ENVIRONMENT REPORT June 2016

CONTENTS

2 Key Achievements 11 Waste Reduction

4 Environment Policy & Goals 13 Engagement

6 Global Environmental Initiative 16 Solar Energy

8 Carbon Reduction 18 ECO:nomics Conference

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KEY ACHIEVEMENTS

We believe sustainability begins as a business proposition, but doesn’t end there. Our mission is to inform discussions and decisions – our core business provides a platform for informing people for the good of society. Our authoritative and trusted news and information content sets agendas, starts conversations and influences outcomes. We expose fraud, malfeasance and negligence, and we engage our readers about critical issues such as climate change with highly balanced, journalistic integrity. Our information products are directed at a broad, influential audience and provide accurate, fair and trustworthy information that helps business become more sustainable.

The company’s achievements this year and in the recent past reflect investment and a corporate priority for protecting the environment and energy conservation. Highlights include:

 Reduction of carbon emissions globally by 48% in FY15 from baseline year FY06, and a 6% reduction from previous year.

 All 8 Dow Jones owned print centers are “Zero Waste” facilities for 2015.

 Solar power at our Princeton NJ campus has reduced carbon emissions by over 19,000 tons since its startup.

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 Five offices are now LEED and/or EnergyStar certified, representing 28% of leased office space, including our headquarters at 1211 Avenue of the Americas in New York City.

 At our Bronx Print Center, fluorescent bulbs were replaced with over 3,000 LED tube lights, and over 70 new outdoor LED lighting fixtures were added in the parking lots. With a payback of less than 2 years, this project reduces our carbon emissions by 126 tons/year and electricity costs by over $50,000 per year.

 100% of all newsprint purchased for our newspapers is from paper mills certified by either FSC, SFI, PEFC, CSA, or equivalent.

 Our ninth annual ECO:nomics conference featured top CEOs and non-profit executives, government officials, entrepreneurs, and investors discussing the intersection of business and the environment, hosted by the editors of The Wall Street Journal.

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ENVIRONMENTAL POLICY

Integrity defines the culture at Dow Jones just as it does its journalism and business. Dow Jones strives to be a responsible consumer of energy and resources, and as a positive influence in the communities where we work and live.

We affirm to all our employees, customers and the public that we will conduct our activities in an environmentally-sustainable manner while providing a safe and healthy workplace for our employees, in compliance with all governmental regulations and company policies.

OUR GOALS

In 2007, News Corp & Dow Jones set a target to be carbon neutral in 2010. Upon reaching this target, a new long-term vision was communicated with a set of short-terms goals and strategies to support that vision. Dow Jones believes that tackling climate change risk, and related issues, requires a long-term focus. Our new long-term vision, which is aligned with News Corps’ vision, is to:

1. Reduce our carbon footprint while growing our business, and minimize landfill waste within our business and communities

2. Engage our customers, employees, suppliers and partners on sustainability outcomes

3. Source our paper from paper mills using third-party certified sustainable forest management systems and/or recycled content, and power our operations with clean energy

Our targets to meet these goals are:

 Reduce absolute carbon emissions 40% by 2016 (compared to 2006 baseline)

 Secure new office leases at facilities using renewable energy and/or are LEED, BREEAM or similar certified

 Achieve zero waste to landfill at our owned print centers by 2016

 Continue to lead the discussion where business & the environment intersect via the ECO:nomics conference 4

 Source 100% of newsprint from paper mills operating under third-party certified sustainable forest management systems by 2015

We have exceeded our 40% carbon reduction goal by achieving a 48% reduction in FY15, our owned print centers have been zero waste facilities since 2013, and 100% of the mills used have sustainable certifications, including our international contract print sites.

To achieve its carbon mitigation goals, the company conducts energy audits, solicits ideas for operational improvements from local managers, and promotes best practices. Financial analysis, including calculation of ROIs, is completed for proposed projects. Recently, the company adopted new approaches to prioritizing and financing projects with high financial and environmental returns to further help reach its goals. The company has also improved internal tracking and communications to better respond to increased regulatory and customer requests for environmental data.

To ensure regulatory compliance, a compliance calendar cloud-based software system is in place for our plants and major offices that tracks all federal, state, and local requirements. Tasks are assigned to responsible managers and coordinators at each site and documents are submitted to corporate EHS to verify compliance.

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GLOBAL ENVIRONMENTAL INITIATIVE

Prior to the company split from 21st Century Fox, News Corps’ Global Energy Initiative (GEI) managed all sustainability and energy efficiency programs at the corporate level. As the new News Corp, additional risks and opportunities were identified that directly impact their businesses, specifically around the use of forest commodities in its publishing businesses.

As a result of the company split and revised sustainability strategy, the name of the corporate News Corp team was changed to the Global Environmental Initiative (GEI) to more accurately reflect its broader scope beyond energy and carbon. The GEI program is part of a broader “Corporate Citizenship” initiative at News Corp, encompassing both philanthropy and volunteerism in addition to environmental initiatives.

Dow Jones’ Global Environmental Initiative has developed specific targets and strategies implemented by green teams across the globe. These teams have developed best practices to reduce energy usage and engaged employees, readers, advertisers and suppliers in the quest to reduce consumption and protect the environment.

Day to day implementation and management of environmental programs within the company is handled by the VP of EHS & Sustainability, who also leads News Corp’s corporate GEI program. The Dow Jones GEI team is made up of leaders from HR, Real Estate/Facilities, Communications, IT and Operations.

The GEI team communicates regularly with senior executives across the company about energy/carbon reduction projects and other aspects of the company’s environmental sustainability efforts, as well as the progress being made within the businesses, via regular summary reports and in-person meetings. The GEI team conducts regular meetings to discuss strategy, share successes and challenges, and invite external experts to share perspectives with the group. Internal websites are also available for employees to access environmental information.

Climate change risks and opportunities are reviewed on an ongoing basis by the GEI team. The team is responsible for monitoring business impacts from climate change-related issues (including regulatory changes, energy costs, customer/consumer preferences, and other sources), identifying opportunities or risks with the help of cross functional teams, and reporting these to their respective senior management, as well as to the News Corp corporate GEI committee.

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For printing and distribution operations that can be impacted from climate change and energy issues, there is a systematic evaluation process and dedicated personnel responsible to monitor, evaluate, and report potential risks and opportunities.

The GEI team reviews risks and opportunities each year to determine priority areas and assigns resources accordingly. The specific threshold for evaluating materiality and the related criteria are variable depending on the potential magnitude of impact, likelihood, and timeframe presented, as well as the aspect of the business that could be impacted. However, from a general perspective the company reviews each of these components for each risk presented and determines the appropriate response.

The GEI strategy – rooted in carbon measurement and mitigation of its operational impact – allows the company to take advantage of opportunities to lower costs of inputs, work with partners to reduce costs and generate new streams of revenue, attract and retain top talent, and build a reputation as a sustainability leader to support business objectives and make an impact on pressing environmental issues. Increasing regulatory and market pressures are also drivers of the company’s environmental strategy. The decentralized management structure and cross- divisional communication allows Dow Jones to leverage local expertise and experience and react quickly to changing dynamics.

A key focus of the initiative has been on improving the company’s own internal operations and on being as transparent as possible about the goals, actions, and progress that the company is making. This sustainability program is part of Dow Jones’ identity and a differentiator in the marketplace. In addition, as a new generation of employees looks to work for companies that are addressing their environmental impacts, failure to do so could impact a company’s ability to recruit and retain talent.

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CARBON REDUCTION

Dow Jones shares the details of its carbon footprint in a transparent manner, publicly reporting greenhouse gas (GHG) emissions through the Carbon Disclosure Project (CDP) via News Corp. The GHG emissions covers Scope 1 (direct emissions from gasoline, natural gas and diesel fuel usage), Scope 2 (indirect emissions from purchased electricity usage), as well as business air travel (Scope 3), in accordance with the WRI/WBCSD Greenhouse Gas Protocol.

Dow Jones has a robust program in place for collecting, measuring and analyzing its emissions data, and has developed a comprehensive repository of data with an enterprise data management software tool. The company has been voluntarily reporting emissions and energy data since 2007. The results of our carbon reduction projects are shown below:

In FY2015, Dow Jones’ footprint was 33,635 metric tons CO2e, a 48% reduction from its baseline FY06 year, and a 6% reduction from the previous year. The majority of our footprint is from electricity used in our print centers and offices. Our footprint via News Corp is third party certified.

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Some of the energy efficiency projects that were completed to reduce our carbon emissions include:

 Installation of variable frequency drives on roof top unit HVAC fans

 Installing new LED and other efficient lighting and occupancy sensors in our print centers and offices

 Continuing energy best practices such as minimizing lighting, heating, air conditioning and production equipment during unoccupied times

 Installing energy efficient variable frequency drives for chillers

 Compressed air efficiency improvements

 Forklift battery charging during off-peak times when electricity rates are lowest

 A Six Sigma project that analyzed the most efficient use of press motors at our plants

 Energy efficiency upgrades for our data center in Princeton, NJ

 Energy Star, 100% recyclable white membrane new roofs installed at two printing plants to reduce the cooling load on the facility. This roof is LEED-rated to radiate away 95% of the energy absorbed.

