UTILITY122612-110147.pdf

Please see page 13 for rating definitions, important disclosures
and required analyst certifications
All estimates/forecasts are as of 01/02/13 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.

January 2, 2013
Equity Research
Upgrading POM--Downgrading LNT And IDA
2013 Utilities Outlook: Ten Bold--Or Not So Bold--Predictions for 2013!

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 12/31/12 2012E Y/N 2013E Y/N Curr Prior
Diversified Electric Utilities ET 1 $63.75 $5.50 $5.00 $70-71 N
EX 2 29.74 2.85 2.50 $30-31 N
F 1 41.76 3.35 2.95 $45-46 N
NE 1 69.19 4.55 4.90 $75-76 $73-74
PPL 2 28.63 2.35 2.40 $30-31 N
PEG 2 30.60 2.35 2.35 $30-31 NIntegrated Electric & Gas CNP 1 19.25 1.18 1.25 $20-21 N OG 1 56.31 3.50 3.65 $60-62 N V 2 29.40 1.85 1.97 $30-31 $29-30Regulated Electric Utilities LN 2 43.91 2.95 3.15 $46-47 $49-50
E 2 30.72 2.40 2.25 $32-33 N
EP 1 42.68 3.05 3.10 $46-47 N
CNL 1 40.01 2.43 2.50 $45-46 N
CMS 1 24.38 1.55 1.62 $27-28 $26-27 ED 2 55.54 3.75 3.88 $57-59 $56-58 DU 2 63.80 4.30 4.35 $64-65 $62-63 EI 1 45.19 3.40 3.30 $50-51 $49-50 GXP 2 20.31 1.30 1.60 $21-22 N IDA 2 43.35 3.35 3.23 $44-46 $44-45
IT 1 76.91 4.13 4.90 $97-99 N
NU 1 39.08 2.30 2.55 $43-44 $42-43
NW 1 34.73 2.40 2.55 $38-39 $37-38
NV 2 18.14 1.35 1.30 $19-20 $18-19
POM 1 19.61 1.18 1.20 $21-22 $20-21 PCG 2 40.18 3.13 2.85 $42-43 $41-42 PNW 2 50.98 3.42 3.55 $52-54 $51-53 PO 2 27.36 1.95 1.95 $28-29 $27-28 SCG 1 45.64 3.12 3.33 $50-51 $49-50 SO 2 42.81 2.65 2.80 $46-47 $45-46
1 28.62 1.98 2.00 $30-31 N
E 2 36.85 2.32 2.35 $38-39 $37-38
XEL 1 26.71 1.80 1.90 $29-30 N

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

• Our 2013 Utilities Outlook consists of 10 bold--or not so bold--predictions.
We are constructive on the group headed into the New Year and believe Regulated
Electric Utilities will continue to trade toward the top end of historical P/E
valuation metrics given healthy fundamentals, low interest rates, and investor
appetite for yield. Of note, we expect utilities will begin to talk down EPS CAGRs,
which could spark discussion around higher payout ratios and M&A. Adjusting
ratings for POM, LNT and IDA; adjusting ranges for LNT, CMS, ED, DUK, EIX,
IDA, NU, NWE, NVE, POM, PCG, PNW, POR, SCG, SO, VVC, WEC, and NEE.
We are upgrading POM to Outperform from Market Perform on positive
regulatory developments. We are downgrading LNT and IDA to Market Perform
from Outperform based solely on valuation considerations.

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

2

Ten Bold--Or Not So Bold--Predictions for 2013!

1. Regulated Electric P/E Multiples Remain Elevated

The Regulated Electric Utility group has been trading toward the upper end of historical P/E-based valuation
metrics for the last several years (see Figures 1 and 2). On an absolute basis, the group trades at approximately
15.5x forward earnings versus the 15-year range of 10-18x. Further, the group’s forward P/E approximates
112% of the forward P/E multiple of the S&P 500, which compares to the 10-year median of 98% and 15-year
median of 85%.

We believe the elevated absolute and relative P/E multiples have been justified by (1) the low interest rate
environment, which improves the relative appeal of income-oriented securities in a yield-hungry environment
(see Figure 3), (2) solid fundamentals, including favorable regulatory trends, (3) above-average growth
outlooks (4-6% versus 3-4% historically), and (4) relatively low-risk profiles that are less impacted by
challenging macro-economic conditions than the broader market.

As low interest rates and uncertain macro-economic conditions persist into 2013, we expect investors will
continue to gravitate toward Regulated Electric Utility stocks for their attractive dividend yields and
comparatively low risk EPS growth outlooks. As a result, we believe the group’s valuation will remain toward the upper end of historical P/E ranges. Our viewpoint assumes a modest increase in the dividend tax rate and
parity with the capital gains tax rate. This is consistent with the bill passed by Congress on January 1, 2013,
which calls for an increase in both the dividend and capital gains tax rates to 20% from 15% for families
making more than $450,000 and individuals making more than $400,000. It is our understanding that the
5% increase is in addition to the 3.8% additional tax included in the healthcare bill.

Figure 1: Wells Fargo Securities Electric Power Universe Forward P/E Versus 10-Year Median

Source: FactSet and Wells Fargo Securities, LLC

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Upgrading POM--Downgrading LNT And IDA EQUITY RESEARCH DEPARTMENT

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Figure 2: Wells Fargo Securities Electric Power Universe Forward P/E as Percent of S&P 500
Forward P/E

Source: FactSet and Wells Fargo Securities, LLC

Figure 3: Wells Fargo Securities Electric Power Universe Forward Earnings Yield as a % of 10-
Year Bond Yield (1.7%)

Source: FactSet and Wells Fargo Securities, LLC

2. Power Market Outlook Remains Subdued BUT Diversified Valuations Appear Reasonable
Since 2008, power market leveraged companies have had to weather one negative data point after another.
First, the Great Recession had a material negative impact on end-user demand resulting in an over-supply of
capacity. Second, the seemingly infinite amount of shale gas and resultant precipitous decline in natural gas
prices also served to put significant downward pressure on power prices. Third, increasing efficiency measures
combined with potential structural changes in customer usage patterns, particularly in the residential segment,
has stunted a demand-based recovery in power prices.

As a result, the Diversified Electrics have underperformed the Regulated Electric group in each year during the
period 2008-2012. Since year-end 2007, shares of Entergy, Exelon, FirstEnergy, Public Service Enterprise
WELLS FARGO SECURITIES, LLC
Utilities EQUITY RESEARCH DEPARTMENT

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Group and PPL Corp. are down 34%, 54%, 27%, 23% and 31%, respectively, on a total return basis versus the
Regulated Electric group, which has a positive 34% total return during the same period.

Heading into 2013, we wish this could be the year that we asserted with some degree of conviction that the
Diversifieds were at long last finally positioned to outperform the Regulated Electrics. Unfortunately, we
believe that such an opinion requires a belief that there is meaningful upside potential to the current forward power curves. Rather, we are of the opinion that the current Diversified valuations are more reasonable than
in prior years, particularly when taking into account the notion that current estimates are based on more
realistic forward curves. On a P/E basis, the Diversified Electrics currently trade at 14.1x, 13.3x and 12.3x
2013-2015 estimated EPS, which are below the Regulated Electric P/E multiples of 14.7x, 13.6x and 12.9x. We
believe the discounted valuations are warranted given comparable five-year EPS growth outlooks between the
groups and the Diversifieds’ considerably higher risk profile.

