CPN NRG GEN DYN TCEH EME NRG DYN GEN EME CPN TCEH Saute: Morgan and company reports. Note: Energy Future Makings and Texas Competitive Energy Hddngs Generation Capacti data is tie same. Note: As of 30Sep-11. 30 EFTA00606188 Dave Katz CFA North America Credit Research 16 February 2012 J.P.Morgan Rankings LTM Rovonuos ',MOM) LTM AdjustedEBITDA IMmia $20.000 80.0% $18000 70.0% $16000 60.0% $14000 $12,0® 50.0% $10,000 40.0% 58.000 30.0% 56.000 20.0% 34.000 52.000 10.0% so 0.0% co >- LL w 2 2 2 0 is 2 LTMMINUSEBITDAIfmMI0ne1 LTMRocours•liverts 86.000 14.0x 55.000 12.0x 1 54.000 10.0x 8.0x 53.000 8.0x 52,000 4.0x 51.000 2.0x so 0.0x 8 X 2 2 u. 0. w 22 CWi w O w w Somme: M. Morgan and company reports. Note: Energy Future HolcIngs end Texas Competeve Energy Holdings Revenues ere the saws. 31 EFTA00606189 Dave Neff_ CM North America Credit Research 16 February 2012 J.P.Morgan Individual bond trading history Difference (bp) a AES 7.750% 2014 vs. HY Split BBB Spread (bp) Difference (bp) AES 7.750% 2015 vs. HY Split BBB Spread (bp) 300 sour« IN. voifun 1400 Sotoca:M.f4oreau 1200 Tight -2914 175 Tight: 4t8bp Wide: 302bp 1200 Wide: 233bp 200 Avenge: 57bp, Avenge: 49bp Current dill. .52bp went cif.( Current (AES 14): 3234 1000 75 rent (MS 100 Current (HY S 375bp Current Price 2014): 108.25 800 800 0 800 600 -100 400 400 200 -225 200 200 300 -325 I 0 1 - r4 2 4) nanitl I " '" " "cmc : — Rti"4 c4"42 rn $$$$ I " r" " a2ki—Fgan - .Zga,11 - 1.1m ga,11 . 1.7ga giflUgginljganlZgAnietgA le Difference Avg Dill. —AES 7.750% 2014 — HY SS BBB Difference Avg Diff. —AES 7.750% 2015 — HY Split EBB Difference (bp) AES 9.750% 2016 vs. HY Split BBB Staid (bp) 1200 Difference (bp) AES 8.000% 2017 vs. HY Split BBB Spread (bp) 275 tkurcentalenan Sotoca:M.Papan 1200 Tight .118bp 200 Tight: 477bp 715 Wide: 288bp 1000 Wide: 263bp Avenge: 108bp Average: 39bp 1000 meat dill. (09-Nov.11): 50bp 1 Iiii 100 Current dill. ( 175 trend (AES 9.750% 2016): Cap I Current (MS (HY Split BBB): 3754 II I. : 800 Current (HY S 800 C Price (MS 9.750% 2016): 118.00 k ' 0 ,i'C'Innt Price 125 600 75 800 -100 25 400 400 -200 -25 200 -300 • 200 -75 -125 0 -400 a a 9 3 3 cl 3 Difference Avg Dill. —AES 9.750% 2018 3 — Ali HY Spa BBB 4I:nl fl ic kl-FgailkU Diffe ence i.$$$$ ""c m ganttgaillttgA Avg DWI. —AES 8.000% 2017 7m s -- — HY Split BBB 32 EFTA00606190 Dave Nat. CFA North America Credit Research 16 February 2012 J.P.Morgan Individual bond trading history (continued) 225 Difference bp) AES 8.000% 2020 vs. HY Split BBB Spread (bp) Difference (bp) AES 7.375% 2021 vs. 1-IY Split BBB Spread (IV) 1200 1200 Seismlif.itorgan se‘ectakre-ean Tight: 175 Tight: obp 125 Wide: 21 1030 VAde:186bp 1 1000 Average: Average: 75bp I ' Currentit 11): 40bp Current diff.(09.Nov41). 13bp Current 2020): 41Sbp Current (AES 7.375% 2021): 387b9 25 tcsnom 3750 125 Current IHY Split BBB): 3750 800 Current Current Price (AES 7.375% 2021E 112.25 -75 -175 -275 -375 ...... -25 0 0 3 -Is a - r9iz .43' rit 1Al 11 A LI- Dille ence Avg Dill. • •AESS.CCO% 2020 — HY Spat BBB owe Site Avg DIN. ' 'AES 7.375% 2021 -HYSplit BBB 225 Difference (3p) CPN 7.250% 2017 vs. HY BB Spread (bp) Difference (bp) CPN 8.000% 2019 vs. HYBB savant/0pm 1200 Mayan 1200 Tight .19bp 175 Tigh 40bp Wide: 202bp Wide. 191bp 175 Average: 85bp 1000 Avenge: 101bp 1000 Current dill. (09-Nevi11): 131bp Current dill. (09-Nov.11): 137bp Current (CPN 7.250% 2017): 4991:9 Current ‘CPN 8.000% 2019): 574bp Current (HY BB): 4380 125 Current (HY BBIc 438bp 800 800 125 Current Price (CPN 7.250% 2017h 105.50 Current Price (CPU 8.000% 2019): 107.88 800 75 75 400 25 200 -25 0 0 a. a. 3 4 4 i. 3 (11 1 6 4 a A a 4 Difference Avg Dif. CPN 7.250% 2017 — HY BB Oilference Avg Dill. CAN 8.01(0% 2019 - HY B8 33 EFTA00606191 Dave Nat. CFA North America Credit Research 16 February 2012 J. P Morgan Individual bond trading history (continued) Difference (bp) CPN 7.875% 2020 vs. HY BB Spread (bP) Difference (bp) CPN 7.500% 2021 vs. HY BB Spread (bp) sowc. sorban 1200 sotto amoeba 1200 160 135 Tight: 8bp Tight: Obp Wide: 184bp Wide: 143bp 140 Average: 68bp 1000 115 Average: 54bp 1000 Current dill. (09Nov41): 123bp Current call. (09-Nov.11): 72bp 120 Current (CPN 7.875% 2020): 5800p 95 Current (CPN 7.500% 2021): 510bp Current (HY BB): 438bp 800 Current (HY BB): 438bp 800 Current Price (CPN 7.875% 93208 108.50 Current Price (CPN 7.500% 2021): 108.50 100 75 _ _ 600 80 55 — 60 35 400 400 40 15 200 200 20 -5 0 0 0 — — — 6. a a. = 91 z a (9; U. •, a. V Avg Diff. -CPN 7.675%2020 -HYBB — Difference Avg Diff. —CPN 7.500% 2021 —HYBB Difference (bp) CPN 7.875%2023 vs. HY BB Spread (bp) Difference (bp) EIX 7.500% 2013 vs. HY Split B Sprawl (bp) sowc• a Morgan 1200 SOWCO:ellnlia 140 Tight: 16bp Tight: -13670p Wide: 130bp Wide: 1090bp 120 Average: 60bp 1000 625 Average: -216b Current dill. (09Nov41): 79bp Current dill.