Dow Jones continues to invest strategically in sustainability, including in energy efficiency, energy measurement/tracking systems, and analyses of supply chains to find opportunities for improvement. Many of the energy efficiency projects completed at the company have an average payback of less than 3 years.

Due to the volatility of energy prices and the expectation of consistent cost increases, continuous evaluation of energy efficiency and renewable energy opportunities will continue as part of a long-term strategy.

The company’s process is already yielding some strategic advantages, and with a continuous improvement philosophy built into the program, it will continue to do so. Benefits include operational cost advantages, more efficient supply chains, and the opportunity to build sustainability intelligence into content for news and information media outlets. The company has also identified opportunities to generate revenue through new product deliveries, deepen partnerships with customers and suppliers, and make more meaningful connections with 9 customers.

For example, our Distribution & Delivery group reviewed its newspaper delivery operations and was able to eliminate redundant truck and airline routes in the U.S., partnering with third party delivery firms to use their existing routes. Dow Jones was able to remove 11 trucks in 2015 vs 2014, resulting in the reduction of 524,000 driving miles per year.

News Corp’s GEI committee continues to monitor possible physical changes attributable to climate change. Additionally, Dow Jones sites have in place Emergency Action Plans and business contingency plans.

The company does manage physical risk by preparing for potential disruptions to operations or to its supply chain. For example, print centers and newsrooms have backup power generators in the event grid power fails. The backup power plan can be used or modified to address increased climate related risks, as the physical aspects of climate change are more precisely modeled and understood.

During past years, disruptive phenomena highlighted the effect of extreme events on business operations, while disruptions to operations and employees caused by Superstorm Sandy highlighted direct business impacts of extreme weather. For example, weather-related missed deliveries have increased over the past few years, resulting in a 10.1% increase in missed copies in FY15 vs FY14. To the extent that any increase in frequency of extreme events can be correlated to a trend like climate change, there is a continued need to prepare for business disruptions.

Current investments in on-site renewable power production, such as the installation of the solar power system in New Jersey, will allow the company to meet at least some its power needs should there be a disruption to grid-supplied power, and in the interim helps the company deal with the financial impact of energy price volatility. Additionally, the company has various contingency and backup plans in case of physical risk or damage. As an example, critical data records are backed up at offsite locations and emergency communications plans are implemented in the event of extreme events.

Managing such risks requires consistent and effective communication. Measurement, disclosure, and improvement of the company’s own environmental impacts help form a strong reputational basis on which the company may engage externally. The company also engages through partners and industry groups on sustainability issues to drive improvement in the broader business community.

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WASTE REDUCTION

All Dow Jones owned Print Centers are “Zero Waste” facilities as defined by the Zero Waste International Alliance.

This means that at least 90% of waste generated at the facilities must be recycled or reused to be considered a Zero Waste facility. The plants raised the bar further by achieving a 95% average recycling rate for 2015.

All Dow Jones owned print centers recycle waste newsprint, used aluminum plates, end rolls, cores & wrapper paper, cardboard, scrap metal, wood skids, plastic drums, used fluorescent bulbs, batteries, computer and electronic equipment, and office paper, cans and bottles. The plant green teams also continue to review ways to change processes and eliminate the generation of waste, and look for alternate ways to recycle or reuse raw material in order to minimize waste entering landfills.

Our LaGrange GA print center recently conducted a waste audit, collecting 12 landfill bags of waste from 2 days’ worth of normal waste generation. The plant green team then began of the sorting process to remove items that can be recycled, and ended the process with only one half-full trash bag that was truly not recyclable – a 96% reduction!

The Zero Waste print centers are located in:

• Beaumont, TX

• Bowling Green, OH

• Bronx, NY

• Chicopee, MA

• Highland, IL

• LaGrange, GA

• Seattle, WA

• White Oak, MD

This achievement by the print centers not only helps Dow Jones achieve its GEI goals, but it also meets one of the business’s three goals to drive its business forward: rigorous cost management. Reducing waste reduces costs and creates a smart, efficient and green operational environment for print centers to succeed in providing quality products to Dow Jones’ customers.

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Our plants use soy-based inks for our Wall Street Journal and Barron’s newspaper products, which minimizes Volatile Organic Compounds (VOC) emissions into the air.

All computer equipment that is no longer usable at 2.5M LBS Dow Jones’ U.S. locations is recycled through approved Amount of computer waste recycled at Dow Jones through 2012 recycling facilities. A milestone was reached in 2012 when over 2.5 million pounds of computer

equipment waste was recycled since the inception of the program.

Our print centers have reduced hazardous waste to just 1% of the total industrial waste generated at its facilities.

News Corp has developed a new paper policy to ensure that paper is purchased from suppliers who use sustainable forest management practices. 70% At Dow Jones, 100% of all newsprint purchased for our newspapers is from paper mills certified by either FSC, SFI, PEFC, CSA, or equivalent. These considerations are of U.S. newspapers were recycled in combined with investments that are part of a larger 2012 (source: US EPA) sustainability and business strategy.

A waste management plan has been developed for our print centers and major offices to document procedures and best

practices.

“Characteristics of an excellent business recycling program are evident at Dow Jones… they 100% have a comprehensive and well organized recycling program in Percent of newsprint purchased by Dow place." Jones from paper mills certified by FSC, Montgomery County Maryland Department of SFI, PEFC, CSA or equivalent Environmental Protection, after awarding our White Oak Print Center the “Outstanding Recycler Achievement Award”

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ENGAGEMENT

Employees

Reduction activities are supported through numerous employee led initiatives. Through these local programs, employees are informed about the company’s overall environmental priorities and encouraged and empowered to take action locally. Several employee engagement programs recognize and reward successful ideas for emissions reductions activities in the home and workplace.

News Corp conducted a staff survey to evaluate their knowledge of the company’s sustainability initiatives, gauge employee preferences, and evaluate the effectiveness of the communications. 89% of News Corp employees reported that it is important for their company to reduce its impact on the environment. Hence, the company knows that effectively communicating about the GEI is critical to employee satisfaction and not meeting these expectations could affect turnover or other HR issues.

Effectively engaging employees is critical to the success of the GEI program. Not only can engaged employees help carry out many aspects of the program, but communicating the company’s commitment to sustainability and giving employees the opportunities to get involved presents an opportunity for recruiting and retaining talent who are increasingly looking for employers that share their values.

At Dow Jones, green recognition initiatives has been integrated into an existing employee reward program called ONE, with the first “ONE Goes Green” award announced in early 2015.

According to Gallup, businesses with the highest levels of employee engagement experience 37% less absenteeism, 25-50% less turnover, 60% fewer quality issues, 12% higher customer satisfaction, 18% higher productivity, and 16% higher profitability. Moreover, according to HR assessments, replacing a good employee costs companies 70- 200% of an employee’s annual salary, making retention a key financial driver.

Effectively engaging employees is critical to the success of the GEI program and can provide financial benefit through employee-led solution generation and implementation, and by reducing costs for employee recruiting and retention. Through these local efforts, employees are informed about the company’s environmental priorities and are empowered to take action locally. These programs provide tangible carbon reduction opportunities, and have played a significant role in fulfilling the company’s sustainability goals. Sustainability program details are utilized in recruiting efforts and materials as well.

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Carpool/High MPG priority parking lot spaces have been created at two of our major offices for employees who take the personal initiative in helping to conserve energy and reduce greenhouse gases.

Suppliers

Dow Jones works with its suppliers to measure the company’s environmental impacts and develop strategies to reduce them. The company has engaged dozens of suppliers for newspapers, and other important product categories to collect data, calculate life-cycle assessments (LCA), and address LCA hotspots.

For example, in 2008 the company conducted a carbon product life cycle analysis of the Wall Street Journal newspaper to aid in understanding the impact of the company’s operations and supply chain. We recognize that a large portion of our product manufacturing processes reside within our supply chain. The result was an analysis that begins with the harvesting of timber and ends with the disposal of the non-recycled percent of newspaper that decomposes in a landfill. The company found substantial emissions in the supply chain, principally on the production of newsprint. This data will help to focus our efforts on future reductions in GHG emissions.

As previously mentioned, Dow Jones purchases newsprint for our newspapers from paper mills 100% certified by either FSC, SFI, PEFC, CSA, or equivalent. In addition, our international contract printers were reviewed in 2016 and verified that they also purchase newsprint from certified mills. Dow Jones has also utilized high levels of recycled fiber in its newsprint for many decades.

