UTILITY080213-124414.pdf

Please see page 10 for rating definitions, important disclosures
and required analyst certifications
All estimates/forecasts are as of 08/02/13 unless otherwise stated.
Wells Fargo Securities, LLC does and seeks to do business with companies
covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of the
report and investors should consider this report as only a single factor in
making their investment decision.

August 2, 2013
Equity Research
July 31-August 2 Conference Call Takeaways

Sector Rating: Diversified Electric Utilities, Market Weight
Sector Rating: Integrated Electric & Gas, Market Weight
Sector Rating: Regulated Electric Utilities, Market Weight
FY EPS Valuation Range
Chg. Price Chg. Chg.
Ticker Rating Y/N 08/02/13 2013E Y/N 2014E Y/N Curr Prior
Diversified Electric Utilities
PPL 2 $31.90 $2.30 $2.25 $32-33 $29-30
Integrated Electric & Gas
V 2 37.26 2.00 2.20 $37-39 $34-35
Regulated Electric Utilities E 2 36.56 2.10 2.30 $37-38 $34-35 CNL 1 48.82 2.50 2.75 $53-54 $49-50 ED 2 60.18 3.75 3.82 $63-64 $58-59 EI 1 49.35 3.35 3.50 $55-56 $51-52 IDA 2 52.67 3.50 3.40 $54-55 $48-49
LN 2 53.53 3.10 3.30 $54-55 $50-51
PCG 2 46.20 2.65 3.05 $45-46 $44-45
SCG 1 52.19 3.37 3.50 $58-59 $54-55
SO 1 44.23 2.75 2.88 $48-49 N
XEL 1 30.30 1.90 2.00 $33-34 $31-32

Source: Company data and Wells Fargo Securities, LLC estimates 1= Outperform, 2 = Market Perform, 3 = Underperform, V = Volatile
= Company is on the Priority Stock List NA = Not Available, NC = No Change, NE = No Estimate, NM = Not Meaningful

• Summary. Highlights from the earnings reports and conference calls of the
following companies are included in this note: AEE, CNL, ED, EIX, IDA, LNT,
PCG, PPL, SCG, SO, VVC, and XEL. We are increasing valuation ranges for AEE,
CNL, ED, EIX, IDA, LNT, PCG, PPL, SCG, VVC, and XEL primarily to reflect
meaningfully higher peer group multiples since our June 24 update. We are
updating EPS estimates for AEE, ED, IDA, PCG, and SO. Please see specific
company comments for details.
• General Q2 Observations. The second quarter saw the continuation of trends
noted for some time now: Economic updates are positive, but sales growth
generally remains lackluster; companies are keenly focused on cost control
measures on both the regulated (to sustain/improve earned ROEs and/or avoid
base rate filings) and non-regulated fronts; and power market woes continue.

Neil Kalton, CFA, Senior Analyst
[phone] /
[e-mail] Akers, CFA, Senior Analyst(314) 875-2040 /
[e-mail]
Glen F. Pruitt, Associate Analyst
[phone] /
[e-mail]
Jonathan Reeder, Associate Analyst
[phone] /
[e-mail]
WELLS FARGO SECURITIES, LLC
Utilities EQUITY RESEARCH DEPARTMENT

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July 31-August 2 Earnings Updates & Conference Call Takeaways

Our EPS estimates and valuation ranges are outlined in Figure 1 followed by key takeaways and thoughts from
Q2 conference calls for the following companies: AEE, CNL, ED, EIX, IDA, LNT, PCG, PPL, SCG, SO, VVC &
XEL.

Figure 1: Ratings, Valuation Ranges & EPS Estimates

8/02/2013
Company Ticker Analyst Rating Price ($) New Prior New Prior New Prior New Prior
Regulated Electrics
Alliant Energy Corp. LNT Kalton MP 53.74 54-55 50-51 3.10 3.10 3.30 3.30 3.45 3.45
Ameren Corp. AEE Kalton MP 36.30 37-38 34-35 2.10 2.15 2.30 2.30 2.45 2.45
Cleco Corp. CNL Kalton OP 49.04 53-54 49-50 2.50 2.50 2.75 2.75 3.05 3.05
Consolidated Edison ED Akers MP 60.33 63-64 58-59 3.75 3.75 3.82 3.80 3.98 3.95
Edison International EIX Kalton OP 49.90 55-56 51-52 3.35 3.35 3.50 3.50 3.55 3.55
IDACORP, Inc. IDA Akers MP 52.49 54-55 48-49 3.50 3.27 3.40 3.40 3.40 3.40
PG&E Corp. PCG Kalton MP 46.31 45-46 44-45 2.65 2.65 3.05 3.10 3.20 3.40
SCANA Corp. SCG Kalton OP 52.34 58-59 54-55 3.37 3.37 3.50 3.50 3.75 3.75
Southern Company SO Kalton OP 44.35 48-49 48-49 2.75 2.77 2.88 2.93 3.03 3.10
Vectren Corp. VVC Akers MP 37.23 37-39 34-35 2.00 2.00 2.20 2.20 2.35 2.35
Xcel Energy XEL Kalton OP 30.34 33-34 31-32 1.90 1.90 2.00 2.00 2.10 2.10
Diversified (IPP/Regulated) Electrics
PPL Corp. PPL Kalton MP 31.98 32-33 29-30 2.30 2.30 2.25 2.25 2.35 2.35
Rating: OP = Outperform; MP = Market Perform; UP = Underperform
Source: Wells Fargo Securities, LLC Estimates
Valuation Range ($) 2013E EPS ($) 2014E EPS ($) 2015E EPS ($)

