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HomeMy WebLinkAbout20170516Compliance Filing.pdfii i:.,: I1,/'; i) ,- ,i,,, , i5 iril $: 2l Paclfic Powcr I Rocky Mountaln Powcr 825 NE Multnomah. Suite 2000 Porttand, Oregon 97232 May 16,2017 VA OVERNIGHT DELIVERY Idaho Public Utilities Commission 472West Washington Boise, ID 83702-5983 Attention:Ms. Diane Hanian Commission Secretary Re: Idaho Docket No. PAC-E-05-08 Compliance Filing To the Idaho Public Utilities Commission: PacifiCorp submits the attachment in compliance with the Commission's Order in the above referenced case issued on February 13,2006 and amended on March 14,2006. The Order approved the Stipulation supporting the acquisition of PacifiCorp by MidAmerican Energy Holdings Company.r CommitmentI20 of the Stipulation provides that PacifiCorp will provide to the Commission, on an informational basis, credit rating agency news releases and final reports regarding PacifiCorp when such reports are known to PacifiCorp and are available to the public. Therefore, in compliance with Commitment I20 of the Stipulation, please find the attached credit rating agency report related to PacifiCorp. Very truly yours, Weems Treasurer Enclosure I On April 30,2014, MidAmerican Energy Holdings Company changed its name to Berkshire Hathaway Energy Company. FitchRatings U.S. Corporates Spotlight Series Berkshire Hathaway Energy Company May 2OL7 Ratings Berkshire Hathaway Energy Gompany Subsidiary of Berkshire Hathaway, lnc. Special Report Ratings Long-Term IDR Short-Term IDR Senior Unsecured IDR - lssuer Default Rating. Rating Outlook Long-Term IDR F2 BBB+ BBB+ Stable Key Rating Drivers BHE Ownership: Berkshire Hathaway Energy Company's (BHE) affiliation with Berkshire Hathaway, lnc. (BRK, AA-/Stable) is a key factor supporting BHE's 'BBB+' lssuer Default Rating (lDR). BRK's ownership of BHE allows the subsidiary to retain capital gpically paid out in the form of dividends by investor-owned utilities (lOU). This dynamic is a function of BRK's strong credit profile, large cash position (approximately $86 billion as of Dec. 31, 2016) and investment appetite. Positive FCF Projections: Unlike most lOUs, BHE is able to retain earnings normally paid out in the form of dividends to attract equity capital. As a result of this and predictable, strong cash flow from its diversified mix of utility and utility-like assets, Fitch Ratings estimates that BHE will be FCF positive during2017-2020. FCF in 2015 and 2016 was $1.1 billion and $966 million, respectively. Total adjusted debt declined approximately $600 million to $38.8 billion as of Dec. 31, 2016 from $39.4 billion at the end of 2014. Fitch pro,lects that FFO-adjusted leverage, which peaked in 2013 at 5.9x, will approximate 5.0x in 2017-2020. Future M&A Likely: BHE has been an active consolidator in the utility, power and gas sector, acquiring high-quality, low-risk electric and gas utilig, electric transmission and natural gas pipeline assets. The impact of future M&A activity on BHE's credit quality will be a tunction of price, asset quality and funding choices. Debt-funded acquisitions and/or acquisition of high- risk profile businesses could challenge credit quality. Large acquisitions in recent years include Altalink, L.P. (ALP) in2014 and NV Energy, lnc. (NVE, BBB-/Positive) in 2013. Diversified, Regulated Asset Base: BHE'S ratings are supported by its large, highquality portfolio of utility and utility-like assets primarily located in the U.S., Canada and Great Britain. BHE owns three large U.S.-based integrated electric utilities with generally constructive regulation operating in the U.S. Rocky Mountain, Pacific Northwest, Midwest and Desert Southwest regions. Fitch expects cash from BHE's diverse portfolio will amply cover future parent-only obligations. Gonsolidated Financial Metrics: The acceleration of BHE's M&A activity in 2013 and 2014 and an associated increase in parent-company leverage is estimated by Fitch to pressure BHE's consolidated credit metrics. Fitch projects FFO fixed-charge coverage and adjusted leverage ratios will be in the ranges of 3.9x-4.1x and 4.6x-4.8x, respectively, in 2017-2020. Strong Parent-Only Cash Flow: Fitch estimates that the ratio of BHE parent-only debVtotal sources will be in lhe 2.7x-3.2x range in 2017-2019. Parent-only BHE debt (composed of senior notes and junior subordinated debentures) hit a peak of $1 1.7 billion in 2014, reflecting funding of the NVE and ALP acquisitions. From the peak, BHE has reduced its outstanding parent company debt by 28o/o to $8.4 billion as of Dec. 31, 2016. Absent further M&A activity, Fitch estimates that BHE parent-only debt will continue to decline. Related Research Fitch Affirms Berkshire Hathaway Energy Co & Subs (February 2017) Ana Philip lysts Smyth, CFA +1 212 908-053'l phf, ip.s.nylh@litfi ralings.corn Kevin Beicke, CFA +1 212 908-0618 kevin.beii(e@t$ralings.cqn www.fitchratings.com May 2,2017 Ratings Related Criteria Criteria for Reting Non-Financial Corporates (March 2017) Recovery Ratings and Notching Criteriafor Non-Financial Corporate lssuers (November 2016) Parenl and Subsidiary Rating Linkage (August 2015) Recovery Ratings and Notching Criteria for Utilities (March 2016) Rating U.S. Utilities, Power and Gas Companies (Sector Credit Facbrs) (March 2014) Rating Sensitivities Berkshire Hathaway Energy Positive Rating Action: Relatively high consolidated leverage is a significant hurdle to positive rating actions in the near-to-intermediate term. Nonetheless, improvement in FFO-adjusted leverage to 3.6x-3.8x or better on a sustained basis could result in future rating upgrades. Negative Rating Action: Deterioration of BHE's FFO-adjusted leverage to 5.0x-5.5x or worse on a consistent basis would likely lead to a rating downgrade. Longer term, a change in ownership structure and/or strategic direction at BRK that eliminated or diminished capital retention and other benefits currently available to BHE would likely lead to a downgrade at the utility holding company and pressure its subsidiaries' ratings as well. Large debt-funded M&A transactions and/or acquisition of assets with more volatile cash flows and higher business risk at BHE could trigger a rating downgrade at the utility holding company. Such higher-risk businesses in the Utilities, Power & Gas sector would include certain higher-risk midstream and merchant generation assets. Significant deterioration in the financial strength of BRK leading to a rating downgrade would likely also trigger adverse rating actions at BHE. Poor operating and financial performance or catastrophic outages at its operating subsidiaries could lead to a downgrade at BHE. NV Energy Positive Rating Action: lmprovement in NVE's FFO and EBITDAR leverage to 5.0x and 3.75x or better, respectively, on a long-term basis, along with continuation of a balanced political/regulatory environment in Nevada, could lead to a one-notch upgrade for NVE and its operating subsidiaries, Nevada Power Company (NPC) and Siena Pacific Power Company (SPPC), within 18 months. Resolution of pending energy policy uncertainties in Nevada, including retail customer choice, net energy metering, energy efficiency and higher renewable portfolio standards (RPS), signalling continuation of a balanced regulatory compact, could lead to future positive credit rating actions. Negative Rating Action: An unexpected deterioration in the currently constructive regulatory compact in Nevada or other factors pressuring FFO leverage to 6.0x or weaker for NVE could lead to a future, adverse rating action for NVE, NPC and SPPC. The highly politicized debate in Nevada regarding net metering and other critical energy policy issues is a source of concern that could lead to future negative credit rating actions. MidAmerican Energy Company / MidAmerican Funding LLC Positive Rating Action: The utility's strong credit rating limits a positive rating action. However, stable, sustained FFO-adjusted coverage and leverage ratios of 5.0x and 3.5x or better, respectively, could result in a rating upgrade. Structural subordination of MidAmerican Funding LLC (MF, BBB+/Stable) debt to MidAmerican Energy Co. (MEC, A-lStable) and current Fitch notching criteria require an upgrade at the utility to accommodate an upgrade at MF. Negative Rating Action: A significant deterioration in the regulatory compact in lowa, a catastrophic plant outage, or other factors causing MEC's FFO leverage to weaken to 4.5x or worse on a sustained basis would likely lead to a rating downgrade for both MEC and MF. Berkshire Hathaway Energy Company May 2,2017 2 a PacifiCorp Positive Rating Action: A positive rating action for PacifiCorp (PPW, A-/Stable) is unlikely in the near-to-intermediate term given Fitch's current expectations. However, further improvement in PPW's FFO coverage and leverage ratios to 5.0x and 3.5x, respectively, in concert with a stable or improving business risk profile, could result in a rating upgrade. Negative Rating Action: An unexpected, sustained weakening of FFO leverage due to deterioration in PPW's regulatory oversight, meaningtully higher-than-expected capex, a catastrophic plant outage, or other factors causing PPW's FFO leverage to weaken to 4.5x or worse could lead to a rating downgrade. Northern Natural Gas Company Positive Rating Action: The pipelines' relatively high ratings challenge future positive rating actions. Negative Rating Action: Deterioration of Northern Natural Gas Company's (NNG, A/Stable) FFO-adjusted leverage to 4.0x or weaker could result in a rating downgrade. NNG could be downgraded due to recontracting risk, unexpected increases in operating costs, or catastrophic pipeline related events leading to significant pressure on projected credit metrics. What lnvestorc Wantto Know ls Future M&A Activity Likely at BHE? What lmpact Would a Major Acquisition Have on BHE's Ratings? BHE has been an active consolidator in the Utilities, Power & Gas sector, acquiring high-quality, low-risk electric and gas utility, electric transmission and natural gas pipeline assets. Large BHE acquisitions in recent years include NVE in 2013 and ALP in 2014. The potential impact of future M&A activity on BHE's credit quality will be driven by price, asset quality and funding choices. Large, debtfunded acquisitions and/or acquisition of high-risk profile businesses are a primary source of concern in Fitch's view that could challenge credit quality at BHE. Central to Fitch's rating considerations in light of BHE's high leverage relative to its current 'BBB+' IDR is the locus of BHE's M&A activity. While BHE has primarily targeted utility and utilityJike businesses, including interstate gas transmission, pursuit of far riskier assets across the energy food chain cannot be ruled out and is a key credit concern. Among riskier asset classes along the energy food chain, investment in nuclear or fossil-fuel merchant generation appears unlikely. More likely, in Fitch's opinion, would be a large acquisition by BHE in the midstream space at a price it deems attractive relative to long-term business fundamentals. BHE has frequently been mentioned as a potential suitor for Oncor Electric Delivery Company, which may soon be on the market again in the wake of regulatory opposition to NextEra's proposed acquisition of the Dallas-Fort Worth-based transmission and distribution utility. Management made a point of mentioning at its April 1,2017 fixed-income analyst day that it is comfortable with ring-fence structures, which have been implemented across its major operating subsidiaries. The recent rejection of the proposed merger of Westar Energy and Great Plains Energy lnc. by the Kansas Corporation Commission could provide a future mid- cap target for BHE should the link-up with Great Plains Energy fall through. Structuring of past deals at BHE has been fairly aggressive in term of leverage, in Fitch's view, and relied primarily on public debt issuance and hybrid securities issued to BRK with the latter being repaid relatively quickly. ln the ALP merger, BHE financed the all-cash acquisition with Berkshire Hathaway Energy Company May 2,2017 3 Ratings approximately $1.5 billion of senior notes and $1.5 billion of junior subordinated debentures. Acquisition funding for NVE also relied on a large component of senior notes and subordinated debentures. The funding of the ALP and NVE acquisitions pushed junior subordinated debentures on BHE's balance sheet at year-end 2014 to $3.8 billion and total parent-only debt to $1'l .7 billion. By the end of 2016, BHE had repaid approximately $2.9 billion of its junior subordinated debt outstanding, and total parent-only debt was reduced 28o/o to $8.4 billion. Fitch expects BHE to completely repay the remaining hybrid securities balance of $944 million as of Dec. 31, 2016 by the end of 2017 - Based on Fitch estimates, BHE will be significantly FCF positive in 2017- 2020, and leverage is estimated to decline moderately through 2020. The timeline below summarizes BHE's acquisition track record, which includes MEC in 1999, NNG and Kern River Gas Transmission Co. (KRGT) in2002 and PPW in 2006, in addition to NVE and ALP. Timeline - Berkshire Hathaway Energy Company CalEnergy Co. CalEnergy acquires MidAmerican Energy Co. MEHC acquired by private investment group led by Berkshire Hathaway, lnc. Berkshire Hathaway Energy Company (BHE) acquires PacifiCorp BHE acquires NV Energy 1996 1999 2002 2012 2014 1971 1998 2000 2006 20't3CalEnergy acquires Northern Electric (U.K.