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Putting the Guidance Documents (HOA + MOU) in Context A Presentation - - PowerPoint PPT Presentation

Mar 16, 2023 284 likes •417 views

Putting the Guidance Documents (HOA + MOU) in Context A Presentation to the Fairbanks Chamber of Commerce Department of Natural Resources March 5, 2014 Joe Balash Commissioner Department of Revenue Michael Pawlowski Deputy Commissioner

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SLIDE 1

Putting the Guidance Documents (HOA + MOU) in Context

A Presentation to the Fairbanks Chamber of Commerce

March 5, 2014

Department of Natural Resources Joe Balash Commissioner Department of Revenue Michael Pawlowski Deputy Commissioner

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SLIDE 2

Where We Are Today?

2

AGIA:

State: ~$330 million APP (TransCanada & EM): ~$130 million

Denali

(BP & CP) ~$200 million

Stop: does State buy $130 million of APP data?

AGDC ASAP Advancing to 2015 Open Season (sharing w AKLNG)

SB 138 Jan- April 2014

Heads of Agreement

GO

All AGIA and Denali work is contributed to AKLNG with passage of enabling legislation (SB 138). State & TransCanada mutually abandon AGIA license. No more reimbursement.

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SLIDE 3
  • Describes agreement to

transition from AGIA License to a more traditional commercial relationship.

  • Describes key commercial

terms for that relationship.

  • Describes roadmap to

advance project through phased process.

  • Describes understanding

and consensus on key terms.

Guidance Documents & SB 138

Heads of Agreement (HOA) Memorandum of Understanding (MOU)

3

Senate Bill 138

  • Participation in the

AKLNG Project.

  • Percentage of State

Gas Share and Participation in the AKLNG Project.

  • Process for

development of Project Enabling Contracts and Legislative oversight and approval of future contracts.

HOA and MOU Describe how SB 138 would be used. Legislature decides whether to advance or not.

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SLIDE 4

ALASKA NORTH SLOPE ROYALTY GAS STUDY 4

SENATE FINANCE COMMITTEE – OBSERVATIONS ON HOA SENATE FINANCE COMMITTEE – OBSERVATIONS ON HOA

Royalty Gas 13% Tax Gas

8%

Total State Gas Share 20% State Equity Participation 20% State Investment $9B Royalty Gas 13% Tax Gas

14%

Total State Gas Share 25% State Equity Participation 25% State Investment $11.3B Royalty Gas 13% Tax Gas

10.5%

Total State Gas Share 22% State Equity Participation 22% State Investment $10B

GROSS TAX RATE SETS THE TOTAL STATE GAS SHARE & EQUITY PARTICIPATION

VALUE TO SOA

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SLIDE 5

ALASKA NORTH SLOPE ROYALTY GAS STUDY 5

SENATE FINANCE COMMITTEE – TRANSCANADA PARTICIPATION

* Assumes 25% State equity participation

OPTIONS IDENTIFIED BY STATE FOR EQUITY PARTICIPATION

SOA : 25% SOA: 25% SOA: 25% TC: 25% TC: 25% SOA: 25% TC: 15% TC: 15% SOA: 25% SOA: 10% SOA: 10%

GTP Pipeline LNG Plant SOA Alone SOA + TC No Buyback SOA + TC with Buyback

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SLIDE 6

ALASKA NORTH SLOPE ROYALTY GAS STUDY 6

SENATE FINANCE COMMITTEE – TRANSCANADA PARTICIPATION

IMPLICATIONS OF OPTIONS AND POTENTIAL OFF RAMPS

$108M $450M $13.2B

SOA GO IT ALONE:

Pay TC Dev. Costs of ~$70M (Incl. AFUDC of $5M) Pay TC Dev. Costs of ~$390M (Incl. AFUDC of $50M)

TC NO BUYBACK:

$43M $180M $6.7B

TC WITH 40% BUYBACK:

$43M $360M $9.3B

Pay TC Dev. Costs of ~$70M (Incl. AFUDC of $5M) Pay TC Dev. Costs of ~$230M (Incl. AFUDC of $30M)

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 PRE-FEED FEED CONSTRUCTION

FID

TIMELINE: PROJECT STAGE: STATE INVESTMENT

* Assumes 25% State equity participation

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SLIDE 7

ALASKA NORTH SLOPE ROYALTY GAS STUDY 7

SENATE FINANCE COMMITTEE – TRANSCANADA PARTICIPATION

SOA UPFRONT CAPITAL COST EXPOSURE IS REDUCED THROUGH TC PARTICIPATION

TransCanada participation can reduce the State’s investment during peak construction by $1.6B-$2B/YR

* Assumes 25% State equity participation

STATE OF ALASKA ANNUAL INVESTMENT

SOA ALONE?

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SLIDE 8

ALASKA NORTH SLOPE ROYALTY GAS STUDY 8

SENATE FINANCE COMMITTEE – TRANSCANADA PARTICIPATION

RETAINING MOMENTUM ON PROJECT COULD BE MORE VALUABLE THAN SECURING BETTER COMMERCIAL TERMS

Each 5% decrease in equity ratio is equivalent to $200MM in additional NPV to State Each 1% decrease in ROE is equivalent to $100MM in additional NPV to State Each year’s delay in project operation is equivalent to loss of $800MM in NPV to State

TC AS PARTNER

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SLIDE 9

ALASKA NORTH SLOPE ROYALTY GAS STUDY 9

SENATE FINANCE COMMITTEE – TRANSCANADA PARTICIPATION

SUMMARY ON 4 KEY QUESTIONS

  • Experience
  • Momentum
  • Expansion
  • Change in

financing could materially lower TC’s ROE & NPV

  • TC can reduce

SOA investment by$4-$7B

  • SOA may hit

debt limits going alone

  • Total cash flows

reduced by $4B; NPV impact is marginal

ECONOMIC IMPACT TO THE STATE FROM TC? CAN THE STATE GO IT ALONE? IS TC A GOOD PARTNER? DOES TC BEAR ANY FINANCIAL RISK?

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SLIDE 10

ALASKA NORTH SLOPE ROYALTY GAS STUDY 10

SENATE FINANCE COMMITTEE – OBSERVATIONS ON HOA SENATE FINANCE COMMITTEE – OBSERVATIONS ON HOA

Total Cash Flow (Through 2041) = $72 Billion

PRESERVE VALUE TO STATE FROM ROYALTY & TAXES

VALUE TO SOA

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SLIDE 11

Summary

  • The Heads of Agreement (HOA) and

Memorandum of Understanding (MOU) provide guidance on how the powers provided in SB 138 will be used.

  • At each stage in the project there are “off-

ramps” and decision points for Legislative and public review.

  • Commitments by the State will be made

commensurate with progress by the project.

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SLIDE 12

THANK YOU

Please find our contact information below:

Michael Pawlowski Deputy Commissioner Department of Revenue Michael.Pawlowski@alaska.gov

Resources

http://dor.alaska.gov/AKGasDocs.aspx www.dnr.alaska.gov/AKgas.htm Joe Balash Commissioner Department of Natural Resources Joe.Balash@alaska.gov