Virtual Pipeline Service (VPS) Presented November 20 th, 2013

Virtual Pipeline Service (VPS) Presented November 20 th, 2013

PROBLEM: How to get gas to the Interior, sooner than later? Piece meal with multiple parties is risky. May not make the Sept. 2015 deadline. Getting late start for site in Prudhoe Bay. Market is there, but not coming together in timely cohesive manner. May have to happen concurrently with construction. IGU/FNG issues at RCA. Competitive LNG pricing not in FNG s best interest, need an alternative supplier. VPS Nov 2013 2

The private sector can t speculate to the extent needed The State passed SB23 to prompt the development. Spectrum Alaska, LLC is on the short list with AIDEA s development strategy. Spectrum believes more marketing/gas sales efforts will benefit the project. VPS Nov 2013 3

VPS provides significant enhancements to the IEP Focuses the responsibility of delivering gas on one entity. Ensures the schedule will be met. Provides gas service to many more Alaskans that just Fairbanks/North Pole. Increases efficiency of project by one team controlling all aspects of delivery. VPS Nov 2013 4

What is VPS? Turnkey, curb to curb gas delivery service, just like a pipeline. Prudhoe Bay LNG Plant Tanker Gas Supply Gas Delivery VPS Nov 2013 5

Typical LNG Satellite System (Stores LNG and sends out gas) 6

Recent Projects LNG Satellite Vermont USA 7

Recent Projects LNG Satellite Northwest Territories, Canada 8

Recent Projects LN2 System Queensland, Australia 9

Drawings, Pictures, Videos Tank Installation http://youtu.be/vakqjyevm4g VPS Nov 2013 10

How will it work? As Proposed: The Quanta Spectrum JV (QS) will develop the entire chain of delivery. Best analogy is a statewide LNG distribution utility. Each town will provide its own local sponsor for gas distribution and utilization. QS will provide all equipment needed to deliver gas to the community. Each community will provide a suitable location for the LNG Satellite. QS will offer technical assistance to locals on how to best use natural gas service in a safe manner. VPS Nov 2013 11

Alaskans will benefit from: Continuing economic benefits from the use of cheaper fuel. Initial construction efforts throughout many communities. Benefits spread more evenly throughout Alaska Cleaner air. Less soil contamination from diesel storage. Increased oil exports from reduced in state consumption. VPS Nov 2013 12

How does VPS fit in? Spectrum has been developing the Prudhoe Bay LNG Plant Project since early 2012. Currently Spectrum is on the AIDEA short list for funding the Prudhoe Bay LNG plant. The missing key ingredient is a commitment from the market to buy the product. No one wants to sign a take or pay agreement; all want the state to take the risk through SB23. VPS is offered as an option to Spectrum s proposal to AIDEA to assure the sales volumes will materialize and make the project a success. VPS happens to offer many more benefits. VPS Nov 2013 13

Other harmonious benefits from VPS The AIDEA Interior Energy Project overall needs to maximize its throughput in order to minimize the cost of service to the customer. More customers = lower cost. Heating load peaks in the winter. Transportation fuel peaks in the summer. VPS makes both CNG and LNG available statewide for motor fuel. Alaska will be able to join the wave of Americans that are switching to natural gas as a motor fuel. VPS Nov 2013 14

Which communities get gas? Ester Nenana Anderson AFB Clear AFB Healy McKinley Park Cantwell Talkeetna Hope Cooper Landing Fox Livengood Fort Knox Mine North Pole Eielson AFB Pogo Mine Delta Junction Tok Northway Glennallen Valdez Moose Pass Seward Alaska Skagway Haines More gas served to others also means more project certainty, more economies of scale. Spread the benefits to more Alaskans. VPS Nov 2013 15

2020 Projected LNG Demand for Add l Communities (GPD) 70,000 60,000 50,000 Heating GPD Power Generation GPD LNG Motor Fuel LCNG Motor Fuel G P D 40,000 30,000 20,000 10,000 VPS Nov 2013 16

Economics RCA Cost of Service model used for pricing. No continuing subsidies used. Additional sales enhance the overall project, the more gas sold, the cheaper it gets for everyone. No cross subsidies between locations. VPS Nov 2013 17

Natural gas used for motor fuel has many benefits of its own Cheaper Direct impact to consumers. Cleaner Substantially reduced pollution helps reduce non attainment issues. Economic stimulus from the conversions and new vehicle sales. VPS Nov 2013 18

Spectrum LNG, LLC Lowest cost LNG producer in Western US. Experienced gas developer in Alaska. Built Norgasco and FNG. Conceived and built Pt. McKenzie and Ehrenberg LNG plants. Built first trucked LNG operation in Alaska. VPS Nov 2013 19