-based retail gas and electricity) Reorganized as MidAmerican Energy Holdings (MEHC) MEHC acquires Kern River and Northern National Gas Pipelines fulrdAmerican Renewables formed to oversee expansion in unregulated renewable generation projects. Renamed BHE Renewables BHE acquires AltaLink ln 2008, BHE bid $4.7 billion for Constellation Energy Group (CEG), a utility holding company with a relatively high business risk profile that included significant merchant nuclear generation and energy marketing operations. BHE provided a $1 billion lifeline to CEG during a period of extreme financial stress, which it tunded by issuing junior subordinated debt to BRK. CEG ultimately rgected the proposed merger with BHE, opting instead to sell its nuclear generation to the French power company Electricite de France. (CEG was ultimately acquired by Exelon Corporation.) Rejection of the proposed merger by CEG resulted in a windfall for BHE. While BHE may have lost out on its bid, it walked away from the transaction with after-tax proceeds of approximately $725 million and unencumbered by exposure to merchant nuclear generation. More than $400 million of the after-tax proceeds were used by BHE to reduce debt. ln Fitch's estimation, BHE paid a full price for its respective $7 billion and $10 billion acquisitions of ALP and NVE. More recently, BHE has been disciplined with regard to M&A, sitting on the sidelines since closing the ALP acquisition in 2014, choosing not to pay up for assets. Nonetheless, M&A is a central component of BHE's growth strategy in Fitch's view, and the agency expects BHE's acquisitive streak will continue, driven by its ultimate parent's desire to deploy capital in the sector. Sour6e: Fitch Ratings. Berkshire Hathaway Energy Company May 2,2017 4 tchRatings Could a Change in Leadership at BRK Result in Downgrades to BHE's Credit Ratings? Key man risk from the potential departure of BRK chairman Warren Buffett is a concern at BHE and its corporate parent, BRK. The main risk to BHE's creditworthiness, in Fitch's opinion, is a resulting change in strategy or, as is sometimes the case with a change in leadership at a large conglomerate, the breakup of the company to maximize shareholder value. ln this scenario, the substantial credit benefits from BHE's affiliation with BRK - including dividend retention, tax efficiency and access to relatively inexpensive capital - may be obviated and could result in future credit rating downgrades. Would a Downgrade to BRK Result in a Downgrade at BHE? Significant deterioration at BHE's corporate parent sufficient to result in adverse rating actions is a low-probability event in Fitch's view, but one that cannot be ruled out entirely. lf material weakness in BRK's business fundamentals became severe enough to obviate the capital retention and other advantages provided to BHE, credit downgrades at the utility holding company would likely be unavoidable. Because of its affiliation with BRK, BHE is able to retain capital typically paid out in dividends by publicly held lOUs. This dynamic is a function of BRK's strong credit profile, large cash position ($86 billion as of Dec. 31, 2016) and investment appetite. The ability of BHE to retain earnings is a key competitive advantage. As a result, Fitch projects that BHE, unlike the vast majority of utilities, will be FCF positive in 2017-2020. A reversal of fortune at BRK sufficient to trigger significant cash demands of BHE would be a significant adverse development for the utility holding company and would likely pressure creditworthiness at its operating subsidiaries. However, ring-fence provisions at ALP, MEC, NNG, NVE and PPW, in this hypothetical scenario, would likely provide a measure of downside credit protection, in Fitch's estimation, as BRK and BHE moved down the rating scale. Do You Expect Trump Administration Policies to Have a Meaningful Impact on BHE's Creditworthiness? The impact of anticipated tax reform legislation is a source of uncertainty for BHE from a credit perspective, in Fitch's view, based on initial Trump administration and House Republican draft legislation. The potential loss of tax deductibility is the biggest concern for BHE in light of the utility holding company's significant parent-level debt, which at year-end 2016 represented approximately 22o/o of consolidated debt. Fitch believes successful implementation of the Trump administration's pro-growth policies would be generally constructive for credit quality from a utility industry perspective. Trump administration initiatives to reverse the previous administration's strong support for carbon emission reductions are likely to help some coal-heavy utilities and merchant generation companies. However, Fitch believes the impact to BHE's U.S. operating utilities is likely to be modest given low natural gas price prolections and strong state political support for a cleaner energy mix. Significant momentum for energy policy supporting a rapidly growing share of low- and non- emitting energy resources exists at the state level, as witnessed by leap-frogging renewable portfolio standards and initiatives to phase out coal generation. Low natural gas prices and burgeoning shale reserves bode ill for a rebound in coal-fired generation output supporting a de facto U.S. renewables and natural gas energy supply policy that appears to have widespread grassroots support. Berkshire Hathaway Energy Company May 2,2017 5 Ratings On the local political front, Fitch expects an active legislative session in Nevada with regard to energy policy, including retail customer choice, net energy metering and a potential increase in the state's RPS. lowa, a strong and early supporter of clean energy, continues to support further development of clean energy initiatives, including energy efficiency, renewables and a more flexible grid, taking a holistic, balanced approach to statewide energy policy, in Fitch's view. ln 2016, Oregon enacted legislation phasing out coal generation. ls Oregon Legislation Phasing out Coal a Significant Challenge to PPW's or BHE'S Creditworthiness? ln Fitch's view, Senate Bill (S.B.) 1547-8 enacted in March 2016 phasing out coal-fired generation in Oregon by 2035 while sharply increasing Oregon's renewable standard is likely to result in higher costs for the utility. However, Fitch believes the higher costs associated with S.B. 1547-8 will be recovered from customers and the impacts of the legislation will be manageable within PPW's current credit profile. The law sets firm milestones for the elimination of coal-fired generation for the state's two largest electric utilities, Portland General by 2035 and Pacific Power (which is a division of PPW) by Jan. 1, 2030. S.B. 1547-8 also sets a significantly higher RPS, requiring that 35% of retail load is sourced from qualifying renewables by 2030, 45o/o by 2035 and 50o/o by 2040. Oregon's 2007 RPS required that 20% of retail customer power needs be met by qualifying renewables, increasing lo 25o/o in 2025. S.B. 1547-8 was the result of a collaborative process of stakeholders, including PPW and environmental groups, and will help the state achieve its ambitious carbon reduction goal of 75% below 1990 levels by 2050. PPW estimates that the legislation will save consumers up to $600 million compared with a proposed ballot initiative sponsored by Renew Oregon. \Mile Oregon is PPW's secondlargest contributor to consolidated kilowatt-hour (kWh) sales ranked by state, it represented approximately one{uarter of annual PPW sales, underscoring the geographic diversity of the utility's operations. As indicated in the table below, Utah, Oregon and Wyoming accounted lor 85o/o of total kWh sales during 201$-2016, with Washington, ldaho and California accounting for the remaining 15%. PacifiCorp Electric Sales by State (GWh) 30,000 25,000 20,000 1 5,000 1 0,000 5,000 0 24,020 12,869 Utah Oregon Source: Company reporls, Fitch Ratings. 3,982 3,510@w 9,1 89E 748 1y. CaliforniaVwoming Washington ldaho Berkshire Hathaway Energy Company May 2,2017 6 a tt: ls Exposure to Coa! Generation a Significant Risk at BHE's Other U.S.-Based Electric Utilities? NVE's in-house generation is primarily natural gas-fired. NVE shuttered coal-fired Reid Gardner Unit 4 in the first quarter 2017 and expects to eliminate its interest in Navajo Units 1 , 2 and 3 in 2019, which are also coal-fired. The plant closures are in compliance with Nevada Senate Bill (S.B.) 123, which mandated retirement of approximately 800 megawatts (MW) of coal-fired generation. Under the Nevada Public Utility Commission-approved emissions reduction and capacity replacement plan, Nevada Power will shutter 8121\A/ of coal-fired generation by the end of2019. Load requirements are primarily met through in-house gas generation and a significant measure of primarily long-term purchased power contracts, as NVE's operating utilities are short capacity. Approximately 71o/o of NVE's operating utilities' energy supply was provided by in-house generation (64% natural gaslTo/o coal), with the remainder purchased primarily via long-term renewable and nonrenewable contracts. MEC, on the other hand, is a coal-heavy Midwestern utility, albeit one that has been able to significantly mitigate environmental exposure, in Fitch's opinion. This has been achieved with the support of a forward-looking, balanced lowa regulatory compact, large investment in wind generation, installation of pollution-control equipment to comply with Environmental Protection Agency rules and the retirement of certain coal units. At the end of 2016, MEC owned approximately 4,000MW of wind capacity up from 1,300MW at the end of 2010 and, with completion of its 2,000MW Wind Xl prolect, MEC's owned wind capacity is expected to approximate 6,000fvlw in 2020. As a result of this aggressive commitrnent to renewables and other factors, coal as a proportion of MEC's energy mix declined to 39% in 2016 from 58% in 2012, while wind output has grown to 35% of MEC's energy mix in 2016 from 19% in2012. 2016 MidAmerican Energy Co. Total Energy Supplied by Energy Source Nuclear 12o/o 2012 MidAmerican Energy Co. Total Energy Supplied by Energy Source Purchased Wind 35o/o Natural Gas Power 12o/o Nuclear 1 1o/o Purchased Power 10o/oNalural Gas 2o/o Source: Company reports, Fitch Ratings.Source: Company reports, Fitch Retings. What Key Factors Support Fitch's Positive Rating Outlook for NVE? The Positive Rating Outlook for NVE and its operating subsidiaries NPC and SPPC, reflect solid credit metrics, affiliation with a stronger corporate parent since BHE's 2013 acquisition of NVE and a credit supportive regulatory/legislative environment. Fitch estimates FFO-adjusted leverage of less than 5.0x for NVE and its subsidiaries, supporting a one-notch upgrade for NVE, NPC and SPPC. The upgrade would narrow the rating differential between BHE's 'BBB+' IDR and NVE's IDR from two notches currently to one notch. The ratings and Positive Outlook anticipate continuation of a supportive Nevada regulatory/legislative environment. Adverse developments in Nevada's 20lT legislative session would likely restrain upward momentum for NVE and its subsidiaries'credit ratings. Wind '190/o Berkshire Hathaway Energy Company May 2,2017 7 Ratings ls Retail Customer Choice Likely to Be !mplemented in Nevada? While it is not clear if full customer choice will ultimately be implemented in Nevada, strong support for industry restructuring was clearly evident in the 2016 vote supporting the ballot initiative. ln Nevada's 2016 election, a plurality of more than 70o/o voted in favor of retail customer choice. The administration of Governor Brian Sandoval has formed a committee to anticipate changes that would be required to implement full retail customer choice. Legislation has also been proposed to form a separate legislative committee to review the issue and its implications. The legislature will be required to enact laws to facilitate implementation of full retail competition in Nevadaby 2023 should the initiative pass muster with voters in a second vote to be held in 2018. Fitch believes the prospect of retail choice injects a significant measure of uncertainty for NVE from a credit perspective with regard to ultimate implementation and cost recovery issues, including potential stranded costs. With executive order 2017-03, Governor Sandoval created a 22 voting member committee headed by Lieutenant Governor Mark Hutchison to prepare for anticipated changes due to adoption of customer choice for all retail customers. The mission of the governor's committee on energy choice is to identify issues to be resolved and offer suggestions and proposals for legislative, regulatory and executive actions to be taken to implement the ballot initiative. A second vote is required to amend the Nevada constitution to implement choice for all retail customers. NVE management has a seat on the governor's committee as the state considers energy restructuring and how competitive generation markets will be structured. Key issues to be determined include recovery of potential stranded costs and the provision of standard offer service. NVE is not interested in undertaking the role of provider of last resort in a restructured Nevada power market. Assembly Bill (A.8.) 452 proposes formation of a legislative committee to consider questions raised by Question 3, the 2016 retail choice ballot initiative. The committee, in addition to anticipating any issues, policies or requirements resulting ftom Question 3, would review the work of the governor's committee on energy choice with an eye toward efficient implementation of retail customer choice. What Does Fitch Expect for Net Energy Metering and Other Legislative lnitiatives in Nevada? As anticipated, Nevada's 79th (2017) legislative session has been active in the area of energy policy beyond retail customer choice, with several bills proposed. Sponsored by Democratic Assemblyman Justin Watkins, A.B. 270 would roll back changes to Nevada's net energy metered customer tariffs, rates and charges to those in effect prior to enactment of S.B. 374 in 2015. Consistent with S.B. 374, the Nevada Public Utilities Commission (PUCN) issued orders modifying net metered (NM) tariffs in late 2015 and the first quarter 2016, significantly increasing fixed charges and reducing prices paid by the utility to customer generators over a 12-year period. As a result of the commission changes to NM tariffs, solar installations in Nevada evaporated along with jobs and installed roof-top solar systems turned more costly for systems already installed by customer exporters. The resulting political backlash was strong. The governor implemented personnel changes at the PUCN. The reconstituted PUCN issued an order at NVE's request in September 2016 grandfathering existing distributed generation systems for 20 years. ln addition, the governor reconvened the New Energy Task Force, which submitted recommendations including reinstatement of NM. As proposed, A.8.270 includes no celp on the number of NM systems that may be installed and mandates that distributed systems subject to time-of-use rates be accorded the highest rates first for exports to the utility. Berkshire Hathaway Energy Company May 2,2017 8 Berkshire Hathaway Energy Gompany Other legislative proposals include A.B. 206, which, if enacted as proposed, would increase Nevada's RPS to 50% by 2030 and 80% by 2040. This compares with the 2015 RPS of 25o/o. The bill is opposed by Wynn Resorts, Las Vegas Sands and the Nevada Resort Association. NVE proposes maintaining the cunent RPS. Legislation has also been proposed to protect retail buyers of roof-top systems from fraud. Corporates Ratings Navigator US Utlll0ccTGfum ^ta t+ a t. ffi ffilli D E I 6 a II IIIIII A+ A b larn t&ffi ccc cc crcnm Company Overview, Segment Performance and Expectations BHE is a large, diversified utility holding company operating in energy markets primarily in North America and the U.K. that is 90% owned by BRK. Walter Scott, along with family members, and related entities (9%) and Greg Abel (1%) account for the remaining 10% ownership interest in BHE. The company's history extends back to the formation of CalEnergy in 1971. From its roots in geothermal energy production, CalEnergyerpanded in unregulated and regulated energy markeb in the U.S., Asia and the U.K., acquiring MidAmerican Eneryy Company in 1998. The company was reorganized as MidAmerican Energy Holdings Company (MEHC) and ultimately acquircd by an investor group led by Warren Buffet's BRK in 2000. MEHC was renamed Berkshire Hathaway Energy Company in20'14. BHE is BRK's investment vehicle in the utility power and gas sector. Aided by the significant advantages provided through affiliation with BRK, BHE has grown rapidly through M&A and reinvestment of retained eamings and cash flow fom its core utility and utilityJike businesses. Advantages from afftliation with BRK include capital retention and significant tax efficiencies. As a privately held company since 2000, BHE's M&A activity has focused on large, monopolistic or quasi-monopolistic assets with regulated or relatively predictable cash flow that provided essential services to customerc. ln 2002, BHE acquired two natural gas pipelines, NNG and KRGT. The acguisition of PPW followed in 2006 and BHE acquired NVE in 2013 and ALP, a Canadian transmission company, in 2014. Berkshire Hathaway Energy Company May 2,2017 I FitchRatings Assuming a 1.8x multiple of book value of shareholder's equity, BHE's market capitalization would approximate $44 billion, among the largest investor-owned electric utilities, as indicated in the bar graph below. Approximately 70o/o ol consolidated BHE 2016 EBITDA was provided by its North American electric and gas utility and electric transmission operations. Northern Powergrid Holdings Company (NPG, BBB+/Stable) and its two U.K.