Partners

Through working sessions and meetings, the company also consults with outside experts, non-profit organizations, industry peers and corporate sustainability leaders. Much like its engagement with suppliers, Dow Jones collaborates with partners in areas of highest impact. Industry partners offer an additional benefit of enabling improvement industry-wide. Therefore, engagement prioritization consists of high-impact categories where industry collaboration can scale and amplify success. As the company learns more about how to address its emissions, it continues to share lessons and best practices with business partners.

In the US, Dow Jones participated in the Environmental Defense Fund’s Climate Corps program, an innovative summer fellowship program that placed specially-trained graduate students in our Bronx, NY Print Center facility over the course of 3 summers to identify energy inefficiencies and reduce both carbon emissions and costs.

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Dow Jones believes that its environment strategy – rooted in carbon measurement and mitigation of its own operational impact – enables the company to strengthen relationships with its employees, business partners and readers. Specific to business partners, given the evolving sustainability requirements of companies that advertise through Dow Jones’ media platforms, a positive reputation on sustainability issues presents an opportunity for revenue generation.

Customers

Dow Jones has continued to take aggressive actions to reduce the impacts of its own operations and to connect with its customers on sustainability issues. These actions have helped build the company’s reputation as a leader on the topic, both in the corporate and the environmental/NGO communities, and are a key component of the company’s efforts to build its program on a platform of transparency and credibility. In addition, through programs and efforts like The Wall Street Journal’s annual ECO:nomics conference, the company has strengthened its reputation as a leader in sustainability among its customers.

As consumers become more aware of environmental issues and change their buying habits, the company has an opportunity to staying ahead of these trends; as customers shift from products with physical footprints, the company can gain an advantage by continuing to lead in the area of physical to digital media transformation. For example, the Wall Street Journal continues to increase its readership in the digital and social platforms, having reached 893,000 digital-only subscribers in March 2016, accounting for nearly 45% of all Journal subscribers. Our investment in and collective focus on digital and mobile helped Dow Jones reach an important milestone: digital now accounts for more than 50% of total revenues.

Dow Jones continues to face new customer requirements as they are increasingly asking for evidence of positive environmental and sustainability performance from their suppliers and partners. A growing number of advertisers want to partner with companies that are taking action on environmental issues. Other major advertisers have indicated that they will pull ad dollars from companies who do not have sustainability strategies aligned with their own. Building and maintaining a strong reputation by addressing its environmental footprint will continue to provide a positive impact on Dow Jones’ relationships with customers.

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SOLAR POWER

The 4.1 MW system at our Princeton NJ campus is one of the largest solar power installations at a single commercial site in the U.S. Its 13,000 solar panels cover nearly 230,000 square feet of parking space, and produce 5 million kilowatt-hours of electricity per year. Capable of supplying 50% the site’s energy needs during a sunny day, it supplies nearly 15% of the campus’s energy needs over the course of a year. Through May 2016, the solar installation has reduced over 19,000 tons of carbon emissions and $2.8M in electricity costs since its operational startup in 2011. This is equivalent to planting over 4,000 acres of trees or not driving over 41 million miles. Dow Jones was among the top 25 companies in America leading the use of commercial solar use as measured in the 2013 Solar Means Business Report. The 2013 Solar Means Business report is released by The Solar Energy Industries Association and Vote Solar Initiative and identifies major commercial solar projects and ranks America’s top corporate solar users. The Top 25 companies, ranked by installed capacity, also included Walmart, Costco, Kohl’s, Apple, IKEA, Macy’s, Johnson & Johnson, McGraw Hill, Staples, Campbell’s Soup, U.S. Foods, Bed Bath & Beyond, Kaiser Permanente, Volkswagen, Walgreens, Target, Safeway, FedEx, Intel, L’OREAL, General Motors, Toys “R” Us, White Rose Foods and Toyota.

Construction, Ceremonies & Quotes:

A groundbreaking ceremony at the Princeton campus was held in June 2010 with the late US Senator Frank Lautenberg of NJ, US Senator Robert Menendez of NJ, and Bob Martin, Commissioner of the New Jersey Department of Environmental Protection.

Calling it a demonstration that “a clean energy future is both possible and profitable” and “groundbreaking in every sense of the word”, U.S. Senators Frank Lautenberg and Robert Menendez of New Jersey praised Dow Jones’ solar energy project.

“I salute Dow Jones for its leadership. The company is demonstrating that a clean energy future is both possible and profitable,” Senator Frank Lautenberg said in his comments to nearly 1,000 Dow Jones employees gathered for the groundbreaking ceremony.

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“This will be one of the most outstanding examples of what America’s clean energy future looks like, and it will be yet another innovation in the long innovative history of Dow Jones & Company,” said Senator Robert Menendez. “We need to embrace the potential of a clean energy future, and it is through bold investments like this that we are doing so."

"Our dependence on fossil fuels hinders our state economically and hurts our environment," Commissioner Martin said. "Dow Jones' leadership in solar power is a significant step to a better energy future."

“Investing in solar power confirms our commitment to environmental responsibility. Dow Jones wants to be one of the companies making a difference,” said Les Hinton, former chief executive of Dow Jones.

“What makes this investment attractive is that not only are there meaningful environmental benefits but we also will see significant tax incentives and a substantial reduction in our annual energy costs,” said Stephen Daintith, former chief operating officer for Dow Jones. “New Jersey is a leader nationwide in supporting solar power installation, and we’re grateful for the support of the state as well as PSE&G and the township of South Brunswick for assisting us in sourcing alternative, renewable energy such as solar,” Mr. Daintith said.

“Dow Jones’s leadership position with solar energy is a real-world example of how this technology can make sense for the environment,” said Ralph LaRossa, PSE&G president and chief operating officer.

Discussing the "major commitment to the environment" made by Dow Jones and News Corp. at the solar christening event in 2011, Les Hinton, former chief executive of Dow Jones said: "(This) commitment to environmental responsibility pre-dates this system and extends beyond it. For decades, Dow Jones has aggressively strived to reduce waste, minimize hazardous emissions and optimize electric efficiency. These programs didn't begin with solar and they won't end there."

"If this solar installation stands for anything at Dow Jones, it should stand as a testament to a company with vision," Hinton said. "Dow Jones isn't waiting for the future. We are making it. We are pioneering profitable digital business models, and we are developing innovative technology to make information more accessible and more useful and ultimately more interesting." "Solar fits a company like this. It is consistent with a company that isn't limited by convention, a company that isn't afraid to lead the way," he said. In 2012, Dow Jones received an Environmental Stewardship award from the New Jersey Department of Environmental Protection for the solar project.

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ECO:nomics Conference

On April 6-8 2016, some of the world’s most influential leaders and experts in energy convened at the Bacara Resort & Spa in Santa Barbara, CA to attend The Wall Street Journal’s ECO:nomics Conference. Moderated by the Journal’s editorial team, the event featured interviews focused on how energy policy, sustainability and climate are impacting business today.

ECO:nomics 2016 kicked-off Wednesday afternoon with a boat excursion around Platform Holly, an oil and gas producing rig, located just off shore from the Bacara. The tour was led by a geologist from Venoco, the company which operates the rig, and a noted microbiologist from the University of California at Santa Barbara. The conference continued into Wednesday night with an opening dinner and evening program featuring Ban Ki-moon, United Nations Secretary-General, and Mark Fields, President and CEO, Ford Motor Company.

Other notable speakers included: Sheryl Corrigan, Director of Environmental, Health and Safety, Koch Industries, Inc.; David Crane, President and CEO (2003-2015), NRG; David T. Danielson, Assistant Secretary, Energy Efficiency and Renewable Energy, U.S. Department of Energy; Thomas A. Fanning, Chairman, President and CEO, Southern Company; Lynn J. Good, Chairman, President and CEO, Duke Energy; Joe Manchin, U.S. Senator, (D., W.Va.); Kevin McCarthy, U.S. House Majority Leader, U.S. Representative (R., Calif.) and Gérard Mestrallet, Chairman and CEO, ENGIE.The conference was sponsored by PPG and Siebel Energy Institute.

To find out more, visit http://economics.wsj.com/. A Wall Street Journal special report on the conference is provided on the next few pages.

