Proposed Bellefonte Project

Questions/Concerns/Issues

What has Nuclear Development, LLC (“NDLLC”) offered to MLGW?

NDLLC has offered to enter into an agreement to sell up to 1,340 MW of base
nuclear power to MLGW at an estimated cost of $39 per megawatt hour plus a
variable O&M charge upon completion of the Bellefonte nuclear plant.

What is the Bellefonte nuclear plant?

The Bellefonte nuclear plant is an unfinished generating facility located in
Hollywood, Alabama. It consisted of four planned units but none were
completed. TVA owned the site and initially funded construction of two units but
later abandoned plans to complete this project and, ultimately, offered the plant
for sale at auction in 2014. Construction work at the site has been stopped since
1988.

What is the current status of the Bellefonte nuclear plant project?

NDLLC won a bid to purchase the Bellefonte nuclear plant for $111 million.
Construction work has not commenced at the facility, licenses have not been
obtained and no operator of the plant has been identified.
NDLLC says it can save MLGW customers $487 million dollars a year over
the next 30 years. Is that true?
It is not possible at this time to confirm any claims of savings for the Bellefonte
transaction. However, MLGW customers would not receive a savings on their
power costs until the Bellefonte plant is completed and becomes operational. The
amount of that savings will depend on a number of factors including NDLLC’s
actual costs in completing the plant and the additional capital, administrative and
operational costs that MLGW will incur in order to access power from NDLLC and
acquire the remainder of the power needed to meet our customers’ needs.
MLGW management and its consultants, GDS Associates, Inc., are in the
process of evaluating those costs and estimates as well as the feasibility that the
plant will ever be completed and become operational. Several of the
assumptions made in the material provided to MLGW raise questions. For
example, NDLLC’s estimated savings amounts assume that TVA’s net pricing will
increase 1.5%/year for 30 years. Our actual experience over the past 7-8 years
has been a relatively flat net price from TVA (~+0.6%).

Why is MLGW being so careful before accepting this proposal?

MLGW’s primary concern is to continue to provide reliable, low cost power to its
customers. There are several factors which must be considered before MLGW
can obligate its customers to this project, including the following:
o The proposal made by NDLLC to MLGW is uncertain because the plant is
not yet constructed. That means we cannot be certain that the plant will be
constructed, when it will be constructed, or how much it will cost.

o In order to purchase power from the Bellefonte facility, MLGW will have to
terminate its existing all requirements contract for power from TVA. In the
event the plant is not constructed or not constructed on time, MLGW must
plan for an alternative source of power supply in order to ensure that it can
meet its obligation to provide reliable, low-cost power to its customers.

o Even if the plant is constructed on time and at the expected cost, the plant
will not provide all of the power that MLGW needs to serve its customers.
The options for acquisition of the remaining power needed and the long
term cost of constructing facilities to access that additional or replacement
 power supply must be analyzed before we will be able to assess whether
the deal offered is a good one and on what terms and conditions MLGW
would be willing to undertake the risks necessary to pursue this offer.

Is completion of the Bellefonte nuclear plant a viable project? Can NDLLC

deliver?
• Some of the many concerns MLGW management has regarding this
project include:

o Age of unit...future viability...

o Nuclear industry challenges...risk of completion...NDLLC/DOE needs

our commitment prior to known outcome...

o De-coupling from TVA is initiated by PPA (maybe LOI)...unknown risks

and no guarantee that TVA won’t market the supply previously
contracted to MLGW to other entity(ies).

o Uncertainty of supply coverage, risks and costs to customers.

o Lack of diversity in supply...risks tied to single unit with no known

reliability back up.

o Unknown operators post-construction.

o Fuel supply risks.

o Transmission risks.

o Sustainability of the offered price from NDLLC.

o Impacts on the rates offered by regulatory oversight agencies with

jurisdiction over NDLLC’s wholesale rates.

o The process by which NDLLC is promoting its proposal.

Why won’t MLGW sign the Letter of Intent requested by NDLLC?
MLGW signed a nonbinding Letter of Interest with NDLLC in January 2018.
There is no expiration date on that letter which was executed by MLGW’s then
current President. NDLLC has asked that MLGW sign an additional letter prior to
the receipt of the study MLGW has commissioned, which would bind MLGW to
the terms and conditions of a power purchase agreement should we opt to go
forward with this transaction. Since MLGW has not completed its due diligence
with respect to the Bellefonte proposal and has not yet received independent
feedback on a multitude of concerns, management believes that it is premature
to negotiate and commit to the terms of a PPA.

Can or should MLGW borrow funds from NDLLC?

Governmental entities in Tennessee are authorized to issue bonds and notes to
finance infrastructure improvements. In fact MLGW’s current budget request
assumes the issuance of some bonds to finance capital costs. However, to our
knowledge NDLLC is not a lending institution and does not have the means or
certification to act as one. In essence, NDLLC suggests that MLGW increase the
amount of debt to be issued now on the assumption that our customers will
receive a savings beginning five years in the future if the Bellefonte plant is
completed according to cost estimates and schedule. The downside is that our
customers will pay debt service on the additional debt now and will still be
responsible for that debt service even if NDLLC’s nuclear plant is never finished.