( 738bp Current (CPN 7.875% 2023): 517bp Current (EIX 7. 1617bp 100 Current (HY BB): 438bp Current (HY Current Price (CPN 7.875% 20238 107.50 125 Current Price 1500 80 60 -375 1000 400 40 -875 500 -1375 0 2 214. 4922 .11, 21.2:cccr 6 z A au(s:M8aitM au(tM ait.2.1.7 a Difference Avg Dill. —CPN 7.875% 2023 HY BB '—' Difference Avg DWI. —EIX 7.500% 2013 — HY Spill B 34 EFTA00606192 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan Individual bond trading history (continued) Difference (bp) EIX 7.750% 2016 vs. HY Split B Spread (bp) Difference (bp) r EIX 8.560% 2016 vs. HY Split B read 0 Source& ...organ SourcoM.Hanan 1025 - Tight -1466bp -200 Wide: 1381bp 2000 Avenge: -10 Current dill.( ov-11): 874bp -400 -11): -54bp 525 Curren! (EIX 7. SO% 2016 1753bp 2016 825bp Curren! (HY Sp1it B): 879b B): 87 Curren! Price ( IX 7.750% 6): 69.50 1500 -600 IX 8.560% (2016): 99.00 1500 L/ 25 1000 1000 -1000 -475 -1200 500 500 -975 -1400 -1475 0 -1600 0 AX .2.1Zetati.2.1.76 .8X.2.14. 45AX.2.1VA Dille ence Avg DWI. EIX 7.750% 2016 —HY Spld B — Difference Avg Dill. - -E0C 8.560% 2016 — HY Split B Difference (bp) EDC 7.000% 2017 vs. HY Spilt B Spread (bp) 975 Difference (bp) EIX 7.200% 2019 vs. HYSplit B Spread (bp) Souza M. Morgan Sourco:Elidcogan 975 Tight: -15110p Tight: -1507bp Wide: 126.4bp 2000 Wide: 958bp Average: -12 475 Average: -1810 Cloven! dill. ( 899bp Current diff. ( 72dbp 475 Current (61%7 1778bp Current (EIX 7. 1602bp Curren! (MY Current (MY Curren! Price 1500 -25 CutreM Mice 019):.69A0 1500 -25 1000 -525 1000 -525 500 -1025 500 -1025 -1525 - -1525 0 mumml1 0 0 °A ,g 1141;11L11.1111;ligilmmgA Dille ence Avg Dill. r i-EIX 7.000% 2017 — HY Split B Difference Avg DWI. r—mEIX 7.200% 2019 —HY spii B 35 EFTA00606193 Dave Katz CFA North Arnerica Credit Research 16 February 2012 J.P.Morgan 550 DrfI Wence (bp) EIX 7.625% 2027 v5. HY Split B Sixes:1(bP) eHerence (bp) EN 7.625% 2014 vs. HY Split BB Speed (Pp) 1600 sonne M.Porgan 450 Sourrolnlmorsan 350 - Mahl: -144 54P Tight: -431tip 1400 Wkle: 5360p 350 Yade:482bp 150 Average: .2316 Average: 33 Curient diff. (09- ov-11) 250 Current diff. 229bp 1200 -50 , CIM«. (EIX 7. 25% 20 Current (GEN 4): 751bp Cunent (NY S KB): 1500 150 Current (HV El bp -250 , Curie« Pike IX 7.625% Current Prise EN 2014): 99.50 1000 50 -450 800 1000 -50 -650 600 -850 -150 400 -1050 500 -250 -350 200 -1250 -1450 0 -450 gC atelAzoanAjoa - 7 -- 7 - fliegnel.egA 0 — Difference Avg Diff. —EIX 7.62551 2027 -HYSplii8 ElifI erence Avg Diff. —GEN 7.625% 2014 —HY Splil BB Difference (Pp) GEN 7.875% 2017 vs. HYSplit BB Sixeild (DP) 1600 500 efterence (Pp) GEN 9.500% 2018 vs. HY Split BB Sposad (Pp) 1600 Sotoce:B. Sorgen Sottcolt Malen bi 350 450 Tight: -632bp 1400 Tight: 104bp 1400 Wide:424bp I VAde:493bp Average: 19bp 400 Awange: 200bp 150 Gurren! diff. ( 424bp 1200 Current di8. (09-Nov-11): 476bp 1200 Gurren! (GEN 7): 947bp 350 Current (GEN 9.500% 2018): 998bp Gurren! (HY 5 bp Curft (HV Split B8): 523bp Currenf. Brite 2617E 90.00 - 1000 300 Cut t Prise (GEN 9.500% 2018): 92.25 1000 -50 800 250 800 200 -250 600 600 150 400 400 -450 100 200 200 50 -650 I 0 0 0 O re g ele e" ele e 7. :;: 7i 757 3SsA‘t" ais-x-R.ROa Ä I efence Avg Diff. —GEN 7.675% 2017 —HV Split BB DifI erence Avg Diff. —GEN 9.500% 2015 — HV Split BB 36 EFTA00606194 Dave Has. CFA North America Credit Research 16 February 2012 J.P.Morgan Difference (bp) GEN 8.500% 2021 vs. HY Split BB Spread (bp) 1600 GEN 9.125% 2031 vs. NY Split BB Spread (bp) 1600 325 sourcoin Morgan 300 Sourco...Monen Tight: -466bp 1400 Tight: 499bp 1400 225 Wide: 3336p 200 Wide: 307bp Average: 19bp Average: 43bp 125 Current diff. 1200 100 Current dill. ( 1200 urrent (GE Current (GEN (H torrent 25 1000 0 Current Price 1000 -75 800 -100 800 -175 600 -200 600 -275 400 400 -375 200 -400 200 -475 0 -500 0 1,M11/A5 n/HAHHAA.fl.i8A rat :ill-I .. - • Dif erence Avg Dill —GEN 8.500%2021 — HY Split BS ^Difference Avg Dill. —GEN 9.125% 2031 — HY Spilt BB 225 I Difference (bp) NRG 7.375% 2017 vs. HY BB 350 Difference (bp) NRG 7.625%2018 vs. HY BB Spread (tip) source. Morgan seance warped 1200 125 . Tight: 473bp 300 Tight: 48bp Wide: 214bp Wide: 329bp Average: 26bp Average: 142bp 1000 Current dill. Current dill. (0944ov-11): 244bp 25 Current NRG 250 Current (NRG 7.625% 2018): 681bp unit Current (HY BB): 438bp 8 urrent Price Current Price (NRG 7.625% 2018): 99.00 -75 200 600 150 400 -275 100 -375 50 200 -475 0 0 1§.11111,1MO 11A°;$° °$ °8 A° -A' ii,R8A -12 I A Difference Avg Cliff. —NRG 7.375% 2017 — HY BS ~DAlerence Avg Dill. — NRG 7.625% 2018 — HY BB 37 EFTA00606195 Dave Fia2.CFA North America Credlt Research 16 February 2012 J.P.Morgan 300 Difference (bp) NRG 7.625% 2019 vs. HY BB Orflerence (bp) NRG 8.500% 2019 vs. HY BB Spreed (bp) so..