3. Average Allowed State ROE Dips Below 10%

Until recently, state-approved allowed returns on equity (ROEs) have held fairly steady in the 10.0-10.5%
range, including a 10.2% average allowed electric ROE through the first three quarters of 2012 (see Figure 4).
That said, in the second quarter of 2012, the average electric allowed ROE dipped below the 10.0% mark to
9.9%. Even so, nine of the thirteen cases were at or above 10.0% in the second quarter. The tide continued to
turn in the second half of 2012, however, and we think the trend will continue in 2013.

Figure 4: Average Allowed Electric ROEs

Source: SNL Financial and Wells Fargo Securities, LLC

The downward trend in allowed ROEs can be directly linked to the low interest rate environment. We attribute
the somewhat delayed response by regulators to lower ROEs to several factors, including recognition that rates
are unnaturally low due to Fed action in response to extreme economic conditions and a desire to encourage
in-state investment (and jobs!). However, as utilities are in front of their regulators for the second (or third)
time in the low interest rate environment and most economists are not calling for a material rise in rates in the
near term, state regulators appear more comfortable approving ROEs below 10.0%. While states with above-
average regulatory environments will likely continue approving ROEs north of 10.0%, we expect the average
allowed ROE for electric utilities to be in the 9.5-10.0% range in 2013.

Favorably, we do not expect lower allowed ROEs to result in a material diminution of Regulated Electric
Utilities’ earnings power as regulatory lag (the gap between allowed ROEs and earned ROEs) has been
declining causing earned ROEs to be flat or even up in many cases. The reduction in regulatory lag reflects a
slew of improvements in regulatory principles including more forward-looking test years, enhanced recovery
mechanisms for operating expenses and capital investments (riders, etc.), and multi-year rate plans. We
attribute these improvements to more sophisticated regulatory personnel and utilities’ efforts to educate commissioners and staff members on regulatory lag.

Separately, we expect noise around FERC ROEs that was ever-present in 2012 to subside in 2013. All eyes
remain on the New England Section 206 base ROE challenge, which will not likely be resolved until early 2014.
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While the process will likely continue to be watched closely, we believe positive signals out of the FERC in 2012
have eased investor concern and made clear that the FERC is cognizant of the potentially chilling effect of
negative regulatory signals on transmission investment. We continue to believe that newly established base
ROEs will trend downward and incentives will be applied more stringently, but that existing ROEs will hold up
as within the zone of reasonableness.
4. Regulated Electrics Increasingly Talk Down EPS CAGRs …

During 2013, we believe Regulated Electric management teams will increasingly communicate reservations
around the sustainability of existing five-year EPS CAGRs--the average range is currently 4-6%. Our logic is
largely based on simple math as the pace of rate base growth is slowing down and it is not as if allowed ROEs
are trending upwards.

As depicted in Figure 5, annual capex doubled during the period 2004-2008 before modestly tailing off during
the Great Recession. Since late-2010, capex growth has resumed albeit at a far more modest pace than during
the pre-recession period. To be clear, we expect the industry’s capex to remain at elevated levels relative to
depreciation for the foreseeable future due to the ongoing need to replace aging infrastructure, improve
reliability and meet environmental standards. However, we believe the projected pace of rate base growth will
be more supportive of annual EPS growth in the 3-5% range as compared to 4-6%.

Figure 5: U.S. Investor-Owned Utility Capital Spending--Trailing Twelve Months, in Billions

Source: Edison Electric Institute (EEI) and Wells Fargo Securities, LLC

5. Prompting Renewed Interest in M&A?

Over time, we think that declining rate base growth prospects could prompt a renewed interest in mergers and
acquisitions (M&A) as a means to reinvigorate EPS growth. M&A activity amongst the Regulated Electrics has
been fairly subdued in recent years due in large part to ample organic investment opportunities--after all, it is
far easier to grow EPS via rate base growth than through the M&A route. That being said, we think there is an
economic logic to combining adjacent utilities as long as the companies involved can hammer out a reasonable
deal with state regulators.

6. Dividend Payouts: 70% Here We Come?

As investment opportunities tail off for the Regulated Electrics it stands to reason that dividend payout ratios
will likely increase. Currently, the median payout ratio on 2012 estimated EPS is 63% with most companies
targeting a payout ratio in the 60-65% range. As we move further into 2013, we suspect that management
teams will increasingly communicate a payout ratio goal closer to 70%.

WELLS FARGO SECURITIES, LLC
Utilities EQUITY RESEARCH DEPARTMENT

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7. Growth Utilities Stand Out

As a follow on to the last several points--as the average regulated electric utility struggles to maintain a 4-6%
EPS CAGR, those utilities that have the ability to grow at an annual rate of 6%+ will increasingly stand out in
our view. Within our coverage universe, we highlight the following Outperform-rated names as companies
that we have a high degree of confidence in an ability to achieve well-above industry average annual EPS growth over the next five years: CLECO Corp (8-11% EPS CAGR) CMS Energy (6-7%), ITC Holdings
(16%), Northeast Utilities (8-9%) and OGE Energy (5-7%).

8. A National Clean Energy Standard Regains Traction in Washington

We think it is possible that President Obama will seek to more aggressively address climate change in his
second term. Recall, when President Obama first ascended to power in 2008 it was widely speculated that
climate change could be the signature issue of the first term--even over healthcare. However, when the
administration elected to pursue healthcare reform the climate change discussion was marginalized from a
legislative perspective.

Fast forward to 2012: We thought it was potentially significant that President Obama mentioned climate
change during his acceptance speech after being tactically silent on the matter during the course of the
campaign. It is possible that the President considers climate change to be a legacy issue. If that is the case, it is
hard to imagine that the administration would not seek to address the issue in a more meaningful way whether
it is through legislation and/or advocating an even more aggressive approach by the Environmental Protection
Agency (EPA).

As we assess the options, we think it will be very difficult for the Democrats to pass specific carbon dioxide-
related legislation given (1) Republican control of the House of Representatives and (2) CO2 emission
reduction measures such as cap-and-trade and/or a carbon tax are perceived as simply tax increases during a
period when the near and intermediate-term economic outlook remains uncertain.

In our view, from a legislative perspective a more politically palatable route could be further promotion of
renewables (wind and solar) via a meaningful extension of production tax credits for wind and/or passage of a
National Clean Energy Standard, which we believe would likely encompass new nuclear development. A few
years ago, a National Clean Energy Standard seemed like a distinct possibility but fell by the wayside due to a
number of factors including the economic downturn and general stalemate in Congress. As we move beyond
the Fiscal Cliff we think it is possible that a clean energy standard will regain some level of traction in
Washington in 2013 as a viable alternative to CO2 legislation.