-based network operating businesses accounted for go/o of consolidated 2016 BHE EBITDA. BHE's two natural gas pipeline systems, NNG and KRGT, represented 9% of consolidated EBITDA. BHE Renewables and Home Services contributed 8% and 4%, respectively, to 2016 BHE consolidated EBITDA. Market Capitalization Comparison ($ Bil.) 70 60 50 40 30 20 10 0 I NextEra Duke Southern Dominion Berkshire PG&E Exelon American Sempra EdisonEnergy, Energy Company Resources, Hathaway Corp. Corp. Electric Energy lnternationallnc. Corp. lnc. Energy Power Sources: Bloomberg, Fitch Ratings analysis. BHE's capital investment plan as presented at its 2017 fixed income investor conference on March 31, 2017 is significantly higherthan the plan management presented at its 2016 fixed income investor conference. BHE capex over the next three years is expected to increase approximately $4.2 billion, or 45o/o from last year's projected $9.4 billion investment estimate. The sharp increase in 2017-2019 planned capex is driven primarily by MEC's $3.6 billion Wind Xl prolect, wind repowering at PPW and solar renewable energy development at BHE Renewables, ofbet somewhat by lower growth investment at ALP. Moreover, Fitch believes that BHE's recent capex estimates are likely to be exceeded based on PPW's recently filed integrated resource plan (lRP), which includes incremental investment in wind renewables. The IRP includes 1,100t\A/U of new-build wind capacity, 905MW of repowered wind generation and a 140-mile transmission line in Wyoming to access the new-build \ /Y wind generation and relieve congestion. Macro Factors Low interest rates and power and gas commodity prices are significantly positive factors supporting integrated and transmission and distribution utility creditworthiness. Advances in drilling technology have resulted in a surfeit of supply and a sharp, sustained decline in energy prices. ln addition, the secular decline in interest rates, now in its fourth decade, has confounded prognosticators' expectations for a meaningful reversal in recent years. While Fitch believes secular lows are probably in the past, upward movement in interest rates and natural gas and power prices are expected to be manageable. Fitch estimates that the U.S. 10-Year Treasury yield will be 2.8o/o at the end of 2017, a 24-basis-point increase from the year-end 2016 U.S. Treasury yield and 2.23o/o re@ntly. Fitch expects natural gas prices to rebound from recent cycle lows of under $2.00/MMBtu in 2016. However, the anticipated rebound off of recent lows is expected to be moderate. Fitch's base case Henry Hub natural gas price forecast is $2.75lMMBtu in 2017, $3.00/MMBtu in 2018 and 2019 and $3.25lMMBtu in the long term. Based on Fitch's work with third-party consultant Wood Mackenzie, Henry Hub natural gas prices are expected to remain under $4.00/MMBtu through 2026. Berkshire Hathaway Energy Company May 2,2017 10 t a 16 14 12 10 8 6 4 2 0 Henry Hub Daily NaturalGas Spot Price (Dec. 31, 2003-April 13, 2017) (MmBtu) *.1eo$*o$o$psoW"ts.+$otog}sure*,ve6oap"u$x$"*pf "S*df "l"gDt.tof .tu*l' MmBtu - Million British thermal units. Source: Bloomberg. Fitch believes the regulatory environment for utilities has improved meaningfully over the past decade, despite the persistent declining trend in authorized return on equity (ROE). Declining commodity costs since 2008 have provided meaningful headroom in rates to absorb higher capex without undue rate increases to customer bills. There has been a notable increase in adoption of periodic rate adjustment mechanisms that provide utilities with timely recovery of a variety of operating costs outside of base rate proceedings, mitigating earnings attrition due to rate lag. Other key factors coloring the strategic outlook for BHE and its competitors in the sector include a rapidly declining renewable energy cost curve, strong public policy support for retail distributed generation and renewables, energy efficiency and sluggish growth in kWh sales. Fitch expects total retail sales to grow between 0.0% and 0.5% annually, significantly below the |o/o-2Yo growth rates witnessed in prior decades. Sluggish electricity demand growth is, in Fitch's opinion, a function of tepid economic growth, energy efficiency initiatives, demand-side management programs and, to a small extent, growing penetration by distributed generation. lndustrial sales have struggled as a strong dollar and subdued global demand have affected export-driven demand sectors, such as primary metals, chemicals and paper. Based on U.S. Energy lnformation Administration (ElA) data, 2016 industrial sales were down 5%. Despite sluggish sales trends, eamings rose approximalely 7o/o in 2016 and fourthquarter management guidance suggests 2017 earnings growth of 5% over 2016 reflecling significant utility infrastructure investment and rate base growth. Projected capex is expected to bring upward pressure to bear on customer bills, along with the gradual bottoming and expected moderate rise in natural gas and interest rates. While Fitch believes headwinds presented by the bottoming of natural gas and interest rates are manageable, a more significant acceleration in the rate of gain for natural gas prices, interest rates and the general level of inflation than currently expected by Fitch cannot be ruled out and could challenge sector creditworthiness. ln this scenario, recovery of rapidly accelerating costs would bring upward pressure to bear on monthly customer bills and potential political resistance to rate increases. Moreover, rising rates erode the industry's competitive position vis-i-vis competing non-emitting technologies, including renewables, energy efficiency, demand-side management and energy storage. Against this backdrop, BHE management is committed to fighting bypass risk by implementing strict cost controls and efficiencies to minimize O&M and upward pressure on rates. Management has indicated that rate increases at PPW are not anticipated until the end of this decade at the earliest, notwithstanding recent increases in capital investment projections. MEC is not expected to file its next general rate case (GRC) until 2029. Changes in revenue Berkshire Hathaway Energy Company May 2,2017 11 requirement at NVE's operating utility subsidiaries, NPC and SPPC, in recent, regularly scheduled triennial GRC filing have been flat to lower, and Fitch expects rates to continue in that direction for the foreseeable future. Parent-Subsidiary Rating Dynamics Fitch utilizes its corporate rating methodology criteria in determining ratings linkage between BHE and its subsidiaries. BHE debt is non-recourse to BRK, and BRK provides no guarantees to BHE. Yet, substantial benefits accrue to BHE (as articulated above) as a result of its affiliation with BRK that support the utility holding company's 'BBB+' lDR. Most important in Fitch's analysis is BHE's ability to retain capital that would otherwise be paid to investors as dividends to attract equity capital if structured as a publicly held, investor-owned utility. ln addition, the parent-subsidiary relationship with BRK provides an efficient conduit for monetization of tax benefits, a meaningful advantage in BHE's wind and other renewable resource investments. Finally, BHE also benefits from access to relatively low-cost capital in certain instances. Fitch also considers covenanted restrictions as well as state jurisdictional capital requirement and other limitations on cash distributions to BHE from its operating subsidiaries. Special purpose entities (SPE) and ring-fence provisions are in place at PPW, NVE, MF, NNG, ALP and NPG. The SPE structure limits legal and operational ties between BHE and its operating utility and gas pipeline subsidiaries. ln the case of a weaker parenUstronger subsidiary relationship, Fitch's general rating guideline is for a subsidiary to be rated a maximum two notches above its corporate parent if weak linkage is established. Rating linkage between BHE and its operating subsidiaries is relatively weak due to the creation of SPEs and ring-fencing provisions. These measures limit financial and operational ties between BHE and its operating subsidiaries. BHE's operating utilities are self-funding and distribute cash to support BHE's funding needs. Berkshire Hathaway Energy Company May 2,2017 12 Berkshire Hathaway. lnc. DR - AA-lStable Berkshire Hathaway Energy Cornpany IDR - BBB+/Stable Tctal Adlusted Debt 4.69 3 AltaLink, L.P MidAmerican Energy Company IDR - BBB+lsiable Tolal Adl!sted 4 4?,2Debt 7 411 BHE U.S. Transm iss ion Nonhern Powergrid (Yorkshire) plc IDR - A_i Stable N o rthe rn Powergrid ( Northeast) Ltd. DR A1 Slab e Nevada Power Company dba NV Energy DR - BBBlStab e Tolal AdJLrstedDebt 3 1 /0 Sierra Pacific Power Company dba NV Energy IDR - BBB+/Stable iota AdlLrstedDebt 1 .201 NV Energy, lnc. DR - BBB lstable Tolai Adlusted Debt Northern Powergrid Holdings Company IDR -BBB+i Stable Kern River Funding Corp. Total Adlusted Debt 237 Northern Natural Gas CompanyIDR Ai Slable Total AdJUSted Deilt PacifiCorp IDR - A /Stabe Total Ad]trste.l Debt MidAmerican Funding LLCIDR BBB+i Stable Totai Adlusted Debt 1 139 HomeServices of America. lnc. Organizational Structure - Berkshire Hathaway Energy Gompany ($ Mil., As of Dec. 31, 2016) IDR - lssuer Default Rating. Source: Company reports, Fitch Ratings. PacifiCorp Acquired by BHE in March 2006, PPW provides integrated electric utility service to 1.8 million retail customers in six western U.S. states. Through its Rocky Mountain Power division, PPW serves customers in parts of Utah, lAfioming and ldaho. lts Pacific Power division oversees its western service territory operations serving customers in parts of Oregon, Washington and California. Combined, Utah, Oregon and Wyoming accounted for 85% of PPW's total retail electricity sales in 201+2016. Regulatory outcomes across PPW's multistate service territory have been and are epected to remain balanced from a credit perspective, with the exception of Washington. Various riders are in place to facilitate recovery of certain costs outside of GRC proceedings, including fuel adjustment clauses that mitigate commodity price exposure in all of PPW's regulatory jurisdictions. GRC filings have slowed, reflecting management focus on rate stability and lower capex. No GRCs are currently pending across PP\A/'s six-state service tenitory. PPW's retail electric rates are competitive regionally, based on weighted average rates. Pacific Power's and Rocky Mountain Power's weighted average retail rates are $0.095/kWh and $0.082/kVVh, respectlvely, which compare with Pacific and Mountain regional average rates of $0.145/kwh and $0.095/kWh, respectively, based on Edison Electric lnstitute data. While year- over-year capex projections have risen meaningfully, Fitch believes PPW will be able to offset Berkshire Hathaway Energy Company May 2,2O17 13 itchRatings costs associated with wind and transmission investment via cost reductions, keeping rates flat through 2019. ln September 2016, the Washington Utilities and Transportation Commission (WUTC) authorized a $14 million, two-step rate increase. The rate increase is composed of a $6 million (1.7%) first-step rate increase effective October 2016 and an $8 million (2.3%) second-step rate increase effective September 2017. The rate increases are based on a 9.5% authorized ROE, the same level authorized in PPW's last GRC. ln Fitch's opinion, the outcome in this rate proceeding is more balanced from a PPW creditworthiness point of view than previous orders issued by the WUTC in 2015 and 2013. PPW filed its most recent rate case with the WUTC in November 2015, initially requesting a $20 million two-step rate increase. The company requested a first-step increase of $1 0 million effective May 1 , 2016 and a second-step increase of $10.3 million effective May 1, 2017. The WUTC orders in the proceeding adopted PPW's proposed depreciation acceleration program and a decoupling mechanism. The new depreciation schedule is designed to recover all capital costs of the Bridger plant by 2025 and Colstrip Unit 4 by 2032. The WUTC-approved a decoupling mechanism is effective for five years and includes triggering thresholds and caps in the interest of rate stability. The commission also denied PPW a return on emission control equipment installed at Jim Bridger Units 3 and 4. ln Fitch's opinion, rulings by the WUTC in GRCs issued March 2015 and December 2013 were unfavorable from a credit point of view. The WUTC orders disallowed costs related to purchased power from qualifying facilities located outside the state of Washington and authorized a below-industry-average ROE of 9.5%. PPW subsequently filed a petition for judicial review of certain findings in the WUTC's December 2013 order. ln April 2016, the Washington Court of Appeals affirmed the WUTC order, deferring to the commission's discretion in ratemaking and concluding that the commission did not abuse that discretion. Washington is a relatively small slice of PPW's operations, representing approximately 7% of consolidated 2016 k\ /h sales. Regulatory outcomes across the remainder of PPW's service territory have been and are expected to continue to be balanced. ln addition to Oregon legislation mandating increased renewable generation and phase-out of coal generation by 2035 discussed in the lilhat lnvestors Want to Know section above, Utah Governor Gary Herbert signed S.B. 115 on March 30,2016. Enactment of S.B. 