«....bargan 300 Source:W1~ga, Tight: 111bp 'right •147bp 250 Wide.293bp 250 Wide: 3200p Average: 178bp Average: 99» Current dilt (0944ey.11i: 2138» 200 Current ditt (09•Novi11): 297» Gitre»! (NRG 7.625% 1011): 724bp Current (NRG 8.300% 2019): 734» 200 Current (HY BB): 438» Current (HY BB): 438W 150 Current Pike (NRG 7 2019): 95.00 Current Price (NRG 8.500% 2019): 99.00 100 150 50 100 0 -50 50 200 -100 0 0 -150 0 0 0 0 0 0 C.4 A -.å k å O Å St: k A -2 0 d .6 [E Dillerence Avg OM. —NRG 7.625% 2019 — HY B8 — Dillerence Avg Ditt. NRG 8.500% 2019 — HY BB Olfterence(bp) NRG 8.250% 2020 vs. HY BB Dtflerenoe (bp) NRG 7.875% 2021 vs. HY BB Sem(' (b9) ~a Bang« soirco.nmergan 1200 250 250 Tight 65» Tight: nibp Wide: 274» Wide: 261» Menge: 138» 1000 Average: 146» 1000 200 Gutten( dilt (0944ey.11): 260» 200 Current dill. (09440.011): 252» Gutten( (NRG 8.250% 2020): 697» Current (NRG 7.875% 2021): 6900p Gutten( (HY BB): 438bp 800 Current (HY BB): 438» 800 Gutten( Pdce (NRG 8.250% 2020): 98.00 Current Nice (NRG 7.875 20210 95.00 150 150 600 600 100 100 400 50 200 50 200 0 0 0 0 0 0 å å, 3. 8 Dineren» Mg Ditt —NRG 8250% 2020 — HY B8 Avg Dill —NRG 7 875% 2021 — HY 08 38 EFTA00606196 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan Difference (bp) TXU 10.250%2015 vs. HY CCC Difference (bp) TXU 11.250% 2016 vs. HY CCC Spread (bp 5275 50w cs Voroan 3050 =Mogan 4000 Tight 4703in 2550 Tight .1442bp Wide: 5466bp Wide: 3105bp Avenge: 633bp Average: 411bp 3500 Current dill. (09Nov41): 4492bp 2050 Current aff.( 1): 2763bp Current (TXU 10.250% 2015): 5659bp Current (TXU 11 6): 3930bp 3000 Current (KY CCC): 1167bp 1550 Current (KY Current Price (TXU 10.250% 20t5) 30.50 Current Price 2016): 31.00 2500 1060 2000 550 1500 50 -450 1000 -950 500 -1450 0 $ 1 11/11 1 1111;iiiiiii $$ — Difference Avg Dill.—TXU 10.250% 2015 — HYCCC Dillsence A g D'ff. -TXU 11.250% 2016 - HYCCC Difference (bp) TXU 11.500%2020 vs. HY CCC Spread MO Difference (bp) TXU 15.000%2021 vs. HY CCC Spread ( 3500 475 source trepan samccEl.morg3n Tight: .108bp 3030 Tight 144bp Wide: 493bp 2000 Wide: 2347bp 375 Average: 46bp Average: 828bp Current dill. (094lev.11): 493bp 2500 Current diff.(09Wev-11): 234701, Current (TXU 11.500% 2020): 1680bp Current (TXU 15.000% 2021): 3514bp 275 Current (HY CCC): 1187bp 1500 Current (KY CCC): 1187bp Current Price (MU 11.500% 2020) 71.00 2000 Current Price (TXU 15.000% 2021): 43.00 175 1500 1000 1500 75 1000 1030 500 500 -125 0 ea o 8 O Difference Mg DifI . — 11.500'4 2020 — HY UGC Dantean A g D'ff. -TXU 15.000% 2021 - HYCCC 39 EFTA00606197 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan Difference (bp) EF .460%2015 vs. HYCCC Spread(bp) DtHerence (bp) EFH 480% 2017 vs. HYCCC EMS MP) Ho Source:. Morgan 3500 1775 source .4organ 1375 Tight: .26013bp Tight: -2709Iap Wide: 1654bp 1275 Wide: 2044bp 3003 875 3030 Average: -407bp Average: •281bp Current dill. 775 Current dint. (09 ov41): 375 Current (EFH 7 Current (EFH 7 0% 201 p - 2500 2500 Current (HY C vs Current (HY CD): 11676 Current Price ( FH 7. -125 2030 -225 2000 -625 1500 -725 • 1500 -1125 -1225 1000 1000 -1625 -1725 - -2125 500 500 -2225 -2625 000 0 -2725 O.O. cc . . ”1.1 11 a:a:cc HIMLUMI ;Li !i'A A at 3 O a ;:a.AL 2~3Oa; gt g ; lc& $ A '—' Different. Avg Dill. —EFH 7.460% 2015 — HYCCC Dif lerence Avg Dill. —:EFH 7.4130% 2017 —HYCCC Difference (bp) EFH 12.000% 2017 vs. HYi C 8PussS (bp) Difference (bp) EFH 10.875% 2017 vs. HY C Spread (bp) Sourco:M. Morgan Sixrcealatergan Tight: 4283bp 3030 625 Tight: 48731:0 3000 700 Wide: 1097bp Wide: 969bp Average: 53bp Average: 4066 Current dirt( Trap 2500 Current dill. ( 41): 65bp Current (EFH 1449bp 125 Current (EFH 1..875% 201' 143 Current (HY C SHY C ) 116 200 Current Price 20176 86.00 Price {EFH 10 2030 -375 1500 0 -875 1000 -800 -1375 500 -1300 0 -1875 1.2 n}M WM; tel ce.'i ii in 'R SA it° °4 t Al A D'ffeennte Avg Dill. —EFH 12.000% 2017 HYCCC D'llerence Avg Diff. . •EFH 10.675% 2017 — HYCCC 40 EFTA00606198 Dave Ka2. CFA North America Credit Research 16 February 2012 J.P.Morgan Oilieronce (bp) EFH 9.750% 2019 vs. HY CCC 3 Difference (bp) EFH 10.000% 2020 vs. HY CCC sowce Morgan sotto, `Morgan .75 Tight: -569bp 3030 