Within our coverage universe, we consider Outperform-rated NextEra Energy--the nation’s leading wind
and solar developer--to be the most positively leveraged to a potential clean energy standard. Our EPS outlook
and investment thesis for NEE is predicated on the company’s existing renewables backlog. Therefore, we
would view additional renewable opportunities as creating potential upside to our EPS estimates and valuation
range.

9. In the Not So Bold Category, Gas Continues to Dominate New Build

We expect natural gas-fired generation will continue to dominate new U.S. capacity additions in 2013 as (1) low, stable gas prices make gas the most economic option, and (2) other fuel choices remain challenged. EPA
carbon emission restrictions on new units effectively ban new coal-fired generation, and advanced
technologies, such as carbon sequestration and integrated gasification combined cycle (IGCC), are either not
commercially viable, not cost-effective, or not widely proven. We continue to believe that nuclear is a long-
term solution, but the first new nuclear projects are not expected to come online until 2016/2017. Renewables
will likely represent a meaningful share of capacity additions as well, but wind is beholden to policy support
and low natural gas prices has caused enthusiasm for renewables to wane in many states.

Projections for range-bound natural gas prices have some believing that gas is more than just a “bridge fuel.”
While we see the merits and necessity of adding gas near term, utility executives continue to value fuel
diversity and, having been burned by commodity swings in the past, companies are generally averse to putting
all the eggs in one basket. As nuclear represents a “clean” base-load energy source, we believe there are a
handful of companies that are closely watching Southern Company and SCANA Corp. as they pioneer new
nuclear in the twenty-first century. Assuming those projects are completed in a reasonable time frame and not
meaningfully over budget, we expect to see other projects move forward, though not necessarily in 2013.

WELLS FARGO SECURITIES, LLC
Upgrading POM--Downgrading LNT And IDA EQUITY RESEARCH DEPARTMENT

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10. ITC And ETR Close the Pending Transmission Spin-Off

On 12/4/11, ETR and ITC announced an agreement under which ETR agreed to spin-off the company’s electric
transmission assets in Arkansas, Louisiana, Mississippi and Texas to ITC Holdings. Key regulatory approvals
needed in order to close the deal include Arkansas, Louisiana, Mississippi, and Texas along with the City of
New Orleans.
We continue to believe the transaction is highly likely to be approved in 2013 through a negotiated process.
We believe ITC and ETR make a compelling case for the assets to be transferred to ITC. Notable selling points
include ITC’s singular focus on transmission, regional approach to transmission planning, and better access to
capital. We have also been encouraged by regulatory developments in the second half of 2012--most notably
state regulatory approvals for ETR’s operating utilities to join the Midwest Independent System Operator
(MISO). While we acknowledge that the MISO approval process is distinct and separate from the ITC approval
process, we cannot help but think that the favorable resolution of MISO has positive implications for the
outcome of the ITC transaction.

For ITC, we think acquiring the ETR assets would be a truly transformational development that would further
improve the company’s ability to be a meaningful participant in the ongoing build-out of the nation’s
transmission infrastructure. We view the deal as highly favorable for ITC from both a financial
and strategic standpoint. Separately, we continue to consider ITC as the most undervalued name within
our coverage universe. On a P/E multiple basis shares trade at 15.7x, 13.3x and 11.7x our 2013-2015 EPS
estimates of $4.90, $5.80 and $6.55 (our 2014 and 2015 estimates are pro forma for the Entergy transaction).
These multiples compare with the Regulated Electric peer group medians of 14.7x, 13.6x and 12.9x. We do not
believe the relative valuation--ITC trades at a modest premium in 2013 and discounts in 2014 and 2015--
adequately reflects the company’s comparatively strong growth prospects (16% EPS CAGR versus 5% for the
peer group).

For ETR’s shareholders, we estimate that the ITC deal would add $8-10 per share of value. In addition, we
believe success on the ITC spin-off is important given the unsuccessful attempt to spin off the non-regulated
nuclear operations and the protracted dispute with New York related to the Indian Point nuclear facility.
Another unsuccessful spin-off could raise legitimate questions regarding ETR’s future.

Bonus Prediction: Pepco Holdings Finally Makes Tangible Progress on Regulatory Lag

We are raising our rating on shares of Pepco Holdings (POM) to Outperform from Market Perform. Our
upgrade is primarily due to recent regulatory developments in Maryland, which appear to indicate that a
gradual improvement in regulatory principles could be underway. From a regulatory jurisdiction perspective,
Maryland accounts for approximately 27% of POM’s overall rate base, followed by FERC-regulated
transmission (25%), the District of Columbia (18%), New Jersey and Delaware (approximately 15% each).

Over the last few years, the operative word for POM has been “potential.” After taking the helm as Chairman,
President, and CEO, Joe Rigby immediately put his stamp on the company by announcing the decision to exit
the merchant generation and retail marketing businesses. We viewed the decision favorably as it not only
dramatically reduced the company’s risk profile but also allowed management to better focus on the core
regulated T&D, or Power Delivery, operations.
This is where the word “potential” comes into the equation because Power Delivery has a lot of EPS growth
potential--in fact, much more so than the average electric utility. First, like many other electric utilities, Power
Delivery is in the midst of a substantial infrastructure investment program. Based on planned capex, Power
Delivery is expected to grow rate base at a strong 9% annual rate during the period 2013-17. Planned 2013-17
capex of $5.9 billion is comprised of $4.6 billion of distribution spending (78%) and $1.3 billion of FERC-
regulated transmission spending (22%).

Second, Power Delivery’s distribution utilities have and continue to materially under-earn their allowed ROEs.
During 2012, we estimate that earned ROEs for POM’s distribution utilities were, on average, 300 basis points
below allowed ROEs in the 9.0-10.0% range. In and of itself, we estimate that the full elimination of regulatory
lag would add approximately $0.30, or 25%, to our 2013 EPS estimate of $1.20.

Regulatory Strategy/Update
POM’s strategy to reduce regulatory lag is to file annual rate cases in all of the company’s jurisdictions while at
the same time continuing to advocate for regulatory mechanisms (capital spending trackers, etc.) that would
reduce the need for such frequent rate filings. While the company’s initial attempts to secure constructive
mechanisms were met with little success, there has been positive movement in recent months:
WELLS FARGO SECURITIES, LLC
Utilities EQUITY RESEARCH DEPARTMENT

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• Maryland – On October 3, 2012, Maryland Governor Martin O’Malley filed a Task Force Report
related to grid resiliency with the Maryland PSC. Amongst other items, the report recommended
the PSC approve surcharge recovery for accelerated investment. In response, on November 30,
2012, Pepco-Maryland filed a base rate case that included a proposal for a Grid Resiliency Charge
that would allow for surcharge recovery of $175 million of capex--primarily underground lines--
and $17 million of O&M expense related to tree trimming. Separately, Pepco-MD proposed an
adjustment to the 2012 test year by allowing for recovery of planned reliability spending during
the period April-December 2013.

While the Task Force Report surcharge recommendation only relates to a small portion of capex,
we view the proposal favorably as it represents a meaningful step in the right direction.
Assuming the MPSC adopts the governor’s proposal, the implementation of the mechanism could
lead to a greater willingness to adopt additional mechanisms in the future. In addition, positive
momentum in Maryland could help Pepco’s pursuit of similar mechanisms in the District of
Columbia. Keep in mind that Maryland and the District of Columbia account for roughly 50% of
POM’s rate base.