'l 15 is a constructive development, in Fitch's opinion, which includes, among other things, authorization of recovery of 100% of net power costs outside of GRC proceedings. The law also requires the Utah Public Service Commission to establish a fund through a change in accounting for energy efficiency programs as a reserve for coal plant exposure. ln addition, S.B. 115 establishes and funds a pilot for investment in electric vehicle infrastructure and clean coal research. PPW's 2017 IRP proposes the addition of 1,100MW of new wind generation in Wyoming that will connect to a new 140-mile 500 kilovolt transmission line from a substation near Medicine Bow, WY to the Jim Bridger power plant. The transmission line will provide access to the new wind generation and relieve congestion. The IRP also includes 905$IW of repowered wind generation and calls for retirement of 3,650MW of coal-fired generation by 2036. The wind projects incorporate federal production tax credit (PTC) benefits and are expected to be completed by 2020. Berkshire Hathaway Energy Company May 2,2017 14 PPW's most recent capex plan (summarized in the bar chart below) includes new wind development of 240MW at an estimated cost of $377 million and repowering of 805MW at an estimated cost of $917 million. PPW's current capital investment plan is 37% higher than the prior capex plan and totals $3.5 billion during 2017-2019, compared with $2.5 billion in the prior plan. lf adopted, the IRP is likely to push capex meaningfully higher in 2018 and 2019. PacifiCorp Capex Projections ($ Mil.) 2,000 1,500 1,OOO 850 7Bo 2017 Current 20'17 PriorPlan Plan 500 0 r Currenl 985 2018 Currenl r Prior 2018 Prior Plan 1,620 2019 Current Plan 2019 Prior PlanPlan Source: Company reports, Fitch Ratings. MidAmerican Energy MEC provides utility service to approximately 1.5 million electric and natural gas customers in lowa, lllinois, South Dakota and Nebraska. Retail customers in lowa accounted for 91% of electricity sales and 760/o of natural gas sales. As discussed above, MEC is a relatively coal- heavy integrated electric utility generator that, with the support of regulators, has been diversifying its generation base to include significant amounts of wind generating capacity. MEC has invested on a cumulative basis $7 billion in wind generation through the end of 2016. ln 2016, MEC's total wind generation as a percentage of the utility's lowa retail electricity sales was 55%. With completion of MEC's Wind Xl project, MEC is expected to produce energy from installed wind capacity sufficient to meet 89% of its lowa retail load in 2020 and its cumulative investment in wind generation is expected to grow to $10.2 billion by year-end 201 9. Efforts by MEC to migrate to a cleaner energy mix to address exposure to environmental regulations include its large wind investment program, installation of pollution control equipment on its existing coal fleet and coal plant retirements. Supported by federal PTCs, the ability to efficiently monetize tax shields via its affiliation with BHE/BRK and a balanced lowa regulatory compact, MEC is the largest owner of wind generation among U.S. utilities, with more than 4.000t\n / of installed capacity as of Dec. 31, 2016. ln addition, MEC has installed pollution control equipment to meet federal emissions restrictions and retired coal-fired Neal Units '1 and 2 in 2016. The utility's wind development strategy is consistent with lowa energy policy, and MEC has been able to develop this important clean energy asset base while maintaining very competitive electricity rates. Based on EIA data, MEC's average rate in 2016 was $0.071/kWh, compared with the $0.08/kwh lowa state average rate and the national average rate of $0.103/kWh. Unsurprisingly, the favorable environmental attributes of MEC's wind investment and well-below-industry-average rate has attracted data centers and other industrial businesses to the utility's service territory. As a result, MEC's retail load has grown at rates above the industry average. Weather-normalized MEC retail load rose 2.6%, 1.8% and 2.9o/o per annum in 2014, 2015 and 2016, respectively, and is expected to increase 2.5o/o in 2017 and1.3o/oin2018. Berkshire Hathaway Energy Company May 2,2017 15 Ratings The regulatory regime in lowa is credit-supportive in Fitch's view. Historical ROEs authorized by the lowa Utilities Board (lUB) tend to be above-industry-average and investor-owned utilities operating in the state are generally provided a reasonable opportunity to earn their authorized return, in Fitch's opinion. lowa law permits the IUB to establish ratemaking principles for prospective capital projects. The IUB has approved ratemaking principles for a series of MEC wind projects stretching back several years, with a weighted average ROE of 11.5o/o. ln addition, the IUB has authorized cost recovery mechanisms for major recurring expenses outside of GRC proceedings including: fuel and purchase power, transmission, energy efficiency and expiring federal tax credits. ln 2015, the IUB approved ratemaking principles related to the construction of 552MW of additional wind generation related to the utility's Wind X project. Wind X entered commercial operation in the fourth quarter of 2016 and was completed on schedule and under the IUB- approved investment cost cap of $888 million. lnstalled wind capacity has grown to more than 4,000[IW at year-end 2016 from 1,284MW in 2010, more than a threefold increase. Wind Xl is a 2,000MW wind-powered generating project that commenced construction in 2016 and is expected to be completed by the end of 2019 for an estimated maximum cost of $3.6 billion. The IUB issued an order in August 2016 approving ratemaking principles for the planned construction of MEC's 2,000MW Wind Xl project. The ratemaking principles establish a cost cap of $3.6 billion, including allowance for funds used during construction (AFUDC), and a fixed rate of ROE of 11o/o ovil the proposed 40-year useful lives of those facilities in any future lowa rate proceeding. The cost cap ensures that as long as total costs are below the cap, the investment will be deemed prudent in any future lowa rate proceeding. The IUB-approved Wind Xl ratemaking principles modified the revenue-sharing mechanism cunently in effect for MEC. The revised sharing mechanism will be effective in 2018 and triggered each year by actual equity returns if they are above the weighted average ROE (as determined by the 'A' rated average utility bond yield plus 400 basis points) for MEC calculated annually. Pursuant to the change in revenue-sharing, MEC will share 100% of the revenue in exc€ss of this trigger with customers. Such revenue sharing will reduce the coal and nuclear generation rate base, which is intended to mitigate future base rate increases. Currently, the revenue sharing mechanism trigger is an 11% ROE, with 80% of MEC net income over the 1 1 % ROE used to reduce rate base and 20% retained by the company up to a 14% ROE. Over 14o/o, all earnings are used to reduce rate base. MEC's current capital investment plan includes Wind Xl, which explains the sharp increase (approximately $3.7 billion) in its 2017-2019 current capital investment plan versus the prior plan, as illustrated in the bar chart below. MidAmerican Energy Co. Gapex Projections ($ Mil.) 2,000 1,500 1,000 500 1,691 2017 Current Plan n 2017 Pno( Plan ! Cunent 1,709 2018 Current Plan r Prior 1,ilg 20 19 Prior Plan Source: Company reporls, Fitch Ratings. 2018 Prior Plan 2019 Current Plan 16Berkshire Hathaway Energy Company May 2,2017 aa NV Energy Through its operating subsidiaries, NPC and SPPC, NVE provides integrated electric and natural gas distribution services to approximately '1.4 million customers in portions of the state of Nevada, including greater Las Vegas, Reno and northern Nevada. The direction of energy policy in Nevada is the subject of robust debate currently and is a source of uncertainty for NVE and its operating subsidiaries from a credit perspective. Fitch views efforts to implement customer choice by 2023 and reinstitute interclass residential subsidies for NM customers to be paid for by non-NM customers as a sourc€ of intermediate- to long-term uncertainty for NVE's creditworthiness. The current legislative session includes several energy-related bills, including formation of a legislative committee to consider implementation of retail customer choice by 2023 should voters support the initiative in a second vote in 2018. Other proposed legislation would roll back commission changes to NM tarif6 implemented by the Nevada commission in 2016, and another would expand the state renewable standard to 80% by 2O4O. ln 2016, the PUCN issued an order establishing separate rate classes for customers with installed distributed renewable generation. The PUCN order also established new rates for existing and prospective NM customers. Tariff changes include higher basic service and lower volumetric charges that are revenue neutral to the utility. ln addition, the commission order reduced the credit for customer exports to NVE from the full retail rate to the actual value of excess generation based on the utility's avoided cost, phasing in the lower NM customer credits over 12 years. S.8.374 enacted in June 2015 directed the PUCN to review NM rates and identify and eliminate unreasonable shifts in costs from NM customers to non-NM customers by year-end 2015. As a result of the NM tariff changes, distributed solar installations ground to a halt, eliciting a sharp political backlash evidenced by the raft of legislative proposals being considered in the current session and the Sandoval administration's reaction. lf NM tarifb are rolled back to their pre-S.B. 374 status as proposed by A.B. 270, higher power supply costs paid by NVE for exports from customergenerators to the grid would be recovered via fuel adjustment clauses. However, lost revenue associated with lower volume would be absorbed by the utility - absent implementation of full revenue decoupling mechanisms -until completion of a subsequent GRC filing. As more customers opt to self{enerate, the cross-subsidization of NM customers by non-NM customers will grow, pushing rates for non- NM customers higher and thereby incentivizing more of them to selfgenerate. This gives rise to an unsustainable cycle of a growing NM customer base subsidized by rising rates for the utility's remaining customers. A.B. 270 as proposed contains no cap on the number of customers permitted to selfgenerate. The regulatory compact for NVE's operating utilities is credit supportive, in Fitch's opinion. NPC and SPPC are required by Nevada statute to file GRCs every three years. Test years are historic and adjusted for known and measurable changes. The PUCN is required to issue a decision within 210 days from the GRC filing date. Adjustrnent clauses have been authorized by the commission for the recovery of purchased power and fuel costs, as well as energy efficiency and conservation program expenses. Twenty-year integrated resource plans are filed every three years and are subject to PUCN review with regard to ultimate inclusion in base rates. Customer choice for large commercial and industrial customers has been in effect since 2002, following enactrnent of enabling legislation, subject to PUCN approval and payment of exit fees to hold remaining customers harmless. SPPC's last triennial GRC was filed with the PUCN in June 2016. ln December 2016, the commission approved a settlement that reduces the utility's electric rates $2.9 million (0.4%) Berkshire Hathaway Energy Company May 2,2017 17 FitchRatings :i. and gas rates $2.4 million (2.2%) based on 9.6% and 9.5% authorized ROE for the electric and gas operations, respectively. Fitch expects NPC to file its triennial rate case in the second quarter of 2017. Changes in revenue requirements in recent years have been modest, reflecting the companies' manageable capital investment program and focus on cost control and rate stability to combat bypass risk. Weather-normalized retail load at NPC was essentially flat in 20'16 and is expected to decline 3.1o/o in 2017. The decline in 2017 reflects departure of two large industrial customers (MGM Resorts lntemational and Wynn Las Vegas) to alternative power suppliers. Non-residential load growth drives an expected rebound in higher weather-normalized retail sales of 1.4o/o in 2018. At SPPC, weather-normalized retail load rose 1.8o/o in 2016, driven by manufacturing and residential customer growth. Weather-normalized load is expected to rise 0.4% in 2017 and 3.8% in 2018, reflecting increasing data center and manufacturing load growth. Fitch expects NVE's projected 2017-2018 capex will remain low relative to historic peaks and consistent with management's strategic commitment to customer rate stability. NVE capex is expected to decline to $386 million in 2018 and $376 million in 2019 from $457 million in 2017. Capex over the forecast period is expected to be limited to investment in grid resources to maintain the system and accommodate customer growth. Fitch expects NVE will not contemplate, nor would the PUCN approve, incremental new-build generation until there is greater clarity with regard to retail customer choice. NV Energy, lnc. Capex Projections ($ Mil.) 500 400 300 200 100 0 I Current r Prior 2017 Currenl Plan 457 2017 Piot Plan 2018 Current Plan 2018 Prior Plan 376 2019 Current Plan 2019 Prior Plan 386 386 Source: Company reporls, Fitch Ratings. Berkshire Hathaway Energy Company May 2,2017 1B Ratings Energy lmbalance Market PPW and NVE have participated in the California lndependent System Operator's (CAISO) Energy lmbalance Market (ElM) since 2014 and 2015, respectively. The EIM is expected to reduce NVE's and PPW's costs to serve customers, providing benefits through more efficient dispatch from a larger, more diverse pool of resources, more effective integration of renewable resources and enhanced reliability through greater situational awareness and responsiveness. PPW is considering the feasibility, costs and benefits of joining CAISO as a participating transmission owner and has completed a comprehensive benefits study. The results of the study, showing net benefits to constituents, were released in October 2015, along with an extension of the nonbinding memorandum of understanding originally entered into by PPW in April 2015. The results of the study supports further analysis. California S.B. 350 authorizes the Califomia legislature to consider making changes to current laws that would create an independent governance structure for a regional independent system operator in the state's 2017 legislative session. Regulatory approvals would be required if PPW decides to become a participating transmission owner in CAISO. ln that scenario, PPW would participate in the day- ahead market operated by the CAISO and the unified planning and operation of PPW's transmission network. BHE Pipelines NNG owns and operates a 14,700-mile interstate natural gas transmission pipeline system. NNG transports natural gas to city gates in the Upper Midwest for heating and electric generation, and its business has not seen significant competitive effects from new pipelines. NNG's pipeline operations provide essential natural gas supply under long-term contracts to utilities in the Upper Midwest. NNG's reticulated system is difficult to replicate economically, providing protection against competitive inroads. ln addition, shale plays have flattened basis spreads, discouraging greenfield-pipeline development. Concern regarding shipper recontracting risk at NNG is mitigated by the pipeline's low-cost and strong market position in the primary markets it serves in the Upper Midwest. ln 2016, NNG completed approximately 1.2 billion cubic feet per day of contract renewals, wrlh a 2o/o increase in rates. As indicated in the table below, the Field Area, which Fitch believes is more vulnerable to competitive pressure from shale resource development, accounted lor 10o/o of 2016 NNG revenue. Market Area (77o/o) and Storage (1 1%) accounted for 88% of 2016 revenue. Northern Natural Gas Operating Revenue 2016 2015 2014 (g Mil., As of oec. 31) (%) (%) (%) MarketArea Transportation 492 77 474 72 457 63 Field Area Transportation 64 10 84 12 100 14 Total Tramportaoon 556 87 558 85 557 77 Storage 69 11 62 9 61 8 Total Tremportation and SbrageRovenue 625 98 620 94 618 96 Gas, Liquids and Othersales 11 2 36 6 106 4 Total Operating Rovenue 636 100 65G 100 724 100 Source: Berkshire Hathaway Energy Company 1 0-K. Berkshire Hathaway Energy Company May 2,2017 '19 Ratings NNG is the largest interstate natural gas pipeline system in the U.S. based on pipeline miles and is composed of 6,300 miles of mainline transmission pipelines and 8,400 miles of branch and lateral pipelines. The system reaches from Texas to Michigan's Upper Peninsula and is composed of two operationally integrated systems. lts traditional end-use distribution market area in the northern part of its system is referred to as the Market Area and includes points in lowa, Nebraska, Minnesota, Wisconsin, South Dakota, Michigan and lllinois. lts southern system, referred to as the Field Area, includes points in Kansas, Texas, Oklahoma and New Mexico. NNG's Market Area has a design