Building Natural Gas Consumer Markets

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Natural gas offers a very unique value proposition when considering energy security, energy efficiency, environmental sustainability, and economic impact. This presentation provides a framework which …

Natural gas offers a very unique value proposition when considering energy security, energy efficiency, environmental sustainability, and economic impact. This presentation provides a framework which can be used in developing natural gas markets and the associated infrastructure in emerging economies.

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  • In addition to HRX providing system connection and supply diversification for VNG, two utilities have shown interest in this project for gas distribution and power generation needs. Columbia Gas of Virginia has subscribed to capacity on the HRX and both Columbia and Dominion Virginia Power have subscribed to increased capacity on the VNG Joint Use Pipeline (JUP). Two new service agreements negotiated with these parties have required VNG to amend it’s application with the commission and request additional compressor stations. The incremental costs attributable to the additional compressor stations will be borne by Columbia, Dominion, and VNG. The inclusion of Columbia and Dominion as part of our overall HRX strategy provides us with additional revenue opportunity as these utilities subscribe to increased usage on our pipelines.

Transcript

  • 1. Building Local and Regional Natural Gas Markets Clean. Reliable. Abundant. Responsible. Value, Comfort, and Peace of Mind
  • 2. Topics of Discussion
    • Introduction and Acknowledgements
    • AGL Resources and Partners
    • Natural Gas Value Proposition
    • Supply-Side Technologies/Infrastructure
    • Developing Regional Markets
    • Demand-Side Technologies/Applications
    • Localization of Industry Supply Chain
    • Sell, Sell, Sell
  • 3. Topics of Discussion
    • Introduction and Acknowledgements
    • AGL Resources and Partners
    • Natural Gas Value Proposition
    • Supply-Side Technologies/Infrastructure
    • Developing Regional Markets
    • Demand-Side Technologies/Applications
    • Localization of Industry Supply Chain
    • Sell, Sell, Sell
  • 4. Who is AGL Resources?
    • In business of gas distribution for over 150 years
    • One of the largest investor-owned natural gas distribution companies in the U.S.
    • Market capitalization of approximately US$2.5 billion and US$5.5 billion in plant, property, and equipment investments
    • Primary business is owning and operating regulated natural gas utilities in six states along the US East Coast (from Florida to New Jersey), serving 2.3 million customers with 353 BCF annual thru-put
    • The best OJI safety record in the U.S. gas distribution industry in 2008 for mega large distribution companies
    • Complementary businesses in wholesale services, retail marketing and midstream development and operations
  • 5. Distribution Operations Retail Energy Operations Wholesale Services Energy Investments ~80 percent of 2008 earnings (EBIT) generated from primarily distribution and marketing
    • 6 utilities in 6 states (Eastern seaboard)
    • ~2.3 million customers
    • Unified platform for operating/cost efficiency
    • Largest Georgia marketer (33% market share)
    • Stable, annuity earnings stream
    • Exporting model to other states
    • Asset management (affiliates and non-affiliates)
    • Low-risk arbitrage business
    • Jefferson Island Storage facility
    • Golden Triangle Storage facility
    • Project development
    • AGL Networks
    AGL Resources Business Lines
  • 6. AGL Resources Customer Growth
  • 7. AGL Resources Distribution Assets
    • Assets used by our distribution operations and energy investment segments for the distribution of natural gas to our customers in our service areas
    • Includes approximately 45,000 miles of underground distribution and transmission mains.
    • These mains are located on easements or rights-of-way which generally provide for perpetual use.