• Delaware - On November 29, 2012, the Delaware Public Service Commission approved a settlement
agreement allowing DPL to implement a $22 million base rate increase premised on a 9.75%
ROE. In addition, the settlement agreement allows for the parties to pursue a multi-year plan.

EPS Outlook And Valuation Comments
Combine an improvement in regulatory lag with POM’s rate base growth prospects and we think there is the
potential for a highly compelling EPS growth story. Our 2013-15 EPS estimates are $1.20, $1.40 and $1.55.
Our estimates reflect an assumption that earned distribution ROEs trend toward 8.5-9.0% by 2015--still
50-100 basis points below assumed allowed ROEs. On a P/E basis, shares trade 16.3x, 14.0x and 12.7x our
2013-15 EPS estimates versus Regulated Electric peers at 14.7x, 13.6x and 12.9x. In addition, shares offer a
5.5% dividend yield, which is well above the peer group median of 4.2%. We do not project any growth in the
dividend rate of $1.08 per share until the payout decreases to the 60-70% range, which by our estimates, could
occur by 2015.

Our 12-18 month valuation range of $21-22 is premised on a P/E multiple methodology along with our
dividend discount analysis. We apply a P/E multiple of 15.0-15.5x to our 2014 EPS estimate of $1.40 to derive
a valuation range of $21.00-21.70 per share. The P/E multiple range of 15.0-15.5x compares with the 2013
Regulated Electric peer group median multiple of 14.7x. We compare the 2013 peer group multiple to our 2014
EPS estimate given the forward looking nature of our valuation range. Separately, our dividend discount
analysis indicates a 12-18 month valuation of approximately $21 per share. Key assumptions include no
increase in the annual dividend through 2015 followed by long-term earnings and dividend growth of nearly
4% based on 9.5% ROE and 60% payout ratio and an 8% discount rate.

WELLS FARGO SECURITIES, LLC
Upgrading POM--Downgrading LNT And IDA EQUITY RESEARCH DEPARTMENT

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APPENDIX 1: Ratings And Valuation Ranges for Wells Fargo Securities, LLC Utility Coverage
Universe

12/31/2012
Company Ticker Analyst Price ($) New Prior New Prior
Regulated Electrics
Alliant Energy Corp. LNT Kalton 43.91 46-47 49-50 Market Perform Outperform
Ameren Corp. AEE Kalton 30.72 N/C 32-33 N/C Market Perform
American Electric Pow er AEP Kalton 42.68 N/C 46-47 N/C Outperform
CenterPoint Energy, Inc. CNP Akers 19.25 N/C 20-21 N/C Outperform
CLECO Corp. CNL Kalton 40.01 N/C 45-46 N/C Outperform
CMS Energy CMS Kalton 24.38 27-28 26-27 N/C Outperform
Consolidated Edison ED Akers 55.54 57-59 56-58 N/C Market Perform
Duke Energy DUK Kalton 63.80 64-65 62-63 N/C Market Perform
Edison International EIX Kalton 45.19 50-51 49-50 N/C Outperform
Great Plains Energy GXP Akers 20.31 N/C 21-22 N/C Market Perform
IDACORP, Inc. IDA Akers 43.35 44-46 44-45 Market Perform Outperform
ITC Holdings ITC Kalton 76.91 N/C 97-99 N/C Outperform
Northeast Utilities NU Kalton 39.08 43-44 42-43 N/C Outperform
NorthWestern Corp. NWE Kalton 34.73 38-39 37-38 N/C Outperform
NV Energy NVE Akers 18.14 18.50-19.50 18-19 N/C Market Perform
OGE Energy Corp. OGE Akers 56.31 N/C 60-62 N/C Outperform
Pepco Holdings POM Kalton 19.61 21-22 20-21 Outperform Market Perform
PG&E Corp. PCG Kalton 40.18 42-43 41-42 N/C Market Perform
Pinnacle West Capital PNW Akers 50.98 52-54 51-53 N/C Market Perform
Portland General Electric POR Akers 27.36 28-29 26.50-27.50 N/C Market Perform
SCANA Corp. SCG Kalton 45.64 50-51 49-50 N/C Outperform
Southern Company SO Kalton 42.81 46-47 45-46 N/C Market Perform
Vectren Corp. VVC Akers 29.40 30-31 28.50-29.50 N/C Market Perform
Westar Energy WR Akers 28.62 N/C 30-31 N/C Outperform
Wisconsin Energy WEC Kalton 36.85 38-39 37-38 N/C Market Perform
Xcel Energy XEL Kalton 26.71 N/C 29-30 N/C Outperform
Diversified (IPP/Regulated) Electrics
Entergy Corp. ETR Kalton 63.75 N/C 70-71 N/C Outperform
Exelon Corp. EXC Kalton 29.74 N/C 30-31 N/C Market Perform
FirstEnergy Corp. FE Kalton 41.76 N/C 45-46 N/C Outperform
NextEra Energy, Inc. NEE Kalton 69.19 75-76 73-74 N/C Outperform
PPL Corp. PPL Kalton 28.63 N/C 30-31 N/C Market Perform
Public Service Enterprise Group PEG Kalton 30.60 N/C 30-31 N/C Market Perform
N/C - No Change; Bolded lines denote rating change.
Source: Wells Fargo Securities, LLC Estimates
Valuation Range ($) Rating

WELLS FARGO SECURITIES, LLC
Utilities EQUITY RESEARCH DEPARTMENT

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APPENDIX 2: Wells Fargo Securities, LLC Utility Coverage Universe Stats Sheet
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0
1
3
E
Di
v
.

Yl
d
.
Pa
y
o
u
t

20
1
2
E
Eq
u
i
t
y

/

Ca
p
i
t
a
l
Re
g
u
l
a
t
e
d
:
Sm
a
l
l

C
a
p
:
C
L
E
C
O

C
o
r
p
o
r
a
t
i
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n

C
N
L

N
K

1

4
5
-
4
6

4
0
.
0
1

2
.
4

2
.
4
3

2
.
5
0

2
.
7
5

8
%

1
6
.
5
x

1
6
.
0
x

1
4
.
5
x

1
.
1
1

9
.
6
x

9
.
0
x

3
.
4
%

5
6
%

5
0
%
G
r
e
a
t

P
l
a
i
n
s

E
n
e
r
g
y

G
X
P

S
A

2

2
1
-
2
2

2
0
.
3
1

3
.
1

1
.
3
0

1
.
6
0

1
.
6
5

9
%

1
5
.
6
x

1
2
.
7
x

1
2
.
3
x

1
.
0
5

8
.
7
x

8
.
0
x

4
.
3
%

6
7
%

4
8
%
I
D
A
C
O
R
P

I
D
A

S
A

2

4
4
-
4
6

4
3
.
3
5

2
.
2

3
.
3
5

3
.
2
3

3
.
3
5

4
%

1
2
.
9
x

1
3
.
4
x

1
2
.
9
x

0
.
8
7

9
.
5
x

9
.
0
x

3
.
5
%

4
5
%

5
0
%
N
o
r
t
h
W
e
s
t
e
r
n

C
o
r
p
.