Tight: .5900P Wide: .16913p -100 Wide: -218bp Average: .3350p Average: .368bp Current dill (09-Nov-11): -336bp 2500 Current cliff. (09-Nov.11): -444bp -175 Current (EFH 9.750% 2019): 8310p Current (EFH 10.000% 2020): 723bp Current (HY CCC): 11670p -200 Current (HY CCC): 1167bp Current Price (EFH 9.750% 2019): 102.00 2030 Current Price (EFH 10.000% 2020): 107.38 -275 -300 1500 1500 -375 1000 1000 -475 -500 500 500 -575 0 -600 0 0 0 0 0 0 0 0 0 0 8 6 to 6, 6, 6 R .R 0 0 3 — Difference —.EFH 9.750% 2019 1— I Difference Avg Diff. —EFH 10.000%2020 — HY CCC Difference (bp) EFH 6.500% 2024 vs. HY CCC sax* Morgan 525 3030 25 2500 2030 -475 1500 -975 1000 -1475 500 -1975 0 #`4111 a ,- **1111` °77.°: .R0a2ics-a.R0a;,2.. 1 6 6 ,-5 R.aa21-4.O,3 D'fferente Avg Dill. EFH 6-500% 2020 — HY COC 41 EFTA00606199 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan Working Natural Gas Total Estimated Storage 4000 3500 Sri 1 • ...." • •• • • ed. 1% i • % 1 1 • e# % % 3000 so % % % t % % 0,• 2500 • 1 ♦ 1 % % % % % % • I • % 2000 • • • % 0• % • % •„n e-di % 1500 • • ♦ • •,,,. • ....,•••• 1000 A it-11 May-11 May-11 Jtrt-11 Jul-11 Aug-11 Sap-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Natural Gas Storage —5 yr avg en Max .s... Min Source: Etloomberg and M. Morgan. 42 EFTA00606200 Dave Nat. CFA North America Credit Research 16 February 2012 J.P.Morgan Working Natural Gas Change in Estimated Storage Data 150 100 0 A 1 May-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 1 Dec-11 Jan-12 Feb-12 liar -12 I -100 I -150 I —Change in Estimated Storage — — 5 yr avg &arca: elocnterg and..Mixgan. 13 EFTA00606201 North America Credit Research Dave Kali. CFA 16 February 2012 J.P.Morgan Natural gas futures prices ($/MMBtu) $10.00 $9.00 $9.00 a 4 I I$ I 0 :•. I% la. $ 1 dv • • 37.00 •• i 1 s. t 1 I., •I %1 •• :e....,- . ...: • I: .I . •I s••••4. •• •. • • • .. . •1,It ,', ., $I .,..° •• 1. .. • : ••••.,• • .: • $6.00 1% / % I r / 1 it 1 / ...0 ) L..° : •▪ ••- • 1 /% 1 % i 1 , I .o... .. • t / 1 f t ." ..- I , 1••• „•., • : • t% j ... • . $5.00 I 1, / $4.00 $3.00 $2.00 15-Feb-2012 31-Dec-2011 31-Dec-2010 -30-Jun-2010 - -31-Dec-2009 Some:Bombers 44 EFTA00606202 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan Henry Hub Natural Gas Spot Price (USD/MMBtu) $20 Bloomberg function: Max yry change since 2000: Increase $16.01 NGUSHHUB <Index> Decrease (SIMMBM: -$13.32 4— $18 Increase (%). 667.2% Peak: $19.38-02/25.2003 Decrease (%). -75.3% Current (StINMBtu): $2.54 $16 $14 $12 $10 $8 S6 S4 52 Trough: $1.88 - 11/16/2001 $0 Apr-01 Apr-02 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Sastre: Bloomberg. 45 EFTA00606203 Dave Katz. CFA North 16 February America 2012 Credit Research J.P.Morgan Coal spot prices ($/ton) Powder River Basin 8800Bru CAPP Thermal ••••• ••••••••••0..01/0...... Pam. oleo Miaow lt•C. leaven pin ilt•prilal • In AM in MO Meal .1144 in Jet Ana MO Ana MP Y2 MOS Ina Maim" MU Ina M Ina YaI ins MO loll Mil a. .wen ass al•• Jell MP Ina MO Jr. Ara lel. Mu laid ail /ma MY. .inn aw a SKI Loa MO Jog MO NI Mil -0 Uinta (Western Sitamlneus) Intorla(IllInolsEtasM) wirers /.401C.S•renl Ma In Spinal SO 10 • Mgt UM Lm YO MO MO 1.441 Ana MO AMMO Inn Ytl YNl Sal Joe •••• YO et a YiIW. Not lee Me Jed lab Lodi Ma eta Ma In. Ida •••• 1.447 a MA Sea she J•I loll Mil .I••• 46 EFTA00606204 Dave Kali. CFA North America Credit Research 16 February 2012 J.P.Morgan Coal futures $90 $18 $80 5'0 / $70 $60 i 551 r. $50 I S'2 1 $40 0 $30 5x 520 S6 510 50 56 Mar-11 Sep -12 Mar-13 Sep-13 Mast Sep-le Mar-15 Sep-I5 Mar-16 Sep-16 — — Certral twalxhan Cad ICAFF) Ponder RS Basin (FRB) Scarce: Bloomberg (NYMEX). 47 EFTA00606205 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan Coal Stockpiles in the Electric Sector 250 200 ................ ........... 150 ............. ............. ..................... ... .... .... ... ....... .......... .... ....... ....................... ............ .......... 100 avv• 50 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2010 2011 Mln (00 -'10) Max COO -'10) Average COO -'10) Source: Doomberg. 48 EFTA00606206 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan Coal Production 100.0 95.0 - • • X • • X / X • \ / _ -- • X / X X / X \ / • • 90.0 X/ • • \ tit / • I • S• • ,• e • e / • v / •• • 4/ 85.0 •% if2 ••••/ 80.0 75.