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JOURNAL REPORT

© 2016Dow Jones & Company. All Rights Reserved. THE WALL STREET JOURNAL. We dnesday, April 13, 2016 | B5 Ford’sRoad Map To the Future The FutureMay Be Clear.The Path Isn’t. Chief ExecutiveMark Fields gets Weaning the world off coal, doubling down on renewablesand investing in breakthrough ready fordriverless cars technologiesthat canhelp stopclimate change were hotly debated topics last week The auto industry has been un- ple getting into the business. at The Wall Street Journal’sECO:nomicscon- dergoing aremarkable transfor- You’re seeing car sharing. Tell us ference in Santa Barbara, Calif. mation—and it’s only the begin- how you are preparing. At the annual gathering, environmentalists DOW JONES ning. Energy prices and atough MR. FIELDS: We’regoing to disrupt S/ and energy experts sparred over lofty envi- regulatory environment are com- ourselves.Wehavethis core busi- TO ronmental goals as well as the current reali- plicating product planning. Elec- nessofdesigning,developing, tiesoffossil-fuel demand. Cannatural gas re- tric motors and autonomous driv- manufacturing,marketing and place enough coal-fired power generation to

ing systems may redefine how servicing and financing great cars, GENESIS PHO clear the air of carbon emissions?The Sierra people move around. utilities and trucks.But also we Club’s Michael Brune thinks not. To get aglimpse of how car see these emerging opportunities MR. FIELDS: Youcould saythere The electric company? Energy banker Jeffrey Holzschuh of Mor- makers are navigating this uncer- around what we call smart mobil- would be lessvehicles sold, but MR. BAKER: Does Elon Musk keep gan Stanleypredicted solar power will over- tain environment, TheWall Street ity.Wewant to lead in specific ar- we’rechanging our business you awake at night? take wind. But he warned that better battery Journal’s Gerard Baker spoke with eas around autonomous vehicles, model to look at this as vehicle MR. FIELDS: They always ask me, storage of electricityisneeded to truly ce- Ford Motor Co. Chief Executive around the connected carasitbe- miles traveled. And when youlook “What keeps youupatnight?” ment green power in the U.S. energy mix. Mark Fields.Here are edited ex- comes part of the Internet of at it that way,itchanges your Nothing. Iamdead tired by the Koch Industriesdefended itsenvironmental cerpts of their discussion. things, around mobility,ride shar- mind to think about what kind of time Iget to bed, because Ilove record. And U.N. Secretary-General Ban Ki- ing, car sharing, around data and services canweoffer via our what Ido. But clearly,wetakeour moon said that while the Paris climate talks Tough terrain analytics and how we can antici- products. I could argue that with competitorsveryseriously.When held in December were flawed, theywerethe MR. BAKER: We’re seeing an ex- pate customers’ needs. autonomous vehicles,the actual you look at the level of competi- best outcome that could be hoped for and a traordinary transformation of the mileageonthose vehicles will ac- tion we have from traditional and necessary steptowardcombating the top auto market. We’re talking about MR.BAKER: What are you doing to cumulatealot morethan aper- nontraditional competitors, we’re threattohumanity. “This is not the end,”he electrification and autonomous prepare for an age when ahuge sonally owned vehicle,plus the embracing that. said. “This is the beginning.” driving. And we’re seeing compa- amount of carmobility may be servicing.That could actually be a —Lynn Cook nies like Google and possibly Ap- done through sharing? bit of an offset. Please see FIELDS page B6

Change on Wheels | Auto executives increasingly see big changes in the industry soon INSIDE

Howlikely is amajor business-model disruption in the next 5years?How much will legislation and regulation Percentage rating each trend influencethe developmentofthe industry? extremely important Ban Ki-moon on the Paris accord’s fate, B6 2015 54% Average Low or no influence Connectivityand digitalization Michael Brune’senergy optimism, B6 2016 influence 50% 2% 43% Hybrid electric vehicles Lynn Good looks intothe futureofcoal, B7 50% Battery electric vehicles Sheryl Corrigan defends Koch Industries, B8 32% 28% 17% 47% Very high Thomas Fanning and David Crane differ on influence Market growth in emerging markets 46% clean-energy strategiesfor utilities, B8 29% 15% 14% Fuel-cell electric vehicles Jeffrey Holzschuh and Douglas Kimmelman High 45% 9% outline their investment portfolios, B9 influence Mobilityasaservice 3% 3% 1% 51% 42% Lynn Jurich and To mWarner on solar, B9 Extremely Somewhat Somewhat Notlikely Neutral Customer data/big data likely likely unlikely at all 41% Plus: Anne Finucane,Rep.Kevin McCarthy, Source:KPMG survey of 800 autoexecutives world-wide, conducted online between July and November 2015 THE WALL STREETJOURNAL. Sen. Joe Manchin and Alan Armstrong B6 | We dnesday, April 13, 2016 THE WALL STREET JOURNAL. JOURNAL REPORT | BUSINESS & ENERGY

‘Everybody knows which Carbon Compact country is doing what and Ban Ki-moon on enforcing the Paris Agreement how much they are doing.’

One of the biggest events of largest emitters of the world: member states will have an the past year in energy and en- China and U.S. They agreed opportunity to verifywhich vironmental policy was the that thereshould be an agree- countryhas done howmuch. Paris climate talks. More coun- ment, and we worked and This is an obligatory clause. tries than ever have pledged reached out to manycoun- significantcarbon cuts. Yet in tries. [It] was very positive. MS. STRASSEL: But for China, many people’s views, those maybe it was alittle bit easier pledges fall far short of what a MS. STRASSEL: Some would to agree to its targets; its lot of scientists say is necessary. saythere is no enforcement economy has slowed, its de- United Nations Secretary- mechanismtomake any of mand forenergy has slowed. General Ban Ki-moon sat down this happen. What do you say But in five years, let’s say that with Kimberley Strassel, a to critics who say this is more has changed and the amount DOW JONES (2)

member of The Wall Street of afeel-good agreement than of carbon emissions have gone S/ Journal editorial board, to dis- aconsequential way of reduc- up and they’re not hitting the TO cuss the future of climate di- ing carbon? targets. What does the U.N. do plomacy. Edited excerpts of MR. BAN: This is an interna- about it?

their discussion follow. tional agreement; thus,it’s MR. BAN: Everymember of the GENESIS PHO obligatory. It’snot that all the Paris Agreement will have an Paris and after clauses,all the articles,are interest to abide by their agree- mechanism? countries owed trillions. Do MS. STRASSEL: But it is. MS. STRASSEL: The U.N. was obligatory. But core elements ment. These areverystrict MR. BAN: Yes. We arenot go- you think industrialized coun- MR. BAN: Unfortunately.I’m notactually there doing the are. Forexample,the national peer reviews.Every year there’s ing to shame,but everybody tries are willing to do that? concerned. But Idoappreciate negotiations in Paris, but you targets, Intended Nationally aUNFCCC meeting [U.N. knows which countryisdoing Andhow important is that President Obama’sstrong com- got called in at the last minute Determined Contributions,are Framework Convention on Cli- what and how much they are piece to making this happen? mitment. to make afew countries fall in not binding.But everyfive mateChange] to reviewall this. doing.Everybody has an inter- MR. BAN: Theinitial promise by He knew that, with all this line. years, this will be monitored But everyfiveyears, there est to fully comply. the OECD countries and big de- opposition of theRepublican MR. BAN: Iamverygratefulto and reviewed, and in 2018,the would be four-month review- veloped countries wastopro- Party’s stance, he may not be President Obama and Presi- parties will gather to review and-reporting sessions,and MS.STRASSEL: The U.N. has its vide $100 billion by 2020.Un- able to have all this legally— dent Xi Jinping fortheir lead- what happened from 2015 un- therefore, fortheir ownna- Green Climate Fund, with a fortunately,the firm through alegal process. But he ership and strong commit- til 2018. From then on, every tional economyand the world goal of I think $100 billion by commitment has not been also has executivepower. He ment. Basically,itwas the U.S. five years there will be moni- economy, everycountryhas an 2020.But the India environ- made.Ithas been pushed back will do whatever he canunder and China who really helped toring and reporting.This is interest to keep their promise. ment minister said that if you until 2020.When it comes to his executive power. [make] this Paris agreement mandatory. And thereismuch, want developing countries to 2020,therewill have to be a possible.These arethe two much morepossibility that MS. STRASSEL: So ashaming get on board, industrialized firm commitment, as well as a MS. STRASSEL: Do things fall road map,framework,how apartinternationally if this $100 billionper year will have continues to be stalled?

to be provided to developing MR. BAN: It has given acertain

✕✁ ✏ ✂ ✄ ✂ ✁ ☎ ✁ ✆ ✗ gn of y countries.After that, there negativewavetothe interna-

Percentage in ✝✞✟ ✞ saying: Attitudes toward climate change differ markedly by region around should be morethan $100 bil- tional community.But Ibelieve the world and by political affiliation in the U.S. Global climate change is avery Support limiting greenhouse- lion. President Obama’sassurances serious problem gas emissions Percentage*saying climate change is avery serious problem that he will do whatever he can Republican 82% 72% Supreme concern do under his presidential exec- Latin America 74% Independent 68% MS. STRASSEL: The U.S. has a utivepower. 50% Democrat 41% plan to reduce emissions by Africa 61% 28%. It went to delegation after MS. STRASSEL: President 20% delegation and said, “Look at Obama said climate change Europe 54% our commitments, look at the was a bigger threat than ter- president’s climate plan.” But rorism. Do you agree? Very concerned thatclimate Climate change is harming the plan is now mired in the Su- Longer term, it is a Asia/Pacific 45% change will harm me personally people now MR. BAN: preme Court. How much does it much, much moreserious is- U.S. 45% concern you that one of the sue. Of course, terrorism, ex- 53% leading things that got this tremism must be defeated. But 42% 42% done is now uncertain? look at the consequences.Ter- Middle East 38% 30% 24% MR. BAN: As the largest econ- rorism terrifies the people of 12% China 18% omyinthe world, Ibelieve the world, but climatechange that this climatechangeissue does not respect any borders. *Regional medians, except for U.S. and China should not be asubject of a It affectsawhole humanity,it Source:Pew Research Center's Spring 2015 Global Attitudes Survey of 45,435 adults in 40 countries, conducted in person and by telephone, March 25 to May27, 2015 THE WALL STREETJOURNAL. political debate. affects our planet Earth.