N
W
E

N
K

1

3
8
-
3
9

3
4
.
7
3

1
.
3

2
.
4
0

2
.
5
5

2
.
7
0

5
%

1
4
.
5
x

1
3
.
6
x

1
2
.
9
x

0
.
9
7

9
.
7
x

8
.
1
x

4
.
3
%

6
2
%

4
5
%
P
o
r
t
l
a
n
d

G
e
n
e
r
a
l

E
l
e
c
.

P
O
R

S
A

2
28
-
2
9
27
.
3
6

2
.
1

1
.
9
5

1
.
9
5

2
.
1
0

5
%

1
4
.
0
x

1
4
.
0
x

1
3
.
0
x

0
.
9
4

6
.
6
x

6
.
7
x

3
.
9
%

5
5
%

4
8
%
V
e
c
t
r
e
n

C
o
r
p
.

V
V
C

S
A

2
30
-
3
1
29
.
4
0

2
.
4

1
.
8
5

1
.
9
7

2
.
1
0

6
%

1
5
.
9
x

1
4
.
9
x

1
4
.
0
x

1
.
0
7

6
.
9
x

6
.
7
x

4
.
8
%

7
7
%

4
4
%
Sm
a
l
l

C
a
p

M
e
d
i
a
n
:
6%

1
5
.
0
x

1
3
.
8
x

1
3
.
0
x

9
.
1
x

8
.
0
x

4
.
1
%

5
9
%

4
8
%
Mid

C
a
p
:
A
l
l
i
a
n
t

E
n
e
r
g
y

C
o
r
p
.

L
N
T

N
K

2

4
6
-
4
7

4
3
.
9
1

4
.
9

2
.
9
5

3
.
1
5

3
.
2
5

6
%

1
4
.
9
x

1
3
.
9
x

1
3
.
5
x

1
.
0
0

9
.
0
x

8
.
0
x

4
.
1
%

6
1
%

5
0
%
A
m
e
r
e
n

C
o
r
p
.

A
E
E

N
K

2

3
2
-
3
3

3
0
.
7
2

7
.
5

2
.
4
0

2
.
2
5

2
.
4
0

2
%

1
2
.
8
x

1
3
.
7
x

1
2
.
8
x

0
.
8
6

6
.
5
x

7
.
0
x

5
.
2
%

6
7
%

5
1
%
C
e
n
t
e
r
P
o
i
n
t

E
n
e
r
,
I
n
CN
P

S
A

1

2
0
-
2
1

1
9
.
2
5

8
.
2

1
.
1
8

1
.
2
5

1
.
3
2

5
%

1
6
.
3
x

1
5
.
4
x

1
4
.
6
x

1
.
1
0

7
.
0
x

6
.
8
x

4
.
2
%

6
9
%

4
2
%
C
M
S

E
n
e
r
g
y

C
M
S

N
K

1

2
7
-
2
8

2
4
.
3
8

6
.
5

1
.
5
5

1
.
6
2

1
.
7
0

7
%

1
5
.
7
x

1
5
.
0
x

1
4
.
3
x

1
.
0
6

8
.
5
x

8
.
0
x

3
.
9
%

6
2
%

3
0
%
I
T
C

H
o
l
d
i
n
g
s

I
T
C

N
K

1

9
7
-
9
9

7
6
.
9
1

4
.
0

4
.
1
3

4
.
9
0

5
.
8
0

1
8
%

1
8
.
6
x

1
5
.
7
x

1
3
.
3
x

1
.
2
5

1
2
.
0
x

1
0
.
1
x

2
.
0
%

3
7
%

3
2
%
N
V

E
n
e
r
g
y

N
V
E

S
A

2
18
.
5
0
-
1
9
.
5
0
18
.
1
4

4
.
3

1
.
3
5

1
.
3
0

1
.
3
5

4
%

1
3
.
4
x

1
4
.
0
x

1
3
.
4
x

0
.
9
0

7
.
6
x

7
.
6
x

3
.
7
%

5
0
%

4
2
%
O
G
E

E
n
e
r
g
y

C
o
r
p
.

O
G
E

S
A

1

6
0
-
6
2

5
6
.
3
1

5
.
6

3
.
5
0

3
.
6
5

3
.
9
0

5
%

1
6
.
1
x

1
5
.
4
x

1
4
.
4
x

1
.
0
8

8
.
8
x

8
.
4
x

3
.
0
%

4
8
%

4
6
%
P
e
p
c
o

H
o
l
d
i
n
g
s

P
O
M

N
K

1

2
1
-
2
2

1
9
.
6
1

4
.
5

1
.
1
8

1
.
2
0

1
.
4
0

7
%

1
6
.
6
x

1
6
.
3
x

1
4
.
0
x

1
.
1
2

9
.
1
x

8
.
2
x

5
.
5
%

9
2
%

5
0
%
P
i
n
n
a
c
l
e

W
e
s
t

C
a
p
i
t
a
l

P
N
W

S
A

2

5
2
-
5
4

5
0
.
9
8

5
.
6

3
.
4
2

3
.
5
5

3
.
7
0

4
%

1
4
.
9
x

1
4
.
4
x

1
3
.
8
x

1
.
0
0

7
.
2
x

6
.
9
x

4
.
3
%

6
4
%

5
4
%
S
C
A
N
A

C
o
r
p
.

