MarketLink Expansion Project Opportunity


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MarketLink Expansion Project

  • Opportunity

  • Overview

  • ENA MarketLink Position

  • Market Analysis

  • Economics

  • Exit Strategy

  • Background Information

    • Competition
    • Generating Plants


Opportunity

  • Acquire capacity in constrained Transco Zone 6 New York market

  • Premium priced pipeline

  • Limited expansion of a highly utilized pipe (85+%) with high potential for demand growth

  • Critical segment of market-area pipeline without long-haul cost risk



Pipeline Network



MarketLink Overview

  • Transco expansion from Leidy, PA to New York City by looping and adding compression approved by FERC on 4/26/00

  • 700,000 Dthd total capacity increase in two phases

  • Precedent Agreements with 7 shippers totaling 770,600 Dthd

    • Engage (NY) Enron (NY) LFG Energy Dynegy
    • Amerada Hess (NY) Sunset Energy Williams (NY)
  • Tiered demand pricing structure

  • First phase begins service 11/2001 with 280,000 - 370,000 Dthd depending upon final service agreements

  • Only 200,000 Dthd primary into Transco Zone 6 New York market in first phase. Zone 6 NY volume limited by FERC filing to 394,000 Dthd.



ENA MarketLink Position

  • Precedent Agreement executed 5/7/98

  • 30,000 Dthd MDQ

  • 10 year term starting in 11/2001

  • Primary delivery points as proposed

    • 10,000 Con Ed (Z6 New York)
    • 10,000 PSEG (Z6 New York)
    • 10,000 Brooklyn Union (Z6 Non-New York)


Market Analysis

  • Transco has high load factor

    • 85%+ 1999
    • 84% 1998
    • 85% 1997
    • 82% 1996
    • 92% 1995
  • Transco allocated at the Linden regulator 92 days during the last winter and only allowed primary deliveries on 29 days

  • NYISO condition that 80% of total load requirements must be sourced from in-City installed capacity (Locational Installed Capacity requirement)

  • NYISO Locational Installed Capacity requirement for Long Island is 93%



Economics

  • Mark to Market Value:

  • $5.325 MM Basis Spread NPV ($0.0747/Dth)

  • $135K - $1.884 MM Spread Option NPV

  • ($0.0025 - $0.025/Dth)

  • Based on $0.3004/Dth 100% load factor demand, $0.0041/Dth demand & commodity surcharges and 0.84% fuel



Additional Value Opportunity

  • Cumulative intra-month balancing on contract up to 5% of volumes transported (up to 46,500 Dth on ENA volume)

  • Intra-day balancing on contract up to 10% of MDQ

  • Ability to segment capacity and transport from Non-New York pooling point to deliveries south of Princeton Junction

  • Backhaul to Transco Zone 5 or Zone 4 during periods of forward haul constraint within these zones



Exit Strategy

  • MTM economics are positive for entire term, but potential risk mitigation for out years:

  • Utilize capacity during first three to five years of contract and flip to an Enron or third party electric generation project

  • Leverage contractual asset into New England delivery through asset management of New York player with Iroquois capacity or other New England deliveries

  • Release capacity or make delivery to retail marketer who requires firm delivery into Transco Zone 6 New York market



Competition - Iroquois

  • Eastchester Extension Project filed with FERC on 4/28/00 expands Iroquois by 220,000 Dthd

  • Expands mainline capacity and extends system from Northpoint, Long Island through the Long Island Sound to connect with Con Ed in the Bronx

  • Additional supplies to come from Waddington

  • Two phase project in which first phase supplies 70,000 Dthd to Orion’s Astoria Generating project by 4/2002

  • Remaining capacity would be in place by 11/2002

  • Executed Precedent Agreements with Astoria, Con Ed, Keyspan Ravenswood, Engage Energy and Riverbay Corporation



Competition - Millennium

  • Columbia/MCN/TCPL/Westcoast partnership project filed with FERC on 12/22/97 for 700,000 Dthd

  • Pipeline would transport from Dawn to New York City

  • Project in jeopardy due to NiSource acquisition of Columbia and right-of-way problems in New York

  • Project may not get approvals for deliveries into NYC

  • Scheduled to access electric generation projects above NYC



NYC Generation Plants

  • Pending NYC Electric Generating Facility Applications before the New York State Siting Board

  • Estimated

  • MW Developer In-Service Date

  • Astoria Energy 1000 SCS Energy 3Q 2003

  • East River Repowering 360 Con Ed 2Q 2002

  • Poletti Station Expansion 500 NYPA 3Q 2002

  • Ravenswood Cogen 250 Keyspan 3Q 2002

  • Sunset Energy Fleet, LLC 520 SEF 2002

  • Oak Point Energy 1075 Oak Point, LLC 4Q 2003



Regional Generation Plants

  • Planned Generation Capacity Additions in the NPCC and PJM regions close to Transco

  • Estimated

  • MW Developer In-Service Date

  • Linden 125 Cogen Tech 2001

  • Linden 1100 PG&E 2Q 2003

  • Linden 1100 PSEG 2Q 2003

  • Mantua Creek 800 PG&E 2Q 2002

  • Eden Township 90 PPL Global 2Q 2002




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