Alliant Energy Corp. (LNT/Market Perform) (Kalton)
Reported Q2 EPS: Aug 2 (before open)
Conference Call: Aug 2 (10:00am ET)

• Summary. We are reiterating our Market Perform rating and increasing our 12-18 month valuation
range to $54-55/sh from $50-51/sh to reflect higher regulated peer group multiples. Our 2013-17E
EPS estimates remain $3.10, $3.30, $3.45, $3.65, & $3.75, which result in an EPS CAGR of 4% (off
2012 EPS of $3.05). In our view, EPS growth is supported by rate base growth including
environmental controls projects and the proposed construction of the Marshalltown Generating
Station (MGS), as well as continued cost control efforts. We consider LNT to be a high quality
regulated utility and our neutral rating is based solely on valuation considerations. During the Q2 call,
LNT reaffirmed 2013 EPS guidance of $2.95-3.25.

• Regulatory Update. A decision is expected Q4 for the settlement agreement submitted by IPL to the
Iowa Utility Board (IUB) regarding construction of MGS for which hearings were held in May. Recall
that a settlement was reached this spring with the Iowa Office of Consumer Advocate (OCA) including
a ROE of 11% and a 10.3% ROE used for AFUDC calculations. Parties agreed to address double
leverage in the context of a future rate case (or other proceeding). Construction of MGS is scheduled
to begin in 2014 with a targeted in service date of early 2017. Separately, WPL received approval from
the Public Service Commission of Wisconsin (PSCW) to install emission control equipment at
Edgewater Generating Station Unit 5 and a decision is expected from the PSCW regarding proposed
efficiency improvements at Columbia Energy Center in Q3. We view these developments as
constructive and supportive of our EPS estimates.

WELLS FARGO SECURITIES, LLC
July 31-August 2 Conference Call Takeaways EQUITY RESEARCH DEPARTMENT

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Ameren (AEE/Market Perform) (Kalton)
Reported Q2 EPS: Aug 1 (before open)
Conference Call: Aug 1 (10:00am ET)

• Summary. We are reiterating our Market Perform rating and lowering our 2013E EPS estimate to
$2.10 from $2.15. We are maintaining our 14-15E EPS of $2.30 & $2.45. Our neutral rating primarily
reflects valuation considerations as shares trade at a modest 1-3% P/E multiple discounts on our 13-
15E EPS vs. the Regulated Electric peers, which we believe is reasonable given the historically below
average regulatory environments in MO & IL. We are increasing our 12-18 month valuation range to
$37-38/sh from $34-35 to reflect higher peer group multiples.

• Comments on EPS. We are lowering our 2013E EPS to $2.10 from $2.15 and maintaining our 14-15E
EPS of $2.30 & $2.45. Lower 2013E EPS is primarily driven by an unfavorable decision by the MO
Court of Appeals related to the Fuel Adjustment Clause requiring a refund of ~$26mm. Additionally,
AEE lowered ’13 EPS guidance for continuing operations (excludes the Merchant Generation assets)
to $2.00-2.15 from $2.00-2.20. AEE’s guidance is largely consistent with our assumptions, which
already excluded Merchant Generation.

• Regulatory Update. In Illinois, two positive steps were made on the regulatory front including the
recently enacted Senate Bill 9 (SB9) overturning a veto by IL Gov. Quinn. Recall that SB9 clarified
formulaic rate filings by specifying that year end, not average, values be used for rate base and capital
structure in ratemaking. Additionally Gov. Quinn signed the Natural Gas Consumer Safety and
Reliability Act in July which establishes a regulatory framework for accelerating gas infrastructure
investment in IL. In the Q2 call, AEE indicated the intention to begin participation in 2014 or ‘15
adding an incremental $330mm CapEx above baseline over ten years potentially adding $0.01-$0.02
to EPS power as early as 2016-17 by our calculations. In MO, developments were less positive as the
Infrastructure Strengthening and Regulatory Streamlining (ISRS) died as the legislative session
closed. Progress continues toward the merchant transaction with requests for regulatory approvals
pending at the Illinois Pollution Control Board and FERC – closing is anticipated in Q4 2013.

Cleco Corp. (CNL/Outperform) (Kalton)
Reported Q2 EPS: July 31 (after close)
Conference Call: Aug 1 (8:30am ET)

• Summary. We are reiterating our Outperform rating and increasing our 12-18 month valuation range
to $53-54/sh from $49-50/sh. Our 13-15E EPS remain $2.50, $2.75 & $3.05. CNL remains one of our
favorite regulated names based on expected above peer group EPS and DPS growth prospects. We
project ’13-17 EPS & DPS CAGRs of 7-8% & 12%, respectively, which compares favorably with
projected peer group median growth of 3-5% for both EPS & DPS.

• EPS Outlook. CNL affirmed 2013 EPS guidance of $2.45-2.55. Our ’13-17 EPS estimates remain
$2.50, $2.75, $3.05, $3.40 & $3.55. Key assumptions include (1) an extension of the FRP with terms
that do not result in a meaningful change to the company’s earning power, (2) the inclusion of
Coughlin in rate base, (3) $300mm in share repurchases and (4) new regulated investment
opportunities of $600mm during the period ’15-17 driven by an assumed need for new regulated
capacity and, to a lesser extent, incremental transmission opportunities related to the pending move
to MISO.