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dee 2009 2010 2011 Some: Energy Infamatian Agency 49 EFTA00606207 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan Weekly Electricity Output 100.000 95.000 90.000 it 85.000 80.000 a te • 75.000 70.000 65.000 60.000 55.000 50,000 I Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec --- 2010 2011 2012 Some: °bombe% 50 EFTA00606208 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan Electricity Output The last update as of 3-Feb -12 Trailing 52 weeks Region Weekly Y/Y change QTD YTD Current WY change Relevant to New England 2.463 -9.1% 12,728 12,728 129,027 -1.9% AES, CPN, DYN, GEN, NRG Mid-Atlantic 8,312 -10.4% 43,376 43,376 450,502 -2.1% AES, CPN, DYN, EIX, GEN, NRG Central Industrial 12,784 -13.4% 68,999 68,999 701,812 -2.1% AES, CPN, DYN, EIX, GEN , NRC Southeast 18,593 -10.8% 97,944 97,944 1,013,038 -5.0% AES, CPN, DYN, EIX, GEN, NRG South Central 10,937 -23.r/o 57,397 57,397 682,785 2.5% AES, CPN, EIX, NRG, TXU Rocky Mountain 4,954 -7.5% 25,209 25,209 268,956 0.4% AES, EIX, DYN, NRG West Central 5,267 0.0% 31,243 31,243 335,548 -1.4% AES, EIX Pacific Southwest 5,196 -2.1% 26,261 26,261 290,006 0.1% AES, DYN, CPN, EIX, GEN, NRG Pacific Northwest 3,411 -7.1% 18,202 18,202 160,668 3.3% CPN, EIX, NRG, Total Electricity Output 71,917 -13.5% 381,359 381,359 4.032,347 -1.5% Soiree: Romberg. Lints: QM. 51 EFTA00606209 Dave Natt. CFA North America Credit Research 16 February 2012 J.P.Morgan Total Degree Days Total Degree Da» As of I1-Feb-12 Region YTE) 2012 YTD 2011 Normal YoY vs Normal Company New England 2,170 2,741 2,572 -20.8% -15.6% AES, CPN, DYN, GEN, NRG Mid Atlantic 2,083 2,612 2,459 -20.3% -15.3% AES, DYN, EIX, GEN, NRG E. North Central 2,265 2,917 2,772 -22.4% -18.3% DYN, EIX, GEN, NRG W. North Central 2,341 3,163 2,954 -26.0% -20.8% AES, CPN, GEN, NRG, TXU South Atlantic 1,395 1,897 1,750 -26.5% -20.3% CPN, DYN, E. South Central 1,284 1,919 1,767 -33.1% -27.3% CPN, GEN W. South Central 904 1,440 1,329 -37.2% -32.0% CPN, NRG, GEN Mountain 1,867 2,209 2,180 -15.5% -14.4% CPN, DYN, Pacific 952 1,028 1,130 -7.4% -15.8% AES, CPN, DYN, EIX, GEN, NAG Total Degree Days As of 31-Dec-11 Region 2011 2010 Normal YoY vs Normal Company New England 1,790 2.205 2,195 -18.8% -18.5% AES, CPN, DYN, GEN, NRG Mid Atlantic 1,711 2,082 2,062 -17.8% -17.0% AES, DYN, EIX, GEN, NRG E. North Central 1,946 2,356 2,326 -17.4% -16.3% DYN, EIX, GEN, NRG W. North Central 2,173 2,438 2,526 -10.9% -14.0% AES, CPN, GEN, NRG, TXU South Atlantic 1,361 1,700 1,572 -19.9% -13.4% CPN, DYN, E. South Central 1,263 1,542 1,455 -18.1% -13.2% CPN, GEN W. South Central 1,073 1,066 1,106 0.7% -3.0% CPN, NRG, GEN Mountain 2,180 2,003 2,205 8.8% -1.1% CPN, DYN, Pacific 1.114 1,088 1,097 2.4% 1.5% AES, CPN, DYN, EIX, GEN, NRG Same: Naticrel Oceanc and Almosphenc tannzaabea. Note: Gas hare heatng coswner weighled. 52 EFTA00606210 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan Average Cooling Degree Days 120 100 80 A • I 91\1 80 r v .1 9 40 i • Pm • 20 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec --- 2009 2010 2011 Normal ---2012 Soso?: Naicnal Oceanic and Abnesphenc Administaxm (NOM). 53 EFTA00606211 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan Average Heating Degree Days 300 250 200 150 100 50 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun -- 2009/2010 2010/2011 2011/2012 Normal Scuts: Unocal Oceanic and Aunosphenc Adrnnsuaom INOAA) 54 EFTA00606212 Dave Katz. CFA North America Credit Research 16 February 2012 J.F!Morgan Generation Share Forecasts and Implied Capacity Factors 2005A 2006A 2007A 2008A 2009A 2010A 2011k 20bk. 20201: 202:1k. 20301. 20356 Coal 51.1% 50.4% 49.9% 49.5% 45.9% 46.5% 46.0% 44.2% 45.1% 46.9% 46.0% 45.5% Petroleum 3.0% 1.5% 1.5% 1.1% 0.9% 1.0% 1.0% 0.9% 0.9% 0.9% 0.9% 0.9% Natural Gas 17.5% 18.8% 20.3% 20.2% 22.1% 22.9% 22.0% 21.5% 20.2% 19.1% 21.0% 22.3% Nuclear Power 20.0% 20.1% 20.1% 20.3% 20.9% 20.3% 20.6% 21.0% 21.1% 20.4% 19.6% 18.9% Pumped Storage/Other 0.0% 0.0% 0.0% 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Renewable Sources 8.3% 9.0% 8.0% 8.8% 10.1% 9.4% 10.5% 12.4% 12.6% 12.7% 12.5% 12.3% Distributed Generation (Natural Gas) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.1% 0.1% Implied coal plant capacity factor 73.4% 72.6% 73.8% 72.7% 63.8% 66.1% 64.2% 63.7% 67.4% 72.5% 74.0% 75.7% Implied gastoil plant capacity factor 21.7% 21.2% 23.1% 22.0% 22.3% 24.0% 22.5% 23.0% 22.8% 21.4% 22.6% 23.2% Implied nuke plant capacity factor 89.1% 89.7% 91.5% 91.5% 90.3% 90.7% 90.6% 90.6% 90.6% 90.6% 90.6% 90.3% Implied renewable plant capacity factor 39.5% 41.8% 36.0% 36.3% 37.5% 34.7% 36.8% 41.3% 43.7% 43.9% 43.7% 43.9% Source: Energy Infamaton Agency. 