capacity of 5.8 billion cubic feet (Bcf) per day and Field Area delivery is 1.7 Bcf per day. NNG's pipeline system also has five natural gas storage facilities with a total firm capacity of more than 73 Bcf and 2.0 Bcf per day of peak day delivery capability. NNG has access to five traditional supply regions and direct access to non- traditional (tight sands and shale) supply regions. Average annual deliveries during 2014-2016 were 1,005 Bcf. Kern River Funding Corp. (KRF) is a financing vehicle for the long-term debt obligations of KRGT, which unconditionally guarantees KRF debt. KRF redeemed its 4.893% notes due 2018 earlier this year. As a result, there is no debt outstanding at KRF, and no debt is expected to be issued by the company consistent with its Federal Energy Regulatory Commission (FERC) rates. KRGT owns and operates a 1,700-mile interstate natural gas transmission pipeline system. The pipeline delivers natural gas from the Rocky Mountain basin to makets in Utah, Nevada, California and Arizona. KRGT serves growing areas in Salt Lake City, southern Nevada and Southern California. Design capacity is 2.2 million dekatherms per day of natural gas. Approximately 91 % of capacity is under long-term contracts maturing 20'18-2033, with a weighted average contract life of eight years. The FERC approved an uncontested settlement earlier this year that allows KRF to establish an alternate, lower set of period 2 rates for shippers versus current rates. Ninety-four percent of period 1 shipper contracts expiring in 2016-2017 elected to extend their contracts at period 2 rates. BHE Transmission / AltaLink, L.P. BHE Transmission accounted for approximately 7% of BHE's consolidated EBITDA and is composed of BHE's wholly owned Canadian transmission utility ALP and BHE's U.S. transmission projects. BHE develops, owns and operates transmission assets and is pursuing investment opportunities in the U.S. and Canada. ALP plays a key role in the Province of Albe(a's energy infrastructure and the achievement of the province's energy policy goals. The provincial economy has been hit hard by declining energy prices and economic activity. Alberta's unemployment rate stood at 8.1% in December 2016 compared with the 7.0o/o Canadian average. While signs of improvement in the local economy are emerging, supported by job gains in four of the five last months, the sluggish economy has delayed oil and gas grid connections offset by renewable energy connection requests. The soft economy underscores the need for rate stability, and capex is expected to normalize at relatively low levels. Capex at ALP is expected to approximate C$600 million and C$300 million, respectively, in2017 and 2018 compared with a recent peak of C$1.8 billion in 2014. ln the long term, growth is expected to be driven by Alberta's Climate Leadership Plan, which eliminates coal generation in Alberta by 2030, replacing it with a one-third/two-thirds mix of wind/gas generation. ALP operates solely in the Alberta transmission market, where it provides access to wholesale markets to power generators, utilities, retailers and industrial users. The utility is not subject to commodity or volumetric risk. Counterparty credit risk is significantly reduced by exclusive billings to the Alberta Electric System Operator (AESO), a financially robust off-taker. The Berkshire Hathaway Energy Company May 2,2017 20 FitchRatings Alberta electricity market was restructured under the Electric Utilities Act in the mid-1990s. Power generation was deregulated and the regulated transmission and distribution businesses separated from competitive businesses (i.e. generation and retail supply). ALP purchased the transmission assets of TransAlta Corporation in 2002 and was the first investor-owned transmission company in Canada. ALP is regulated by the Alberta Utilities Commission (AUC), which under the Electric Utilities Act is charged with providing ALP with a reasonable opportunity to recover prudently incurred and forecasted costs and a fair return on investment. Rates are established based on a forecasted test year on a cost-of-service basis. Once approved, revenue is paid to ALP by the AESO in monthly installments. Transmission project requirements are determined by the AESO and assigned to transmission facility owners, including ALP. Projects assigned by the AESO are approved by the AUC before construction. ALP files general tariff applications (GTA) biannually and generic cost-of-capital (GCOC) proceedings are bifurcated from GTAs. ln ALP's 2016 GCOC proceeding, the AUC authorized an8.3o/o ROEfor2016and8.5%for2017and anequityratioof 37o/otor 2016and 2017. The AUC-authorized ROE and equity ratios for 2016 and 2017 are an improvement to ROE and equity ratio authorizations of 8.3% and 36%, respectively, in 201F2015. ln the U.S., BHE owns a 50% interest in Electric Transmission Texas, LLC (ETT) along with subsidiaries of American Electric Power Co. (AEP). ETT owns and operates transmission assets in ERCOT and is regulated by the Public Utility Commission of Texas. As of Dec. 30, 2016, ETT had a total of $2.7 billion of projects in service and expects to complete an additional $300 million of prolects through 2020. BHE Transmission also owns a 25% interest in Prairie Wind Transmission, LLC, a joint venture with AEP and Westar Energy. Prairie Wind is a 108-mile, 345kv transmission line that cost $158 million and was placed in service in November 2014. Northern Powergrid Holdings Company NPG, through the group's two network operating businesses (DNOs), Northern Powergrid (Northeast) Limited and Northern Powergrid (Yorkshire) plc, serves 3.9 million end users in northern England and accounted for approximately 9% of BHE's consolidated 2016 EBITDA. NPG is in the middle of an eight-year regulatory price control period and appears to be off to a solid start. Total expenditures for the 2015/2016 regulatory year are al 97% of allowances and outputs 14o/o ahead of target, positioning NPG to effectively deliver on its commitments over the eight-year price control. The current electricity price control became effective April 1, 2015 and is expected to continue through March 31, 2023. The new ED1 price control is stricter and more difficult to outperform than the previous DPCRS. Allowed return on regulatory equity, cost of debt and total expenditure are lower than DPCRS. Final determinations for the current price control were published November 2014 by the office of gas and electric markets and appealed by NPG. The appeal authority allowed part of NPG's appeal, awarding GBP30 million in additional expenditure allowances. Projected capex in BHE's current plan for NPG of GPB1.2 billion is GBP196 million higher than the prior plan, reflecting growth in the DNOs' smart meter rental business. NPG's DNOs operate in an area covering 10,000 miles from North Northumberland through Tyne and Wear, County Durham and Yorkshire to North Lincolnshire. Suppliers purchase electricity from generators and sell the electricig to customers using NPG's distribution network to transport power from the supplier to end user. Under the U.K. regulatory regime, variations in demand from end users have no effect on the total revenue that NPG's DNOs are permitted to recover in a price control period. Berkshire Hathaway Energy Company May 2,2017 21 aI a BHE Renewables, LLC BHE Renewables' strategy is focused on direct ownership of utilig-scale wind and solar assets with long-term off-take agreements and tax equity investment in hedged or contracted utility- scale wind pQects. BHE Renewables' portfolio of net owned capacity as of Jan. 31,2017 totaled 4,082MW and was composed of 36% solar, 28% wind, 24o/o natural gas, 8% geothermal and 4% hydroelectric. Sixty-nine percent of the company's off-take contracts mature after 2029,7% during 2020-2029 and 24% in 2017-2019. ln January 2017, BHE Renewables acquired the 11OMW Alamo 6 solar project in Texas for $385 million and plans to spend approximately $218 million constructing community solar gardens in Minnesota. BHE Renewables is pursuing an interconnection agreement for a 50MW battery storage facility at its Solar Star site to be bid into the California energy storage market. Berkshire Hathaway Energy and Subsidiaries - CreditSummary BHE's ratings reflect the favorable impact of BRK's 90% ownership of BHE by BRK. Ownership of BHE by BRK affords the former with the ability to retain capital typically paid out in the form of dividends by publicly held investor-owned utilities. This dynamic is a function of BRK's strong credit profile, large cash position and investment appetite. As a result, Fitch estimates that BHE will be FCF positive and that consolidated debt will decline 2016-2020. Through affiliation with BRK, BHE is able to monetize tax benefits and fund strategic growth opportunities more efficiently than it could as an independent, publicly held company. M&A activig and the associated increase in BHE parent-company leverage following the acquisitions of NVE and ALP pressured BHE's consolidated credit metrics in 2014. Fitch prolects BHE funds FFO coverage and leverage ratios will be in the ranges of 3.9x-4.1x and 4.6x-4. 8x, respectively, during 2017 -2020. PPW's ratings and Stable Outlook reflect the utility's strong credit metrics, balanced jurisdictional regulatory environment, relatively low business risk profile and retail rates that are well below the industry average. Fitch forecasts FFO fixed-charge coverage and FFO-adjusted leverage will approximate 4.9x and 3.7x or better, respectively, consistent with target medians with the 'A-' lDR. The utility's multistate service territory and diversified regulatory environment support the ratings and Stable Outlook. The vast majority of PPW regulatory decisions across PPW's six-state service territory have been and are expected to continue to be balanced from a credit perspective. Various riders are in place to facilitate recovery of certain costs outside of GRCs, including fuel adjustment clauses that mitigate commodity price exposure in all of PPW's regulatory jurisdictions. Washington regulation remains challenging with some evidence of improvement, in Fitch's view, based on a reasonable outcome in PPW's most recent rate case. Slowing PPW service territory load growth trends are driven primarily, in Fitch's view, by energy efficiency gains and are a source of some uncertainty, along with the impact of environmental rules and regulations on PPW's coal-fired generation. Fitch believes these dynamics, along with the recent upsizing in PPW's capex program are manageable within the regulatory compact and unlikely to meaningfully weaken PPW's creditworthiness in the near-to- intermediate term. MF is an intermediate holding company owned by BHE. MF in turn owns MEC and is dependent on distributions from the utility to meet its ongoing obligations. MF and MEC's ratings and their respective Stable Outlooks reflect the utility's relatively low business risk profile, solid FFO metrics, a cleaner fuel mix in recent years and a credit-supportive regulatory environment in lowa. The IUB issued an order in August 2016 approving ratemaking principles Berkshire Hathaway Energy Company May 2,2017 22 ffi- r=. FitchRatin':,gs forWind Xl that include a cost cap of $3.6billion, including AFUDC, and a fixed 11.0% ROE over the proposed 40-year useful lives of those facilities in any future lowa rate proceeding. As long as total costs are below the cap, the investment is expected to be deemed prudent in any future lowa rate proceeding. Additionally, the Wind Xl ratemaking principles modify the revenue sharing mechanism currently in effect at MEC. ln its last GRC, the IUB authorized a $266 million rate increase phase-in over several years. The final $45 million rate increase was effective Jan. '1, 2016. ln addition, the IUB authorized energy and transmission cost adjustment mechanisms and a mechanism to recover expiring production tax benefits in rates. MEC has significantly diversified its fuel mix via meaningful new-build wind generation while maintaining rates that that are competitive regionally and compared with the national average. Fitch estimates that MF and MEC's financial metrics will remain consistent with current rating levels based on Fitch's target medians and peer comparisons. The utility's FFO fixed-charge coverage and FFO-adjusted leverage ratios are expected to remain strong, in the ranges of 5.7x-€.9x and 3.2x-3.5x, respectively, during 2017-2020. Similarly, MF's FFO fixed-charge coverage and FFO-adjusted leverage ratios are estimated at 5.3x{.2x and 3.4x-3.7x, respectively, during 20 1 7 -2020. The ratings affirmation and Positive Outlooks for NVE, NPC and SPPC reflect solid credit metrics that are consistent with 'BBB' target medians. The ratings and outlooks also consider the balanced Nevada regulatory compact, manageable leverage, improving regional economic conditions and modest sales growth. Fitch expects resolution of the Outlooks will tum on regulatory/legislative developments in 2017. An active legislative session is expected in Nevada in 2017 with regard to energy policy, and Fitch anticipates NPC will file a GRC later in 2017, as well. Constructive outcomes on these fronts could result in a one-notch upgrade for NVE, NPC and SPPC. The regulatory compact for NVE's operating utilities is credit supportive, in Fitch's opinion. NVE's adjusted debVoperating EBITDAR, based on Fitch' projections, improves to 3.6x in 2020 from 3.9x in 2017, and FFO-adjusted leverage is estimated in a range oI 4.2x4.6x in 2017-2020, levels consistent with mid-BBB' credit ratings. NVE's solid credit metrics, affiliation with BHE and a continued supportive regulatory/political construct in Nevada could result in a credit rating upgrade within 12-18 months. ln December 2016, the PUCN issued an order adopting the settlement filed by SPPC in its October 2016 GRC. The filed settlement did not resolve rate design issues associated with net metering. ln addition to adopting the settlement's proposed $2.9 million electric and $2.4 million gas rate decreases, the commission authorized net metering using full retail requirement rates for up to 6MW of capacity, noting that its decision was case-specific and not precedent-setting. The ratings and Stable Outlook for NNG reflect the pipeline's strong business position and relatively low business risk profile. NNG's natural gas transportation system is an essential source of contracted supply to its Upper Midwest utility customer base. Counterparty credit risk is ameliorated by the pipeline's diverse group of primarily highly rated off-takers with multiyear contracts. NNG's ratings also consider the pipeline operator's constructive regulatory compact and its consistent ability to earn a reasonable ROE, typically in the low double digits. Fitch projects NNG FFO coverage and leverage of 6.4x-8.0x and 2.4x-3.0x, respectively, in 2017- 2020, levels consistent with NNG's 'A' lDR. Recontracting risk and more stringent rules regarding pipeline integrity and related issues are potential sources of concern for NNG. Fitch believes these concerns are manageable within NNG's current rating category given its competitive market position and ongoing infrastructure investment. Berkshire Hathaway Energy Company May 2,2017 23 Financial Overview Liquidity and Debt Structure Fitch believes BHE's liquidity position is solid and likely to strengthen over the forccast period, given its strong projected2017-2021FCF profile. As of Dec. 31,2016, Fitch calculates total BHE consolidated liquidity of $4.7 billion as summarized in the table below. Consolidated BHE liquidity is composed of approximately $4 billion of remaining borrowing capacity under BHE parent and subsidiary credit facilities and cash and cash equivalents ol $721 million as of Dec. 31, 2016. BHE and its operating subsidiaries have credit facilities with total undrawn borrowing capacity of $6.4 billion. BHE debt maturities, in Fitch's Mew, are manageable in 2017-2021. Scheduled debt maturities at BHE and its operating subsidiaries total $9 billion during 2017-2021 , ranging from a low of $823 million in 2021 to a high of $3.5 billion in 2018. Liquidity Summary (s Mit.) {z3rn5 rz3ln6 Toild Cash and Cash Equirralcnb 1,'108.0 721.0 Scheduled Debt Maturities ($ Mir.) l?3lr{6 Doc.31,2017 1,006.0 Doc.31,2018 3,544.0 Drc.3'1,2019 2,099.0 Oec.31,2020 1,552.0D€c.31,2021 823.0 ThorBaftsr 27,271.0 Tot l D.bttLtur{d.! 30,205.0 Sourcs: Company filings, Fitdr Ratings Less: Not Rcadily Availablc Caih and Carh Equivalont! Fitch-Defi ned Rsadily Availablo Cash and Cash Equivalents Aveilability Undcr CommitEd Lines of Crldft To,trt Uquldlty Source: Companyfilings, Fibh Ratin$. 