Welcome to First Hydro

Welcome to First Hydro16 July 2010

First HydroSlide 2

Approximately 200 employees across four sites

Dinorwig– largest pumped storage plant in Western Europe– commissioned 1983– total plant capacity 1,728MW– 6 reversible pump/turbines – reservoir capacity ~10GWh

Ffestiniog– UK’s first major pumped storage station– Commissioned 1963– total plant capacity 360MW– 4 separate turbines & pumps– reservoir capacity ~1.3GWh

Electric Mountain visitor centre

Bala House trading office

Owned by International Power (75%)/Mitsui & Co, Ltd (25%) since December 2004

First Hydro overview

First HydroSlide 3

Pumped storage principle

Pump water overnight

Generate electricity during the day

Typical cycle efficiency ~70 - 75%

Closed hydraulic system

Generating

Pumping

Power import

Power export

First HydroSlide 4

Asset features

Originally designed and built to support grid system management

Extremely high reliability and availability

Rapid speed of response– Dinorwig full output in ~16 seconds– Ffestiniog full output ~60 seconds

~25,000 mode changes per year

Asset capabilities provide for a diverse range of trading and marketing opportunities

Shut Down

Generate

Pump

Spin Gen

Spin Pump

<30s

6m7m

6m

3m

<12s

6m

<90s

8m6m

<30s

<30s

1.5 2.5

60

85

0

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90

Dinorwig Ffestiniog CCGT (hot) Coal (hot)

Typical start-up times (minutes)

Dinorwig mode transition times

First HydroSlide 5

The role of First Hydro

1. Energy arbitrage - peak/off-peak– valuable peaking capacity– enables efficient running of steam plant overnight

2. Reserve provision– range of timescales (focus on fast)– but, limited storage

3. Frequency control– fast response to plant trips, TV pickups etc.

Roles underpinned by plant reliability and dynamic capabilities

Buying fuel and selling power exports via the same market

Diversity of revenue streams

First HydroSlide 6

Optimising value

2088 MW CapacityEnergy limited

2088 MW CapacityEnergy limited

Fir

st

Hyd

ro

com

peti

tive

ad

van

tag

e

Mark

et

featu

res

First Hydro

TV pick up: England vs USA 12th June

National Grid

FHC Output over same period:

0

50

100

150

200

250

300

19:00

19:15

19:30

19:45

20:00

20:15

20:30

20:45

21:00

21:15

21:30

21:45

22:00

MW

Time

DINO-1 DINO-6

FFES-1 FFES-4

Slide 7

First HydroSlide 8

Dinorwig physical layout

First HydroSlide 9

Dinorwig physical layout

First Hydro

Underground caverncross section

Pump/Turbine

Generator/motor

Power station/unit cross-sections

Slide 10

First Hydro

Market review

Slide 11

Significant market volatility Winter 05/06 and throughout 2008

– Positive impact of additional storage on utilisation/value in 2008

Less stress on system in 2009/10

– Impact of new build and recession-led demand reduction

– But, some intraday volatility– Retain ability to capture

value during ‘system shocks’

First HydroSlide 12

Market outlook

Projected New BuildDECC – Updated Energy and Emissions Projects, June 2010

GB plant mix to change radically in next 10-15 years

GB plant mix to change radically in next 10-15 years

First Hydro

Ancillary services developments

Demand for reserve services to increase

– Impact of increased wind generation– Intermittency increases system risks

across a range of timescales

Frequency response requirements to be revised upwards

– To be consistent with increased wind generation, new generation nuclear reactors, and large offshore wind connections

New providers expected to enter these markets

– Dynamic demand response– New OCGT plant

FH well positioned, with diverse capabilities

Source Data: National Grid “Future Requirements”

Slide 13

First HydroSlide 14

Plant investment strategy

Assess changing market environment

Preserve competitive advantage

Enhance capabilities

Invest to maintain assets

Invest to improve assets

– Opportunities and challenges

– Improve reliability/availability– Increase quality or range of

products

– Engineering integrity and plant life– Maintain current levels of performance

– Focus on quality of core maintenance

– Replace or refurbish ageing/obsolescent equipment

– Retain expertise within business

Additionalstorage

Additionalstorage

Increased automationIncreased

automationNew

runnerNew

runner

First HydroSlide 15

Dinorwig additional stored energy

Extension of Marchlyn Mawr planned 2005/6

Permissions granted 2006

Completed October 2007

Increased storage by approximately 8%

Short payback period

First Hydro

Plant automation

First Hydro despatch is already extremely accurate

– 99% of instructions are delivered within one minute of required time

Engineers manually accept instructions from grid and despatch the plant

Aiming to automate majority of despatch instructions

– Improve despatch precision to maintain/enhance competitive advantage

– Target 99% within 15 seconds

Automate progressively from 2011 to 2014

Slide 16

0

5

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60+ 45 30 15 0 15 30 45 60+

% Instructions

Seconds early/late

Based Jan-Jun 2010.>13000 instructions.14 not delivered

First Hydro

Turbine runner

2008 record utilisation; pumping costs >£100m

Re-established project to look at improving cycle efficiency

Turbine design optimised in 2007/8 via computational and physical modelling

Currently replacing a turbine with completion targeted for Q3 2010

– Unit efficiency gain > 2%– Short payback period

Slide 17

First HydroSlide 18

Summary

First Hydro remains highly relevant to the UK system

Future market developments will increase the need for response and reserve

– Providing critical reserves to support intermittent generation– Ability to “time-shift” excess wind generation off peak– Complement new nuclear build

Historic investment in plant has maintained integrity/longevity

Current investment program improves market position– Increases competitive advantage– Enhances ability to capture current and future value