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AEC

AEC. October 31, 2000. Western U.S. Gas Grid. Northern Border. Potential Connect to NBP. PGT. To Chicago. Northwest. Expected Constraint. KN. CIG & WIC. Trailblazer. NGPL. Kern. Northwest. CIG. Pastoria Power Plant. El Paso. El Paso. Rocky Mountain Market Dynamics.

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AEC

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  1. AEC October 31, 2000

  2. Western U.S. Gas Grid Northern Border Potential Connect to NBP PGT To Chicago Northwest Expected Constraint KN CIG & WIC Trailblazer NGPL Kern Northwest CIG Pastoria Power Plant El Paso El Paso

  3. Rocky Mountain Market Dynamics • Recent ramp-up in Powder, Wind, and Green River Basin supply is expected to continue for the next few years • Take-away lines are approaching capacity with no significant expansions or new pipelines available in the near term • Rockies’ basis and the availability of firm markets are expected to continue to weaken due to “gas on gas” competition Incremental production increases are expected from Wind, Powder, and other Rockies basins Incremental Rockies supply is expected to significantly exceed incremental demand

  4. SoCal & Midwest Demand SoCal Market Dynamics: • Characterized by rapid demand growth associated with a strong economy and population growth • Competition for Canadian gas will put increased demand on city-gate supplies • Increase in gas-fired generation of 14,000 MW, resulting in more than 1 Bcf/day of incremental gas demand by 2003 Midwest Market Dynamics: • New pipeline take-away capacity will dampen the 1.4 Bcf/d increase in volumes from Alliance • Vector – 700 MMcf/d expandable to 1.2 Bcf/d • Guardian – 700 MMcf/d online in 2002 • Increase in gas-fired generation in Illinois alone of 15,000 MW, resulting in more than 1.5 Bcf/day of incremental gas demand by 2003

  5. ENA Situation • Rocky Mountains: • ENA currently has long-term gas purchase agreements with 15 Wind and Powder River Basin producers • Based on these purchases, ENA has secured Trailblazer capacity to transport gas to the Midwest • ENA has access to existing CIG capacity to NGPL that is currently available • Midwest: • People’s Gas of Chicago has entered into a deal with ENA to outsource their complete gas supply portfolio • Hub Partners – J.V. with People’s Gas to optimize assets • ENA has access to discounted Northern Border capacity • Southern California: • ENA is seeking gas supply for its Pastoria power facilities • Generation capacity: 750 MW • Total gas requirement: 120 MMcf/d

  6. ENA Purchase Proposal • AEC volume commitments at Opal/Muddy Creek that ramp up with production increases • Portfolio of three pricing points

  7. Chicago Netback • Concept: • ENA would purchase AEC gas at OPAL/Muddy Creek for a Chicago netback price • AEC supply could flow eastward on existing ENA capacity • ENA would be free to use Powder River producer volumes to support a project to NBP • Purchase Price at OPAL/Muddy Creek: NGI Chicago City Gate – Transport & Fuel (approx. $0.59 & 7%) • Volume: 70,000 MMBtu/d • Term: Jul ’03 – Jun ‘07 Northern Border $0.33 & 5% fuel $0.21 & 1.5% fuel Potential Connect to NBP To Chicago KN CIG & WIC Trailblazer $0.05 & .5% fuel Physical Delivery Point CIG Note: transport and fuel rates are approximate

  8. NGPL Netback • Concept: • ENA would purchase AEC gas at OPAL for an NGPL netback price • Purchase price would be net of CIG transportation rates to the NGPL interconnect at Forgan • Purchase Price at OPAL/Muddy Creek: IF NGPL Mid. Con Zone – Transport & Fuel (approx. $0.32 & 3.25%) • Term & Volume: Jan ’01 – Dec ’01 50,000 MMBtu/d Jan ’02 – Jun ’03 80,000 MMBtu/d Jul ’03 – Dec ’03 50,000 MMBtu/d • Jan ’04 – Jun ’07 30,000 MMBtu/d To Chicago CIG & WIC Physical Delivery Point CIG NGPL $0.32 & 3.25% fuel Note: transport and fuel rates are approximate

  9. SoCal Netback • Concept: • ENA would purchase AEC gas at OPAL for SoCal Border netback price • Purchase price would be net of Kern River transportation rate • Purchase Price at OPAL: NGI SoCal Border – Transport & Fuel (approx. $0.48 & 2%) • Volume: 30,000 MMBtu/d • Term: Jul ’03 – Jun ‘07 $0.48 & 2.0% fuel Physical Delivery Point Kern Pastoria Power Plant Note: transport and fuel rates are approximate

  10. Gas Purchase Summary • The gas purchase would be structured under a firm contract with liquidated damages. ENA would be responsible for all downstream risk. • ENA’s existing network of physical assets, transport capacity, and long-term supply and market deals enable us to offer: • A diverse portfolio of pricing structures based on markets with strong fundamentals • Firm, long-term volume takes that ramp up according to AEC’s needs • AEC would be insulated from Rockies basis exposure as it continues to weaken due to surging supply • The deal would free up ENA Powder River volumes to support a project to NBP, alleviating some of the Rockies’ capacity constraints Average Advantage: $.415 / MMBtu

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