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Global Utility White Paper CONFIDENTIAL MSCI World Utility vs MSCI World Price Spread (90-Day MA) Source: Bloomberg Price MSCI Global Sectors 1/1/2009 12/31/2012 Performance Consumer Discretionary 68.5 132.4 93% Information Technology 54.2 96.9 79% Materials 146.1 237.2 62% Industrial 101.4 155.8 54% Consumer Staples 104.7 160.5 53% Health Care 89.1 128.4 44% Energy 181.9 238.9 31% Financials 63.0 82.0 30% Telecom 51.0 56.9 12% Utilities 113.4 100.9 -11% Source: Bloomberg e Reasons for Underperformance Much of this recent underperformance can be explained by investors’ textbook preference, coming out of recession, to add high-beta stocks and shed low-growth utilities. This was exacerbated by: o soft power demand growth (particularly in Europe); generation overcapacity; delays in capital spending; lower commodity prices (particularly as a result of US shale gas production); central banks’ quantitative easing; political interference (notably in Europe); high debt loads; the Fukushima nuclear disaster in Japan; and © concerns about interest rate rises from today’s very low levels. It is hard to imagine a more perfect storm for the global utility sector than that which has played out over the past 4 years. 000000 0 e Potential Exists for Sharp Outperformance Globally or regionally, it is not unusual to find long and/or sharp periods of utility underperformance (as with the current record period). During such periods, when combined with wholesale shorts and market underweighting, the sector becomes poised for extended outperformance rallies. This results from fundamental investors (both long/short and long-only) rotating into the sector en masse, bidding up the best value and growth utilities and underweighting or shorting utilities with poor business 15 Electron Capital Partners, LLC HOUSE_OVERSIGHT_024216