  • 8. AGL Resources Storage Assets
    • Salt domes provide safe, reliable and high-deliverability storage for natural gas
    • Demand for salt-dome storage continues to grow with natural gas price volatility
    • Flow sensitive supplies like LNG (liquefied natural gas), unconventional and Alaskan gas will increase need for high-deliverability storage
    • Dynamics of the Gulf Coast region support significant storage build
  • 9. AGL Resources Pipeline Assets
    • Projects which diversify supply to our customers
    • Projects which provide services to other industry participants in our service territories (marketing entities, pipeline companies, and electric utility)
  • 10. AGL Resources LNG Assets
    • Operations
    • 43 MMSCFD Liquefaction Capacity
    • 7.4 BCF of Storage Capacity
    • 890 MMSCFD Vaporization Capacity
    • Operations Risk Management
    • Process Safety Management
    • Occupational Safety
    • Emergency Planning and Response
    • Total Productive Maintenance
  • 11. AGL Resources Building Assets
    • Base Business
      • New Customers
      • System Reinforcements
      • Relocations
    • Pipeline Replacement Programs
    • Natural Gas Storage Projects
    • Pipeline Projects
      • Magnolia
      • Hampton Roads Crossing
  • 12. AGL Resources Partnerships
    • Objectives
    • Facilitate and provide expertise in the development of regional and international natural gas markets
    • Provide complete value chain solutions
    • Leverage collective, unique set of competencies and technologies of the partners in the global marketplace
    • Deliver solutions and services of the partners through a “virtual” JV
    • Assist developing economies in the localization of supply chains and leveraging energy sector into broader economic growth
    • Current Development Partners
    • Pace Global Energy Services
    • Logan Energy
    • CED Consortium – virtual JV
    • Desired Additional Partners
  • 13. Pace Global Energy Services
  • 14. Pace Global Energy Services
  • 15. LOGANEnergy
    • LOGANEnergy Corp. (“LEC”) is a recognized world leader providing fuel cell solutions that target customer desires for clean energy services.
  • 16. Fuel Cells and the Environment
  • 17. CED Consortium
    • The CED Group is a vehicle for organizing resources, developing holistic solutions, and delivering services designed to create access to economic opportunity and vitality in emerging domestic and emerging international markets.
    • Capital Formation and Enterprise Development Strategy : develop structures and regional assets which provide access to and accumulate capital and sustain the development of high-growth business enterprises.
    • Energy and Resource Development Strategy : the development and delivery of globally competitive projects, technologies, and services to facilitate more inclusive participation and wealth creation in energy and resource development value chains while providing full value chain transparency.
    • Supply Chain Strategy : the development and delivery of highly integrated services to facilitate and support localization of supply chains and which create improved, sustainable supplier performance.
  • 18. The CED Group Business Opportunity Evaluation Business Plan Development IP Harvesting Commercial Support Research & Development Develop & Access Talent Pool of Entrepreneurs & Management Teams
    • Capital Formation
    • Seed (Founders)
    • Business Angels
    • Venture Capital
    • Expansion Capital
    • Liquidity Event
    • Support for
    • Enterprise Development
    • Startup
    • Revenue Generating
    • Initial Profits
    • Growth
    • Investor Exit Options
    Business Firm
  • 19. Topics of Discussion
    • Introduction and Acknowledgements
    • AGL Resources and Partners
    • Natural Gas Value Proposition and Value Chain
    • Supply-Side Technologies/Infrastructure
    • Developing Regional Markets
    • Demand-Side Technologies/Applications
    • Localization of Industry Supply Chain
    • Sell, Sell, Sell
  • 20. Natural Gas Value Proposition
    • Energy Security
    • Abundant supplies
    • Diversity of available sources
    • Climate Change
    • Lower Carbon emissions
      • 45%<coal
      • 30% < oil
    • 40% lower household carbon footprint with natural gas appliances
    • Renewable Energy
    • Biogas proven and commercial
    • Lower carbon intensity
    • Fuel Cell technology is considered “renewable” in some US jurisdictions
    • Economic Growth
    • Cost competitive, abundant & sustainable
    • 25% of world’s energy demand
    • Energy Efficiency
    • 90+% delivered in form of useful energy
    • Historical performance: 1% improvement in appliance efficiency per year
  • 21. Natural Gas Value Chain
  • 22. Topics of Discussion
    • Introduction and Acknowledgements
    • AGL Resources and Partners
    • Natural Gas Value Proposition and Value Chain
    • Supply-Side Technologies/Infrastructure
    • Developing Regional Markets
    • Demand-Side Technologies/Applications
    • Localization of Industry Supply Chain
    • Sell, Sell, Sell
  • 23. Market-Oriented Supply Solutions
    • Export to consumer markets
      • Pipeline
      • Large-scale LNG
      • Small-scale Technology Solutions
    • Combined-commodity projects
      • Gas-to-Liquids (Diesel, Methanol, Petrochemicals, etc.)
