ALASKA GASLINE PORT AUTHORITY

1

ALASKA GASLINE PORT AUTHORITY
2
Alaska Gasline Port Authority

• The Alaska Gasline Port Authority consists of
  three municipalities
• North Slope Borough
• Fairbanks North Star Borough
• City of Valdez

3
Alaska Gasline Port Authority

• Board of Directors

Fairbanks North Star Borough Mayor Rhonda Boyles,
Treasurer Charlie Cole, Vice Chair Barbara
Schuhmann
North Slope Borough Mayor George Ahmaogak,
Chair Al Adams Richard Glenn
City of Valdez Mayor Bert Cottle Dave Cobb,
Secretary John Kelsey
4
Alaska Gasline Port Authoritys Mission

• The mission of the Alaska Gasline Port Authority
  is to enable the development of Alaskas North
  Slope gas to the maximum benefit of all Alaskans.

5
Evolution of the Alaska Gasline Port Authority

• Preparation of the project development plan
  engineering, procurement and construction plan
  project cost estimate and alternatives analyses
• Preparation of economic and financial models
• IRS granting of federal income tax exemption

6
The Project Team

• Alaska Gasline Port Authority
• Bechtel Corporation technical and development
  support
• Taylor DeJongh financial analysis and formation
• OMelveny and Myers development counsel
• Walker Walker and Associates general counsel

7
Advantages of a Y-Line

• Combining a gasline to the lower 48 with a
  gasline to an LNG and/or GTL project will lower
  the cost of gas transportation down each branch
  of the line by approximately 33 percent

8
Construction Cost

• A single line to carry 3 bcf per day 7.0
  billion
• A Y-line to carry 3 bcf to the Canadian border
  and 3 bcf to an LNG/GTL facility 9.7 billion

9.7 2
4.85 billion
9
Project Scope Y-Line

• Gas conditioning plant on the North Slope
• 550-mile, 56-inch diameter pipeline from North
  Slope to Delta Junction
• 150-mile, 44-inch diameter pipeline to Canadian
  border for interconnect to lower 48
• 256-mile, 46-inch diameter branch line to Valdez
• Spur line to Anchorage from Glennallen
• 15 million ton per year LNG plant, LPG
  fractionation plant and port facilities in Valdez

10
Cost of Y-Line for Two Projects

• Construction cost
• Conditioning plant (assuming no
• efficiencies from existing plant) 4.2 billion
• Pipeline (including the
• two branches) 9.7 billion
• LPG fractionation plant 450 million
• LNG plant and port facilities 3.65 billion
• Construction cost total 18.0 billion

(includes escalation and 1.8 billion contingency)
11
Cost of Y-Line for Two Projects (Contd)

• Soft costs
• Interest during construction 4.9 billion
• Owners contingency 900 million
• Debt service reserve 1.0 billion
• Financing fees, working capital, etc.
  1.0 billion
• 7.8 billion
• Minus pre-completion revenue -3.2 billion
• Total financing required 22.6 billion

(for both LNG project and pipeline to
Alaskan-Canadian border for Lower 48 sales)
12
Financial Results of the Y-Line

• Producers 2 billion to 3 billion per year
• State royalties, severance tax, and corporate
  income tax 750 million to 980 million per
  year
• Payment in lieu of property taxes 114 million
  per year
• All Alaskan Community Dividend 111 million per
  year
• Assistance to Alaskan communities to lower energy
  costs 37 million per year

13
Benefits of Port Authority Ownership

• Guarantees maximum in state usage of North Slope
  gas
• Income is tax exempt (IRS ruling)
• Port Authority can access 100 percent project
  financing for the entire project
• Port Authoritys required return on investment is
  substantially lower than a privately-owned project

14
Benefits of Port Authority Ownership (Contd)

• Some debt would be financed with tax-exempt bonds
• Port Authority is not subject to FERC regulation
• Annual flow of revenue to state and local
  communities
• Port Authority creates local ownership of gasline

15
Benefits of Port Authority Ownership (Contd)

• No need to give up state revenue (tax or
  royalties) to subsidize the project
• More certainty of gas available for in-state
  usage and more control over price

Example 3.00 Chicago price per million
Btu -1.20 Transportation cost Alaska-Canadian
border to Chicago 1.80 Total wholesale price
to Anchorage or Fairbanks communities
16

ALASKA GASLINE PORT AUTHORITY