Wind Hedges & Energy Budgets

Roy Morrison & Associates, LLC.

www.RMAenergy.net

© RMA, 2006

Wind Hedge Savings and Energy Budgets

• A Wind Hedge, When Properly Sized, Can Keep Total Yearly Energy Budget Flat

• The Hedge Works in Low, Probable, and High Case Future Price Scenarios

• When Energy Prices Rise, the Wind Farm Pays the End User. When Prices Fall, the User Pays the Wind Farm.

Wind Hedge Example

• Slides 4-6 Document the 20 Year Financial Behavior of a Wind Hedge

• The Model Is for a Customer With a $1.5 Million/Year Energy Budget for Electricity and Natural Gas

• Under Low, Probable, and High Price Case Energy Scenarios, the Properly Sized Hedge Keeps Energy Budget Flat

Wind Hedge $ Savings

• Hedge Keeps Net Annual Budget Flat at $1.5 Million/year

• Total 20 - Year Wind Hedge Savings: High Price Case: $38,911,482Probable Price Case: $15,157,877Low Price Case: $2,324,489

High Gas Price Case

-$1,000,000

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Bill without wind Bill with wind Save

Low Gas Price Case

-$1,000,000

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Bill without wind Bill with wind Save

Probable Gas Price Case

-$1,000,000

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Bill without wind Bill with wind Save

Natural Gas Prices and Wind Hedge

• In the Northeast, Natural Gas and Electricity Prices Are Based on Henry Hub, Louisiana Natural Gas Prices

• Electricity Prices Rise and Fall With the Price of Natural Gas

• This Is Why the Wind Hedge Works• Slide 9 Presents Our Future High,

Probable, and Low Gas Price Scenarios

Henry Hub Future Gas Price

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

1/1/02 1/1/04 1/1/06 1/1/08 1/1/10 1/1/12 1/1/14 1/1/16 1/1/18 1/1/20 1/1/22 1/1/24 1/1/26 1/1/28

$/mmBTU

low prob high 12 per. Mov. Avg. (low)

Roy Morrison & Associates LLC

Contact:

603-496-4260 / 603-456-2871 (Fax)

r.morrison@iamnow.net

www.RMAenergy.net

P.O. Box 201 Warner, NH 03278