      • Gas-to-Wire (High Voltage DC)
    • Development of local and regional gas market demand
      • Combined Heating and Power
      • Hybrid Renewable Systems
      • Distributed Generation
      • Large-Scale Power Generation Infrastructure Providers
      • Compressed Natural Gas Vehicles
  • 24. Topics of Discussion
    • Introduction and Acknowledgements
    • AGL Resources and Partners
    • Natural Gas Value Proposition and Value Chain
    • Supply-Side Technologies/Infrastructure
    • Developing Regional Markets
    • Demand-Side Technologies/Applications
    • Localization of Industry Supply Chain
    • Sell, Sell, Sell
  • 25. Developing Regional Markets Step 1: Data Collection
    • Industrial
    • Nature of Industrial Market
    • Fuel Consumption
    • Constraints to Natural Gas
    • Assessment of Interest Level
    • Residential/Commercial
    • Average Size and Type
    • Average Income
    • Focus Groups & Interest Level
    • Transport
    • Characterization of Fleets
    • Fuel Types and Usage
    • Fuel Efficiencies
    Step 2: Initial Demand
    • Industrial Markets
    • Analysis of Fuel Consumption
    • Cost of Fuel Switch
    • Market and Demand Estimate
    • Residential/Commercial
    • Identify/Target Dense Clusters
    • Estimate Market Penetration
    • Demand Estimation
    • Transport
    • Quantification of benefits
      • CNG
      • LNG
      • Hydrogen/Hythane
    • Switching Capital Cost Est
    Step 3: Demand Forecast
    • Industrial
    • Demand Projections
      • Initial Demand Capture
      • Expected Expansions
      • New Additions
    • Residential/Commercial
    • Average Size and Type
    • Average Income
    • Transport
    • Characterization of Fleets
    • Fuel Types and Usage
    • Fuel Efficiencies
  • 26. Developing Regional Markets Step 6: Initial Cost Estimate Project Cost estimation based on preliminary project design Identification of optimal capital structure Identification of required rate of return based on financial costs Estimation of operating costs Step 7: Regulatory Frame Clear and stable Legal and Regulatory Framework Clear market rules Investment guidelines and prudency tests Tariffs to cover costs Mechanisms to enforce payments and/or compensate for social protection Stable fiscal environment
  • 27. Developing Regional Markets Step 8: Supply-Side Analysis Identification of gas sourcing options Comparison based on security of supply, timeframe, supply quantity, expected price and availability of transmission infrastructure Estimation of expected transportation, storage, and peaking costs Terms of the contract Step 9: Market Clearing Price Analysis of existing fuel for each customer segment View on likely price scenario of existing fuel Capital cost involved in switching to Natural Gas in each segment Appropriate discount determination on alternate fuel prices based on desired payback period
  • 28. Developing Regional Markets Step 10: Risk Analysis
    • Identification of risk items under each risk class:
    • Development period risk
    • Construction period risk
    • Operating period risk
    • Market risk
      • Demand
      • Price risk
    • Regulatory risk
    • Suggest risk mitigation measures
    Step 11: Business Feasibility Creation of financial model based on demand, price and cost projections Analysis of key financial aspects i.e. equity IRR, DCF Sensitivity analysis on assumptions of the base case and effect on key project characteristics like equity IRR etc.