• Wholesale Contract and Regulatory Update. On the Q2 earnings call management discussed the
termination of two contracts offset by the expansion of their Mississippi Delta Energy Agency
(MDEA) contract. MDEA proposed expanding from an electric only contract to a 50-70MW full
requirement (electric, capacity, and services) contract for a 10 year period. Final decision on the
MDEA contract is expected in Oct. 2013. On the regulatory front, in April, CNL made two filings with
the Louisiana PSC: (1) the proposed transfer of the 775MW Coughlin Plant to Cleco Power for a
purchase price of $427mm, or $575/kW on rated capacity and (2) a proposed 5-yr extension of the
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Utilities EQUITY RESEARCH DEPARTMENT

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company’s formula rate plan (FRP) through June ‘20. Management estimated a decision on both
Coughlin and the FRP extension could occur as early as the April 2014. We continue to expect
constructive outcomes in both cases.

Consolidated Edison (ED/Market Perform) (Akers)
Reported Q2 EPS: August 1 (after close)
Conference Call: N/A

• ED affirmed 2013 guidance of $3.65-3.85. No change to our ‘13E EPS of $3.75, but we are
nudging up our ‘14E-16E to/from $3.82/$3.80, $3.98/$3.95 & $4.18/$4.15 on slightly higher allowed
ROE assumptions. Our ’14-16E EPS result in earned ROEs CECONY of 9.3%-9.4% assuming 48%
equity ratios - we estimate that a 25 bp change in the earned ROE has a $0.07-0.08 impact on EPS.
Our CECONY Electric rate base figures are nearly in-line with requested levels in 2014 and modestly
below the 2015 & 2016 numbers provided in ED’s rate filing (1% upside to our 2015E & 2016E EPS if
CapEx/RB ultimately approved as filed). The only equity included in our outlook is the assumed
resumption of dividend reinvestment/employee plans in 2015 at approximately $50mm per year.

• CECONY Rate Case Update. As revised in July 2013, the Staff supports electric, gas and steam rate
decreases of $187mm, $122mm and $28mm, respectively, reflecting an allowed ROEs of 8.7% and a
common equity ratio of 48%. This compares to ED’s revised request of $425mm, $26mm and
$11mm, respectively, based on a 10.1% allowed ROE and 50% equity ratio. Hearings are ongoing,
after which we would expect settlement discussions to ensue, and an Administrative Law Judge (ALJ)
recommendation is expected in October.

• LILO Update. In January 2013, ED made a $447mm deposit with federal and state agencies earlier
this year for the potential tax liability of all lease-in-lease-out (LILO) transactions and related interest
expense. In June 2013, (1) the IRS returned $95mm of the deposit, and (2) the 1999 LILO transaction
was terminated resulting in net cash proceeds of $108mm. ED estimates that termination of the 1997
LILO transaction would generate an addition $90mm of cash proceeds, pre-tax.

Edison International (EIX/Outperform) (Kalton)
Reported Q2 EPS: August 1 (after close)
Conference Call: August 1 (5:00pm ET)

• 2015 GRC. SCE submitted its notice of intent to the DRA on 7/15 indicating rate relief of $120mm in
2015, $368mm in 2016 and $331mm in 2017 was necessary. The actual GRC application will be filed
in Q4. The 2015 requested increase is low as workforce reductions and the repair tax benefits flow
back to customers. The filing (1) requests 2015-17 CapEx of $4.2B, $4.2B and $3.9B to accelerate
electric distribution infrastructure replacement and (2) assumes full recovery of SONGS rate base and
net investment. Based on the CapEx budget, SCE forecasts a 7-9% rate base CAGR from 2013-17.

• SONGS Update. Following SCE’s 6/7 decision to shut down both SONGS units permanently,
attention has shifted to the decommissioning process, ensuring a reliable grid without SONGS
(transmission investment opportunities for SCE??) and cost recovery. A decision in Phase 1
(reasonableness of 2012 O&M and CapEx) of the CPUC’s OII is expected in Q3 while a Phase 2
decision (what should be included in rate base) is schedule for February 2014. Phase 3 – which
determines SCE’s prudency around the steam generator replacement project – is the crucial one. The
entire four phase process is expected to wrap up by YE2014 – unless a comprehensive settlement is
reached which we believe could be more readily achieved now that the retire decision has been made.
Assuming any disallowances do not exceed the $365mm Q2 charge, we believe EIX can support its
CapEx budget without the need to issue equity – consistent with management’s comments.

• Third Party Recovery. On 7/18, SCE provided replacement steam generator supplier Mitsubishi
Heavy Industries with a formal notice of dispute seeking unspecified damages while alleging the
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July 31-August 2 Conference Call Takeaways EQUITY RESEARCH DEPARTMENT

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$138mm warranty cap in the contract does not apply due to gross negligence. Should SCE and MHI
be unable to resolve the claims by mid-October, SCE expects to initiate binding arbitration. In
addition, SCE is pursuing claims under SONGS’ outage policy with Nuclear Electric Insurance
Limited for its $304mm share of market energy purchases. As evidenced by Progress Energy’s
Crystal River 3 claim, the NEIL process could take well over a year to resolve.