S
C
G

N
K

1

5
0
-
5
1

4
5
.
6
4

6
.
0

3
.
1
2

3
.
3
3

3
.
5
0

6
%

1
4
.
6
x

1
3
.
7
x

1
3
.
0
x

0
.
9
8

9
.
3
x

8
.
6
x

4
.
3
%

6
3
%

4
2
%
W
e
s
t
a
r

E
n
e
r
g
y

W
R

S
A

1

3
0
-
3
1

2
8
.
6
2

3
.
6

1
.
9
8

2
.
0
0

2
.
1
5

4
%

1
4
.
5
x

1
4
.
3
x

1
3
.
3
x

0
.
9
7

8
.
9
x

8
.
7
x

4
.
6
%

6
7
%

4
5
%
W
i
s
c
o
n
s
i
n

E
n
e
r
g
y

W
E
C

N
K

2

3
8
-
3
9

3
6
.
8
5

8
.
5

2
.
3
2

2
.
3
5

2
.
4
5

5
%

1
5
.
9
x

1
5
.
7
x

1
5
.
0
x

1
.
0
7

1
0
.
0
x

9
.
6
x

3
.
7
%

5
9
%

4
4
%
Mid

C
a
p

M
e
d
i
a
n
:
5%

1
5
.
3
x

1
4
.
7
x

1
3
.
6
x

8
.
9
x

8
.
1
x

4
.
2
%

6
3
%

4
5
%
La
r
g
e

C
a
p
:
A
m
e
r
i
c
a
n

E
l
e
c
t
r
i
c

P
o
w
e
AE
P

N
K

1

4
6
-
4
7

4
2
.
6
8

2
0
.
7

3
.
0
5

3
.
1
0

3
.
2
5

4
%

1
4
.
0
x

1
3
.
8
x

1
3
.
1
x

0
.
9
4

8
.
0
x

7
.
5
x

4
.
4
%

6
2
%

4
4
%
C
o
n
s
o
l
i
d
a
t
e
d

E
d
i
s
o
n

E
D

S
A

2

5
7
-
5
9

5
5
.
5
4

1
6
.
3

3
.
7
5

3
.
8
8

3
.
9
5

3
%

1
4
.
8
x

1
4
.
3
x

1
4
.
1
x

1
.
0
0

8
.
7
x

8
.
4
x

4
.
4
%

6
5
%

5
0
%
D
u
k
e

E
n
e
r
g
y

D
U
K

N
K

2

6
4
-
6
5

6
3
.
8
0

4
4
.
9

4
.
3
0

4
.
3
5

4
.
6
5

4
%

1
4
.
8
x

1
4
.
7
x

1
3
.
7
x

1
.
0
0

1
3
.
4
x

9
.
2
x

4
.
8
%

7
1
%

5
1
%
E
d
i
s
o
n

I
n
t
e
r
n
a
t
i
o
n
a
l

E
I
X

N
K

1

5
0
-
5
1

4
5
.
1
9

1
4
.
7

3
.
4
0

3
.
3
0

3
.
5
0

5
%

1
3
.
3
x

1
3
.
7
x

1
2
.
9
x

0
.
8
9

8
.
1
x

7
.
9
x

3
.
0
%

4
2
%

3
8
%
N
o
r
t
h
e
a
s
t

U
t
i
l
i
t
i
e
s

N
U

N
K

1

4
3
-
4
4

3
9
.
0
8

1
2
.
3

2
.
3
0

2
.
5
5

2
.
7
5

6
%

1
7
.
0
x

1
5
.
3
x

1
4
.
2
x

1
.
1
4

1
0
.
4
x

9
.
6
x

3
.
5
%

6
0
%

4
4
%
P
G
&
E

C
o
r
p
.

P
C
G

N
K

2

4
2
-
4
3

4
0
.
1
8

1
7
.
3

3
.
1
3

2
.
8
5

3
.
3
0

0
%

1
2
.
8
x

1
4
.
1
x

1
2
.
2
x

0
.
8
6

8
.
1
x

6
.
1
x

4
.
5
%

5
8
%

4
9
%
S
o
u
t
h
e
r
n

C
o
m
p
a
n
y

S
O

N
K

2

4
6
-
4
7

4
2
.
8
1

3
7
.
4

2
.
6
5

2
.
8
0

2
.
9
5

5
%

1
6
.
2
x

1
5
.
3
x

1
4
.
5
x

1
.
0
9

9
.
4
x

8
.
8
x

4
.
6
%

7
4
%

4
5
%
X
c
e
l

E
n
e
r
g
y

X
E
L

N
K

1

2
9
-
3
0

2
6
.
7
1

1
3
.
0

1
.
8
0

1
.
9
0

2
.
0
0

5
%

1
4
.
8
x

1
4
.
1
x

1
3
.
4
x

1
.
0
0

8
.
4
x

7
.
6
x

4
.
0
%

6
0
%

4
5
%
La
r
g
e

C
a
p

M
e
d
i
a
n
:
5%

1
4
.
8
x

1
4
.
2
x

1
3
.
5
x

8
.
5
x

8
.
2
x

4
.
4
%

6
1
%

4
5
%

R
e
g
u
l
a
t
e
d

C
o
v
e
r
a
g
e

G
r
o
u
p

M
e
d
i
a
n
5%

1
4
.
9
x

1
4
.
3
x

1
3
.
5
x

8
.
8
x

8
.
0
x

4
.
2
%

6
2
%

4
5
%
Div
e
r
s
i
f
i
e
d

E
l
e
c
t
r
i
c
:
E
n
t
e
r
g
y
*

E
T
R

N
K

1

7
0
-
7
1

6
3
.
7
5

1
1
.
3

5
.
5
0

5
.
0
0

4
.
0
5

0
%

1
1
.
6
x

N
M

N
M

0
.
9
4

8
.
2
x

8
.
4
x

5
.
2
%

6
0
%

4
1
%
E
x
e
l
o
n

C
o
r
p
o
r
a
t
i
o
n

E
X
C

N
K

2

3
0
-
3
1

2
9
.
7
4

2
5
.
4

2
.
8
5

2
.
5
0

2
.
4
5

-
5
%

1
0
.
4
x

1
1
.
9
x

1
2
.
1
x

0
.
8
5

6
.
8
x

6
.
9
x

7
.
1
%

7
4
%

5
2
%
F
i
r
s
t
E
n
e
r
C
o
r
or
a
t
i
o
FE

N
K

1

4
5
-
4
6

4
1
.
7
6

1
7
.
5

3
.
3
5

2
.
9
5

3
.
1
5

4
%

1
2
.
5
x

1
4
.
2
x

1
3
.
3
x

1
.
0
1

7
.
8
x

8
.
2
x

5
.
3
%

6
6
%

4
0
%
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WELLS FARGO SECURITIES, LLC
Upgrading POM--Downgrading LNT And IDA EQUITY RESEARCH DEPARTMENT

11

Valuation Range Information:
ETR Basis and Risks: Our $70-71/sh valuation range is based on a sum-of-the-parts analysis ($47/sh for
Regulated & Parent, $22 for the transmission assets, and $1-2/sh for ETR's merchant assets. Risks to our
valuation range include commodity price sensitivity, nuclear relicensing and operational risks, regulatory risks
and failure to close the transmission transaction.

EXC Basis and Risks: Our $30-31/sh valuation range is primarily based on a P/E multiple analysis (13.0X
our 14E EPS of $2.45)and Residual Income Analysis. Risks include commodity price sensitivity, failure to
achieve cost and revenue synergies, and regulatory risk.

FE Basis and Risks: Our $45-46/sh valuation reflects a comparison, sum-of-the-parts ($35/sh Regulated &
Parent and $10-11 per share Merchant) and residual income analyses. Risks include commodity price
sensitivity and operational risks.

NEE Basis and Risks: Our $75-76/sh valuation reflects a comparison, sum-of-the-parts ($50/sh Regulated
& Parent and $25-26 per share NEER) and residual income analyses. Risks include the ability to deliver on
wind development plans, FL economic and regulatory concerns and commodity price risk.

PPL Basis and Risks: We value PPL under a P/E multiple analysis (14X on our 14E of $2.20). Risks include
earnings sensitivity to power prices, regulatory/political risks and generation-related operating risks.

PEG Basis and Risks: Our $30-31/sh valuation range is based on a sum-of-the-parts (we value Utility,
Parent & Energy Holdings at $20/share - 15X our 14E EPS - and Power at $10-11/share - 6X our 14E EBITDA)
and residual income analysis. Risks to our valuation include earnings sensitivity to commodity prices,
operational risks and unfavorable regulatory/political developments.