Spectrum LNG Ehrenberg Plant Development Purchased the remnants of the Rosenberg LNG Plant out of the ENRON estate in 2006. Planned to install in Prudhoe Bay. Changed to Ehrenberg when Clean Energy signed take or pay (TOP) agreement in 2007. Located excellent site for plant on the AZ/CA border. Redesigned the plant to make 50,000 gpd, permitted, re built and installed the plant. Producing the lowest priced LNG in the US, making close to 55,000 gpd average. Recently agreed with Clean Energy to expand TOP capacity to 65,000 gpd. Expansion completion in the first Quarter of 2014. We are developing a second site in Arizona and another site in Oklahoma, in addition to Prudhoe Bay. 20

Spectrum LNG Plant Ehrenberg, Arizona 21

Spectrum Ehrenberg, Arizona (Experience)

Spectrum Ehrenberg, Arizona (Experience) 23

Looking North over Spectrum s LNG Plant in Arizona 24

View to the South 25

This is what we do every day, load trucks (Experience) 26

This is what we do, ship LNG (Experience) 27

Our customers rely on us (Experience) 28

Our Team Has: (Experience) Developed two of the five Merchant LNG Plants in the Western U. S. Developed two of the four Natural gas distribution companies in Alaska. Developed two liquid fuel distributorships in Alaska. We have had the privilege of leading multiple successful gas distribution projects in AK and elsewhere. Including other non Alaskan Ventures, we have developed 7 Enterprises that continue in profitable operation today. 29

Quanta Services brings a lot to the party Conam Construction Co. is Quanta s local construction group in Alaska. Is the leading specialty contractor providing comprehensive energy infrastructure solutions to the electric and gas utility and pipeline industries. Has scope and scale in its core businesses with deep customer relationships. Is the preferred employer in the industries it serves. Leads the industry in safety performance. Has a strong balance sheet and financial flexibility. Has an entrepreneurial business model and culture. $6.5 Billion in Revenues, $6 Billion market Cap 30

Unmatched Resources and Expertise Electric Power Services Differentiators Transmission Distribution Substations Emergency Restoration Energized Services EPC Solar & Renewables Engineering Specialty Services Largest T&D Contractor in North America Reputation & Track Record Safe Execution Unmatched Solutions Scope Human & Equipment Resources Energized Services EPC Capabilities Balance Sheet Natural Gas & Pipeline Services Differentiators Mainline Pipeline Shale Gathering Pipeline Compressor, Metering & Pumping Stations Gas Distribution Pipeline Integrity Horizontal Directional Drilling Storage Facilities Pipeline Logistics Management Specialty Offshore Field Services Largest Pipeline Contractor in North America Reputation & Track Record Safe Execution Turnkey Solutions In House Automatic Welding EPC Capabilities Balance Sheet VPS Nov 2013 31

Blue Chip Customer Base & Low Customer Concentration No single customer accounted for more than 12% of revenues for the first nine months of 2013 The 10 largest customers accounted for approximately 35% of revenues for the first nine months of 2013 Strong relationships with the majority of U.S. investor owned utilities and Canadian utilities in North America many going back for decades VPS Nov 2013 32

Integrated Services Quanta is one of few specialized service providers capable of regularly delivering end to end solutions on a nationwide basis Planning, engineering and design through procurement and construction to start up, operations and maintenance Service delivery tailored to unique customer requirements, whether single service or integrated turnkey approach Construction Planning PEPC / EPC Capabilities Procurement Engineering VPS Nov 2013 33

Natural Gas and Pipeline Leading Market Position, Comprehensive Solutions VPS Nov 2013 34

Implementation? The State needs a single experienced team of LNG developers and major construction experts to bring this project together. One that can guarantee the delivery of the project on time. AIDEA completes negotiations with Spectrum in a timely manner. AIDEA signals they want the QS offered VPS option. If the State wants to buy down the cost of service, it can be done by offering lower priced debt for the VPS to areas outside of SB23 intentions. In the RCA s Cost of Service model, lower interest rates pass through to the customer in lower monthly bills. VPS Nov 2013 35

Schedule Prudhoe Bay LNG Plant VPS Nov 2013 36

Schedule Fairbanks Satellite Plant VPS Nov 2013 37

Summary Quanta and Spectrum stand ready provide Virtual Pipeline Service to many areas in Alaska. The project begins with a supply of LNG from Prudhoe Bay. Through Senate Bill 23, the State elected to participate in the construction of the needed LNG Plant. The Legislature gave AIDEA the funds to finance the project. As of November 2013, AIDEA is deliberating over development options. The Spectrum LNG Plant is ready to begin construction now and can easily be completed in 2015. AIDEA needs to select the most competitive and widest ranging solution that provides the most economic benefits more Alaskans. Spectrum provides this solution. VPS Nov 2013 38