0.0 (0.0) 1,108.0 5,032.0 6,{t10.0 0.0 (0.0) 721.0 4,019.0 1,74i,.0 Berkshire Hathaway Energy Company May 2,2017 24 Appendix A: Peer Group Financials Peer Group Historical Financials - Berkshire Hathaway Energy Company (s Mit.) Duke Energy American Electric Corporatlon PorverGompany, lnc, 2ttvla ,t2131n4 Dominion Rosourcaa, lnc. ,t2l3,lit6 Berkshire Hathaway Enorgy Company 12t31t1G Stabment Type lssuer Default Rating Outlook Profrtability (%, Operating EBITDAR Margin Operating EBITDA Margin Operating EBIT Margin FFO Margin FCF Margin Retum on Capital Emdoyed (ROCE) Gro$ Leverage (x) Total Adjusbd DebUOp. EBITDAR FFO Adjusted Leverage FCF/Total Adjusted Debt (%) Total Debt with Equity Crediuop. EBITDA Total Secured DebUOp. EBITDA Total Adi. DebU(CFO Before Lease Expense - Maint. Capex) Net Leverage (x) Total Adjusted N6t DebUOp. EBITDAR FFo-Adjusted Net Leverage Total Net DebV(CFO - Capex) Coverage (x) Op. EBITDARI(lnterst Paid + Lease Expense) Op. EBITDA,/Interest Paid FFO Fixed-Charge Coverage FFO lnterest Coverage CFO/Capex DebtSummary Total Debtwith Equity Credit Total Adjusted Debt with Equity Credit LeaslEquivalent Debt Other Off-Balance.Sheet D6bt lnterost (Paid) lmplied Cost of Debt (o/o) Cash FlowSummary Funds frcm Op6ration6 (FFO) Change in Working Capital (Fitch-Defined) Cash Flowfrom Operatiorc (CFO) Non-Operating/Non-Recuning Cash Flow Capex Common Dividends (Paid) FCF Acquisitions and Divestitures Net Debt Proceeds Net Equity Proceeds Other lnv$ting and Financing Cash Flow Total Change in Cash and Equivalents Continued on next page. Source: Company reporB, Fitch Ratings. Oilginal BBB+ Rating Outook Negative 41.6 40.5 23.4 28.2 (16.s) 4.6 5.5 6.2 (35.3) 50,382 52,3',t8 1.936 (1,794) 3.9 6,409 383 6,792 (8,208) (2,332) (3,748) (4,778) 5,868 731 1,462 (465) Original Original BBB BBB+ Rating Outook Rating Outook Stabla StaUe 6.2 6.3 (17.3) 34,136 34,968 832 (1,169) 3.7 4,212 (85) 4,127 Original BBB+ Rating Outook Stable 37,513 38,761 1,248 (1,854) 4.8 5,865 191 6,056 40.2 39.3 24.4 33.7 5.5 5.4 5.5 5.0 2.5 5.5 34.5 6.3 5.4 (1 0.s) 6.2 (1 8.s) 5.5 6.2 (7.2) 5.5 5.2 (44.6) 33.0 31.6 21.3 26.1 (10.6) 6.3 4.1 4.2 (7.8) 4.0 0.1 (61 6) 4.1 4.1 (u.2) 47.5 46.7 30.9 35.9 (31.4) 6.4 5.4 4.9 38.1 4.6 5.1 4.1 4.6 0.8 4.8 5.8 4.8 5.8 0.9 4.4 4.7 4.3 4.6 0.7 3.5 3.7 3.9 4.1 1.2 19,998 21,798 1,800 (88s) 4.5 4,175 27 4,202 (4,781) (1,121) (1,700) (236) 1,606 34 331 35 (6,08s) (1,727) (3,68s) (4,421) 4,858 3,'124 (222) (346) (s,0? 966 (66) ,u? (662) (387) Berkshire Hathaway Energy Company May 2,2017 25 Peer Group Historical Financials - Berkshire Hathaway Energy Gompany (Continued) Duke Energy Am.rlcin Eloctrtc Corporation PowerCompany, lnc. Domlnion Relourcer, lnc. 1A$n6 Bed(shi,D Hdh.way Energy Company Llquldlty Readily Availabl€ Cash end Equivdents Availability undor Committed Crcdit Lines Not Readily Availablc Cash ard Equivalonts Wod(lng C.plt l N€t Working Capitd (FitctFD€fi ned) Trad6 AccounB Receivable (Days) lnwnbry Tumo\€r (Oays) Trade Accounb Payable (Days) Capital lrbnsity (%) lncome Statomont Revgnuo Rewnu€ Growth (%) Opcratng EBITDAR Opsrating EBITDAR Aftor Oividends to Associates and Minoritieg Opcratine EBITDA Operating EBITDA After Dividends to A$ociates and Minorities Oporating EBIT Itbcellanoou! Total Dobuoapitalization (%) Total Equity/Cepitalization (%) Rctum on Equity (ROE) (%) lnbr€st Received Prrhr€d DMd.nds (Pekl) Conv€rtsd b USD ftom tis Following: Spot FX Rabs Usod p€r Statsm€nt AW. FX Rat$ Used pcr Statement Source: Company roports, Fitch Ratings. 5,863 2,285 42.4 186.6 158.6 36.1 55.1 44.9 5.2 2'.1 USD 1.000 1.000 2.,743 (3 1) 9,454 9,448 9,212 9,206 5,332 (80) 43.7 61.6 107.6 29.9 15,997 (0.2) 5,279 5,279 5,054 s,054 3,411 211 2,460 USD 1.000 1.000 1,249 47.4 192.4 126.3 51.8 't1,737 0.5 5,580 5,580 5,476 5,476 3,827 2,260 67.0 33.0 14.5 USD 1.000 1.000 255 36.7 78.2 1'.11.4 29.2 17,422 (2.6) 6,998 6,998 8,842 6,842 4,25'l 721 4,019 60.5 39.5 10.4 't20 USD 1.000 1.000 281392 53.4 46.6 3.5 16 Berkshire Hathaway Energy Company May 2,20'17 26 Peer Group Historical Financials - PacifiCorp (3 Mit.) Public Servlce Southem Callfiomia Company of Color.do Duke Energy Ohlo, lnc. Edlron Company 12t31t16 lugn6 12131t16 Paclflcorp 12t31t13 Statement Type l$uer Dofault Rating Outook Proft.blllty (%l Opcrating EBITDAR MaEin Operating EBITDA Maryin Operating EBIT Maoin FFO Margin FCF Margin Retum on Capital Employed (ROCE) Gro!! Lovorago (r) Total Adju3bd DebUOp. EBITDAR FFGAdjusted Leverage FCF/TotalAdjGtsd D6bt Total Debt with Equig CrediuOp. EBITDA Total Sccursd DsbUOp. EBITDA Total Adj. DobU(CFO Before Lease Expense - Maint. Capex) N.t Lever.go (x) Totd Adjust8d Nrt DcbUOp. EBITDAR FFGAdjusted Net Leverag€ Totd N6t D8bU(CFO - Capox) Coverage (x) Op. EBITDAR(lnErsgt Paid + Loesc Expense) Op. EBITDA,/Intar$t Paid FFO Fixed Charye Covcrage FFO lnterBt Coverage CFO/Cepox Dobt Summary Total D€Uwith Equity Credit Total Adjueted Debt with Equity Credit LeaslEqui\ralBnt Debt O(her Off-Balance-Sheet Oebt lntrr$t (Paid) lmplied Coat of Debt (o/o) Cr3h FlowSummary Funds from Op€rations (FFO) Change in Working Capital (Fitch-Defined) Ca3h Flil from Opsrations (CFO) Non-Operating/Non-Recuring Cash Flow Capex Common DMdondE (Paid) FCF Acquisilions and DivBtiturss N6t Dobt Procc.ds Net Equity Proceeds Odtcr lnvcaffng and Financing Cach Flow Total Change in Cash and Equivalents Lhuldity Roadily Ar/ailable Cash and Equi\ralo.rts Availability Under Commitbd CBdit Lines Not Rsadily A\railablc Cash and Equi\ralcntE WD - \ fithdrawn. Continuad on next pagp. Source: Company r€ports, Fitch Ratings. Original A- Rating Outook Siaug 33.4 33.0 22.0 28.7 o.0) 6.6 Original 30.E 29.9 17.7 22.7 (3.e) 5.3 3.4 3.7 (37.71 1,935 2,063 128 (e4) 5.2 Original A- 36.9 36.4 16.7 27.8 (7.e) 4.8 2.9 3.2 (110.8) 12,2i24 12,768 544 39 1,890 Oririnal A- 12.5 42.2 27.4 u.2 (4.0) 6.7 3.4 3.4 (2.8) 3.3 t.2 11.0 WD Rating Outook Stable Raling Outook Stable 7.2 7.8 7.2 7.8 1.0 3.4 3.4 11.0 5.6 5.8 5.5 5.7 1.7 2.9 3.2 (7.3) 2.8 (304.0) 3.4 3.8 (3.7) 3.3 0.0 (s8.e) 3.3 3.3 (6.3) 3.3 3.2 66.4 3.3 3.3 u.2 (s64) 4.3 3,287 236 3,523 (3,633) (824',.? 502 169 276 13 112 (17) 425 (,176) (25)0l 201 (128) (1) 6.9 7.6 5.3 5.8 1.0 5.4 6.2 5.0 5.6 0.9 4,385 4,513 128 (172) 1,163 3 1,166 (380) 5.24.0 (210) 182 33 5 't7 588 6 568 7,351 7,471 120 1,7n (20s) 1,568 (87s) (1,114) (337) (285) 230 39 18 2 (s03) 13 409 27Berkshire Hathaway Energy Company May 2,2017 Peer Group Historical Financials - PacifiCorp (Continued) ($ Mit.) Publlc Servlco Southem Callfornh GompanyofGolorrdo DukoEnoqyOhlo,lnc. EdllonCornpany 12t31t18 12t31113 12tt1t,t6 PacmGorp 12t3il16 Wo*lng Cipltirl N.t Wofi ino CapiH (FibtFDcfi n€d) Trad€ Accounts Receivable (Days) lnwnbry Tumor,.r (Day8) Trade Accounts Payable (Days) Capital lntlndty (%) lncome Strtemont Ra\renuo Revenue Growth (%) Operating EBITOAR Operatng EBITDAR After Dividends to Associates and Minoritieg Op.ratng EBITDA Operating EBITDA After Dividends to Associatas and Minoriti€g Oporatng EBIT MLcdlaneouc Total Dcbucapitalization (%) Total Equity/Capitalization (0/6) R€tum on Equity (ROE) (%) lnbrest Rscsived Pr€fiEr€d Divi&ndt (Paid) Converted b USD tom the Following: Spot FX R8bs Urctl per Strtomont AW. FX Ratgs Used per StatBment Source: Company roport3, Fitch Ratings. 118 55.1 45.0 105.9 27.5 4,M8 (2.8) 1,353 1,353 1,337 1,337 89.1 (205) 37.6 83.9 211.3 24.5 39.2 60.8 7,8 5 USD 1.@0 't.000 (82) 33.0 19.3 108.4 30.7 518 51.1 92.3 85.0 17.4 5,20'l (0.6) 2,211 2,211 2,1fi 2,196 't,426 45.4 54.6 8.8 2 USD 1.000 1.000 11,830 3.0 1,370 4,370 4,302 4,302 2,217 s0.0 59.2 10.4 3 (123) USD 1.000 1.000 49.9 50.1 ,o.a USD 1.000 1.000 1,944 2.0 598 598 552 582 345 Berkshire Hathaway Energy Company May 2,2017 28 Peer Group Historical Financials - MidAmerican Funding LLC CenterPoint Enetgy llidAmerican Houston Eleciric, LLG Bhck Hlll! Corp. Unlon Elecfilc Co. Fundlng LLC($Mit.\ 12t31t18 12t31t18 12131t16 12t31t16 Stabmcnt Typ6 Original Odginal Orhinal Origind lssuorDefaultRating BBB+ BBB+ BBB+ BBB+ Orrtook Rating Ou0ook Stable Rating Outook Stauo Rating Ou0ook Stabls Rating Oufook Siable Proftablltty (%) Opsrating EBITDAR Margin Operating EBITDA Mangin Opcrating EBIT Margin FFO Margin FCF Margin Return on Capital Employed (ROCE) Groa! Lovorage (x) Total Adjugted DebUOp. EBITDAR FFGAdlusted Leverage FCF/Total Adjusbd Doil (%) Total Debt with Equity Crediuop. EBITDA Total Securod D6bUOp. EBITDA Total Adj. DebU(CFO Before Lease Expens€ - Maint. Capex) ilot Levorege (x) Total Adiusted Not DoH/Op. EBITDAR FFcAdjusted Not Leverage Total Net D6bU(CFO - Capcx) Coverage (x) Op. EBITDAR(lnbr€8t Pakl + Leesc Be6nse) Op. EBITDA/Intereet Paid FFO Fixsd4h.rgc Cwerage FFO lnFlest Coverage CFO/Capox DebtSummery Tobl Dabt with Equity Crcdit Total Adlusted Debt with Equity Credit Loaae-Equival€nt Debt Other Ofr-Balance-Sheet Debt lntrr$t (Paid) lmplisd Cost of Debt (%) Carh Flow Summary Funds From Opcra$ons (FFO) Change in Wo*ing Capital (Fitch-Defin6d) Cash Flow fmm Opcralions (CFO) Non-Oporating/Norr.Recuning Cash Flow Capcx Common Dividends (Paid) FCF Acquisitions and Oiwstitures N6t Debt Procc€da N6t Equity Proceeds Othsr ln\r€3ting and Financing Cash Flow Total Change in Cash and Equivalsnts Continued q, next pag,o. Sourca: Company rBports, Fibh Ratings. 3.5 3.7 3.5 3.7 0.7 5.9 6.8 5.9 6.7 1.6 5.0 5.1 7.4 7.5 0.9 6.6 6.5 o.3) o.o 5.7 (22.4) 6.5 6.5 (20.4) 2.7 3.3 (10.6) 2.7 5.0 (18.s) 2.3 2.9 (15.e) 3,340 3,420 80 (13e) 5.3 38.2 38.1 20.8 25.5 (10.8) 5.9 33.6 33.0 21.0 24.1 (16.0) 6.5 379 (67) 312 (47s) (88) (251) (1,1 1s) 623 't22 192 (427) 39.0 38.0 21.1 33.3 2.1 5.8 39.9 39.7 21.5 50.7 (s.2) 3.7 4.6 3.1 (s.1) 4.6 4.5 (20.0) 4.6 3.1 (1s.5) 1,335 58 1,393 2.9 2.9 1.8 2.8 2.8 8.8 2.9 2.9 8.8 7.1 7.4 5.9 5.0 0.8 2,614 2,622 I (132) 5.1 658 61 7't9 (862) (135) (278) 4,757 4,789 32 (204) 4.3 (1,636) (213) '132 23 (88) (302) 374 283 77 3,777 4,049 272 (1e8) 5.'t '1,172 (6) 1,166 c/38) (3ss) 73 (117) 44 (1ee) (1ee) Berkshire Hathaway Energy Company May 2,2017 29 Peer Group Historical Financials - MidAmerican Funding LLC Conb.Point En.ryy Hourton Electric, LLG Bhck Hill! Corp. ,12t3,U16(s Mit_) Unlon Elec'Uic Co. 12t71t16 lridAmerican Funding LLC 12tt1t16 Liquldlty Readily Avalable Cash and Equivalonts Availability Under Committed CEdit Lines Not Rcadily A\/eilable Carh and Equivabnts Worklng Ceplt l Not Wo*ir,rg Capital (FitctFD€fi nod) Trade Accounts Rscsivable (Days) lnwnbry Tumovrr(DaF) Trade Accounts Payable (Days) Capital lntcnrity (%) lncomo Strtrmont Rownuc Revenue Growth (%) Operating EBITDAR Operating EBITDAR After Dividends to Associates and Minorities Op.ratng EBITDA Operating EBITDA After DMdends to A$ociabs and Minorities Oporaling EBIT tllcellaneoua Total Dobdcapitalization (96) Total Equity/Capitalization (0/6) R€tIm m Equity (ROE) (%) lnt3lest Receivod Pr0hn€d DMdond3 (Paid) Convert€d b USD from th6 Following: Spot FX R.bs Usod pcr Sbbmont Avg. FX Rate3 Used per StatEmont Source: Company r€porB, Fitch Ratings. t5 506 11 617 2 u1 296 159 61.2 55.3 44.7 13.0 USD 1.000 1.000 (40) 61.0 78.3 1 11.9 30,2 0 1,000 149 36.6 136.8 178.7 20.9 3,523 (2.4) 1,373 1,373 1,339 1,339 745 59 39.8 123.5 141.3 62.2 2,631 (23.1) 1,049 1,049 1,045 1,045 566 .13.9 56.1 8.7 USD 1.0(X) 1.000 1,573 20.5 529 519 519 509 330 33.4 2,577 9.7 984 984 983 983 5i]8 65.8 u.2 4.5 ,| USD 1.000 1.000 48.5 52.5 8.8 28 (3) USD 1.000 1.000 Berkshire Hathaway Energy Company May 2,2017 30 Peer Group Historical Financials - NV Energy, lnc. ($ Mil.) Southwe!ilem Publlc tonongahela SeMce Cornpeny PorerCo. 9130r{6 9,|!0n6 lndlana liichigen PowerCo. 9/30r{6 NV Energy, lnc. 9,:}0rr6 Stebmsnt Typo lssuer Default Rating Orrtook Prolttabllity (%) Op6ratn0 EBITDAR Margin Operating EBITDA Maqin Oporating EBIT Margin FFO Mergin FCF Margin Retum on Capital Employed (ROCE) Gro3s Leverrge (x) Tobl Ad,ustcd DcbUOp. EBITDAR FFGAdjusted Loverage FCF/Tdd Adjuabd Dabt (%) Total Debtrvith Equity CrediUOp. EBITDA To0al S€cund D,cbUOp. EBITDA Total Adi. Oebu(CFO Bsfors L€ase Exp€nss - Maint. Capex) l{et Lev.rago (x} Total Adjustod Not Dcbt Op. EBITDAR FFGAdjusted N€t Lsverage Totil N6t hbU(CFO - Capox) Cowrrge (x) Op. EBITDAR/0nbrest PaU + L6asc E)eem€) Op. EBITDA,/Interest Paid FFO Fixrd4hargB Co,rragc FFO lnErest Covorage CFO/Capox Dobt Summary Total Dobt with Equity Credit Total Adlusted Debt with Equity Credit Loas$.EquivalGnt Dobt Other Off-Balanc€-Sheet Debt lntcrr3t (Paid) lmplied Cost of Debt (%) C.!h Flow Summrry Funds from Oprations (FFO) Change in Working Capital (Fitch-Defined) CaBh Flow from Operations (CFO) Non-Operating/NoFRecuning Ca3h Flow Capex Common Dividen& (Paid) FCF AcquEitiom and Divestitur6s Nct Dcbt Prccoods Net Equity Procoods O0ler lnwsling and Fin.ncing Ca3h Flil Total Change in Cash and Equivalents Continued on next page. Source: Company reports, Fitch Ratings. Origiml OdginelBBB BBB. Rding Ouuook Stablc Ratng Oufook Stablo Original Original BBB- BBB- Rating Outoot SbUs Raling Ou{ook Positw 3.6 3.5 (8.4) 26.2 25.8 16.5 22.5 (15.s) 5.4 4.0 4.0 (14.7\ 4.0 2.3 (10.0) 't,850 1,898 46 (67) 3.9 403 (58) 345 0 (s{1) (83) (ztel 0 n7 196 10 2U 2..2 21.6 14.2 23.0 (1.1) 6.2 1.1 3.2 (1.2) .t-0 13.0 40.0 39.3 25.3 33.3 3.3 6.7 4.1 3.2 13.3 3.9 3.6 2.1 3.9 9.0 3.6 3.4 8.4 31.9 27.9 19.0 33.2 0.3 5.0 4.2 3.3 0.2 3.6 0.0 13.3 4.2 3.3 16.6 3.8 6.4 4.9 8.4 1.2 6.4 5.9 6.5 7.0 0.6 1.3 4.8 5.5 6.1 1.5 4.1 4.4 1.5 4.7 1.8 1,359 1,455 96 (72\ 5.3 367 (41) 326 (224) (120) (1E) 2,177 2,881 704 (s4) 4.6 4,533 4,693 160 (5sl) (400) 100 0 (271\ (180) (28s) 5.7 998 93 1,091 711 (s2) 659 0 (s28) (124) 7 (167) /165 0 (304) 1 16 2 0 (e) Berkshire Hathaway Energy Company May 2,2017 31 Peer Group Historical Financials - NV Energy, lnc. (Continued) SouthYu$tern Public Sorvice Company 9/30/16 Monongahela Powcr co. 9/30n6 lndlana Mlchigan PorerCo, 9/30/16 NV Energy, lnc. Liquidity R€adily Availau€ Cash and Equi\ralents Availability under Committed Credit Lines Nc,t Rsadily Availaue Calh and Equival€ntg 207 395 ,| 361 10 2*:357 650 Worklng Capltal Net Working Capital (Fibh-D€fi ned) Trade Accounts Receivable (Oays) lnventory Tumo/er (DaW) Trade Accounts Payable (Days) Capital lntemity (%) 5 44.1 14.5 65.7 30.1 123 4't.4 45.1 49.5 14.1 44 16.5 106.0 't04.4 24.7 192 50.4 34.3 72.4 19.7 lncome Statement Revenue R6venu6 Growth (o/o) Operating EBITDAR Operating EBITDAR After Dividends to Associatos and Minorities Opgrating EBITDA Operating EBITDA After Dividends to Associates and MinoritieE Oporating EBIT 1,795 (1.4) 470 470 463 463 296 1,594 4.0 354 354 u4 u4 26 2,'.t40 (4.0) 682 682 597 597 4m 2,996 (1 0.7) 1,197 't,197 1,177 1,177 758 Mlscellaneous Total Deb{/Capitalization (%) Total Equity/Capitalization (%o) Retum on Equity (ROE) (%) lnterest Received PBf6ned Dividends (Paid) Converted to USD from the Following: Spot FX Ratgs Used per statement Avg. FX Rates Used per Statement Source: Company Eports, Fitch Ratings. 