Reconfiguring Assets
For Geographic Diversity,
Optimal Returns and Improved
Service
2004 Analyst Conference
November 11-12, 2004
NUI Integration
Strategy
Eric Martinez
SVP, Engineering and Construction
2004 Analyst Conference
November 11-12, 2004
People
INTEGRATION
STRATEGY
Business Standardization
External
Strategy
External Strategy
Sales and Marketing
Media Relations
Governmental and Community
Regulatory/Performance Standards
AGLR September 2004/NUI August 2004
50%
70%
90%
AGLC
VNG
CGC
ETG
CGF
CSR Satisfaction Rating
FSR Satisfaction Rating
1st Call Resol/Overall
Customer Satisfaction Ratings
Commission Complaints
August 2004
0
25
50
75
100
125
AGLC
VNG
CGC
ETG
Systems and Applications
Contract Leverage
Organizational
Business Standardization
In Minutes
Atlanta Gas Light
Virginia Natural Gas
Elizabethtown Gas
Meter Reads
09
05
03
Turn Off
15
07
05
Turn On
26
19
18
Time Is Money
Orders Per Day
People
Stay Inside
the Lines
High
Performing
Culture
Capacity Planning and
Rethinking Asset
Optionality
Suzanne Sitherwood, VP, Gas Operations
2004 Analyst Conference
November 11-12, 2004
Buying and
Building
Strategic
Assets…In a
Maze of
Pipes…And A
Plethora of
Storage
Options
Natural Gas Use Per
Residential Customer
Throughput and Load Factor
Forecast for 2005 Calendar Year
Design Day Sendout for
Winter ‘04 – ‘05
Historical Weather:
SCADA & NOAA
Is it mostly about weather?
Customer Behavior at
Extreme Temps
How cold is cold enough?
Annual Demand Costs
on 50k Dth
Source: EIA
Compound Annual Growth Rate
of Gas Consumed
(Residential and Commercial Customers)
Since 1973, winter load
(Dec-Feb) is growing
more than twice as fast
as annual load.
ENHANCEMENTS
Infrastructure
SNG Facilities Purchase
Macon LNG Debottlenecking
Service/Flexibility
Elba Segmentation
Atlanta Pool Group
Beltline Operations
Thomaston
Ocmulgee
S. Atl #1
S. Atl #2
Marietta
Sewell Rd
Griffin
Austell #2
30 inch
20 inch
18 inch
16 inch
14 inch
12 inch
10 inch
Dallas #2
East Pt
Fulton
Hampton
Barnesville
Jackson
Forsyth
Smarr
Zebulon
West Ga
Thomaston
Transco Jonesboro
3rd Party meter
AGL meter
Proposed pipeline facilities
Proposed meter stations
New AGL meter stations
New S. Atl #3
New - Ocmulgee
New - Thomaston
New - N. Atl
Proposed SNG facilities for sale to AGL
Facilities To Be Purchased
Cove
Point
DTI
JUP
TCO
Transco
Suffolk
South
North
Quantico
Existing Utility Upstream Portfolio
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
Peaking
938,000
120,000
128,215
119,745
1,765
-
1,307,725
Incremental Storage
449,449
-
-
116,779
1,101
-
567,329
Firm Transport
1,070,228
73,622
321,350
172,608
6,189
58,910
1,702,907
AGLC
CGC
VNG
ETG
EKT
CGF
Total
21%
Fixed Cost
Customer Cost Breakdown:
Can’t Be Complacent About Fixed Costs
Because Gas Prices Are High
TOTAL $1085
COMMODITY AND SERVICE COST $ 743
FIXED COST $ 342
$ per therm $1.23
Typical residential
bill of 880 therms
and 1.29 DDDC,
excludes applicable
riders and sales tax
21%
11%
62%
6%
Fixed Cost
Commodity
& Service
$1085
$65
$ 678
$ 114
$ 228
Pivotal Energy
Development
Dana Grams
SVP, Business Development
2004 Analyst Conference
November 11-12, 2004
2004 Results
04/14/04
Southern
Natural
Triangle
Purchase
(signing)
Macon
Peaking
Pipeline
Saltville
Storage
Acquisition
Through
NUI purchase
11/03
Propane
Plant
Application
Filed
02/04
Propane
Plant
Land
Purchased
04/04
Propane
Plant
Construction
Starts
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Jefferson
Island Storage
And Hub
purchase