MR. BRUNE: Iam. We’recon- it’s allowing companies to re- serious proposal, particularly fronted with two realities place coal? You’re not afan of in the U.S.,toscale up nuclear The SierraClub’s View which aregoing to happen al- natural gas. power in any way that would most no matterwhat. Climate MR. BRUNE: Thereduction in make a big difference. I don’t changewill continue to get coal is coming from a variety agree that nuclear power is a Why Michael Brune is optimistic about worse. We’realso seeing the of factors, asignificant part of real solution. growth of clean energy.We’re whichisthe lowpriceofnatu- combating climate change starting to see renewables dis- ralgas.Soour goal is to phase MR. GOLD: You probably heard placefossil fuels,starting with outofcoal as quickly as possi- Sheryl Corrigan of Koch Indus- coal. That will accelerateal- ble and use as little natural tries say that Charles Koch be- ‘We’re confronted with most no matterwhat. I’m opti- gas as we can in doing so. lieves climate is changing and two realities which are mistic because Ithink that to- Theclimateimpact of burn- humans have apart in it. gether we cansolvesome of ing gasishalf that of coal. What are your thoughts on going to happen almost ourbiggest problems.Isee However, the amount of fugi- that? no matter what.’ countries coming together on tivemethanes that come both MR. BRUNE: Koch Industries averylarge scale to address at thewell head and from and the Koch brothershave what’s being done. transmission and distribution been funding some of our is so significant that it nar- toughest opponents. They MR. GOLD: You introduced civil rows the differencebetween have been putting millions of disobedience to the Sierra gas and coal. dollarsbehind candidates or Club. Why was that necessary? on issues that aremaking it MR. BRUNE: We engaged in MR. GOLD: The Sierra Club has difficulttosolvethe world’s civil disobedienceonthe Key- said for many years it’s op- biggest problem. stone XL Pipeline because at posed to nuclear. Why can’t Thefact that we have one the time, it was an important you support nuclear? executive who makes a state- issuesubstantively and sym- MR. BRUNE: TheSierraClub ment that showsthat this is bolically,and it needed to be hasbeen opposed to nuclear part of aproblem to be solved, elevated. It needed to have powersincethe late’60s for it’sgreat. I’dlovetosee the moreattention, morefocus on concerns about safety,storage $900 million that the Koch it. We mayengageincivil dis- of radioactivewaste, etc. If brothers are putting into this Are government and indus- with Michael Brune,executive started your speech by asking obedienceonvoting-rightsis- therewas an actual debate election notgointofunding try doing the right things to director of the Sierra Club. the audience whether they felt sues because we depend on a aboutnuclear powerinthis candidates who don’t believe fight climate change? What What follows are edited ex- governments and corporations healthyand thriving democ- country, and if you had finan- climatechangeexists, who can they do better? cerpts of their discussion. were going to be able to re- racy in order to address envi- cierswho really were going to don’t think that humans have To get an insider’s view of spond to the challenges of cli- ronmental issues. put serious money behind nu- anyrole and arespending the question, The Wall Street MR. GOLD: Isaw aspeech that mate change. Are you optimis- clear power, then it would be a hugeamountsofmoney de- Journal’sRussell Gold spoke you gave on YouTube, and you tic? MR. GOLD: Shouldn’t we be cel- different question. It is not an stroying the world that my ebrating natural gas because activequestion. Thereisnot a kids are growing up into.

our nameplates around the youinyour lane,that will Fields world will be electrified. alert youabout traffic,that will adaptyour speed. We’re ECO:NOMICS Continuedfromthepriorpage MR. BAKER: Some of your com- one of the leadersinthat MR. BAKER: But he does seem petitors, most notably GM, space. That waswhat they call to have somethingofahead have made some pretty big, level zero through three, start here. splashy investments them- where the driver has to be in MR. FIELDS: I would disagree. selves. Billion dollars, I think, control. Then there’slevel What he’s done with Tesla has on cruise automation,half a four, where the driver or pas- TheWall Street Journal thanksthe sponsorsof been amazing.The biggest billion dollars in Lyft, the ride- senger does not need to be ECO:nomics 2016 fortheir generous support. benefit he’sdone is raise the sharing company. You haven’t prepared to take control. That awareness of electrified vehi- gone down the same route. is what we’re working on. We cles.Now,his companyhas ca- MR. FIELDS: We formed Ford will have by some time this teredtoaveryaffluent con- Smart Mobility LLC acouple year the largest autonomous- sumer. Our approach [is that] of weeks ago. Our business vehicle testing fleet. we have one of the largest se- thereistodesign, build, grow lections of electrified vehicles. and invest in mobility solu- MR. BAKER: How close are we We’rethe No.2seller in the tions.Onsome things, we will to autonomous vehicles being U.S. in electrified and No. 1 in do on our own, in others, we available, driven on our roads, plug-in hybrids. We’re invest- will partner with others. carrying our children around? ing another $4.5billion, so by MR. FIELDS: Level-four vehi- the end of the decade, 40% of MR. BAKER: On autonomous cles—[which operate] in ade- driving, tell us more about fined area that’sbeen 3-D what you’ve invested in, what mapped—wethink that some- you might be looking to do. body in the industrywill have ECO:NOMICS VIDEOS MR. FIELDS: We’vebeen work- by the end of the decade.

ing on autonomous vehicles Alevel-fivevehicle,which

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‘The enthusiasm around The Futurefor Coal carbon capture and sequestration was Lynn Good on why coal is being phased out, probably greater before and what needs to be done to replace it the shale-gas discovery.’

Lynn Good is the chief exec- questration [of carbon], and at Carbon capture for gas? utive of DukeEnergy Corp., this point we don’t have avia- MS. HARDER: Former NRG En- the U.S.’s largest power pro- ble technologythat is eco- ergy CEO David Crane said ducer and one of the country’s nomic forthat. So you’retalk- that if we’re going to achieve biggest coal burners. With ing about extending lives of this 2-degree limit in tempera- global leaders increasingly existing plants, and those eco- ture rise that the scientists say calling for the phaseout of nomic decisions become very we need, carbon capture needs

coal due to environmental con- challenging when gasischeap to succeed. Do you agree? (2) cerns, she sat down with Wall and renewables are available. MS. GOOD: Ibelievethat forus Street Journal energy reporter to meet the broader aspiration Amy Harder to discuss the ex- MS. HARDER: President Obama around climate, carbon cap- DOW JONES tent to which that is economi- and the secretary-general of ture is going to be important, S/ cally feasible. theU.N. have called climate and Iwould also arguethat TO Here are edited excerpts. change the biggest problem nuclear is important. Of facing humanity.Asthe CEO course therewill be technolog-