49.5 50.5 7.6 0 0 USD 1.000 1.000 53.6 46.4 5.0 50.4 49.6 10.5 19 0 USD 1.000 1.000 53.1 46.9 8.5 ,* 1.000 1.000 USD 1.000 1.000 Berkshire Hathaway Energy Company May 2,2017 32 Appendix B: Financial Summaries Annual Historical Financials - Berkshire Hathaway Energy Gompany Annual (8 Mit.) 12131112 12131113 l2lt1l14 12131115 12tt1t18 Profitability (%) Oporating EBITOAR Marsin 35.8 35.7 36.1 38.7 40,2 Operating EBITDA Margin 34.8 34.8 35.2 37.8 39.3 Operating EBIT Margin 22.2 22.4 23.4 24.2 24.4 FFO Margin 36.2 33.1 36.5 35.4 33.7 FCF Margin 8.2 2.9 (8.1) 6.2 5.5 Retum on Capital Employed (ROCE) 5.6 5.0 5.8 5.7 5.4 GrGs Leverage (x) To&l Adjusbd DcbUOp. EBITDAR FFcAdjusted Leverage FCF/Total Adjusbd Oebt (%) Total Debt with Equity CrediuOp. EBITDA Total Secured Debt/Op. EBITOA Total Adj. DebU(CFO Before Lease Expense - Maint. Capex) ilet Loverrga (x) Total Adjusbd Ne{ DebUOp. EBITDAR FFGAdjusted Net Leverage Totel N6t D6bu(cFo - capex) Coverage (x) Op. EBITDAR(lnbr$t Paid + Lsase Expensc) Op. EB|TDA,/lnterest Paid FFO Fixe4Charge CqrsragB FFO lnterest Coverage CFO/Capex Debt Summary Total DeHwi$ Equity Credit Total AdjusEd Debt with Equity Credit LeeseEquivalsnt Dsbt Other Off-Balance-Sheet Debt lnErest (Paid) lmplied Cost of Debt (%) Cash FlowSummary Funds from OFrations (FFO) Change in Working Capital (FitclFoefined) Caeh Flowfiom Op€rations (CFO) Non-Operating/Non Recuning Cash Flow Capex Common Dividends (Paid) FCF Acquisiliom and Divestitures Net Oebt Proceeds Net Equity Proceeds O$er lil,Gsting and Financing Cash Flou, Total Change in Cash and Equivalents Lhuldity Readily Available Cash and Equivalents Availability Under CommitEd Credit Lines Not R€adily A\railaHe Cash and Equit/alenlg Continued @ next page. Source: Company rsporG, Fitch Ratings. 3.8 4.',| 4.5 4.9 1.1 3.6 3.8 4.3 4.6 1.2 3.5 3.7 3.9 4.1 1.2 6.3 4.9 (3.6) 6.3 (31.2) 6.2 4.8 (n.71 5.5 4.2 1.2 5.4 21.3 5.3 4.1 2i2.1 21,684 22,580 896 (1,046) 1,177 150 4,327 (3,380) %7 (s41) 534 (450) Tt6 1,539 7.1 5.9 't.'l 7.0 66.4 6.8 5.7 E2.2 30,947 31,891 9rl4 (1,073) 4,178 491 4,669 (.f,307) 362 (s,s36) 5,079 1,000 (so6) 399 1,175 3,268 38,197 39,365 1.168 (1,s85) 6,316 (1,1 70) 5,'t48 (6,sss) (1,40e) (2,956) 3,790 37,474 38,762 't,288 (1,7O4) 4.5 5.4 4.9 38.1 37,513 38,761 1,248 (1,8s4) (682) (387) 4,019 5. 4.7 2.9 5.5 2.3 30.6 5.4 4.6 32.9 5.5 5.0 2.5 5.5 34.5 3.6 3.8 4.8 5.0 1.3 3.6 3.9 4.e 5.0 0.8 4A4.44.05.0 6,331 649 6,980 0 (5,875) 0 1,105 (144) (146) (36) (288) 491 5,865 191 u'01 (5,0? 966 (66) (625) 721 ; (5s8) 617 4,598 490 1,108 5,032 0 Berkshire Hathaway Energy Company May 2,2017 33 Annual Historica! Financials - Berkshire Hathaway Energy Company (Continued) ($ Mit.)12t1t1t12 l?31t,3 12tt1t11 12t31t15 12t31t18 Worklng C.pttrl Nct Working Capital (Fikfi -I)dncd) Trado Accounb Rec8ivable (DaF) lnwnbry Tumo\r6r (Day!) Trade Accounk Payable (Days) Capibl lntcmity (%) lncomo Strtrment Rownu6 Revenue Growth (70) Operating EBITDAR Operating EBITDAR Aft6r Dividonds to Associates and Minorities Opcratng EBITDA Opereting EBITOA After Dividsn& to A$ociabs and Minorities Oponting EBIT Mllcollaneou! Totel Dsbuc.pitelization (%) Total Equity/Capihlization (%) Retrm on Equity (ROE) (%) lntarest Received PlcEmd Dividonds (Pakt) Sourca: Company GporE, Fitch Ratings. 115 43.6 79.5 29-3 1 1,548 4,1U 4,134 4,022 4,022 2,567 57.9 42.5 _ (3s) 51.1 82.0 v.1 12,635 9.4 4,513 4,513 4,395 4,395 2,835 62.2 37.8 ": (403) 38.7 52.6 37.E 65.0 35.0*: 17,32{l 37.1 6,249 6,249 6,'l03 6,103 4,046 (2) 36.4 53.4 't12.4 32.9 17,880 3.2 6,9't7 6,917 6,756 6,756 4,328 255 36.7 78.2 1',t1.4 29.2 60.5 39.5 '10..1 120 17,422 (2.6) 6,998 6,998 4,842 6,842 4,251 42.4 37.6 't0.6 0 0 Berkshire Hathaway Energy Company May 2,20'17 34 Annual Historica! Financials - PacifiCorp Annual (s Mit.) 12t31t12 1u31nt 1U71t14 12t31t16 1431t16 Prcftablllty (%) Opentiry EBITDAR Margin 34.3 38.0 38.9 4O.4 42.5 Operaling EBITDA Maqin u.o 37.7 38.6 40.1 42.2 Oporatim EBIT MaEin 20.9 24.8 21.8 25.6 27.1 FFO Margin 29.8 29.5 30.'l 3'1.7 U.2 FCF Margin 1.6 (0.3) (4.2) (2.5) (4.0) Retum on Capitel Employed (ROCE) 5.1 6.2 6.3 6.3 6.7 Gros! Lovorage (x) Total Adjust€d DsbUOp. EBITDAR FFcAdiusted Levsrage FCF/Tdal Adjusbd Dcbt (%) Total Debt with Equity Crediuop. EBITDA Total Scq.rnd Debt/Op. EBITDA Total Adi. DebU(CFO Before Leas€ Expense - Maint. Capex) Net Leverage (x) Total Adjwted Nst DcbUOp. EBITDAR FFO.Adjusted Nst Leverage Totel Net DebU(CFO - Capcx) Coverago (r) Op. EBITDAR/(lnbr!3t Paid + L6aso Exp€Ne) Op. EBITDA,/Interest Paid FFO Fircd€haEo Cov.rage FFO lnterest Coverage CFO/Capcx Debt Summary Total O€bt wih Equity Crcdit Total Adjustod Debt with Equily Gredit bas€-Equivalont Dcbt Ofi er Ofi-Balance-Sheet D6bt lnbl€st (Paid) lmplied Cost of D€bt (0/6) Carh FlowSummary Funds from Opcratona (FFO) Change in Working Capital (FitctFDefined) Cash Flow frcrn Op€rations (CFO) Non-Operating/Non-Recuring Cash Flow Capcx Common DiMdends (Paid) FCF Acqubitions and Divestitures Net Dsbt Procc€d3 Net Equity Proc€ods Ofior lnw3ting and Financing Cash Flow Totrel Chang€ in Cash and Equivalents Liquidity Readily Availabls Cash and Equivalgnts Availability Und6r Committed Crsdit Lin6s Not Rradily A\railable Cash and Equivalcnts Conlinued on next page. Source: Company rsports, Fitch Ratings. 4.1 3.7 24.4 3.4 3.4 11.0 4.3 4.4 4.7 4.8 1.2 4.9 5.1 4.8 5.0 1.5 5.2 5.3 5.0 5.2 1.5 5.4 5.5 5.2 5.4 1.9 5.6 5.8 5.5 5.7 't.7 4.2 3.8 1.1 4.1 4.0 23.9 6,881 6,993 1'.t2 (380) 1,455 '170 1,625 (1,346) (200) 79 3.6 3.7 (0.2) 3.5 3.4 14.O 1,517u 1,551 (1,065) (500) (14) 15 (40) 12 (27) 53 t: 3.5 3.6 (3.1) 3.5 3.4 13.9 1,580 (10) 1,570 (16) (30) 7,167 7,247 120 (37e) 1,660 74 1,7U 0 (e16) (es0) (132) 0 124 0 (3) (1 1) 't2 1,020 0 3.4 3.4 (2.8) 3.3 3.2 1 1.0 7,351 7,471 120 (380) '1,777 (20e) 1,568 (e03) (87s) (2',t0) 17,: 3.5 3.5 (1.8) 3.4 3.4 8.7 3.4 3.5 8.7 5.25.3 7,071 7,202 128 (37e) 5.4 6,878 7,006 128 (s7s) 5.55.5 3.5 3.6 14.0 3.6 3.6 14.0 1; 33 5 207(41 (s) 33 80 '1 (r,066) (725) (21) 23,: Berkshire Hathaway Energy Company May 2,2017 35 Annual ($Mit.\ 12i31112 1A$n3 1431n4 lA3,nB 12t31t16 Working Cepital Networking Capital (Fitch-Ddned) 380 381 408 45 518 TradeAccounts Receivable (Days) 50.2 49.6 4a.7 51.6 51.1 lnvontory Tumowr (DaF) 94.0 86.1 76.2 83.0 92.3 Trade Accounts Payable (Days) 92.4 85.0 Capltal lntBnsity (%) n.6 20.7 20.3 17.5 17.4 Annual Historical Financials - PacifiGorp (Continued) lncome Statement Re\renue Re\renue Growth (o/o) Operating EBITOAR Operating EBITDAR After DiMdends to A$ociates and Minorities Operating EBITDA Operating EBITDA After Dividends to Associates and Minorities Op€rating EBIT 4,882 1,675 ,675 ,661 ,661 ,021 47.5 52.8 7.0 5,147 5.4 1,955 1,955 1,939 1,939 1,2U rt6.9 53.1 8.8 5,252 2.0 2,042 2,042 2,026 2,026 1,300 47.7 52.3 9.0 5,232 (0.4) 2,112 2,112 2,097 2,097 1,340 48.9 51.2 9.3 0 0 5,20',1 (0.6) 2,211 2,21'l 2,196 2,196 1,426 43.9 50.1 10.3 iilscellanooua Total DebUCapitalization (%) Total Equity/Capitalization (70) Rehrm on Equity (ROE) (%) lntgrest Received Pre.hr€d Dividends (Paid) Source: Gompany Bports, Fitch Ratings. (2)(2',) Berkshire Hathaway Energy Company May 2,2017 36 Annual Historical Financials - MidAmerican Funding LLC Annuel ($Mit.\ 12tt1t12 12/31n3 1u31nt t2/31n5 nnlt$ Profit blllty (%) OpGratng EBITDAR Margin 23.6 22.4 20.7 25.8 39.9 Operating EBITDA Margin 23.4 22.3 20.6 25.7 39.7 Op€rating EBIT Ma0in 11.4 10.5 11.2 13.8 21.5 FFO Margin 27.2 25.8 2A.1 32.8 50.7 FCF Marsin 18.9 (8.9) (18.8) (3.2) (s.2) Retum on Capital Employsd (ROCE) 3.4 3.1 3.3 3.4 3.7 Grocr Levenge (r) Tohl Adjult€d DrbUOp. EBITDAR FFGAdjusted Leverage FCF/Total Adjuebd Dobt (0/6) Total Debt with Equity CrediUOp. EBITDA Total S€cuEd Dcbt/Op. EBITDA Total Adj. D6bU(CFO Before L€aso Expense - Maint. Capex) Net Leverrge (x) Total Mjusted Not Dcbt/Op. EBITDAR FFGAdjusted Net Lwerage Tobl Net &bU(CFO - Capoo Covor.g. (x) Op. EBITDAR (lnbrld Paid + Lcase Epensc) Op. EBITDA/Interost Paid FFO Fixrd-Chargc Ccn erago FFO lnbr€3tCoverago CFO/Capex Debt Summary Total Dobtwith Equity Crdit Total Adjustod Debt with Equity Credit Lees&Equivalrnt OoU Other Of-Balance-Shoet Dobt lnbr€it (Paid) Implied Co3t of Dcbt (0/6) Calh FlowSummary Funds frofi1 Opcrations (FFO) Change in Working Capital (Fitch-Defined) Cash Flowfrom Operations (CFO) Non-Oporating/Non-Recuning Cash Flow Capax Common Dividon& (Paid) FCF Acquisitions and Divs3tituros Net Dsbt Prococds Net Equity Procseds O0lcr ln\osling and Financing Ca:h Flow Total Change in Cash and Equivalentg Llquldlty Roedily A\ailablr Ca3h and Equivalcnts Availability Under Committed Cr€dil Linss Not Rredily A\ailau€ Cash and Equivalent3 Continued on next page. Source: Company r€ports, FitEh Ralings. 4.3 4.4 5.9 6.1 0.7 5.0 5.1 7.4 7.5 0.9 5.'l 3.7 15.8 5.0 6.3 5.3 3.8 (7.5) 5.3 (13.6) 194 4',14 5.9 3.7 (15.4) 5.9 4,567 4,599 32 (1e7) 4.6 (1,526) 5. 3.6 (2.3) 5.4 (44.6) 5.3 3.5 (1.n 4. 3.1 (5.1) 4.6 4.5 (20.0) 4.6 3.1 (1e.s) 1,335 58 1,393 (1,636) 1.8 3.3 5.7 (6.6) 5.9 3.6 (8.4) 3.9 3.9 6.3 6.4 0.5 5.0 3.6 (12.5) 1.1 4.6 6.1 6.3 2.0 1.2 4-3 6.3 6.4 0.9 3,843 3,891 48 (167) 4.4 884 376 1,260 (645) 615 1,121 214 1,335 0 (1,446) 0 (111) 0 176 0 8 73 4,012 4,060 48 ('t74\ 4.4 882 (161) 721 (1,026) ,r? .t60 (28) 7 (160) 4,757 4,789 32 (204) 4.3 1,7fi 4,76A 32 (206) 4.4 1,056 (236) 820 ,? 6 353 354 340 (706) il2 0 (164) 30 360 2 132 23 (88) 15 506 1Gt 275 0 Berkshire Hathaway Energy Company May 2,2017 37 Annual Historical Financials - MidAmerican Funding LLC (Continued) Annuel ($ Mir.)lugn2 ,12t31t,13 12t31t11 12t31t15 12t31t13 Woddng Capltrl NetWotkine Capital (FitstFDGltncd) Trade Accounts Receivable (Deys) lnwnbry Tumorer (DaF) Trade Accounts Payable (DaF) Cafital lnbmity (%) lncomo Stabment RoYlnua Rswnue Growth (%) Opemting EBITDAR Operating EBITDAR Aftcr DiMd€n& to Associates and Minoriti€s Op.rating EBITDA Operating EBITDA AnEr Oividonds to Assodabs and Minorities Opcratino EBIT lrltcellanoou! Total t).buoaftdtalization (%) Total Equity/Capitalization (o/o) R€tum on Equity (ROE) (%) lnter$t Received Prlfsmd DMdcn& (Paid) Source: Company rrports, FiEh Ratings. 10 47.0 51.9 19.9 17.1 53.3 7.9 157 49.'l ot.u 30.1 48.2 53.8 7.3 54 42.4 31.7 40.6 (21) 36.9 51.3 92.0 12.3 &.2 53.8 8.3 0 0 59 39.8 123.5 '141.3 a2.2 43.9 56.1 - 3,120 (e.1) E84 884 880 880 473 3,762 10.2 NE 778 n4 774 123 3,413 5.1 766 766 760 760 357 3,,N 767 767 761 761 369 2,631 (23.1) 1,049 1,049 1,045 1,045 566 47.4 52.8 - Berkshire Hathaway Energy Company May 2,2017 38 Annual Historical Financials - MidAmerican Energy Company ($ Mit.)12t31t12 12131t13 12t31t11 12tt1t16 12t3.r18 Profit bltlty (%) Op€rali.E EBITDAR Maryin Operatino EBITDA Margin Operaliry EBIT Margin FFO Margin FCF Ma.gin Retum on Capital Employed (ROCE) Gtos! Lovor.go (x) Total Adjult€d DebUOp. EBITDAR FFGAdjusted Leverage FCF/Total Adjusbd Dobt (%) Total Debt with Equity Crediuop. EBITDA Total Sscund Debt/Op. EBITDA Totral Adi. DobU(CFO Before Lease Expenso - Maint. Capex) Net Leverago (x) Tobl Adjultod Net DcbUOp. EBITDAR FFGAdjustod Net Leverage Total Not Dcbt(CFO - Capex) Coverago (x) Op. EBITDAR(lnbrest Paid + Loa3r E)eonse) Op. EBITDA,/Inter€st Paid FFO Fixsd{haeo Coveragc FFO lntercst Coverage CFO/Capex Debt Summary Total Osbtwith Equity Crudit Total Adlusted Debt with Equity Credit Leeso-Equivalcnt Dcbt Other Ofi-Balance-Sh€et D6bt lntsr€st (Peid) lmpli€d Cost of Oebt (%) Calh Flow Summary Fund3 from Operation3 (FFO) Change in Working Capital (FitchDefined) Cash Flil fnom Op€refron! (CFO) Non-Operating/Non-Recuning Cash Flow Capex Common DiMdonds (Paid) FCF Acquisitiom and Divostiluros Net Debt Proca€d3 Net Equity Proce€ds oth€r ln\,!3ting and Finandng Cash Flow Total Change in Cash and Equivalents Llquldlty Readily Availabl! Cash and Equivalsntg Availability Under Committed Credit Lin6s Not Readily Availablr Cash and Equivalant3 Continued on next page. Source: Company nports, Fitch Ratings. 5.2 5.3 7.0 7.3 2.0 4.9 5.0 6.7 6.9 0.7 1.7 4.8 7.'.| 7.2 0.9 4.9 3.3 (2.2) 4.9 (47.3) 4.8 3.2 (43.e) 5.3 3.5 (17.0) 5.3 (5.s) 5.3 3.5 (s.8) 4.4 4.4 6.6 6.8 0.5 4.3 3.2 19.0 4.3 5.2 3.9 2.8 4.6 23.7 23.5 11.1 27.8 19.4 3.8 3,272 3,320 la (143) 900 376 1,276 (64s) (1) 630 22.5 22.3 10.5 26.4 (12.2) 3.4 1.7 3.4 (11.6) 4.7 (12.6) 4.5 3.2 (1 1.s) 3,552 3,600 4 (151) 4.4 809 (1e4) 735 1U 410 20.8 20.7 r 1.3 26.8 (18.8) 3.7 25.9 25.8 13.E 33.3 (2.8) 3.7 4,271 4,303 32 (183) 103 410 0 39.9 39.8 21.5 51.2 (E.s) 4.0 4.2 2.9 (1 8.8) 1,100 4,432 32 (181) 4.2 1,345 58 1,403 (1,636) 4.2 2.9 (5.3) 4.2 4.2 (1s.4) 5.7 5.8 8.3 8.4 0.9 4.14.4 4,'t06 4,138 32 (174) 4.5 1,003 (180) 823 (3) (165) 1,'t 35 216 1,351 0 (1,446) 0 (e5) 0 173 0 (1) 74 (1,026) (12s) (416) 277 (28) 7 (160) n,u? o03) i ,r? 123 21 (8e) 14 ,r? o 353 '1 29 360 Berkshire Hathaway Energy Company May 2,2017 39 Annual Historical Financials - MidAmerican Energy Company (Continued) Annual ($ Mir.)lAgtn 12t31tlt 12t31t11 12t31t15 12t31t16 Wortlng Capltal NEt Wo*ing Capitil (FitclFD3find) Trade Accounts Rsceivable (Days) lnvcntory Tumo!,6r (DaF) Trade AccounE Payable (Days) Capital lnbn3ity (%) lncomo Strtoment R6venuo Revenue Growth (%) Opcratng EBITDAR Operating EBITDAR Aftsr Divid€nds to A$ociat$ and Minorities Opsratine EBITDA Operating EBITDA AfEr Dividends to Associat8 and Minorities Op€ratng EBIT tLcell.neou! To0al Dcbuoapitdization (%) Total Equity/Capitalization (%) Rrtum on Equity (ROE) (%) lnter€st R€ceived PrGbrld Dividcnda (Paid) Source: Company rsporE, Fibh Ratings. 19 46.8 51.9 19.9 3,242 768 768 782 762 370 160 48.7 45.5 ilo.t 3,403 5.0 765 765 759 759 356 58 42.3 31.9 40.8 49.1 50.9 9.8 (17) 36.6 51.6 92.3 42.4 u 39.6 124.2 't42.5 82.3 {t.6 52.8 9.8 (1) .lE.0 52.0 9.1 (1) 47.8 52.4 9.8 0 0 2,625 (23.0) 1,048 1,048 1,044 1,U4 565 46.0 54.0 10.5 3,407 (8.e) 882 882 878 878 471 740 9.9 777 777 773 773 122 3, Berkshire Hathaway Energy Company May 2,2017 40 Annual Historical Financials - Northern Natural Gas Company Annual LTIII 9r30/r6(s Mit.)12t31t12 12t3111t 12131t11 1213il15 Profitabillty (%l Op€rating EBITDAR Maryin Operating EBITDA Margin Operating EBIT MaEin FFO Margin FCF Margin Retum on Capital Employed (ROCE) 57.1 56.4 45.5 47.4 't3.8 10.4 57.0 56.3 45.4 51.6 7.3 9.6 48.3 47.8 38.1 45.3 (17.0) 9.6 56.7 56.1 45.4 59.0 't 1.0 10.0 60.3 59.7 48.1 64.6 4.9 9.8 Gross Leverage (xf Totd Adjustad DebUOp. EBITDAR FFO-Adjusted Leverage FCF/Total Adjusbd Debt (%) Total Debt with Equity CrediUOp. EBITDA Total SecuEd DebUOp. EBITDA Total Adj. Debt{CFO Before Lease Expense - Maint. Capex) 2.7 2.7 8.9 2.7 4.4 2.5 2.5 4.0 6.1 6.5 6.0 6.4 3.0 899 909 10 (51) 5.5 277 27 304 (102) (121) 81 0 (s0) (s) 22 2.7 2.6 4.8 2.7 7.'.| 2.7 2.5 (13.2) 2.6 2.2 1.9 8.7 2.2 5.3 2.2 1.8 3.7 2.1 4.',| Net Loverago (x) TotalAdjusbd Net Debtrop. EBITDAR FFGAdjusted Net Leverage Total Net DebU(CFO - Capex) 2.3 2.2 6.3 15.0 2.5 2.4 14.7 2.1 1.9 5.0 1.9 1.6 3.5 Coverage (x) Op. EBITDAFy(lnbrsst Paid + Lease Expense) Op. EBlTDAJlnterest Paid FFO Fixed4harge Coverage FFO lnterest Coverage CFO/Capex 7.0 7.6 7.4 8.0 1.9 7.3 7.9 7.8 8.5 1.2 8.5 9.2 9.8 10.7 1.7 9.1 9.9 'to.7 11.7 2.0 Debt Summary Total Debt with Equity Credit Total Adjusted Debt with Equity Credit Leas+Equivalcnt Dobt Other Ofi-Balance-Sheet Debt lntotBst (Paid) lmplied Cost of Debt (o/o) 899 905 6 (44) 4.9 306 (41) 255 1112) (80) 43 _ (3) 40 ,: 899 931 32 (44) 4.9 328 (31) 297 (23e) (181)(? 