55 EFTA00606213 Dave Ka2. CFA North America Credit Research 16 February 2012 J.P.Morgan Estimated Generation by Fuel Type 100% 90% - 80% 70% 60% 50% 40% 30% 20% 10% 0% L_ 2005A 2006A 2007A 2008A 2009A 2010A 2011 2015 2020 2025 2030 2035 • Coal • Petroleum o Natural Gas ■ Nuclear Power • Renewable Sources Scuts: Energy Information Agency 56 EFTA00606214 Dave Kali. CFA North America Credit Research 16 February 2012 J.P.Morgan Estimated Capacity Additions, 2007-2030 50 40 30 20 10 0 2010.2015 2015-2020 2020.2025 2025.2030 2030-2035 ■ Coal Steam O Combined Cycle • Combustian Turbine/Diesel • Nuclear Power • Renewable Sources Source: Energy InformalOn Agency. EFTA00606215 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan Analyst Certification: The research analyst(s) denoted by an "AC— on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an "AC' on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that (I) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. Conflict of Interest This research contains the views, opinions and recommendations of• Morgan credit research analysts. Research analysts routinely consult with E. Morgan trading desk personnel in formulating views, opinions and recommendations in preparing research. Trading desks may trade, or have traded, as principal on the basis of the research analyst(s) views and report(s). Therefore, this research may not be independent from the proprietary interests of• Morgan trading desks which may conflict with your interests. In addition. research analysts receive compensation based, in part, on the quality and accuracy of their analysis, client feedback, trading desk and firm revenues and competitive factors. As a general matter,M. Morgan and/or its affiliates normally make a market and trade as principal in fixed income securities discussed in research reports. Important Disclosures • Lead or Co-manager: I. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for AES Corp, Edison Mission Energy, Edison International, NRG Energy within the past 12 months. Explanation of Credit Research Ratings: Ratings System: Morgan uses the following sector/issuer portfolio weightings: Overweight (over the next three months, the recommended risk position is expected to outperform the relevant index, sector, or benchmark), Neutral (over the next three months, the recommended risk position is expected to perform in line with the relevant index, sector, or benchmark), and Underwei ht (over the next three months, the recommended risk position is expected to underperform the relevant index, sector, or benchmark). M. Morgan's Emerging Market research uses a rating of Markenveight, which is equivalent to a Neutral rating. Valuation & Methodology: In M. Morgan's credit research, we assign a rating to each issuer (Overweight, Underweight or Neutral) based on our credit view of the issuer and the relative value of its securities, taking into account the ratings assigned to the issuer by credit rating agencies and the market prices for the issuer's securities. Our credit view of an issuer is based upon our opinion as to whether the issuer will be able service its debt obligations when they become due and payable. We assess this by analyzing, among other things, the issuer's credit position using standard credit ratios such as cash flow to debt and fixed charge coverage (including and excluding capital investment). We also analyze the issuer's ability to generate cash flow by reviewing standard operational measures for comparable companies in the sector, such as revenue and earnings growth rates, margins, and the composition of the issuer's balance sheet relative to the operational leverage in its business. Other Disclosures Morgan (1PM") is the global brand name for `Morgan Securities LLC ("JPMS") and its affiliates worldwide. Morgan Cazenove is a marketing name for the U.K. investment banking businesses and EMEA cash equities and equity research businesses of JPMorgan Chase & Co. and its subsidiaries. Options related research: If the information contained herein regards options related research, such information is available only to persons who have received the proper 2ption risk disclosure documents. For a copy of the Option Clcarin Co ration's Characteristics and Risks of Standardized Options. • please contact yourM. Morgan Representative or visit the OCC's website at Legal Entities Disclosures US.: JPMS is a member of NYSE, FINRA. SIPC and the NFA. JPMorgan Chase Bank, M. is a member of FDIC and is authorized and regulated in the UK by the Financial Services Authority. U.K.: U. Morgan Securities Ltd. (JPMSL) is a member of the London Stock Exchange and is authorized and regulated by the Financial