CNP Basis and Risks: Our valuation range is based on a P/E (15X on our 14E EPS), sum-of-the-parts,
dividend discount and residual income analyses. We add $1/share for assumed incremental investment
totaling $350 million. Risks include execution risk related to new growth opportunities, negative regulatory
developments, and unfavorable moves in commodity prices.
OGE Basis and Risks: Our valuation is based on a sum-of-the-parts analysis (14.25X OG&E/Parent 14E of
$3.00 and 8.2X Enogex 14E EBITDA). Risks include negative regulatory developments, commodity exposure
and weaker than expected electric sales.

VVC Basis and Risks: Our valuation range is based on a sum-of-the-parts ($26/share for Utility Holdings
and $4-5/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.

LNT Basis and Risks: Our valuation range is based on a P/E multiple (14.5X our 14E EPS of $3.25) and
dividend discount analysis. Risks to our valuation include negative regulatory developments in Iowa or
Wisconsin, inability to control operating costs and economic weakness.

AEE Basis and Risks: Our valuation range is based on a P/E multiple (13.5X to 14.0X our 14E EPS of $2.40)
and dividend discount analysis. Risks include unfavorable regulatory outcomes, ability to cleanly exit the
merchant business, and a material rise in interest rates.

AEP Basis and Risks: Our $46-47/sh valuation range is supported by our P/E multiple (14.0x to 14.5X our
2014E EPS of $3.25), dividend discount and residual income methodologies. Risks include potential regulatory
pushback related to environmental spend/costs, economic risks and increasing sensitivity to power/capacity
prices.

CNL Basis and Risks: Our valuation is based on a P/E multiple comparison, residual income and dividend
discount analyses. We apply a 14.7X P/E multiple to our 15E EPS of $3.10. Risks are largely regulatory related
(Coughlin approval & rate case).

CMS Basis and Risks: Our $27-28/sh valuation range is based on a P/E multiple (apply a 15.5X multiple - a
5-10% premium to the 2013E Regulated Electric group median of 14.5X - to our 14E of $1.70 and add $1/sh for
the DIG power plant) and dividend discount model analysis. Key risks include regulatory risk, Michigan
economic risk and a comparatively weak balance sheet at the parent level.

WELLS FARGO SECURITIES, LLC
Utilities EQUITY RESEARCH DEPARTMENT

12

ED Basis and Risks: We value ED under P/E multiple (apply 14.7x to our 2014E EPS of $3.95), dividend
discount, and residual income analysis. Risks to our valuation include regulatory-related risks related to
CECONY Electric's upcoming rate case, higher than expected O&M expense and interest rate sensitivity.

DUK Basis and Risks: Our $64-65/sh valuation range reflects a P/E multiple (apply a 5% discount to the
2013 Regulated Electric group median of 14.5X to our 14E of $4.65), a dividend discount model and a residual income analysis. We believe a modest discount is warranted given merger execution risk, heightened
regulatory risk & uncertainties related to Crystal River 3 and Edwardsport. Risks relate to merger execution,
regulatory orders, international ops and unregulated coal fleet margins.

EIX Basis and Risks: Our $50-51/sh valuation range is primarily based on a sum-of-the-parts analysis and
dividend discount model. We apply the 13E Regulated Electric group median of 14.5X to our $3.50 14E EPS for
SCE & Parent resulting in a forward price of roughly $50-51 per share. We ascribe no value for EMG. Key risks
include a potential deterioration in CA regulation and risks around Edison Mission (distraction to
management, legal challenges in the event EME defaults, etc.)

GXP Basis and Risks: Our valuation range is primarily based on a P/E multiple analysis (13X our 14E EPS
of $1.65). Key risks include unfavorable rate case outcomes, cost pressures and lower than expected sales.

IDA Basis and Risks: We value IDA under P/E multiple (13.5X multiple on our 14E EPS of $3.35), dividend
discount, and residual income analysis. Risks to our valuation include project delays/cancellations, negative
regulatory developments and economic weakness.

ITC Basis and Risks: Our $97-99/sh valuation range is based on P/E and residual income analyses. We
apply a 15.5-16.0X multiple to our 16E of $7.50 and then discount this value back 2-yrs by 9% annually. The
15.5-16.0X multiple represents a reasonable 7-10% premium relative to the 13E Regulated Electric group
median of 14.5X. Our forward-looking valuation range is also well supported by our residual income model.
Risks to our valuation include adverse changes in the FERC's transmission policies, project delays or
cancellations and failure to close the ETR Mid-South transaction.

NU Basis and Risks: Our $43-44/sh valuation range is premised on a roughly 10% premium to the 13E
Regulated Electric group median of 14.5X to our 14E EPS of $2.75. Risks to our valuation include project
delays/cancellations related to Northern Pass and regulatory risks.

NWE Basis and Risks: Our $38-39/sh valuation range is based on a P/E multiple (apply the 13E Regulated
Electric group median of 14.5X to our 14E EPS of $2.70) and dividend discount model analysis. Chief risks
include regulatory, project timing and interest rate risks.

NVE Basis and Risks: Our valuation range is supported by our P/E (14.1X on our 14E EPS of $1.35),
dividend discount and residual income analyses. Key risks include negative economic developments, higher
than expected O&M, and unsupportive regulatory decisions.

POM Basis and Risks: Our $21-22/sh valuation range is based on a combo of our P/E multiple comparison
(apply a modest roughly 5% premium to the 13E Regulated Electric group median of 14.5X to our 14E EPS of
$1.40), dividend discount and residual income methodologies. Risks include regulatory risks associated with
pending and upcoming rate filings and interest rate sensitivity.
PCG Basis and Risks: Our $42-43/sh valuation range is based on a P/E multiple (apply a ~10% discount to
the 13E Regulated Electric group median of 14.5X to our 14E of $3.30) and dividend discount model analysis.
Key risks include unfavorable regulatory outcomes and higher than expected unrecoverable San Bruno
pipeline explosion costs.

PNW Basis and Risks: Our valuation range is primarily based on P/E multiple (14.3X our 14E EPS of
$3.70), dividend discount and residual income analyses. Key risks include unfavorable regulatory
developments, weaker than expected customer growth and cost inflation.

POR Basis and Risks: Our valuation range is supported by our P/E (13.5X on our 14E EPS of $2.10),
dividend discount and residual income analyses. Risks include operating cost increases, a protracted economic
downturn, and adverse RFP and regulatory outcomes.

SCG Basis and Risks: Our $50-51/sh valuation range is based on a P/E multiple (apply the 13E Regulated
Electric group median of 14.5X to our '14E of $3.50) and dividend discount analysis. Risks to SCG shares, in
our view, include regulatory risk, construction risk and a slower-than-expected Southeastern economy.
WELLS FARGO SECURITIES, LLC
Upgrading POM--Downgrading LNT And IDA EQUITY RESEARCH DEPARTMENT

13

SO Basis and Risks: Our $46-47/sh valuation range is based on a P/E multiple (apply a roughly 10%
premium to the 13E Regulated Electric group median of 14.5X to our 2014E of $2.95) and dividend discount
model analysis. In our view, risks include regulatory risk, construction risk and potential exposure to adverse
federal energy legislation.
WR Basis and Risks: Our valuation range is based on a P/E multiple (apply a 14.1X multiple to our 14E EPS
of $2.15) analysis. Risks to our valuation include customer and regulatory pushback to rising costs, lower than
expected sales growth and higher than expected cost inflation.