  • 29. Topics of Discussion
    • Introduction and Acknowledgements
    • AGL Resources and Partners
    • Natural Gas Value Proposition and Value Chain
    • Supply-Side Technologies/Infrastructure
    • Developing Regional Markets
    • Demand-Side Technologies/Applications
    • Localization of Industry Supply Chain
    • Sell, Sell, Sell
  • 30. Demand-Side Applications
    • Residential Applications
    Natural Gas Furnace NGV Filling Station MicroCHP Tankless/Solar Hybrid Water Heater Gas Heat Pump
  • 31. Demand-Side Applications
    • Residential Applications
    Fireplace Lighting Stoves Grill Patio Heater Dryer Pool Heater Tankless Hot Water Tank
  • 32. Demand-Side Applications
    • Commercial Applications
    DeHumidifiers Commercial Cooking Commercial Coffee Roaster Paint Booth Ice Melting Fuel Cell Technology
  • 33. Demand-Side Applications
    • Industrial Applications
    Process Heat Generator Curing Oven Grain Dryer
  • 34. Demand-Side Applications
    • Transport Applications
    CNG Forklift Fleet Vehicles
  • 35. Topics of Discussion
    • Introduction and Acknowledgements
    • AGL Resources and Partners
    • Natural Gas Value Proposition and Value Chain
    • Supply-Side Technologies/Infrastructure
    • Developing Regional Markets
    • Demand-Side Technologies/Applications
    • Localization of Industry Supply Chain
    • Sell the Stories
  • 36. Topics of Discussion
    • Introduction and Acknowledgements
    • AGL Resources and Partners
    • Natural Gas Value Proposition and Value Chain
    • Supply-Side Technologies/Infrastructure
    • Developing Regional Markets
    • Demand-Side Technologies/Applications
    • Localization of Industry Supply Chain
    • Sell the Stories
  • 37. AGL Resources Featured Customer
    • Residential Customer: Mrs. Kathleen Holiman has been an Atlanta Gas Light customer for 55 years. But last year her furnace stopped working. On a fixed income, she began using a stove to heat her home in the dead of winter. Atlanta Gas Light stepped in to help Mrs. Holiman through its participation in the Home and Heartwarming Program in Georgia. Employees with the program repaired her furnace, added insulation, and installed new weather stripping at no charge. These measures helped make her home more energy efficient and lower her utility bills. An emotional Mrs. Holiman told a local TV news reporter, “I’m just overwhelmed. Somebody other than the Lord loves me.”
  • 38. AGL Resources Featured Customer
    • Commercial Customer: Waffle House, Inc. has more than 1,500 restaurants across the United States that are open 24/7, 365 days per year. The Waffle House restaurants utilize natural gas for heating, water heating, food preparation and, more recently, desiccant dryers that reduce moisture and prevent the large windows from fogging over. Waffle House understands the value that natural gas brings to its business. And just as Waffle House provides a consistent dining experience, AGL Resources provides clean, efficient and reliable natural gas as an energy source central to their business.
  • 39.
    • Industrial Customer: Merck & Co., Inc. is a global research-driven pharmaceutical company that discovers, develops, manufactures and markets vaccines and medicines. The company is at the forefront of applying new and renewable technologies to conserve energy, reduce costs and lower its carbon footprint. Merck’s facility in Rahway/Linden, New Jersey, is a longtime customer of Elizabethtown Gas. Merck operates a steam cogeneration facility and natural gas-fired micro turbines that supply steam, hot water and electricity to the site.
    AGL Resources Featured Customer
  • 40. AGL Resources Featured Customer
    • Industrial Customer: NASA’s mission is to pioneer future advances in space exploration, scientific discovery and aeronautics research. Natural gas, supplied by Virginia Natural Gas, helps enable the NASA Langley Research Center in Hampton, Virginia, to conduct wind tunnel experiments. Additionally, the Kennedy Space Center in Florida depends on natural gas supplied by Florida City Gas to control humidity in sensitive processing areas.
  • 41. It’s All About Value
    • Natural Gas Value Proposition
    • Value Chain Solutions
    • Economic Impact and Development
    • US$16 trillion in Energy Investments in Developing Economies over next 20 years
      • $4.0 trillion in natural gas
      • $2.2 trillion needed in China
      • $1.3 trillion needed in South Asia
      • $1.2 trillion needed in Africa