Services Authority. Registered in England & Wales No. 2711006. Registered Office 125 London Wall, London EC2Y South Africa: M. Morgan Equities Limited is a member of the Johannesburg Securities Exchange and is regulated by the FSB. Hong Kong: Morgan Securities (Asia Pacias) Limited (CE number AAJ321) is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission in Hong Kong. Korea: M. Morgan Securities (Far East) Ltd, Seoul Branch, is regulated by the Korea Financial Supervisory Service. Australia:IS Morgan Australia Limited (ABN 52 002 888 01 I/AFS Licence No: 238188) is regulated by ASIC and E. Mo Securities Australia Limited (ABN 61 003 245 234/AFS Licence No: 238066) is a Market Participant with the ASX and regulated by ASIC. Taiwan: Securities (Taiwan) Limited is a participant of the Taiwan Stock Exchange (company-type) and regulated by the Taiwan Securities and Futures Bureau. India: M. Morgan India Private Limited, having its registered office at M. Morgan Tower. OM C.S.T. Road, Kalina, Santacruz East. Mumbai - 400098. is a member of the National Stock Exchange of India Limited (SEBI Registration Number - INB 230675231/INF 230675231/INE 230675231) and Bombay Stock Exchange Limited (SEBI Registration Number - INB 010675237/INF 010675237) and is regulated by Securities and Exchange Board of India. Thailand: JPMorgan Securities (Thailand) Limited is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Indonesia: PT5 Morgan Securities Indonesia is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Philippines:E. Morgan Securities Philippines Inc. is a member of the Philippine Stock Exchange and is regulated by the Securities and Exchange Commission. Brazil: Banco. Morgan S.A. is regulated by the Comissao de Valores Mobiliarios (CVM) and by the Central Bank of Brazil. Mexico: 58 EFTA00606216 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan Morgan Casa dc Boise, S.A. de C.V.... Morgan Grupo Financiero is a member of the Mexican Stock Exchange and authorized to act as a broker dealer by the National Banking and Securities Exchange Commission. Singapore: This material is issued and distributed in Singapore by M. Morgan Securities Singapore Private Limited (JPMSS) [MICA (P) 032/0112012 and Co. Reg. No.: 199405335R] which is a member of the Singapore Exchange Securities Trading Limited and is regulated by the Monetary Authority of Singapore (MAS) and/or JPMorgan Chase Bank, Singapore branch (JPMCB S. Singapore) which is regulated by the MAS. Malaysia: This material is issued and distributed in Malaysia by JPMorgan Securities (Malaysia) Sdn Bhd (18146-X) which is a Participating Organization of Bursa Malaysia Bcrhad and a holder of Capital Markets Services License issued by the Securities Commission in Malaysia. Pakistan: J. P. Morgan Pakistan Broking (Pvt.) Ltd is a member of the Karachi Stock Exchange and regulated by the Securities and Exchange Commission of Pakistan. Saudi Arabia: Morgan Saudi Arabia Ltd. is authorized by the Capital Market Authority of the Kingdom of Saudi Arabia (CMA) to carry out dealing as an agent, arranging, advising and custody. with respect to securities business under licence number 35-07079 and its registered address is at 8th Floor. Al-Faisaliyah Tower. King Fahad Road, S Box 51907, Riyadh 11553. Kingdom of Saudi Arabia. Dubai: JPMorgan Chase Bank, M. Dubai Branch is regulated by the Dubai Financial Services Authority (DFSA) and its registered address is Dubai International Financial Centre - Building 3, Level 7, PO Box 506551. Dubai, UAE. Country and Region Specific Disclosures U.K. and European Economic Area (EEA): Unless specified to the contrary, issued and approved for distribution in the U.K. and the LEA by JPMSL. Investment research issued by JPMSL has been prepared in accordance with JPMSL's policies for managing conflicts of interest arising as a result of publication and distribution of investment research. Many European regulators require a firm to establish. implement and maintain such a policy. This report has been issued in the U.K. only to persons of a kind described in Article 19 (5), 38, 47 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons"). This document must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is only available to relevant persons and will be engaged in only with relevant persons. In other EEA countries, the report has been issued to persons regarded as professional investors (or equivalent) in their home jurisdiction. Australia: This material is issued and distributed by JPMSAL in Australia to "wholesale clients' only. JPMSAL