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Pipeline Financing Discussion

N:\Active\W\WY\Wyoming Pipeline Authority\Present.083\P-082503.ppt. 1. Discussion Topics. Economics Drive Project ViabilityWhat Does a Basic Transaction Structure Look Like?Various Levels of State Involvement ? From Facilitator to Capacity OwnerKey Credit Factors, Regardless of StructureCase Stu

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Pipeline Financing Discussion

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    1. 6/7/2012 9:57 AM N:\Active\W\WY\Wyoming Pipeline Authority\Present.083\P-082503.ppt 0 Pipeline Financing Discussion Wyoming Natural Gas Pipeline Authority

    2. N:\Active\W\WY\Wyoming Pipeline Authority\Present.083\P-082503.ppt 1 Discussion Topics Economics Drive Project Viability What Does a Basic Transaction Structure Look Like? Various Levels of State Involvement – From Facilitator to Capacity Owner Key Credit Factors, Regardless of Structure Case Study: Alliance Pipeline

    3. N:\Active\W\WY\Wyoming Pipeline Authority\Present.083\P-082503.ppt 2 Project viability will be driven by gas price differentials, capital costs, and interest rates

    4. N:\Active\W\WY\Wyoming Pipeline Authority\Present.083\P-082503.ppt 3 Basic Pipeline Transaction Framework

    5. N:\Active\W\WY\Wyoming Pipeline Authority\Present.083\P-082503.ppt 4 Transaction Framework Partners – Most likely Pipeline Companies and Producers in Wyoming fields. The Partners provide initial equity and take risks and benefits of ownership. Not allowed for WNGPA. Shippers – Any entity that makes a long-term commitment to the Pipeline via Ship-or-Pay contracts. Each Partner will be a primary shipper. Other shippers will include gas companies/marketers who wish to have reserved transportation capacity for gas they may purchase from producers. WNGPA (on behalf of State) could be a shipper. Ship-or-Pay Contracts – Long-term contract requiring payment regardless of whether gas is shipped. Key underlying security for Pipeline debt. Wyoming Natural Gas Pipeline Authority – Serves as a passive conduit issuer. Will issue bonds on behalf of the project and lend proceeds to project company in consideration for entering into a loan agreement which obligates project company to make loan payments in amount equal to debt service on the bonds. Wyoming Natural Gas Pipeline Company LLC – The project company formed by the equity partners. Company would have primary responsibility to develop and operate the project. Construction Consortium – Group of engineering, design, and construction firms engaged via contract(s) to develop the physical asset. Investors – Secured by project revenues and/or assets. State can be investor.

    6. N:\Active\W\WY\Wyoming Pipeline Authority\Present.083\P-082503.ppt 5 What techniques can Wyoming use to add value to Pipeline development? Financial involvement and support Contractual/physical involvement and support

    7. N:\Active\W\WY\Wyoming Pipeline Authority\Present.083\P-082503.ppt 6 What financial techniques can Wyoming use to add value to Pipeline development?

    8. N:\Active\W\WY\Wyoming Pipeline Authority\Present.083\P-082503.ppt 7 Lending the State’s Conduit Issuance Ability to the Credit The State, through WNGPA, can act as the nominal issuer of the bonds. Without other tangible credit support does not change credit. May open marketing channels to “taxable municipal investors.”

    9. N:\Active\W\WY\Wyoming Pipeline Authority\Present.083\P-082503.ppt 8 Conduit Financing: Alaska Pipeline Terminal Revenue Bonds

    10. N:\Active\W\WY\Wyoming Pipeline Authority\Present.083\P-082503.ppt 9 Investing in Senior Securities of the Project Benefit: Core investor, sponsorship

    11. N:\Active\W\WY\Wyoming Pipeline Authority\Present.083\P-082503.ppt 10 Investing in Junior Securities of the Project Benefit: Enhance position of senior securities – higher rating, higher expected default recovery

    12. N:\Active\W\WY\Wyoming Pipeline Authority\Present.083\P-082503.ppt 11 Gaining Authority for Moral Obligation Bonds

    13. N:\Active\W\WY\Wyoming Pipeline Authority\Present.083\P-082503.ppt 12 Moral Obligations Are Commonly Used In Resource Development Projects

    14. N:\Active\W\WY\Wyoming Pipeline Authority\Present.083\P-082503.ppt 13 Operating Support Techniques

    15. N:\Active\W\WY\Wyoming Pipeline Authority\Present.083\P-082503.ppt 14 Acting as Aggregator for Smaller Producers

    16. N:\Active\W\WY\Wyoming Pipeline Authority\Present.083\P-082503.ppt 15 Acting as Capacity Owner for RIK Gas

    17. N:\Active\W\WY\Wyoming Pipeline Authority\Present.083\P-082503.ppt 16 Construction Risk Mitigation

    18. N:\Active\W\WY\Wyoming Pipeline Authority\Present.083\P-082503.ppt 17 Operating Risk Mitigation

    19. N:\Active\W\WY\Wyoming Pipeline Authority\Present.083\P-082503.ppt 18 Alliance Pipeline—Example of Project Financed Pipeline

    20. N:\Active\W\WY\Wyoming Pipeline Authority\Present.083\P-082503.ppt 19 Alliance Pipeline Structure

    21. N:\Active\W\WY\Wyoming Pipeline Authority\Present.083\P-082503.ppt 20 Ship-or-Pay Contracts from Variety of Shipper Credits Example from Alliance Pipeline: “All of the 1.325 b.c.f.d. of firm transportation capacity of the System has been contracted by the shippers. . . .”

    22. N:\Active\W\WY\Wyoming Pipeline Authority\Present.083\P-082503.ppt 21 Flexibility in Evolving Group of Shippers

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