Overview. District System Faced With Challenge

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2 Overview District System Faced With Challenge Large customer renewal Pricing pressure Environmental focus Maintain system reliability Responsive Business Practice to Achieve Customer Goals Creative Solution: Improved Production efficiency Cost competitiveness Environmental footprint Achieves 10% of City of Philadelphia s GHG reduction goal 2

3 Global Environmental Company Ranked second greenest utility company in the world in Newsweek Magazine s 2012 Green Rankings The standard for water management 2012 Revenue $15.9 billion The only company in the world able to cover the entire range of environmental services (NYSE: VE) The standard for energy management 2012 Revenue $10.1 billion 2012 Global Revenue $38.8 billion The standard for waste management and resource recovery 2012 Revenue $12.0 billion 3

4 District Energy Networks: Largest Portfolio in North America 17 District energy networks 9 networks powered by Combined Heat and Power (CHP) plants 4

5 Philadelphia, PA District Heating and Cooling Network with CHP Context Philadelphia, PA Third largest district energy system in the U.S. Over 500 buildings served from three steam and one chilled water plants over 41 miles of steam and chilled water networks. Services Heating Cooling Cogeneration / CHP Serving over 100 million SF of customer space. Staff of 85 services accounts, distribution network and plant assets. Customers - 85% of revenue under long-term contracts Universities & Healthcare Government Office Hotels Residential Veolia Energy s Production Capacity 4 million lbs. per hour of steam 7,000 tons of chilled water 163 megawatts of cogeneration / CHP Highest % cogenerated steam in the US Robust and Growing World Class Network Barnes Foundation (LEED Platinum) Penn CAM Wistar Institute Drexel Integrated Sciences Building TJU 901 Walnut Street 5

6 Customer Profile 300+ Customers 500+ Buildings Apartments & Hotels 7% Misc. 6% Schools 36% 100 Million Square Feet 3.6 Million Mlbs Sales Annually Commercial Offices 23% ` Government 8% Hospitals 20% Top 10 customers = 60% of sales Top 20 customers = 80% of sales Top 100 customers = 99% of sales 6

7 Original Oil-Fired Assets Schuylkill Station #23 & #24 Boilers 800 mmbtu # 6 oil fired Installed 1939 #26 Boiler 760 mmbtu # 6 oil fired Installed

8 Original Oil-Fired Assets Edison Station #1 & #2 Boilers 200 mmbtu # 6 oil fired Installed 1957 #3 & #4 Boilers 250 mmbtu # 6 oil fired Installed

9 Operating Assets Oil Terminal Access Via Barge on Schuylkill River 7 Tanks 70,000 bbls #2 & #6 oil 9

10 Grays Ferry Cogeneration Facility Context Grays Ferry Cogeneration Recovered waste heat from this serves the heating, hot water, process and cooling needs of over 500 buildings. In normal operations, 100% of steam demand is supplied from the CHP heat recovery systems. Since 1998, produced steam for Philadelphia s district energy network and electricity for the grid, while reducing Philadelphia's carbon footprint through efficient use of fossil fuels Recognition for Environmental Impact U.S. Environmental Protection Agency s Leadership Award for its role in reducing greenhouse gas emissions Power Plant of the Year Award from Power Magazine Production Capacity 163 megawatts of cogeneration / CHP Siemens-Westinghouse combustion turbine Mitsubishi extraction/condensing steam turbine Power sold under long-term PPA Heat Recovery Steam Generator ( HRSG ) has duct firing capability Steam capacity of 711 Mlbs per hour 735 Mlbs per hour high-pressure superheat boiler 10

11 The Challenge! Re-sign Penn to long term contract Achieve Penn s environmental goals Reduce cost Implications for all district steam customers Maintain steam system reliability Cogen not fully utilized Improve cost competitiveness Improve environmental impact Support City of Philadelphia s Greenworks plan to reduce emissions 11

12 University of Pennsylvania 40% of Veolia Energy Philadelphia Annual Sales (1.5 Million Mlbs) Largest Institutional District Energy Customer in U.S. 25,000 Students 302 Acres 218 Buildings: Both Academic & Research Environmental Commitment: Early signatory to the American College & University Presidents Climate Commitment Leader in energy production & procurement st place in the EPA s nationwide College and University Green Power Challenge 12

13 Solution: Green Steam Repowering Energy Infrastructure Rapid Start Boilers Continued evolution of century old plant Installed Natural Gas Capabilities on Vintage 1970 s Boiler Fuel Sourcing That Reflects Energy Markets Increase Firm Gas Rights 13

14 Philadelphia Green Steam Conversion Rapid Start Boilers: $30 Million Two 250,000 pph package boilers provide back-up capabilities Environmentally responsive units High efficiency burners reduce NOx emissions (9 ppm) Commissioned 4Q 2012 Steam sparging used for boiler unit warm standby 100% steam load ready in less than 9 minutes 14

15 RSBs: Off-Load on the Schuylkill 15

16 RSBs: Streets of Philadelphia 16

17 RSBs: Lift into Building 17

18 Philadelphia Green Steam Conversion Natural gas pipeline expansion: $30 million Eliminated physical supply constraint on TETCO lateral Eliminates gas curtailments Unwound long-haul gulf contract Regionally sourced Reduced line losses Marcellus impact Natural gas is bought daily in the spot market $50M annually local 18

19 Texas Eastern (TETCO) Pipeline Eagle Lateral Producing Region 19

20 Philadelphia Green Steam Results Cost savings and environmental benefits realized by all customers Improved production efficiency Reduced fuel cost Improved environmental footprint Achieves 10% of City of Philadelphia s Greenworks emissions goals Equipment modernization 20-year contract extension with Penn Veolia leases and provides O&M for Penn s 11-mile steam network 20

21 Philadelphia Green Steam Results Lower Greenhouse Gas Emission: $60M Green Steam project 70,000 metric tons per year (11,000 car equivalent) 16% less carbon than on-site natural gas fired boilers Improves LEED score & energy benchmarking LEED New Buildings - CHP as though built on site LEED Existing Buildings - 30% CHP capacity Renewable Source: Co-gen Project: $170M 163 MW cogeneration plant 360,000 metric tons per year (60,000 car equivalent) 100% cogenerated; highest in the United States District energy customers receives benefit of co-gen without installing on-site 10% of City of Philadelphia s Greenworks emissions goals 21

22 Philadelphia Green Steam Results Eliminate Air Quality Fuel Improvements Oil Consumption 2010 vs Veolia 19.5% improvement Natural Gas Sourcing NOx Lower 92.6% Greenhouse improvement Gas in SO2 Emissions Contributes to City Greenworks goal for Improved Air Quality 22

23 Mayor Michael Nutter City of Philadelphia Veolia Energy has proven to be a strong partner with the City. The completion of this project marks an important step forward in the achievement of our Greenworks goal of reducing greenhouse gas emissions by 20 percent. In addition, by ensuring a reliable and competitive energy resource, these investments will fuel growth in our vital central business and university city districts. 23

24 Mike Smedley Office: (267)