The impact of gas of amajor utility company, do ical breakthroughs—I think GENESIS PHO MS. HARDER: In 2005 Duke En- you believe you share in a re- batterystorage is something ergy’s coal generation was sponsibility to address climate that we all have some hope in. still being a fossil fuel that is motely on your mind or in some carbon captureand sequestra- nearly 60% of its [power gen- change? We have probably six or eight emitting carbon, albeit at a of the R&D that’s going on? tion into that analysis will be eration] mix. Today that’s MS. GOOD: Ilook at my respon- pilotsourselves,trying to put moremodest rate,and nuclear MS. GOOD: It is. anaturalevolution. And I down to 35.3%. Andin2030 sibility as serving about 20 battery technologytowork having the challenges that it think there’ssome infrastruc- you predict it will be 23%. million people in the U.S. with with renewables and other has with building and financ- MS. HARDER: How costly would turethat’sgoing to go with That’s abig drop in ashort affordable,reliable,safeand parts of our system. ing new plants, I would agree something like that be? that—capture and movement time. What is driving the shift? clean energy.And so youthink But I think we need to rec- that if we’regoing even MS. GOOD: We are still study- to geological formations or MS. GOOD: Over the last 10 about that responsibility 24/7, ognizethat running a24/7 deeper and deeper in carbon ingthat. Idon’t have aquot- others that would makethat years, we have had atargetof these lightshavetowork all powersystemrequires 24/7 reductions that larger-scale able figure for that, but actu- feasible.Wehavedone some lowering our carbon emissions the time and have to work for power. And the options we 24/7 solutions need to be a ally Ithink thereare afew studieswith the Energy De- consistently through invest- 20 millionpeople.And so cer- have todayfor 24/7 powerare part of the discussion. people in the audiencewho partment on wherethe geol- ment. Thetransition has tainly environmental responsi- nuclear, natural gas and coal. arelooking closely at that ogyworks.Not very good in largely been driven by invest- bility is apart of my responsi- And if youthink about coal as MS. HARDER: What about car- technology. As we think about theCarolinas,betterinthe ment in natural gas. So if I go bility,but so is affordability, being phased out over time, bon capture for natural gas? Is the transition from coal to Midwest. So that hastobe back to 2005, no natural gas. so is reliability,soissafety. youthink about natural gasas that something that’s even re- natural gas, Ithink putting part of the discussion, as well. And then todayitrepresents And so youlook at all of those about 25% of our mix.We’ve thingstogether,and Ithink I also been investing in renew- have to be at that intersection. ables since2007 and today operate one of the largest re- MS. HARDER: Southern Co. CEO newable fleetsand have driven Tom Fanning had some pretty North Carolina into a leading critical words for carbon cap- position in solar penetration. ture and sequestration in the last panel. He said he doesn’t MS. HARDER: What would you think it’s going to be economic say is the single biggest driver here in the U.S., given cheap dragging down the U.S. coal natural-gas prices. Do you industry? agree? MS. GOOD: Natural gashas MS. GOOD: Theenthusiasm been agame changer.Ifyou around carbon captureand se- thinkabout the discoveryof questration wasprobably shale and the low natural-gas greater beforethe shale-gas prices that we’veexperienced discoveryand the lowprices from the harvesting of that re- were so prevalent. And I source,it’shad an extraordi- would step back again to the naryimpact on the economy pragmatism of an investment at large and certainly on the in carbon captureand seques- Advancingthe Science generation of electricity.I tration, or retiring an [existing would also put aweakening coal-fired] plant and building economygenerally and world- natural gas and renewables. I of SmartEnergy wide as another driver around also think that as a nation we coal. At one point over the last haven’t invested as much in many years there was a lot of research and development hope and interest in the ex- around [carbon capture] as we porting of coal. Of course,that have other technologies. hasn’t materialized. MS. HARDER: How much are With some of the greatest minds in engineering and computer MS. HARDER: Do you ever envi- youinvesting in carbon cap- sion afuture, whether it’s ture and sequestration now? science, the Siebel Energy Institute pushes the boundaries of 2050 or 2100, when coal will MS. GOOD: Modest invest- be next to 0% electricity here ments. innovation to address today’spressing energy challenges. in the U.S.? MS. GOOD: Icertainly think MS. HARDER: And where do we’removing in that direction. you see that going over the Under the rules that exist to- next 10 years? day, youcan’t build anew coal MS. GOOD: Iwould saystaying

plant without captureand se- about the same or going down.

✿ ❀ ❁ ❁ ❂ ❃ ❀ ❄ ❅ ❆ ❆ ❇ If all goes as planned, this will be the firstyear thatsolar power accounts formorenew utility-scale electricity-generating capacityin the U.S. than anyother source Scheduled capacity

additions for2016

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37%

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✣✜✥ ✦✧

✱ ✲ ✳ ✹ ✸ /1% Wind 26%

Source:U.S. Energy Information Administration THE WALL STREETJOURNAL. The Siebel Energy Institute funds research grants in data analytics, VOICESFROMTHE CONFERENCE including statistical analysis and machine learning, to accelerate advancements in the safety,security,reliability,cost efficiency, and environmental integrity of modernenergy systems.

www.SiebelEnergyInstitute.org

ADVISORYBOARD

‘We saw a business here and, from a public-pol- icy point of view, we see the future as going greener. I think the world is moving in that di- rection. And you have almost 200 countries making a commitment. Even if they fail at their commitment, they’re moving in this direction. The Siebel Energy Institute is aproject of the Thomas and Stacey Siebel Foundation. We see business.’ All research results will be shared in the public domain. Anne M. Finucane, Vice Chairman, Bank of America B8 | We dnesday, April 13, 2016 THE WALL STREET JOURNAL. JOURNAL REPORT | BUSINESS & ENERGY

company mandate and this company philosophy? The Koch Perspective MS. CORRIGAN: We arenot per- fect. But Iwill tell youthat when we do have issues,or Insider Sheryl Corrigan defends the company’s environmental record when we do have incidents, we trytodoour best to meet the Koch Industries is one of business in the United States is expectations of the folks that the largest—and most contro- oversubsidized. And yet, etha- we serve as customers and in versial—private companies in ‘We lobby to get rid nol, heavily subsidized by the our communities. And we try the world. Maker of awide ar- of mandates and government, is a big business to learn from them. ray of products, including Di- for Koch. How do you square xie cups, pipelines and refined subsidies that that circle? The climate question oil products, Koch has drawn actually, in some MS. CORRIGAN: We buy busi- MR. BUSSEY: The environment fire forits massive contribu- nesses likeethanol and biodie- has been aflashpoint in the tions to conservative causes cases, benefit us.’ sel because we areconvinced, reputation of Koch publicly— and concerns about its record based on our analysis of the Charles being ambiguous on environmental safety. business, that those products about to what degree humans To get an insider’s view of can stand on their own with- have arole in climate change. the company, The Wall Street out asubsidy or amandate. He acknowledges that things Journal’sJohn Bussey spoke Something that folks might areheating up. But he says, with Sheryl Corrigan,director not understand about ethanol “Look, youknow, maybe not of environment, health and is that it is averyefficient ox- humans.” What is Koch’s posi- safety at Koch and aformer ygenator.And it also increases tion on climate change? pollution-control commis- the octane of gasoline proba- MS. CORRIGAN: Ithink Charles sioner in Minnesota. Here are bly better than the chemicals has said the climate is chang- DOW JONES (5)

edited excerpts of the discus- S/ that have been used in the ing. So the climateischang- sion. TO past. So we believethat mole- ing. I think he’s also said, and cule formolecule,and gallon we believe, that humans have The big principle forgallon, ethanol cancom- a part in that.

MR. BUSSEY: Tell us what you GENESIS PHO pete with the next-best alter- I think what the real ques- do inside the company, and nativefor oxygenatorsand tion is,and Ithink it’ssome- how you would articulate the making the stuff that youand objective to minimize waste, to for50% of our energy require- also for octane enhancers. thing that we’ve talked about company’s guiding principles Iuse everyday.What makes increase profit. But your argu- mentsthere. Our philosophy pretty much allday todayis, that you think that the rest of us unique is that we do that in ment is that it intersects more is,around the wasteminimiza- MR. BUSSEY: Not aproblem what arewegoing to do about the world doesn’t know about, aprincipled way and in away closely with the environmental tion, taking everymolecule, that it’s heavily backed by the it? Right? What is theright that you think are elements of that really is focused on mini- concerns of your customers everybit of rawmaterials that federal government and tax- answer? the culture that they should be mizing waste. We’vebeen than they might think. we bring intoour processes payer dollars? I’mabaseball fan. Just by informed about. practicing sustainability for75 MS. CORRIGAN: I think a great and upgrading that to avalue- MS. CORRIGAN: At Koch Indus- association, I’m aYogi Berra MS. CORRIGAN: Iwas aregula- years as part of our business example is we’reanenergy added product. So that’sthe tries,weactively lobby against fan. So there’sagreat quote tor. And Istarted with Koch philosophy. We just haven’t company, we have an energy whole mind-set of pretty much subsidies.Welobby to getrid by Yogi Berra: “It’simpossible Industries about 10 years ago called it sustainability. We’ve subsidiary. And since 1997, so everyone that works in our of mandates and subsidies to getaconversation going now. What Ilearned from called it long-term value and we’vebeen at this forawhile, company, from the folks at the that actually,insome cases, because everybody’s talking so looking at the company from minimizing waste. Iwould we have reduced our air emis- production floor,all the way benefit us. much.” What I think needs to the outside in is,it’sacom- venture to guess that not too sions at our refineries by 76%. up. happen and what our company panythat is very principle- manypeople knowthat about So that’s a pretty big bite out MR. BUSSEY: Koch got is really focused on is,we based. us. of our emissions. MR. BUSSEY: Koch is in the eth- slammed for instances of vio- want to makesurethat the So our philosophy, our busi- Likewise,atour Georgia-Pa- anol business. Charles Koch is lations with the EPA. How policies andthe actions we nessphilosophy, talks about MR. BUSSEY: It is abusiness cific company, we use biomass very clear that he believes that does that square with this take are good for people.

wooden poles.It’sshocking that we could be this obsolete. TwoUtilities,Two Approaches But everyutility in the coun- tryexcept one,Green Mountain Thomas A. Fanning and David Crane on their different strategies for cleaner energy PowerinVermont, is fighting the market penetration of peo- portfolio work.Inthe compet- ple making their ownelectric- itive[market forenergy]di- ity. That’swhy,ifyou have an versification of portfolio industrythat’sbased, “Oh, doesn’t necessarily work. En- we’regonna givethis company ergy has usually been awin- amonopoly and hope that they ner-take-all business. And do the right thing by the cus- right nowinthe U.S.,the win- tomer,” that’snot going to be ner-take-all is natural gas. thebest approach. One of the thingsweshould MR. FANNING: Tomand Iare be talking about is the role the great friends,wereally are. utilities areplaying in snuffing He’sdead wrong.Southern out distributed generation. Co., actually our largest sub- Thepremise [put forth by sidiary, Georgia Power, was Tom] is that acentral grid named by the solar industryas system is only as strong as its the investor-owned utility of weakest link.We’retalking the year by the solar industry. about an economy we built in Youwant to buy rooftopso- theU.S.built off 130 million lar? Iamglad to sell it to you.