• EPS Outlook. Management affirmed 2013 core EPS guidance of $3.25-$3.45. No change to our core
EPS outlook. Our 2013-16E EPS of $3.35, $3.50, $3.55 and $3.75 reflect EIX’s SONGS rate base
guidance assumptions. We believe there is more upside potential than downside risk to our 2015E
and beyond EPS given (1) our belief that some level of return will be allowed on SONGS rate base and
(2) potential CapEx upside – from both the GRC plan and potential transmission projects to mitigate
SONGS removal from the grid. Our estimates reflect a 2015-17 CapEx budget of $10.6B. This is
below SCE’s 2015 GRC request of $12.3B but above the $10.4B low end of the company’s variability
range. However, we think the upside is tempered by a potential adjustment to SCE’s 11.1% FERC
ROE. SCE and other parties have reached a settlement agreement-in-principle on SCE’s transmission
formula rate however the details will not be filed with the FERC until mid-August. A 50bp change
would impact EPS by roughly $0.03.

• Reiterate Outperform. EIX shares trade at an 8% discount to Regulated peers on our 2015E EPS of
$3.55, which we think more than accounts for ongoing SONGS-related risks particularly considering
our belief that upside potential may exist to our 2015E. We reiterate our Outperform rating and are
increasing our 12-18 month valuation range to $55-56/sh from $51-52/sh due to a higher peer group
multiple.

IDACORP, Inc. (IDA/Market Perform) (Akers)
Reported Q2 EPS: August 1 (before open)
Conference Call: August 1 (4:30pm ET)

• IDA Raises 2013 Guidance on Strong YTD Results. IDA raised 2013 EPS guidance to $3.40-
3.55 from $3.20-3.35 based on strong year-to-date results reflecting both underlying strength (now
expecting utility O&M of $335-345mm vs. $340-350mm previously) and favorable weather (hot –
cooling degree days were +20% vs. Q2 2012 and +30% vs. normal - and dry). We are raising our ‘13E
EPS to $3.50 from $3.27. We think hot July weather, which is not embedded in updated guidance,
could drive full-year results toward the upper end of the new range.

• Post-2013 EPS. No change to our ‘14E of $3.40. Our estimate is premised upon a 9.5% earned ROE
on year-end Idaho-jurisdictional equity, consistent with the ADITC rate plan. While better-than-
expected 2013E EPS has a positive impact on Idaho Power Company’s (IPC) book equity, we are now
no longer assuming a capital contribution from parent in 2013, largely offsetting the impact. Our ‘15E
& ‘16E EPS are $3.40 & $3.50, respectively. We see upside to our post-2014 outlook should (1) IDA’s
ADITC rate plan be extended or (2) IDA secure loads from new large customers, which would support
additional infrastructure investment and sales growth.

• Reiterate Market Perform. We are attracted to IDA’s growing service territory (customer growth
remained strong at +1.2% in Q2’13), constructive regulatory compacts and strong balance sheet.
Shares also offer a 2.9% dividend yield with above-average dividend growth potential. Our Market
Perform rating reflects valuation considerations.

PG&E Corp (PCG/Market Perform) (Kalton)
Reported Q2 EPS: July 31 (before open)
Conference Call: July 31 (11:00am ET)

• San Bruno Update. On Tuesday, the ALJs requested parties submit information regarding the
impact penalties would have on PCG’s ability to raise capital and remain financially viable – further
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Utilities EQUITY RESEARCH DEPARTMENT

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delaying the ALJ decision and adding additional uncertainty into the process. Assuming the ALJs
consider briefing to be complete following the reply comment due date of 9/23/13, the ALJ decision
would be due no later than 11/22/13. While the ALJ decisions are considered to be final, it is our
understanding that any party or CPUC commissioner can request within 30 days that the CPUC
review the outcome. Given the nature of the proceeding and the numerous parties involved we fully
expect that the proceeding will ultimately be reviewed by the CPUC. Management expressed
frustration with the protracted process and what it views as the continued focus on exerting
maximum pain on the company rather than recognizing the considerable efforts made thus far and
ensuring safe, reliable operations going forward. PCG has already incurred or committed $2.2B of
shareholder funds to natural gas pipeline safety work since the accident. If the CPSD’s 7/16 revised
recommendation were adopted, it would result in a $300mm fine and an incremental $1.5B of
shareholder-funded gas safety work. In addition to the civil and regulatory cases that seem to have an
end in sight, there is still the potential for a criminal case to be brought against PCG.

• Rights-of-Way Spending. PCG reiterated its estimate of $500mm of non-recoverable rights-of-way
spending from 2013-17. However, the evaluation process thus far has largely been focused on rural
areas where rights-of-way issues tend to be less contentious. As the company completes the surveying
of the remaining 3,500 miles by the end of the year, there is a risk that the cost estimate could
increase due to challenges presented in more populated urban areas.

• EPS Outlook. PCG continues to project 2013 equity issuances totaling $1.0-1.2B, which reflects
$200mm accrued for potential CPUC penalties. No change to our 2013E EPS of $2.65 – we project
$1.6B of equity in 2013. We have lowered our 2014E and 2015E EPS to $3.05 and $3.20. Our 5-year
estimated EPS CAGR off of the 2012 base of $3.22 is 2%.

• Reiterate Market Perform. PCG shares trade at roughly 5% P/E multiple discounts on our 2014E &
2015E EPS. We believe a discount valuation is warranted given the significant regulatory uncertainty
related to the San Bruno proceeding and lingering questions around the ultimate amount of
unrecoverable CapEx. Despite our lower 2015E EPS, we are increasing our 12-18 month valuation
range modestly to $45-46 from $44-45 due to higher peer group multiple.

