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Southern Energy, Inc.

Southern Energy, Inc. “Natural Gas and Electricity: Looks Like a Good Marriage”. Pamela S. Pierce IPAA Luncheon November 8, 2000 Houston, Texas. Southern Company. Southern Company Official Sponsor of the PGA Tour. Southern Energy, Inc. Southern Company Official Sponsor of the

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Southern Energy, Inc.

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  1. Southern Energy, Inc. “Natural Gas and Electricity: Looks Like a Good Marriage” Pamela S. Pierce IPAA Luncheon November 8, 2000 Houston, Texas

  2. Southern Company Southern Company Official Sponsor of the PGA Tour

  3. Southern Energy, Inc. Southern Company Official Sponsor of the PGA Tour

  4. Southern Energy, Inc. • IPO’d September 27, 2000 - NYSE Symbol SOE • $9.2 billion company headquartered in Atlanta (20% currently in public market) • A leading integrated non-regulated power provider with regionally based businesses in North America, Europe and the Asia-Pacific Region • Vertical integration of non-regulated electricity generation and distribution; marketing and risk management; and access/ management of gas and oil assets

  5. Southern Energy, Inc. • Price range originally filed with SEC: $15 - $17 / share • Price range in last S-1 Amendment: $18 - $20 / share • Actual IPO price: $22 / share • Order book was 13.5 times oversubscribed • Goldman Sachs’ most oversubscribed $1+ billion IPO • Largest ever increase from initial filing range to offer price for all IPOs greater than $1 billion (excluding technology and telecom) • Expectations for a full spin-off from Southern Company within 12 months

  6. Southern Energy, Inc. Ref. Date 11/8/00

  7. Southern Energy, Inc. Ref. Date 11/6/00

  8. Southern Energy, Inc. ELECTRICITY GENERATION AND DISTRIBUTION • One of the leading non-regulated power producers in the U.S. • 14,000 MW of operating capacity in North America targeted to grow to 30,000 MW by 2004 • Power assets in key population areas throughout the US • Worldwide capacity targeted to grow to 50,000 MW by 2004. Currently operating in Germany, England, Philippines, China, Trinidad and the U.S.

  9. Q2’00 Gas Marketing Rankings* (BCF/d) 1. Enron 27.1 2. Duke 11.2 3. Aquila 10.0 4. Coral 9.4 5. Sempra 8.4 6. Dynegy 8.3 7. BP Amoco 8.2 8. Reliant 7.9 9. TransCanada 6.4 10. Southern Energy 5.9 *Source: Gas Daily August 4, 2000 Southern Energy, Inc. MARKETING AND RISK MANAGEMENT Q2’00 Power Marketing Rankings* (MM MWh) 1. Enron 127.4 2. American Electric Power 102.2 3. Duke 59.0 4. PG&E Energy 58.8 5. Southern Energy 46.1 6. Aquila 39.9 7. Reliant 35.9 8. Constellation 27.4 9. Dynegy 26.3 10. Edison Mission 24.6 *Source: Power Markets Week August 21, 2000

  10. Southern Energy, Inc. SOUTHERN PRODUCER SERVICES, L.P. - ENERGY CAPITAL GROUP • Provide financing options for oil and gas companies to transact acquisitions, development drilling programs, monetization of existing assets and company recapitalization • Maximum flexibility to design customized financial structures including debt, equity and working interest • Provide marketing and risk management services to add value to physical commodities • $400 MM annual capital budget • Key drivers: the assets and the partners

  11. Southern Energy, Inc. ELECTRICITY DEMAND • 1999 annual U.S. electrical consumption 3,700,000 GW-hrs • Coal supplies about 55% • Nuclear supplies about 18% • Natural Gas supplies about 15% • Hydro supplies about 8% • Fuel Oil supplies about 4% • Electricity consumption grew by 5.4% during 1998, up from 3.2% annually from 1994-98 • Electricity growth, upwards of 6% could occur due to greater dependence on electricity-consuming technology Source: Edison Electric Institute and Simmons & Company

  12. Southern Energy, Inc. INCREMENTAL NATURAL GAS DEMAND • 5% Electricity Growth - 185,000 GW-hrs per year incremental demand • 185,000 GW-hrs x 8 mcf x 1,000 KW = 1,480 bcf • 1,480 bcf = 4.0 bcf • Average daily demand growth 2-4 bcf depending on weather and plant efficiency Source: Simmons & Company (modified) year year KW 1 GW year day day

  13. Southern Energy, Inc. NATURAL GAS AND ELECTRICITY A GOOD MARRIAGE? • Natural gas supply growth for 2001 on 50 bcfd produced in 2000 is estimated at 1.0 bcfd or 2% • With 5% electricity growth in 2001, need 2-4 bcf/day • Looks like a mismatch between natural gas supply and electricity demand Source: Simmons & Company

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