closes 10/1
12/04
Propane
Plant
Online
Market
Area
Lake Charles
Pivotal
Propane
Saltville
JISH
Elkton
Chattanooga
Elizabethtown
Virginia Natural
City Gas
Atlanta Gas Light
Salt Dome Storage Primer
Salt domes
Formed from natural salt deposits
Push through overlying sedimentary layers
to form large dome-type structures
Salt caverns
Created using water to dissolve and
extract salt from the deposit, leaving a
large empty space in the formation
(leaching)
Well is drilled into the salt formation
Large amounts of water are cycled through
Saturated salt water, or brine, is then
cycled out of the well
The resulting cavern is essentially
impermeable
Market Forecast - Gas Storage
LNG import growth
supports additional storage
requirements
Incremental natural gas
storage is needed in the
Gulf and East coast area
Expansion costs per unit of
capacity at existing facilities
are lower relative to green
field storage projects
Continued volatility
Higher prices
Decline in production
Greater peak demand
Jefferson Island Overview
History
Began operation in 1996 as
Equitable Resources
subsidiary
Purchased by AEP December
1998
Pivotal purchased facility for
$90.3MM including pad gas
Capacity and Interconnects
Working gas capacity is 6.9
bcf (2.5 bcf required pad gas)
10 inventory cycles per year
(720 MDth withdrawal/240
MDth injection)
Market areas
Production area/Industrial
Mid Continent
Mid Atlantic
Northeast
Southeast
Jefferson Island Details
Currently 100% subscribed, forecasted
subscription rate is 95%
Target customers
Potential expansion opportunities
$5MM compression addition to enhance service
turns from 10 to 12
Cavern expansion through solution mining
Additional cavern(s) 5.0 bcf working gas at cost
of approx. $20-25MM (excluding pad gas), 2
year development time
Want to understand specifics of operational
capacity before undertaking significant
investment
Withdrawal Capacity,
720 MDth/day
Injection Capacity, 240
MDth/day
Surface
Brine
Pad Gas
2.5 BCF
Working Gas
6.9 BCF
gas
brine
Pivotal Propane of Virginia
Technical Details
28.8mdth/day send out capacity
3.3MM gallons of propane storage
2005 Financial Details
10-year initial contract term
Rates allow capital recovery at 10.9% ROE
Cost-of-service based revenue model on
depreciated asset base
$27MM capital cost at completion
In service January ’05
Potential for expansion or other uses
Additional propane vaporization capacity
LNG storage tank
Saltville Overview
History
Site of commercial salt production since 1700’s
Only known bedded salt formation in Southern
Appalachian basin
Saltville LLC is jointly owned with Duke in 50/50
partnership
Salt cavern development began in 2001
Capacity
Phase 1 (Current Project)
1.9 bcf working gas capacity
200 MDth/d withdrawal
110 MDth/d injection
5.3 bcf working gas capacity by 06/07
550 MDth/d withdrawal
220 MDth/d injection
Phase 2 (Under Consideration)
Add 2 bcf working gas capacity
Total 7.3 bcf
Cap Rock
Salt
Shale &
Limestone
Well
Surface
=1500 Ft.
=4000 Ft.
Saltville Details
Potential Expansions
Additional expansion beyond Phase 2
could create 7.3 bcf working capacity
Need to develop market
Presently facility is
100% subscribed
Existing customers
include CP&L,
PSNC, WGL, and
Sequent
$16MM Capex
estimated to
complete Phase 1
Cove Point
Pivotal Propane
Saltville
Jefferson Island
Elba Island
Corpus Christi
Hackberry
Sabine Pass
Freeport
AES
El Paso/FPL
Tractebel
Dauphine Island
Likely LNG Import Sites
LNG Market Development