PPL Corp (PPL/Market Perform) (Kalton)
Reported Q2 EPS: Aug 1 (before open)
Conference Call: Aug 1 (8:30am ET)

• Reiterate Market Perform. We are maintaining our13-15E EPS of $2.30, $2.25 and $2.35. PPL
increased ’13 EPS guidance to $2.25-2.40 from $2.15-2.40. While shares appear somewhat
inexpensive trading at roughly 10% P/E multiple discounts to the Electric Universe on ’14 & ’15
estimates, our neutral rating largely reflects PPL’s flattish near-term EPS outlook and our still
cautious attitude toward power market leveraged companies – we note that as a result of PPL’s
regulated acquisition strategy, the company has greatly reduced earnings exposure to changes in
power and capacity prices (regulated earnings are expected to comprise 80%+ of overall EPS for the
next several years. We are increasing our 12-18 month valuation range to $32-33/sh from $29-30/sh
to reflect higher peer group multiples.

• Comments On Supply Business. PPL experienced lower than expected 2016/17 PJM – RPM
capacity auction results this spring with MAAC at $119.23/MW-Day vs. $167.46/MW-Day in 15/16.
Additionally power prices have dropped versus those experienced in Q1 placing renewed pressure on
the merchant business. Management commented that it understands the factors affecting the
merchant business, and reiterated its focus on maintaining supply business EPS positive using
aggressive hedging and O&M CapEx control.

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July 31-August 2 Conference Call Takeaways EQUITY RESEARCH DEPARTMENT

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SCANA Corp (SCG/Outperform) (Kalton)
Reported Q2 EPS: August 1 (before open)
Conference Call: August 1 (10:00am ET)

• Retail Usage Concerns? Similar to neighbor Southern Company, SCE&G’s Q2 weather-normalized
electric retail sales growth seems to have fallen off sharply. For the 12-months ended June 30, 2013,
residential and industrial sales were essentially flat with total retail sales growth of only +0.2%
(adjusted for the leap year effect). This compares with +2.5% residential, +0.5% industrial and +1.4%
total retail sales growth over the 12-months ended March 31, 2013. The +0.2% growth in retail usage
is despite relatively encouraging +0.8% customer growth – thus customers are using less.
Importantly, management’s 2013 expectation is for +0.5% retail sales growth. Assuming the Q2
trends do not materially deteriorate further, SCG can likely find ways to offset the impact with items
such as lower operating expenses.

• O&M Expense Control. SCG lowered its expected 2013 increase in O&M expenses to 3.5% from
5.0%. Roughly 2.5% of the 3.5% increase is due to higher amortization expenses that were included in
SCE&G’s last rate case – no impact on margin. Thus, SCG has reduced the “controllable” portion to
1% from 2.5% as a result of better than anticipated cost mitigation efforts, primarily through non-
nuclear employee attrition. Effective cost management is an integral part of SCE&G’s strategy over
the next few years as the utility plans to avoid any retail electric base rate increases during the peak
nuclear construction years while achieving an earned ROE within 125bp of its 10.25% allowed ROE.

• New Nuclear Update. SCG provided an updated new nuclear CapEx budget for 2013-15 based on
initial estimates following the 9-12 month shifts in the online dates for Summer Units 2 & 3. While
$224mm of CapEx has shifted beyond the 3-year period, it does not reflect the potential increased
costs of up to $200mm that SCG outlined at its 6/5 analyst day. SCG expects clarity by year-end on
the cost impact of the schedule shift and negotiations with the consortium regarding the
responsibility of those costs. We have elected to defer updating our model until a more accurate
CapEx schedule emerges for the entire project. Should the $224mm shift not get backfilled with any
sharing of the up to $200mm of higher costs, it could have a $0.05-0.07 impact on our 2015E.
However, we stress that this is simply a timing difference and does not impact the overall EPS growth
represented by the project.

• Reiterate Outperform. No change to our 2013-15E EPS of $3.37, $3.50 and $3.75. Management
affirmed 2013 guidance of $3.25-3.45 with an internal target of $3.35. While 1H 2013 results appear
ahead of schedule (diluted EPS of $1.72 in 1H13 vs. $1.46 in 1H12), some O&M timing differences –
tree trimming, coal plant outages/projects, etc. – are expected to weigh somewhat on comps for the
remainder of the year. SCG’s 3-5 year growth target remains 3-6%. We reiterate our Outperform
rating and are increasing our 12-18 month valuation range to $58-59/sh from $54-55/sh due to a
higher peer group multiple.

Southern Company (SO/Outperform) (Kalton)
Reported Q2 EPS: July 31 (before open)
Conference Call: July 31 (1:00pm ET)

• IGCC Project. SO and Mississippi Power revised its cost estimate for the plant to $3.87B from
$3.42B resulting in a roughly $278MM after-tax charge. This is on top of the recent cost estimate
increase from the previously agreed upon cost cap of $2.88B and associated $333MM after-tax charge
recorded in Q1. On an absolute basis, the IGCC cost overruns and charges do not meaningfully
impact SO’s financial profile – reduces shareholder value by $0.70-0.75 and lowers the consolidated
equity ratio such that roughly $1B of additional equity (beyond the $300mm already in our model)
must be issued over the next 18 months to maintain a roughly 44% consolidated equity ratio.
However, until important milestones such as heating up the first gasifier (year-end) and placing it
into service (May 2014) are achieved, additional risk exists.