55 (8) (76) 795 827 32 (40) 4.7 387 (25) 362 (210) (80) 72 (80) (1; (1e) 795 827 32 (38) 4.8 408 (23) 385 (18e) (165) 31 0 (4) 27 Cash FlowSummary Funds flom Operations (FFO) Change in Working Capital (Fitch-Defined) Cash Flowfrom Operations (CFO) Non-Operating/Non-Recuning Cash Flow Capex Common Dividends (Paid) FCF Acquisitions and Divestitures Nct Debt Proceeds Net Equity Proceeds other lnvesting and Financing Cash Flow Total Change in Cash and Equivalents Liquidlty R6adily Available Cash and Equivalents Availability Under Committed Credit Lines Not Reedily Available Cash and Equivalentg Continued on next page. Source: Company reports, Fitch Ratings. 83 47 2A 104 Berkshire Hathaway Energy Company May 2,2017 4',l' Annual Historical Financials - Northern Natura! Gas Company (Continued) Annual LTII 9r30fl6(0 Mit.)12t31t12 12t31t13 12111t11 12t31t16 YUorklng Capltel Nrt Worting Capital (Fibh-Dofi n6d) Trado Accoun$ Rccoivable (Daye) lnvcnbry Tumo,rr (Days) Tradc Accounb Payable (Days) C.pital lnbndty (%) (e) 45.5 365.0 I 50.5 2*.1 23.9 (18) 41.8 87.9 5 40.6 252.7 299.5 32.0 (33) 21.9 579.7 880.3 29.9 lncome Statarnant Rar6nuc R6\rsnuc Grovvtr (%) OporatinC EBITOAR Operating EBITDAR After DMdends to Associatos and Minorfi€s Opcratng EBITDA Oporating EBITDA Afbr DMdends to Assocaates and Minoriti€3 Oprrating EBIT 1* 585 334 334 3[t0 330 ffi 593 't.4 338 338 33t 334 269 33.0 724 22.1 350 350 :x6 346 n8 656 (s.4) 372 372 368 368 298 6i,2 (3.7) 381 381 3n 377 304 irllcollanoou! Total Dcbuoapitalizaton (%) Total Equity/Capitalization (%) Rrtum on Equity (ROE) (%) lnterr3t Rscoived Prlbn d Oividonds (Paid) Source: Company r€ports, Fibh Ratings. 41.',| 58.9 10.5 39.8 60.2 11.1 40.3 59.7 11.3 38.1 63.9 11.3 ,| 35.7 64.3 11.5 2 Berkshire Hathaway Energy Company May 2,2017 42 Annual Historical Financials - NV Energy, lnc. Grc* Leverage (x) Toilal Adjurbd Dcbt/Op. EBITDAR FFGAdjusted Lsvcrage FCF/Totd Adjll3bd Osbt (%) Total D6bt with Equity Cr€diUOp- EBITDA Totrl S€cuEd D.bUOp. EBITDA Total Ad!. Debt(CFO Before Lease Expens€ - Maint. Capsx) }{et Lewng. (x) TotalAdjulEd Nd Dcbt/Op. EBITDAR FFGAdjustsd Net Leverage Totel Nct DObU(CFO - Capex) Covorrgo (x) Op. EBITDAR(lnblrst Paid + Lease Expenso) Op. EBITDA/IntErost Paid FFO Fixcd4hargc Cwcragc FFO lnt€rsst Co\rorage CFO/Capcx DebtSunrmrry Toiel D.Hwiur Equity Crcdit Total Adjusbd Debt wi$ Equity Credit Lre..-Equivahnt Dabt Ofi cr Olf-Belance-Shoet Deb( Intrllat (Paid) lmplied Co3t of Dobt (0/6) 1.4 4.3 4.4 4.3 3.6 13.1 4.0 3.2 12.5 4.0 0.4 7.7 Annual '1,262 (68) 1.194 Lil 3.9 3.6 2.1 3.9 90 4,533 4,693 160 (26e) 5.7 998 93 1,091 (ss1) (400) ($Mit.\ 12tt1t12 12t31t13 12131n1 1A31n5 9HU16 Prcfitablllty f[) Op€ratino EBITDAR Mangin 3S.6 35.6 34.2 38.6 40.0 Opsrating EBITDA Margin 39.0 35.1 33.7 36.0 39.3 Opcntit€ EBIT M.rgin 26.4 21.A 22.0 23.8 25.3 FFO Margin 29.9 25.1 31.4 37.7 33.3 FCF Margin 7.8 4.9 2.3 18.6 3.3 Retum on Capital Employod (ROCE) 7.2 5.7 6.2 7.'l 6.7 5.'l 5.1 2.7 5.1 15.8 1.7 3.9 1.4 4.7 13.1 4.8 4.8 15.5 3.3 3.4 3.3 3.4 1.9 5,287 5,373 86 (304) 5.9 742 (47) 695 (372) (178) 145 't4 (235) 63 2 (1 1) 287 744 4.1 4.0 12.8 1.1 3.7 12.7 3.5 2.8 6.7 3.6 3.7 4.3 4.5 1.7 4.2 4.4 5.3 5.6 2.1 4.1 4.4 rt.5 4.7 1.E 3.6 3.4 8.4 3.6 3.8 3.7 3.9 1.8 5,026 5,168 142 (306) 6.0 890 (15) '1 5,091 5,199 108 (2B.zt 5.6 1,017 (81) 936 (557) (30s) 74 (203) 105 (1) (2s) 82 650 4,800 4,960 '160 (n2t 5.5 Ca.h FlowSummrry Fundr from Opcration! (FFO) Change in Working Capital (FitchDefined) Cash Flilhom Opcratiom (CFO) Non-Operating/Non-Rscuning Cash Flow Capcx Common Dividends (Paitl) FCF AcquEitiom and Divestiturss Net Dcbt Prccecdr Net Equity Procosdg Officr lnvr3tino and Finandng Cash Flow Total Change in Cash and Equivalent3 Llquldlty Roadily A\railablc Caah and Equivden8 Availability Undsr Committed Credit Lines Not Rcedily Availablc Carh and Equivalonts Continuod on next page. Source: Company roportB, Fitch Ratings. (4ee) (1sl) 225 (140) (18) 85 152 (5r4 62 9 (43) 4 372 634 650 100 0(ni (e) (180) 357 650 238 ?41 Berkshire Hathaway Energy Company May 2,2017 43 Annual Historical Financials - NV Energy, lnc. (Continued) Annual LIT ($Mil.\ 12131112 12tt1n3 lAgA1 1281t16 9t3U16 Wortlng Crpltel Nrtworking Capital (Fbh-DGfrn.d) 51 32 63 98 152 Trade Account! R€csivablo (Days) 45.7 47.2 39.3 39.5 50.4 lnwnbry TumorEr (Days) 41.3 35.3 30.9 28.2 34.3 Trad6 Accounts Payabl6 (Days) 63.9 72.4 Capr'tel lnbnsity (%) 16.8 12.4 17.2 17.1 19.7 lncomr St tamont Rrwnuo RevBnue Growth (%) Operatng EBITDAR Operating EBITDAR Afbr DiMdonds to Associate3 and Minorities Op.rating EBITDA Oporating EBITDA Aftar Dividonds to Associabs and Minorities Opor.tm EBIT iilrcellrneour Tobl Dobt C.pitelizaton (%) Total Equity/Capitalizalion (%) R.tum on Equity (ROE) (%) lnErgst Received Prsi.rrud Dividcndr (Paid) Source: Company r€porb, Fibh Ratings. 1,181 1,181 1,163 1,163 7E5 2,979 2,961 (0.6) 1,055 1,055 1,039 1,039 639 3,241 9.5 1,1 10 1,1 10 1,092 1,092 713 3,351 3.4 1,2% 1,228 1,206 1,206 796 54.0 45.0 8.8 2,996 (10.6) 1,197 1,197 1,177 1,177 758 53.1 r+6.9 8.5 5E.6 41.4 : 59.3 40.7 4.5 57.7 42.3 7.5 Berkshire Hathaway Energy Company May 2,2017 44 Annual Historical Financials - Nevada Power Company dba NV Energy Annual Profitability (%) Operafng EBITDAR MaEin Operating EBITDA Margin Operating EBIT Margin FFO Margin FCF Margin Retum on Capital Employed (ROCE) Gror. Lever.ge (x) Total Adiust€d D€bt/Op. EBITDAR FFGAdiusted Leverage FCF/Totd Adju3H Drbt (%) Total Debt with Equity CrediUOp. EBITDA To€l Socursd t)6bYop. EBITDA Tohl Adj. DebU(CFO Before Lease Expense - Maint. Capex) Nst Leverage (x) Total Adjustcd Net DobUOp. EBITDAR FFGAdjusted Net Leverage Tohl Net DeH(CFO - Capo() Coverago (x) Op. EBITDAF/(lntarost Paid + Loase Expens€) Op. EBITDA,/lnterest Paid FFO Fixcd€harge Coverage FFO lnterBst Coverage CFO/Capcx DobtSummary Total Dcbt Yvith Equity Crcdit Total Adjusted Debt with Equity Credit Lease-Equivalent D6bt Other Off-Balance-She€t Debt lntel€st (Paid) lmplied Cost of Debt (o/o) Cath FlowSummary Funde ftorn Operelions (FFO) Change in Working Capital (Fitch-Defined) Cash Flow from Operatons (CFO) Non-Op6rating/Non-R6cuning Cash FIow Cap6x Common Dividends (Paid) FCF Acquisitions and Divestitures Nst Debt Proc€€ds Net Equity Proceeds Olher lnvesting ard Financing Cash Flow Total Change in Cash and Equivalents Liquidlty R6adily Available Cesh and Equi\ralenk Availability Under Committed Credit Lines Not ReadilyA\/eilable Cesh and Equivelenb Conlinuad on next page. Source: Company reports, Fitch Ratings. 11.1 40.6 28.0 31.9 10.7 7.6 38.3 37.9 25.5 40.3 23.3 7.4 3.9 3.7 6.8 3.8 3.7 8.0 4.4 3.6 1.8 4_4 4.1 12.O 3.6 3.5 7.6 4.1 3.4 11.4 3.2 3"3 3.3 3.4 2.1 3.8 3.9 4.7 4.8 1.7 4.6 4.8 5.8 6.1 2.8 3,337 3,397 60 (217) 6.4 3,576 3,641 65 (208) 5.8 799 (ss) 7U (410) (230) 64 (e) ; 94 220 o1 3,285 3,373 88 (1s0) 5.5 /[:}.0 42.4 27.8 31.8 (1.6) 7.1 3.5 3.7 (1.0) 3.5 3.5 7.1 3,066 3,170 104 (18s) 662 109 771 (335) (46s) (33) (224) 5.0 4.8 2.8 5.0 5.0 12.5 4.8 4.6 12.3 34.5 34.0 20.8 25.3 4.9 5.3 3,577 3,618 41 (217) 6.3 35.3 34.9 23.1 v.2 2.7 6.5 3.7 2.9 16.6 3.6 3.6 5.8 3.1 2.4 4.4 3.9 4.0 4.0 4.2 2.1 ?.2 3.4 6.4 4.5 4.8 4.3 4.6 2.5 5.8 536 400 0 529 19 548 (267) (178) 103 14 Q2s) 37 (7s) 128 '1 684 18 702 (288) (184) 230 (138) ; 135 201 or: 969 (77) 892 0 (320) (13) 559 9 (262) 0 10 316 (257) 279o: Berkshire Hathaway Energy Company May 2,2O17 45 Annual Historical Financials - Nevada Power Gompany dba NV Energy (Continued) Annual ($ Mil.)12t31t12 12t31t13 12t31t14 12t31t15 ,t2t31t16 Worklng Capital Net Working Capitd (Fitch-D€ft nrd) Trade Accounts Receivable (Days) lnvenbry Tumovur (Days) Trade Accounts Payable (Days) Capital lntensity (%) (3) 42.4 35.0 13.4 2.'.t45 881 881 871 871 601 (s6) 39.6 31.9 12.8 2,092 (2 5) 721 721 7',t2 712 435 29 38.0 29.9 17.5 2,337 11.7 825 825 815 815 541 47 40.3 26.9 72.1 13.3 (14) 42.6 u.7 88.9 16.1 lncome Statemont R€wnua Revenue Growth (0/6) Opcraiino EBITDAR Operating EBITDAR After Dividends to Associates and Minorities Operating EBITDA Operatlng EBITDA After Dividends to Associates and Minorities Op6ratin0 EBIT 2,402 2.8 921 921 9't0 910 613 2,08:l (13.3) 896 896 883 883 580 lllrcellanoou! Total Deb,YGapitulizetion (%) Total Equity/Capitalization (7o) Retum on Equlty (ROE) (%) lnterest Recoived Pr€fened DMd6n& (Paid) Source: Company reports, Fitch Ratings. 53.3 46.7 'j 55.3 44.7 'j 55.3 44.7 7.5 50.9 49.1 9.1 0 0 s0.8 49.2 'l Berkshire Hathau/ay Energy Company May 2,2017 46 Annual Historical Financials - Sierra Pacific Power Company dba NV Energy Annual 12t31t12 1431t13 12B1na 12t3il15 12t31t16($ Mit.) Proftabllity (%) Opcrating EBITDAR Margin Operating EBITDA Margin Operaling EBIT Margin FFO Margin FCF Margin Retum on Capital Employed (ROCE) Gror. L.verage (x) Totil Adjustcd Debt/Op. EBITDAR FFGAdjGted Leverage FCF/Totd Adjucbd Debt (%) Total Debt with Equity CrodiUop. EBITDA To0el S.curd D,sbtlCp. EBITDA Total Adj. OoU/(CFO Before Loa3e Exp.nse - Maint. Capex) Net Lev.r.ge (x) Tot lAdjGt d Nst DsbUOp. EBITDAR FFcAdjusted Net Leverage Totel Nct D6bY(CFO - Capsx) Co\,or.ge (x) Op. EBITDAFy(lnbrBt Paid + L€alc Expons€) Op. EBITDA,/Interest Paid FFO Fixed4harge Cotrora€E FFO lnterBt Coverage CFO/Capax DebtSurwn.ry Tot.l Ocbtwith EquivCrcdit Total Adjusted Debt with Equity Crsdit Lcas.-Equivalent Debt Oth6r Off-Balancc.Sheet Debt lnb]!3t (Paid) lmpliod Cost of Debt (0/6) C..h Flowsummrry Fun& frcrn Opcralions (FFO) Chango in Working Capital (Fitch-Defin€d) Carh Flowfrom Operations (CFO) Non-Opsrating/Non-Recuning Cash Flow Capcx Common Dividends (Paid) FCF Acquisitions and Divestitures Nst Dcbt Proc.odg Not Equity Prcceeds Othcr lnv!3ling and Financing Ca3h Flow Total Change in Cash and Equivalents Llquldfty Rradily Available CaBh and Equi\Elcnb Availability Under Committed Cr€dit Linss Not Rradily A\railable Ca3h and Equivelenb Continued on next page. Source: Company reports, Fitch Ratings. 4.3 4.6 4.7 5.1 1.3 5.7 6.3 5.5 6.1 1.3 36.1 35.4 22.4 28.3 (4.1) 6.5 4.0 3.9 (2.8) 4.0 3.1 (1s1.0) 3.8 3.7 (rs.s) 1,179 1,208 29 (66) 5.6 31.1 30.8 18.4 28.4 (0.e) 4.7 32.O 31.3 19.7 27.8 G.r) 5.7 32.1 31.4 19.4 32.6 8.E 6.2 4.5 4.9 5.5 6.1 1.1 4.3 3.7 16.4 4.3 3.9 (4.4) 4.2 1.2 22.2 4.2 3.8 23.6 4.8 4.0 (0.7) 4.6 4.6 't6.5 1,200 1,241 41 (61) 5.'l 251 (s) 2rc (1s6) (1 0s) (s5) ; I (4s) 22 250 4.1 3.3 6.7 4.0 a.0 't2.9 3.8 3.0 12.2 37.4 36.7 2..2 29.4 (0.2) 6.0 4.0 4.1 (0.2) 3.9 3.9 2',t.8 3.8 3.9 22.4 4.2 4.5 4.3 4.6 0.9 4.0 4.2 4.6 4.9 1.1 242 (16) 26 (1sa (27)I ,1 18 6 67 244 238 (3s) 197 (211\ (20) (34) ? 12 6 61 244 1,200 1,221 21 (62) 5_2 1,202 1,247 45 (61) 5.1 309 33y2 0 (252) (7) 83 0 (1) 0 2 84 106 250 0 't,153 1,201 48 (47) 4.0 239 4 243 (1s4) (51)I (? (s1) 55 170 Berkshire Hathaway Energy Company May 2,2017 47 Annual Historical Financials - Sierra Pacific Power Company dba NV Energy (Continued) Annual 13 Mit r 12t31t13 12t31t11 12tt1t16 12t31t16 Worldng Crpltrl Nctwo*ing Capitd (FiEtFDOltn d) Trad6 Accounb Recaivablo (Days) ln\6nbry TumoEr (Dey!) Trade Accounts Payable (Days) Capital lnbmity(%) lncomo St t ment Rewnuo Rewnue Growth (%) Opcratine EBTTDAR Operating EBITDAR Afbr Dividends to Associat$ and Minorities Op€rating EBITDA Operating EBITDA Aftor Dividcnds to A$ocietos and Minodtiss Opcratng EBIT ililcettanoou! To&l Dcbt/Cepltalization (%) Total Equiv/Capitalization (%) Rctum m Equity (ROE) (%) lnErest Rocaived PI€frrrud Divi&nds (Paid) Sourcc: Company reportB, Fitch Ratings. 812 (14.3) 304 3(X 298 298 180 947 4.8 304 304 297 297 1U 21.7 904 6.0 289 289 283 283 174 18.4 853 2.3 268 268 263 263 tlt() 834 301 301 295 295 't87 24 54.3 68.5 25.3 s3.2 48.8 8.1 14 66.8 45.1 51.2 45.8 'l 13 51.3 33.4 I 47.8 31.'l 101.2 %.6 s2.8 47.2 7.7 0 0 (8) 52.6 51.3 166.5 23.9 51.0 49.0 7.6 54.6 45.4,: Berkshire Hathaway Energy Company May 2,2017 48 a The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. 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As a result, desdte arry rierificdion cf cwent hds, ratirgs and foecasb can be freded by fu[rre erienb or conditiorE that vlere mt anilicipated at the tirne a rating or furecast was issued or affrmed. TIE inbrmation in ths report is prwided 'a is' wihart any representdim or wananty of arry kind, and Frtch does not represent or wanart frat the report or arry of ib contenb will meet any of te reqdrernenb of a recideil of fle repo( A Frtch ratirB b an oflrion as to the credihrvortiness d a seolity. This opinion and reporb made ry Fitch are based on estaUbhed diteria and nrdhodologies hat ffich b continuousf evaluatirg and Wdalirg. Therefoe, ralirgs and reports are the colledi\re umrk produd of Fitch and no indivijual, or group of individuab, is solely resporsible br a rding or a report. The rating does nd address the risk of loss due to risks otler than sedit rbk, urless srrch rbk b speofcally nentioned. Fitdr is not angagEd in f'le ofier or sale cf any seorrity. Al Fitch repoG have shared auhorship. lndiviluals iJentified in a Fitdt report \^,ere inwfued in, hrt are not sgldy resporsiUe fcr, the oprrions stded tlerein. The individuals arc nared for cmrtact purpces oriy. A ,eport proviling a Fitch ratirE b ndtfEr a pros@us nor a substitrte fo the infomation assernbled, verified ard presented to investols by the issEr and ts agenb in connedion rarith the sale of fle seorrities. Ratings may be changed or wihdraan d arry tine for any eason in the sde discretion of Fitch. Frtch does not provile inestnent advice of arry sort. Ratings arc nd a recornrnendation to buy, sdl, or hold arry security. Ratings do nd cornrnent on the adequacy of malket price, tfE suitability of arry seority for a particular investor, or the taxelemil nature or taxability of payrnenb made in resped to any security. Fitch receit€s hes fdn issuets, insurers, gtlaranlors, dher obligors, and udenuiters for rating securities. Sucfr bes gererally vary fiom US$1,000 to US$750,@0 (or the applicable cunency eqLi\dent) per issue. ln certain c6es, Fitdr will rde all or a nunber of issws issued W a particular issuer, or irsured or guaranteed by a partiqlar irEurer or guarantor, for a sirgle annual tse. Such fres are epeded to vary fiom US$10,000 to US$'l ,500,000 (or tl'e apdkrable curency equiwlent). The assignmant, publication, or dissemination of a rating by Fitd| slnll not constitute a consent ry Filch to use ib narne as an epert in connedion wih arry registration staternent filed under the United States seflrities la^,s, tle Financial Services and Markeb Ad of 2000 of he Urited Kingdorn, or the securities laua of arry partialar jurisdidion. Due to the rdative effciency of electronic pLblishing and distribution, Fitcft research may be amilable to eledronic subscribeG up to hree da)6 earlier han to print subscribea. ForArstralia, Na^/ Zealand, Taiwan and South Korea only: Fitch Awtralia Pty Ud holds an Awtralian financial services license (AFS licerse no. 337123) which auhorizes it to provide credit ratings to wholesale clienb only. Credit ratings information published by Fihh is not intended to be wed by persors who are retail dients \ /ithin the rneaning of tle Cuporations Act 200'1. Berkshire Hathaway Energy Company May 2,2017 49 \ FitchRatings Corporate Headquarters Fitch Group FitchRatings www.fitchratings.com Fitch Solutions www.fitchsolutions.com Fitch Learning www.fitchlearning.com New York 33 Whitehall Street New York, NY 10004 USA +7 2L2 908 0500 +1 800 75 FITCH London 30 North Colonnade Canary Wharf London E14 5GN UK +4420 3530 1000