Thomas A. Fanning (left) ercise from time to time where Nuclear,weare leading the re- and China plants. Idon’t think and David Crane we really trytothink about naissanceinnew nuclear.If post-combustioncarbon cap- VOICESFROMTHE CONFERENCE howmuch changeisout there. the countryisserious about ture,asit’sdone,with atech- Utilities have gone through It is up to us,asleaders, to carbon, we need nuclear in the nologythat’sborrowedfrom huge dislocations and disrup- kind of see around the corners. mix. It’s really hard to do nu- the chemical industry, is going tions in recent years, and big We’vemoved in our energy clear. Our deal, if you include to getitdone. financial bets are being made production: Coal, before I got all capital costsand all financ- We need adisruptive as they position themselves for there, 70%; coal this year will ing costs: $15 billion over 10 change. Overall, Iwould tell energy markets of the future. be 28%. Gas back then was years. Coal, we all knowthat youthat Ibelievethis country, Wall Street Journal Global En- 15%, 16%; nowitisgoing to be coal is under pressure. We de- the world, will win the fight ergy Editor Elena Cherney about 50%. We’vedeveloped veloped this technologywhere against climatechangebytak- talked to two key players with our own technology that pro- we canactually consume coal, ing the carbon out of fossil fu- divergent approaches: Thomas duces lesscarbon than natural gasifyit, capture65% of the els beforeitwins the war A. Fanning, chief executive of gas. Renewables,we’removing carbon and moveon. We’ve against climatechangeby Southern Co., and David forwardinabig way on solar, taken our lumps on that deal. making the world an all-renew- Crane, who until December particularly,and some wind. That deal,probably,because able plus battery-storageplace. was CEO of NRG Energy Inc. Energy efficiency, we just an- gasissocheap right now, isn’t MR. FANNING: Nuclear abso- Edited excerpts of theircon- nounced areally important ac- going to happen elsewhere in lutely needs to be part of the versation follow. quisition, PowerSecure Inter- the U.S. But I’m darn surethat portfolio, and in the portfolio national [a provider of there’sagreat market forit it’s cost effective. Letmeex- MS. CHERNEY: You both took distributed generation, giving around the world. plainthat. Theenergy from ‘The No. 1 thing I’d want to have happen is to very different approaches to powercustomersmorecontrol ournuclear plant that we’re bring common sense back. Do not allow one transitioningtocleaner en- over the energy they use]. MS. CHERNEY: David, can car- building in Georgia is going to individual or one agency to pick what’s going to ergy.David, you told me you The whole notion is to un- bon capture be made to work be the equivalent priceof were firedbyyour board at derstand really howthis commercially in the U.S.? about $1 per million BTU. Now, happen. I don’t think that’s productive for any- NRG for being too radical. You model will evolveand tryto MR. CRANE: First, Tomand gas is really cheap right now. body. And it’s better to have all voices at the also said that you wished you skate to where that puck will Southern Co.should be com- Thequeryishow long will gas table. And then let’s base things on science. had been more radical. What be.Ifyou do it in kind of a mended forwhat they’vedone remain at that price. Base it in reality, common sense, and make it did you mean? transparent, orderly way, you with nuclear and with pre-com- Think about stock owner- MR. CRANE: Thereare roughly don’t have this notion of dis- bustion carbon capture. But ship as youbuild your ownper- sustain itself based upon science.’ 55 powercompanies in the U.S. ruption. You have a notion of they’veessentially demon- sonal portfolios.You buy some Kevin McCarthy, U.S. House Majority Leader that producemost of the gener- natural evolution. strated that those two technol- stocks that arereally secure. (R., Calif.) ation.In2006,when Ibecame ogies arenot cost effective. We Then youwant to have some very sensitized to the carbon MS. CHERNEY: Also, you’re cannot affordfor post-combus- stuffthat’skind of riskyand issue,Ilooked at the carbon in- building anuclear facility. Not tion carbon capturenot to be morevolatile.Maybe it’sgot a tensities of the 55 companies. alot of people are doing those cost effective. If we’regoing to long-term return potential. We were 54th, or second-most things. Where do you see that win the fight against climate When youthink about con- VOICESFROMTHE CONFERENCE carbon intense,and the one mix going? change, it must succeed in that structing an energy portfolio that wasahead of us,Mirant, MR. FANNING: All of the above. regard when youinclude India that has gottoachievethe bal- we ended up buying. anceofclean, safe, reliable,af- Iwent to the boardand fordable,itisabsolutely clear. said, “Look,it’sunlikely that Natural Progression Now, there’satemporal feature the world’s going to allow us Natural gas nearly overtook coal lastyear as the most common here. It will changeovertime. to [continue to] do this.” source of electricityinthe U.S. But it is adominant solution to So we started on renew- build nuclear—relatively high ables. We tried to build a nu- U.S. utility-scale electricitynet generation by selected sources, capital cost, very cheap energy, clear plant, because I’m a big in billions of kilowatt hours zero volatility,essentially.

believer in nuclear as a zero- ❈❉ al Natural gas Nuclear Hydroelectric*, It looks likecoal is winding carbon source.But Ifound solar and wind down.Renewables become that youhad to talk about that 2,000 much moreimportant. I’veal- to motivateanemployeebase 1,800 waysbeen afan of solar.The that wantstobasically do 1,600 bridgeinthe middle is gas. Ev- what it has always done.So 1,400 eryone of those has adifferent one of the reasons Iwas so 1,200 risk/return profile,adifferent ‘We’re realistic enough to know what renew- outspoken wastomotivatethe 1,000 capital and energy mix,and as ables will do and what they can’t do. They can’t employeebase,and ultimately 800 aportfolio,they work. give you base load power. They can’t give you that made me abit of acon- 600 troversial figure. MS. CHERNEY: David, do you reliability 24/7. Not yet. Nationwide…But today, 400 agree? you got three months of coal sitting here. I can MS. CHERNEY: Tom, you took a 200 MR. CRANE: In the sense that give you three months of power. Yo u’ve got re- different approach. You de- 0 he has to gethis cost basis actors,I can give you nuclear power. Other than scribed it as amore natural passed through the public ser- 2006 ’07 ’08’09 ’10 ’11’12 ’13 ’14 ’15 evolution. vicecommissions of various that, I can’t guarantee anything.’ MR. FANNING: Itakemyman- *Includes only conventional hydroelectric power, not hydroelectric pumped storage states, arguments like he just Joe Manchin, U.S. Senator (D., W.Va.) agement group through this ex- Source:U.S. Energy Information Administration THE WALL STREETJOURNAL. made about diversification of THE WALL STREET JOURNAL. We dnesday, April 13, 2016 | B9 JOURNAL REPORT | BUSINESS & ENERGY BankersPlaceTheir Energy Bets Jeffrey Holzschuh and Douglas Kimmelman on where their investment billions are going

Jeffrey Holzschuh,the based businesses that are (4) chairman of Morgan Stanley’s moredependent on the vol- Institutional Securities Group, ume of fossil-fuel movements and Douglas Kimmelman, se- rather than the price. We’re DOW JONES

nior partner at Energy Capi- involved in servicebusinesses, S/ tal Partners, move billions of thingslikeconstructing trans- TO dollars through energy invest- mission lines,and we’realso ments around the world. very involved in thedecom-