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• New Nuclear. Construction continues to progress at a reasonable pace. Regarding cost, Georgia
Power had a request pending with the Georgia PSC for a $381MM (8.7%) increase in the $4.4B
certified capital cost and an 18-21 month pushback in the online dates to Q4 2017 and 2018.
However, GP reached a settlement agreement with the GPSC staff on Wednesday (7/31/13) that
would waive the requirement to amend the certified cost during the construction and instead allow
the vetting of all costs to occur during the regular, semi-annual VCM process. The settlement requires
GPSC approval which we expect. Assuming any further cost increases stay within reason, we expect
regulators and other key constituents in the state will continue to support Vogtle 3 & 4. Recall, GP’s
updated analysis of the total rate impact to customers is for a 6-8% increase over the first few years of
operation versus 9-10% previously – an aspect that we believe will carry considerable weight with the
GPSC and may provide additional wiggle room if needed. However, the call for ratepayer safeguards
against undue cost increases could intensify amongst the project’s detractors.

• 2013 Guidance Affirmed. Similar to neighbor utility SCANA, SO’s weather normalized retail sales
faced downward pressure in Q2 declining 0.5%. Adjusted for the leap year, weather-normalized retail
sales are roughly flat year-to-date. Despite sales growth trending below weather-normalized full year
expectation of +0.7%-1.3%, management expressed confidence regarding 2013 guidance of $2.68-
2.80 given the ability to be flexible with non-fuel O&M costs.

• 2014 & Beyond Dependent on Regulatory Outcomes. SO has important regulatory proceedings
pending in all jurisdictions. Alabama is looking into potentially modifying the rate stabilization and
equalization (RSE) rate setting process however Alabama Power believes its cost of capital is fair and
reasonable given a low equity ratio despite an allowed ROE band of 13.0-14.5%. A final decision is
expected in Q3. Georgia is in the early stages of Georgia Power’s 3-year rate plan filing that proposes
a $482mm base rate increase effective 1/1/14. A final decision is expected 12/17/13. In addition,
Florida’s Gulf Power has a $74mm base rate request pending (Q1 2014 decision) while the Mississippi
PSC is considering the 7-year rate plan settlement reached earlier this year for the IGCC plant (Q4
decision?). The outcome in these proceedings will impact whether SO’s target 4-6% EPS CAGR is
achievable or needs to be revised. Should SO successfully navigate the regulatory processes,
management believes finding ways to offset the share dilution is manageable.

• EPS Outlook. We have lowered our 2013-15E EPS to $2.75, $2.88 & $3.03 from $2.77, $2.93 & $3.10
primarily due to the dilutive impact of new equity issuances. We largely assume that any sales
weaknesses can be offset with discretionary O&M spending cuts. Unfortunately, our confidence level
in our estimates is not as high as we would prefer given the credibility concerns that have arisen
recently at SO. While there are distinct differences in the causes of the cost overruns and the
structure of the construction processes, we think the IGCC cost overruns thus far raise legitimate
questions about SO’s ability to effectively manage the remainder of the IGCC project as well as the
new nuclear project.

Vectren Corporation (VVC/Market Perform) (Akers)
Reported Q2 EPS: July 31 (after close)
Conference Call: August 1 (2:00pm ET)

• 2013 EPS Guidance Affirmed. VVC affirmed consolidated 2013 EPS guidance of $1.90-2.10 ($1.65-
1.75 Utility & $0.20-0.40 Non-Utility). While mgmt. suggested that Infrastructure Services could
match record 2012 results ($0.49 vs. current guidance of $0.46) following another strong quarter and
that Utility interest expense may come in below the $58mm expectation, we are maintaining our ‘13E
EPS of $2.00 given potential volatility around coal results for the remainder of the year. No change
to our ‘14E & ‘15E EPS of $2.20 & $2.25.

• Coal Update. For 2013, VVC now expects to produce 6.3 million tons (vs. 6.2 million previously) and
to sell 6.5mm (vs. 6.3 million previously). More importantly, VVC revealed expectations for 2014
production and sales of 7.3 million, which compares favorably to our 6.8 million expectation. While
contracted tons are just 5.0 million for 2014E, VVC is targeting another 1.2-1.6 million of 2014
WELLS FARGO SECURITIES, LLC
July 31-August 2 Conference Call Takeaways EQUITY RESEARCH DEPARTMENT

9

agreements by year-end. Mgmt. sees opportunity for volumes too exceed 2014 expectations, but at
somewhat lower prices than the $46/ton average for the 5.0 million tons already sold. VVC sees
“much higher prices” in 2015 and 2016. Regarding cost/ton, continued productivity improvements
at Prosperity (somewhat thicker coal seams and better mining conditions in 2Q; second set of low
profile mining equipment expected in early August) and the ramp of Oaktown 2 (start-up has been
promising) are expected to result in a favorable trend.

• Other Tidbits. (1) Energy Services – While performance contracting activity in traditional markets
remain slow, VVC is in the final stages of bidding on several contracts. (2) Utility – VVC is evaluating
the size and timing of accelerated bare steel/cast iron replacement programs and additional
infrastructure improvements. We would view any upside to current CapEx guidance favorably given
constructive recovery mechanisms.