WEC Basis and Risks: Our $38-39/sh valuation range is based on a P/E multiple (apply a 5-10% premium
to the 2013 Regulated Electric peer group median of 14.5X - to our 14E of $2.45) and dividend discount model.
Risks to our valuation include regulatory risk and the impact of a protracted recession on sales and costs.

XEL Basis and Risks: Our $29-30/sh valuation range is based on a P/E multiple (apply a 0-5% premium to
the 2013 Regulated Electric peer group median of 14.5X - to our 14E of $2.00) 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

To view price charts for all companies rated in this document, please go to
https://www.wellsfargo.com/research or write to
7 Saint Paul Street, 1st Floor, R1230-011, Baltimore, MD 21202
ATTN: Research Publications
Additional Information Available Upon Request

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
Utilities EQUITY RESEARCH DEPARTMENT

14

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WELLS FARGO SECURITIES, LLC
Upgrading POM--Downgrading LNT And IDA EQUITY RESEARCH DEPARTMENT

15

ƒ Wells Fargo Securities, LLC or its affiliates managed or co-managed a public offering of securities for an affiliate of Duke Energy
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AEE: Risks include unfavorable regulatory outcomes, ability to cleanly exit the merchant business, and a material rise in interest
rates.
AEP: Risks include potential regulatory pushback related to environmental spend/costs, economic risks and increasing sensitivity
to power/capacity prices.
CMS: Key risks include regulatory risk, Michigan economic risk and a comparatively weak balance sheet at the parent level.
CNL: Risks are largely regulatory related (Coughlin approval & rate case).
CNP: Risks include execution risk related to new growth opportunities, negative regulatory developments, and unfavorable moves
in commodity prices.
DUK: Risks relate to merger execution, regulatory orders, international ops and unregulated coal fleet margins.
ED: Risks to our valuation include regulatory-related risks related to CECONY Electric's upcoming rate case, higher than expected
O&M expense and interest rate sensitivity.
EIX: Key risks include a potential deterioration in CA regulation and risks around Edison Mission (distraction to management,
legal challenges in the event EME defaults, etc.)
ETR: Risks to our valuation range include commodity price sensitivity, nuclear relicensing and operational risks, regulatory risks
and failure to close the transmission transaction.
EXC: Risks include commodity price sensitivity, failure to achieve cost and revenue synergies, and regulatory risk.
FE: Risks include commodity price sensitivity and operational risks.
GXP: Key risks include unfavorable rate case outcomes, cost pressures and lower than expected sales.
IDA: Risks to our valuation include project delays/cancellations, negative regulatory developments and economic weakness. ITC: Risks to our valuation include adverse changes in the FERC's transmission policies, project delays or cancellations and failure
to close the ETR Mid-South transaction.
LNT: Risks to our valuation include negative regulatory developments in Iowa or Wisconsin, inability to control operating costs
and economic weakness.
NEE: Risks include the ability to deliver on wind development plans, FL economic and regulatory concerns and commodity price
risk.
NU: Risks to our valuation include project delays/cancellations related to Northern Pass and regulatory risks.
NVE: Key risks include negative economic developments, higher than expected O&M, and unsupportive regulatory decisions.
NWE: Chief risks include regulatory, project timing and interest rate risks.
OGE: Risks include negative regulatory developments, commodity exposure and weaker than expected electric sales.
PCG: Key risks include unfavorable regulatory outcomes and higher than expected unrecoverable San Bruno pipeline explosion
costs.
PEG: Risks to our valuation include earnings sensitivity to commodity prices, operational risks and unfavorable
regulatory/political developments.
PNW: Key risks include unfavorable regulatory developments, weaker than expected customer growth and cost inflation.
POM: Risks include regulatory risks associated with pending and upcoming rate filings and interest rate sensitivity.
POR: Risks include operating cost increases, a protracted economic downturn, and adverse RFP and regulatory outcomes.
PPL: Risks include earnings sensitivity to power prices, regulatory/political risks and generation-related operating risks.
SCG: Risks to SCG shares, in our view, 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.
WEC: Risks to our valuation include regulatory risk and the impact of a protracted recession on sales and costs.
WR: Risks to our valuation include customer and regulatory pushback to rising costs, lower than expected sales growth and higher
than expected cost inflation.
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

16

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: January 2, 2013
50% of companies covered by Wells Fargo Securities, LLC
Equity Research are rated Outperform.
Wells Fargo Securities, LLC has provided investment banking
services for 44% of its Equity Research Outperform-rated
companies.
48% of companies covered by Wells Fargo Securities, LLC
Equity Research are rated Market Perform.
Wells Fargo Securities, LLC has provided investment banking
services for 33% of its Equity Research Market Perform-rated
companies.
2% of companies covered by Wells Fargo Securities, LLC
Equity Research are rated Underperform.
Wells Fargo Securities, LLC has provided investment banking
services for 20% of its Equity Research Underperform-rated
companies.

Important Information for Non-U.S. Recipients
EEA – The securities and related financial instruments described herein may not be eligible for sale in all jurisdictions or to certain
categories of investors. For recipients in the EEA, this report is distributed by Wells Fargo Securities International Limited
(“WFSIL”). WFSIL is a U.K. incorporated investment firm authorized and regulated by the Financial Services Authority. For the
purposes of Section 21 of the UK Financial Services and Markets Act 2000 (“the Act”), the content of this report has been approved
by WFSIL a regulated person under the Act. WFSIL does not deal with retail clients as defined in the Markets in Financial
Instruments Directive 2007. The FSA rules made under the Financial Services and Markets Act 2000 for the protection of retail
clients will therefore not apply, nor will the Financial Services Compensation Scheme be available. This report is not intended for,
and should not be relied upon by, retail clients.
WELLS FARGO SECURITIES, LLC
Upgrading POM--Downgrading LNT And IDA EQUITY RESEARCH DEPARTMENT

17

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credit ratings stated on the respective rating agencies’ websites.
About Wells Fargo Securities, LLC
Wells Fargo Securities, LLC is a U.S. broker-dealer registered with the U.S. Securities and Exchange Commission and a member of
the New York Stock Exchange, the Financial Industry Regulatory Authority and the Securities Investor Protection Corp.
This report is for your information only and is not an offer to sell, or a solicitation of an offer to buy, the securities or instruments
named or described in this report. Interested parties are advised to contact the entity with which they deal, or the entity that
provided this report to them, if they desire further information. The information in this report has been obtained or derived from
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information is accurate or complete. Any opinions or estimates contained in this report represent the judgment of
Wells Fargo Securities, LLC, at this time, and are subject to change without notice. For the purposes of the U.K. Financial Services
Authority's rules, this report constitutes impartial investment research. Each of Wells Fargo Securities, LLC, and
Wells Fargo Securities International Limited is a separate legal entity and distinct from affiliated banks. Copyright © 2013
Wells Fargo Securities, LLC.

SECURITIES: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE