MAY 2, 2017 A NEW POWER MODEL FOR THE FUTURE Presentation to Jemez Cooperative April, 20 PREPARED FOR CITY OF SOCORRO
CITY OF SOCORRO Guzman Energy is a new W HO IS kind of power company, one that customizes energy solutions G UZMAN for rural power cooperatives and municipal energy companies to achieve lower rates, price certainty, E NERGY ? and more flexibility. We use our energy trading expertise and market-driven solutions to provide communities with the lowest cost mix of power generation resources to meet their needs. Guzman Energy is part of the Guzman Group of companies, which has a 30 year history of building innovative and successful businesses.
1960s ARRIVES IN U.S. Lands in Miami from Cuba 1970s COMPLETES EDUCATION Engineering degree at Columbia & MBA at Stanford 1987 GUZMAN & COMPANY Founds company to GUZMANENERGY.COM focus on innovation in the equity markets L EO G UZMAN 1992 Personifying the American JOINS THE NYSE dream, Leo Guzman arrived in The first Hispanic- the U.S. from Cuba as a owned company to teenager in the 1960s and rose become a member to become the first Hispanic member firm of the New York Stock Exchange and a leader in 2013 program trading. A self-made GUZMAN ENERGY man, he has successfully built Founds company to and led businesses for more provide clients with reliable than four decades. His success energy at a lower cost is rooted in seeing opportunities where others don’t, and in being bold when others are not. 2016 BEGINS SERVING COMMUNITIES IN THE WEST
L EADERSHIP T EAM Jeff was born and raised in Denver and has spent his C HRIS M. entire career in the power industry. He's held senior J EFFREY positions at Public Service of Colorado (Xcel Energy), R ILEY M. H EIT Twin Eagle Resource Management and Integrys Energy, as well as a few others. With over 30 years of experience, he has seen the industry change many times in past few years. His passion and experience PRESIDENT MANAGING were the foundation on which Guzman Energy was DIRECTOR built and he's proud to call it home. Jeff overseas Guzman's power operations nationally and continues to reside in Denver with his wife Tamie and their two grown children. The son and grandson of rural Utah coal miners, Chris enlisted in the Navy at the age of 18. He later went on to receive his commission and, during his career as a naval officer, Chris is a native of Douglasville Georgia. He C HRIS A. served as the Chief Engineer of a enlisted in the Navy after high school and served as guided missile destroyer, and later as a Boatswain Mate in the Pacific. He received a M ILLER Commanding Officer of a coastal commission and served a distinguished career as a patrol warship. Chris is a graduate of naval officer. He continues today as a Commander the United States Naval Academy and in the reserves and recently returned from a CHIEF of Harvard Business School. Having deployment to the Horn of Africa. OPERATING seen first hand the effects of market Chris graduated from the United States Naval OFFICER transformation on communities, he Academy and holds multiple masters degrees. developed a passion for understanding the complexities of He is currently completing his MBA from the Northwestern Kellogg School of Management. He is market change and for identifying and an original member of the Guzman Energy team and believes that economic competitiveness is correcting market inefficiencies. He directly connected to smart policy and works hard to make sure Guzman Energy empowers that currently lives in Miami, but still feels connection. the call of the West. He lives with his family in Miami, but still has his southern accent.
We are positioned to help you succeed in the changing energy market by providing market-driven solutions to make you more agile, innovative, flexible & competitive. W HY We are a successful and healthy GUZMAN ENERGY privately held company with a strong IS A SAFE AND balance sheet, $1B capital backing. P ARTNER TRUSTWORTHY COMPANY THAT GIVES RURAL WITH COOPERATIVES ENERGY OPTIONS, We have deep expertise in the energy WHICH ENABLE THE markets with offices in Denver and G UZMAN FUTURE Miami staffed with experienced teams. COMPETITIVENESS E NERGY ? OF THEIR COMMUNITIES We have a strong record of achieving significant savings for our customers, KCEC, Aztec and Jicarilla. We are experienced and fully committed to expanding in the West.
02 T HE D EATH OF C OAL T HE L AST 10 Y EARS CUMULATIVE CHANGE IN GENERATION BY FUEL H AVE S EEN A TYPE* D ISRUPTIVE C HANGE GWhs in THOUSANDS 500 I N T HE E NERGY 300 100 L ANDSCAPE (100) (300) (500) (700) 2004 2006 2008 2010 2012 2014 2016 Coal Renewable 01 M ASSIVE A MOUNTS O F C HEAP S HALE G AS Energy is overwhelmingly shifting to cheap shale gas at the expense of coal . The owners of portfolios heavy in coal CUMULATIVE CHANGE IN GAS PRODUCTION BY TYPE* assets are simply no longer competitive Traditional Gas Shale Gas Total 12 10 8 BTUs in MILLIONS 6 4 2 - 2009 2010 2011 2012 2013 2014 2015 (2) (4) (6) *Source: U.S. EIA
MARKETS HAVE REACTED TO THE IMPACT OF SHALE GAS & RENEWABLES HENRY HUB NATURAL GAS WEST POWER PROMPT YEAR ($/MWH) PROMPT YEAR PRICE $14.00 $60.00 $12.00 79% 61% $55.00 $50.00 $10.00 DECREASE DECREASE $/M M B T U $45.00 $/M W h $8.00 $40.00 $6.00 $35.00 $4.00 $30.00 $2.00 $25.00 $- $20.00 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: ICE, Guzman Energy Source: ICE, Guzman Energy
T HE O LD WEST POWER WHOLESALE RATE VS NEW MEXICO COOP WHOLESALE RATE M ODEL IS 60% B ROKEN 44% AND W ILL 40% N OT F IX I TSELF GUZMANENERGY.COM 20% 0% When markets change 2004 2006 2008 2010 2012 2014 2016 so drastically there will be winners and losers. -20% The only thing that matters is the ability of a company to capitalize -40% on these changes -60% -91% -80% -100% Wholesale West Power NM Coop Wholesale Rate Source: ICE, Guzman Energy
Source: U.S. EIA C OMPETITIVE P OSITION D ICTATES C OST GUZMANENERGY.COM ELECTRIC RATES RESIDENTIAL, 2016 Annual average electricity rates by utility service territory. Map combines data provided by ABB Energy Velocity Suite and state averages reported by EIA. This map was produced by the National Renewable Energy Laboratory for the US Department of Energy. Billy J. Roberts | February 26, 2016
A CTION IS THE S AFE G ROUND GUZMAN ENERGY IS HIGHLY CAPABLE AND CAN EXECUTE WITH PRECISION
INCENTIVE TO GO BEHIND THE METER FOR KIT CARSON CUSTOMERS K IT C ARSON B ENEFITS $85.00 $20.00 $80.00 $18.00 Brought their community lower GUZMANENERGY.COM $75.00 rates in the future and removed the economic incentive of load $70.00 $16.00 defection. $65.00 "We wanted more renewable $60.00 $14.00 energy resources both local and in the portfolio. We wanted more $55.00 flexibility and shorter contracts. $12.00 Guzman brings that to the table” $50.00 “The model we are creating with $45.00 $10.00 Guzman is the model of the future" $40.00 $35.00 $8.00 - LUIS REYES, CEO AND 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 GENERAL MANAGER OF KIT CARSON ELECTRIC COOPERATIVE Moneyness Forecast C&I PPA Rate Indicate KC PPA Rate
I T M AY S EEM D AUNTING , B UT W E ’ VE D ONE T HIS B EFORE KEY STAKEHOLDERS: • New Mexico Public Utilities Commission • Public Service New Mexico • Rural Utility Service • CoBank • Communities W ITH G REAT S UCCESS 12
G UZMAN E NERGY R ESOURCE P ORTFOLIO GUZMANENERGY.COM Craig Ault Midway Four Corners Navajo San Juan Cholla Springerville Shiprock Greenlee - Power Source
G UZMAN E NERGY R ENEWABLE P ORTFOLIO GUZMANENERGY.COM Craig Ault Midway Four Corners Navajo San Juan Cholla Springerville Shiprock Taos Greenlee - Wind Farm - Power Source
S OLAR D EVELOPMENT GUZMANENERGY.COM Taos Aztec - Solar Array
G UZMAN L OAD P ORTFOLIO Aztec Utilities Jicarilla Apache Utility Kit Carson Electric - 7 year transaction Authority Cooperative - Fixed Price - 7 year transaction - 10 year transaction - 1 MW of Solar - Fixed Price - Fixed Price Developed - Solar Development Services: Services: - Scheduling Agent Services: - QRE Services - QRE Services - WREGIS Administrator - WREGIS Administrator Peak Demand – 3 MW - Scheduling Agent - Scheduling Agent - RPS Compliance Peak Demand – 7 MW Peak Demand – 62 MW GUZMANENERGY.COM
Deal Overview – Anacacho Wind Farm Structure: 3 Year Physical Power Hedge & RECs. Transaction Size: 99.8 MW (55 Vestas V100 1.815MW Turbines). Tenor: 3 Years P50 MWh’s: 1,031,904MWh’s. Location: ERCOT South Hub. Status: Completed. Credit: Adequate assurances provided along with margining provision. Anacacho Wind Farm GUZMANENERGY.COM 3 Y EAR M ERCHANT W IND F ARM H EDGE .
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