Xcel Energy Inc. (XEL/Outperform) (Kalton)
Reported Q2 EPS: Aug 1 (before open)
Conference Call: Aug 1 (11:00am ET)

• Summary. We are reiterating our Outperform rating and raising our 12-18 month valuation range to
$33-34/sh from $31-32/sh. We are maintaining our 13-15E EPS of $1.90, $2.00, & $2.10. Shares
trade at P/E multiple discounts of 5%-8% to the Regulated Electric Median on our 13-15E EPS. We
think at least an in-line multiple is warranted given XEL’s ~5% 13-17E EPS CAGR (off the ’12 EPS
base of $1.82), constructive regulatory environments, and proven management team.

• EPS Outlook. Our 13-17E EPS remain $1.90, $2.00, $2.10, $2.20, & $2.30. We project annual EPS
growth of ~5% through 2017 (off the ’12 EPS base of $1.82). Our estimates assume constructive
outcomes in pending rate cases with particular interest in MN, equity issuance totaling $400mm
through ’14 (excluding DRIP), and lower assumed interest costs on recent and upcoming debt
issuances, of which management identified a $40mm-$45mm reduction for 2013. Other longer term
EPS drivers include RFPs issued in CO and MN for additional wind and gas generation incremental to
the existing CapEx forecast – development of additional gas generation would likely be in the ’16-19
timeframe. On the Q2 earnings call, XEL reiterated ’13 EPS guidance of $1.85-1.95/share.

• Regulatory Update. The regulatory calendar remains busy with electric rate cases pending in MN,
NM, WI, and ND and pending gas rate cases in CO and WI. Our focus remains on NSP-MN’s pending
electric base rate request. In July, the MN ALJ issued a recommended rate increase of $127mm based
on an ROE of 9.83% and 52.56% equity ratio. This compares to the most recently requested rate
increase of $259mm based on a 10.6% ROE and 52.56% equity ratio. We view the ALJ’s
recommendation as a part of a negotiated process and we remain of the opinion that a constructive
resolution will ultimately be reached. Also in MN, we view favorably the MN Commission’s issuance
of an order for multi-year rate-making which could serve as a template for up to 3-year rate filings.
Management expects to file a multi-year case in MN during 2H13 for 2014.

Valuation Range Information:
PPL Basis and Risks: We value PPL under a P/E multiple analysis (apply a 10% discount to the 2014
Electric Power Universe peer group median of 15.5-16.0X - to our 15E of $2.25). Risks include earnings
sensitivity to power prices, regulatory/political risks and generation-related operating risks.

VVC Basis and Risks: Our valuation range is based on a sum-of-the-parts ($30-31/share for Utility
Holdings and $7-8/share for Non-Utility), dividend discount and residual income analyses. Risks include
economic weakness, lower than expected coal sales, and Non-Utility exposure to commodity prices.

WELLS FARGO SECURITIES, LLC
Utilities EQUITY RESEARCH DEPARTMENT

10

AEE Basis and Risks: Our valuation range is based on a P/E multiple (apply a 5% discount to the 2014
Regulated Electric peer group median of 15.5-16.0X - to our 15E of $2.45) and dividend discount analysis.
Risks include unfavorable regulatory outcomes, ability to cleanly exit the merchant business, and a material
rise in interest rates.

CNL Basis and Risks: Our valuation range is based on a P/E multiple (apply a 10% premium to the 2014 Regulated Electric peer group median of 15.5-16.0X - to our 15E of $3.05) and dividend discount model. Risks
are largely regulatory related (Coughlin approval & rate case).

ED Basis and Risks: We value ED under P/E multiple (apply 16x to our 2015E EPS of $3.98), dividend
discount, and residual income analysis. Risks to our valuation include regulatory-related risks related to
CECONY pending rate cases and Sandy-related investigation, higher than expected O&M expense and interest
rate sensitivity.

EIX Basis and Risks: Our $55-56/sh valuation range is based on a P/E multiple (apply '14E peer group
median of 15.5-16.0X to our '15E EPS of $3.55) and dividend discount analyses. Key risks include regulatory
and SONGS outage-related.

IDA Basis and Risks: We value IDA under P/E multiple (16X multiple on our 15E EPS of $3.40), dividend
discount, and residual income analysis. Risks to our valuation include project delays/cancellations, negative
regulatory developments and economic weakness.

LNT Basis and Risks: Our valuation range is based on a P/E multiple (apply the 2014 Regulated Electric
peer group median of 15.5-16.0X - to our 15E of $3.45) and dividend discount analysis. Risks to our valuation
include negative regulatory developments in Iowa or Wisconsin, inability to control operating costs and
economic weakness.

PCG Basis and Risks: Our $45-46/sh valuation range is based on a P/E multiple (apply a ~10% discount to
the 14E Regulated Electric group median of 15.5-16.0X to our 15E of $3.20) and dividend discount model
analysis. Key risks include unfavorable regulatory outcomes and higher than expected unrecoverable San
Bruno pipeline explosion costs.

SCG Basis and Risks: Our $58-59/sh valuation range is based on a P/E multiple (apply the 14E Regulated
Electric group median of 15.5-16.0X to our '15E of $3.75) and dividend discount analysis. Risks to SCG shares
include regulatory risk, construction risk and a slower-than-expected Southeastern economy.