The veteran bankers sat missioning of nuclear plants. GENESIS PHO down with Jeffrey Ball, acon- Jeffrey Holzschuh (left) and Douglas Kimmelman tributing editor at The Wall MR. BALL: Jeff, Morgan Stanley Street Journal, to discuss how has said it isn’t going to fi- long-term capital decisions. loser. Others will sayrenew- the energy picture is changing nance strip mines or new coal- ables have aviable possibility and where they are placing fired power plants in devel- MR. BALL: Doug, what is your of supplying all the world’s their bets. oped markets. What motivated kets versus developed mar- they’llcome under the same thinking on coal? electricityand can be profit- Here are edited excerpts. that decision? kets.But our viewnow is that constraints, I’m sure, that the MR. KIMMELMAN: Thereare big able. Jeff, where do you stand? MR. HOLZSCHUH: Almost a when somethingisclearly en- developed countries facenow. swatches of this country that MR. HOLZSCHUH: Right in the No alternative dozenyearsago some in the vironmentally hazardous,we areverycomfortable with the middle.Renewables arehere MR. BALL: Is there really a environmental community aren’t going to participate. Here to stay coal that they’reburning,and to stay.Having said that, the global energy revolution going came to Wall Street and said, MR. BALL: What are you telling I don’t see that going away. question has always been, on? And where are you putting “You guys can’t finance coal.” MR. BALL: But you are going to investors about the advisabil- For us, the most profitable “Without subsidies,are they your money now? Andactually,therewas an in- participate in the developing ity of investing in coal assets? way [tomakemoney from economic?” Ithink scale and MR. KIMMELMAN: I’m in pri- credibly constructiveoutcome world, right? MR. HOLZSCHUH: Thereisno coal] is by cleaning it up,so low-cost financing has made vate equity.We’veraised called the Carbon Principles, MR. HOLZSCHUH: Because there doubt that thereisamacro we built alarge activated-car- them much more competitive about $13 billion from inves- [a series of guidelines on fi- arenoother choices.Look,we trend toward cleaner genera- bon facility in Louisiana that than they were even three tors,mainly public pension nancing electric-powerproj- fundamentally have to allow tion of energy. removes the mercuryemis- yearsago, and that will get plans.Weinvest that in en- ects]that has gotten incre- economies to continue to grow But coal isn’t going any- sions from coal-fired power betterand better. I’m not abig ergy,largely in NorthAmerica. mentally more stringent and and people to have standardof where. It’sgoing to remain a plants. We also have abusi- believer that the technologies We don’t invest in [explora- more defined over time. living.You can’t go to some thirdofthe [energy]mix in nessthat deals with removing areatparity yet[with conven- tion and production]. We don’t We have an incredibly envi- places in the world and not the world. In the developed nitrogen-oxide emissions.Car- tionally produced power], but likethe volatility around that. ronmentally sensitivephiloso- burn fossil fuels.Therejust countries it’sdropping fairly bon capturehas along way to they aregetting closer.Ithink Our focus is in power genera- phywithin MorganStanley.On isn’t anyeconomic alternative. dramatically and will continue go. We aren’t investing in that. solar will overtake wind over tion—fossil generation as well the client side—and we cover And so therehas to be some to go down as plantsget time.It’smoreubiquitous.It’s as renewable generation—and everyindustryand every flexibility in that policy to be closed and newbuild is all MR. BALL: Let’s move on to re- gotbettercharacteristics.And midstream businesssuch as country—thereare going to be able to help those economies, natural gasand renewables.So newables. Some people in this then, if we getstorage,the pipelines, gathering systems differences in those policies, governmentsand companies we’rehelping clientsthink audience will say renewables supply sector will grow even andstorage,which arefee- depending on emerging mar- continue to grow.Overtime through this as they make are acharade and amoney more dramatically.

VOICESFROMTHE CONFERENCE ‘We haven’t learned to produce [natural gas] at the price it sits right now, but we have learned to produce it at a very low cost. And so that demand is building. I think we’ll prob- ably be surprised when all that demand finally kicks in, when all that infrastructure gets built out and the facilities built to consume all that natural gas actually get built out, we won’t have the rigs ready fast enough to get back and caught up.’ Alan S. Armstrong, President and Chief Executive Officer, Williams Cos. t lopmen ve

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01 CustomizedCustomized wo orkforcerkforcer ecruitmenecruitment Lynn Jurich and To m Werner discuss the future ©2 andhan ands-ods-onsimulat imulationion tr raininainingin and the battle in Nevada over net metering cocompanmpanyope perationrations Despite meteoric growth, so- opportunity,itcreates two have paid youfor it, because STSTRATEGIRATEGICLOC OCATIONATION lar is still atiny slice of the things. It creates the desireto I’m being paid prevailing… Idealloc ocationation at Th heePor tof global energy pie. Jeffrey Ball, makesurethat the way it MS. JURICH: Correct. CaCaddo-Bossierddo-Bossier pl luus st tateate acontributing editor at The works has the correct policy. ininvestmentvestmentsinsit einf nfrastructurrastructure Wall Street Journal, spoke with And secondly,itbringsinmas- MR. BALL: That’s apretty andequ quipmentipment im mprovementsprovements two industry executives about sive competition. sweet deal. Is it going to last? where solar is headed: Lynn Ju- Generally speaking,it’sfric- MS. JURICH: Not in Nevada. So rich, co-founder and chief exec- tion, so the consumer loses. let’stalk about this and how utive of Sunrun Inc., and Tom You’re not going to be able to we cansort of resolvethis. Werner, presidentand CEO of pick exactly the right placeto When youlook at the stud- SunPower Corp. Edited ex- put atariff on and makeit ies,what happens is youactu- cerpts follow. right. So when youdothat, ally see that at our penetra- youget counter-tariffs and tion levels,when we put home MR. BALL: The International costs go up. solar ontothe grid, it Energy Agency says if the strengthens the grid. It saves world implements pro-renew- MR. BALL: Lynn, let’s talk about money for all customers. And ables policies, solar’s share of the net metering fight. What manyofthe studies,and all of global power production in has happened in Nevada? the independent studies,have “Louisiana’s custom-fit solutions are 2040 will be about4%—both MS. JURICH: What’shappening shown that. globally andinthe U.S.—up right nowiswe’rebuilding Thereisautility trade group enabling us to identify and train a from about 1% now. two infrastructures out. We’re that just did asurvey that If you put your industry in building an energy infrastruc- asked, “What should consumers highly qualified staff to meet our thecontext of akid growing ture that’s customer-sided at be compensated”—solar cus- up, where is solar? the grid edge, and we’rebuild- tomers—“forenergy that flows specific technology requirements.” MS. JURICH: This industryhas ingout our traditional central- back to the grid?” And 80% CORNÉ BUIJS|BENTELERSTEEL/TUBE CEO&PRESIDENT arrived and is at aplacewhere ized energy.And the econom- said, “Atretail rate or higher.” the momentum is there. The ics areverystrong on the What happened in Nevada, industryinthe U.S. crossed [a customer side now. the legislatorssaid, “Wewant threshold of]overamillion so- this thriving rooftopsolar mar- lar homes this year.Sothere’s MR. BALL: Your company leases ket. Come on in.” Then the util- all this talk about electric vehi- solar panels to homeowners, ity commission said, “You know cles,but thereare morethan puts thepanels on the roofs what? We’regoing to change double rooftopsolar homes as and the homeowners don’t pay therateonwhat we payfor thereare electric vehicles. any capital cost. They pay you customers’ powerthat flows MR. WERNER: We’re like a 13- effectively as their electricity back to the grid. We’regoing to year-old or 14-year-old in high provider and that’s how you payyou two cents, two centsa school who’s really athletic, monetize your business? kilowatt-hour,for the power Benteler Steel/Tube,adivision of Benteler and so you’regoing,“Wow, MS. JURICH: Exactly.And that flowsback to the grid that Group specializinginmanufacturing and that person is going to be re- what’shappening is that the goes to your neighbor.But processingofseamlesssteel tubes, utilized ally good.” But this is a 13- or home on averageuses about we’regoing to charge that 14-year-old. So that would be 70%ofthat power. About 30% neighbor 12 cents.” Louisiana’scustom-fitsolutionstoestablish its the short answer. of it flows back into the grid. That’swhat happened 675-jobhot-rolling tube millinthe U.S. IEA is likeSunPower: Our The framework we’ve used there. That will not stand the What canLouisianadofor your business? forecastsare always wrong,on in this companypredomi- test of time. Find outat OpportunityLouisiana.com. the lowside.Solar’s shareof nantly is that that homeowner totalgeneration is probably should be credited at the retail MR. BALL: Some say it isn’t fair more like 10% by 2040. rate when that energy flows for people who are hooked up back into the grid, because it to the grid but have solar pan- MR. BALL: There’s effectively flowstothe neighbor.It’s elsnot to be paying something atrade war in solar going on. much cheaper forthe powerto for the maintenance of the There are allegations that go to the neighbor than it is… electrical grid. China is selling solar panels MR. WERNER: Thechallenge below production cost, deci- MR. BALL: So Ihave ahouse hereisthe economic model for mating the solar industries in and I buy my power from you electricity wasestablished a the U.S. and Europe. How sig- forless than Iwould pay if I long time ago, and wasn’t es- nificant is this? bought power from the grid. tablished to think youcould MR. WERNER: We’realways go- That’s why I buy power from have distributed generation ing to have some policyissues. you. And Isell it back into the that made sense. So the eco- But youhavesuch amassive grid at ahigher price than I nomic model needs to change.