does not issue or distribute this material to "retail clients". The recipient of this material must not distribute it to any third party or outside Australia without the prior written consent of JPMSAL. For the purposes of this paragraph the terms "wholesale client' and 'retail client" have the meanings given to them in section 761G of the Corporations Act 2001. Germany: This material is distributed in Germany by Morgan Securities Ltd.. Frankfurt Branch and Chase Bank. Frankfurt Branch which are regulated by the Bundesanstalt fur Finanzdienstleistungsaufsicht. Hong Kong: The I% ownership disclosure as of the previous month end satisfies the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission. (For research published within the first ten days of the month, the disclosure may be based on the month end data from two months prior.). Morgan Broking (Hong Kong) Limited is the liquidity providerlmarket maker for derivative warrants, callable bull bear contracts and stock options listed on the Stock Exchange of Hong Kong Limited. An updated list can be found on HKEx website: Japan: There is a risk that a loss may occur due to a change in the price of the shares in the case of share trading, and that a loss may occur due to the exchange rate in the case of foreign share trading. In the case of share trading, JPMorgan Securities Japan Co.. Ltd.. will be receiving a brokerage fee and consumption tax (shouhizei) calculated by multiplying the executed price by the commission rate which was individually agreed between JPMorgan Securities Japan Co., Ltd., and the customer in advance. Financial Instruments Firms: JPMorgan Securities Japan Co., Ltd., Kanto Local Finance Bureau (kinsho) No. 82 Participating Association / Japan Securities Dealers Association, The Financial Futures Association of Japan, Type II Financial Instruments Firms Association and Japan Securities Investment Advisers Association. Korea: This report may have been edited or contributed to from time to time by affiliates of M. Morgan Securities (Far East) Ltd, Seoul Branch. Singapore: JPMSS and/or its affiliates may have a holding in any of the securities discussed in this report; for securities where the holding is 1% or greater, the specific holding is disclosed in the Important Disclosures section above. India: For private circulation only, not for sale. Pakistan: For private circulation only, not for sale. New Zealand: This material is issued and distributed by JPMSAL in New Zealand only to persons whose principal business is the investment of money or who, in the course of and for the purposes of their business, habitually invest money. JPMSAL does not issue or distribute this material to members of "the public" as determined in accordance with section 3 of the Securities Act 1978. The recipient of this material must not distribute it to any third party or outside New Zealand without the prior written consent of JPMSAL. Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or. alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated. formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offence. Dubai: This report has been issued to persons regarded as professional clients as defined under the DFSA rules. General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but 1PMorgan Chase & Co. or its affiliates meteor subsidiaries (collectively M. Morgan) do not warrant its completeness or accuracy except with respect to any disclosures relative to JPMS andior its affiliates and the analyst's involvement with the issuer that is the subject or the research. All pricing is as of the close of market for the securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and arc not intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipient of this report must make its own independent decisions regarding any securities or financial instruments mentioned herein. JPMS distributes in the U.S. research published by non-U.S. affiliates and accepts responsibility for its contents. Periodic updates may be provided on companicsrindustries based on company specific developments or announcements, market conditions or any other publicly available information. Clients should contact analysts and execute transactions through a MI. Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise. "Other Disclosures" last revised January 6, 2012. 59 EFTA00606217 Dave Katz. CFA North America Credit Research 16 February 2012 J.P.Morgan Copyright 2012 JPMorgan Chase & Co. All git hts reset-led. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of.. Morgan. 60 EFTA00606218