SO Basis and Risks: Our $48-49/sh valuation range is based on a P/E multiple (apply a modest premium to
the 14E Regulated Electric group median of 15.5-16.0X to our 2015E of $3.03) and dividend discount model
analysis. In our view, risks include regulatory risk, construction risk and potential exposure to adverse federal
energy legislation.

XEL Basis and Risks: Our valuation range is based on a P/E multiple (apply a 0-5% premium to the 2014
Regulated Electric peer group median of 15.5-16.0X - to our 15E of $2.10) and dividend discount model Risks
include regulatory risks related to pending and upcoming rate cases, a weaker than expected rebound in sales
and cost pressures.

Required Disclosures

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I certify that:
1) All views expressed in this research report accurately reflect my personal views about any and all of the subject securities or
issuers discussed; and
2) No part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed
by me in this research report.
WELLS FARGO SECURITIES, LLC
July 31-August 2 Conference Call Takeaways EQUITY RESEARCH DEPARTMENT

11

ƒ Wells Fargo Securities, LLC maintains a market in the common stock of PPL Corporation, SCANA Corporation, Southern
Company, Alliant Energy Corp., IDACORP, Inc., Edison International, CLECO Corp, PG&E Corporation, Xcel Energy, Inc.,
Ameren Corporation.
ƒ Wells Fargo Securities, LLC or its affiliates intends to seek or expects to receive compensation for investment banking services in
the next three months from Consolidated Edison, Inc., Vectren Corp., Xcel Energy, Inc., PG&E Corporation, CLECO Corp, Edison
International, IDACORP, Inc., Alliant Energy Corp., Southern Company, SCANA Corporation, PPL Corporation.
ƒ Wells Fargo Securities, LLC or its affiliates received compensation for investment banking services from PPL Corporation,
SCANA Corporation, Southern Company, Alliant Energy Corp., IDACORP, Inc., Edison International, PG&E Corporation, Xcel
Energy, Inc. in the past 12 months.
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ƒ SCANA Corporation, PPL Corporation, Alliant Energy Corp., Southern Company, Xcel Energy, Inc., PG&E Corporation, Edison
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was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided investment banking services to SCANA Corporation, PPL Corporation, Alliant Energy Corp., Southern Company, Xcel Energy, Inc., PG&E Corporation, Edison
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Corporation, PPL Corporation, IDACORP, Inc., Edison International, CLECO Corp, Xcel Energy, Inc., PG&E Corporation,
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the next three months from an affiliate of Vectren Corp., Consolidated Edison, Inc., PG&E Corporation, CLECO Corp, Edison
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Wells Fargo Securities, LLC does not compensate its research analysts based on specific investment banking transactions.
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AEE: Risks include unfa orable regulatory outcomes, ability to cleanly exit the merchant business, and a material rise in interest
rates.
CNL: Risks are largely regulatory related (Coughlin approval & rate case).
ED: Risks to our valuation include regulatory-related risks related to CECONY pending rate cases and Sandy-related investigation,
higher than expected O&M expense and interest rate sensitivity.
EIX: Key risks include regulatory and SONGS outage-related.
IDA: Risks to our valuation include project delays/cancellations, negative regulatory developments and economic weakness.
LNT: Risks to our valuation include negative regulatory developments in Iowa or Wisconsin, inability to control operating costs and economic weakness.
PCG: Key risks include unfavorable regulatory outcomes and higher than expected unrecoverable San Bruno pipeline explosion
costs.
PPL: Risks include earnings sensitivity to power prices, regulatory/political risks and generation-related operating risks.
SCG: Risks to SCG shares include regulatory risk, construction risk and a slower-than-expected Southeastern economy.
SO: In our view, risks include regulatory risk, construction risk and potential exposure to adverse federal energy legislation.
VVC: Risks include economic weakness, lower than expected coal sales, and Non-Utility exposure to commodity prices.
XEL: Risks include regulatory risks related to pending and upcoming rate cases, a weaker than expected rebound in sales and cost
pressures.
WELLS FARGO SECURITIES, LLC
Utilities EQUITY RESEARCH DEPARTMENT

12

STOCK RATING
1=Outperform: The stock appears attractively valued, and we believe the stock's total return will exceed that of the market over the
next 12 months. BUY
2=Market Perform: The stock appears appropriately valued, and we believe the stock's total return will be in line with the market
over the next 12 months. HOLD
3=Underperform: The stock appears overvalued, and we believe the stock's total return will be below the market over the next 12
months. SELL
SECTOR RATING
O=Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months.
M=Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months.
U=Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months.
VOLATILITY RATING
V = A stock is defined as volatile if the stock price has fluctuated by +/-20% or greater in at least 8 of the past 24 months or if the
analyst expects significant volatility. All IPO stocks are automatically rated volatile within the first 24 months of trading.

As of: August 2, 2013
48% of companies covered by Wells Fargo Securities, LLC
Equity Research are rated Outperform.
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services for 47% of its Equity Research Outperform-rated
companies.
49% of companies covered by Wells Fargo Securities, LLC
Equity Research are rated Market Perform.
Wells Fargo Securities, LLC has provided investment banking
services for 34% of its Equity Research Market Perform-rated
companies.
3% of companies covered by Wells Fargo Securities, LLC
Equity Research are rated Underperform.
Wells Fargo Securities, LLC has provided investment banking
services for 21% of its Equity Research Underperform-rated
companies.

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WELLS FARGO SECURITIES, LLC
July 31-August 2 Conference Call Takeaways EQUITY RESEARCH DEPARTMENT

13

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