board planning session

Board Planning Session

Kennesaw, GAMarch 21, 2011

Municipal Gas Authority of Georgia

Board Planning Session – March 21, 2011



2010 Financial Results G&A True-up Swing Supply Charge Capacity Management Credits Storage Programs Long-Term Supply Projects

2010 Corporate Goal and Incentive Compensation Plan Proposed 2011 Corporate Goal

- 2 -

Agenda




Conasauga Shale Supply Opportunity in Georgia Portfolio III Investments in Member Debt Draft 2016 Strategic Plan 2010 Audit Results* – Meeting with Ernst & Young

(Tuesday morning before MGAG Board Meeting)

- 3 -

Agenda

* Discussion Materials to be Provided at the Meeting




Actual net G&A represents a favorable variance from budget of $52,000

The overall favorable variance is comprised of the following: Unfavorable variance of approximately $139,000 on G&A expenses

Due primarily to office expansion costs incurred to support new PGP services

Favorable variance of approximately $47,000 in Revenue Credits due to Higher than expected revenues from interest income and Main Street

administrative fees Offset somewhat by reserved amounts of almost $600,000 for timing

differences and risk related to Pine Needle, MGC and FUEL Favorable variance of approximately $145,000 in Member billings

due to colder than normal weather Overall favorable variance has been recorded as additional Net

Assets- 4 -

2010 Financial Results




- 5 -

2010 G&A True-UpBUDGET ACTUAL VARIANCE

2010 2010 (UNFAVORABLE)FAVORABLE

SALARIES & BENEFITS 5,771,230 5,768,877 2,353OFFICE OPERATIONS (BUILDING, TELECOM, SUPPLIES) 507,980 628,884 (120,904)TECHNOLOGY EXPENSES 399,860 434,160 (34,300)PROFESSIONAL SERVICES (LEGAL,CONSULTING,AUDIT) 616,146 610,936 5,210TRAVEL AND MEETINGS 375,650 353,854 21,796OTHER (BOARD MEMBERS, MISC.) 114,200 127,846 (13,646) TOTAL G&A EXPENSES 7,785,066 7,924,557 (139,491)

PGP SERVICE FEES (1,185,000) (1,054,274) (130,726)MAINSTREET FEES A, B, & C (429,655) (515,158) 85,503LONG-TERM SUPPLY ADMIN FEES (410,000) (386,390) (23,610)DEFERRED MAIN STREET REVENUES (375,000) (375,000) 0INTEREST INCOME (145,000) (343,712) 198,712PATRIOTS ENERGY GROUP (306,000) (332,970) 26,970FUEL, INC. FEES (386,718) (286,718) (100,000)RICHMOND ADMIN FEES (277,498) (277,336) (162)PINE NEEDLE REVENUE (110,000) (146,105) 36,105RENTAL INCOME (153,036) (133,830) (19,206)MID-GEORGIA COGEN (139,000) (112,514) (26,486)SUBSCRIBED REGULATORY FEES (50,000) (50,000) 0SEAGD FEES (48,000) (48,000) 0 TOTAL REVENUE CREDITS: (4,014,907) (4,062,007) 47,100

NET G&A EXPENSES 3,770,159 3,862,550 (92,391)TOTAL G&A REVENUE (3,770,159) (3,915,159) 145,000

EXCESS REVENUE - (52,609) 52,609




Purpose Implemented Oct 1, 2003 to pro-actively collect funds to

maintain first-of-month (FOM) pricing for ALL Gas Supply to ALL Members

$2 MM collection is less than 1% of $265 MM in annual gas purchases

Goal Minimize cost impact of swings through use of Member assets

and Gas Authority purchased assets Historic Results

Since inception, returned more than 60% of funds collected FOM pricing maintained for ALL Members in light of increasing

load and price volatility, and increasing pipeline limitations- 6 -

2010 Financial ResultsSwing Supply Charge




2010 Activity SSC Collections $1,975,000 Load Management Gains / Losses

Load / Price Volatility Gains $ 963,000 Load / Price Volatility Losses ($ 450,000) Storage / Option Costs ($ 420,000) Net Gain $ 93,000

Balance to Return to Members $2,068,000 2011 Expectation - $1,250,000

First quarter losses of approximately $500,000 Costs in Jan / Feb from incremental needs at higher prices Costs in Feb / Mar from sales at lower prices

- 7 -

2010 Financial ResultsSwing Supply Charge




Production Area Supply Savings (PASS Credits) Use of upstream capacity to purchase monthly gas when

pricing is significantly below FOM (Monthly credit on bill) 2011 Challenges

Very limited production area savings expected on TR and TETCO Historically constrained supply sold to us at a discount is now flowing

to other pipelines which will result in less savings

- 8 -

2010 Financial ResultsCapacity Management Credits

2005 2006 2007 2008 2009 2010 2011 -

200,000 400,000 600,000 800,000

1,000,000 1,200,000 1,400,000 1,600,000

Amounts by Year and Goals

ActualGoal




Capacity Release Release of excess capacity to 3rd parties and internally Monthly credit to reduce capacity costs

2011 Challenges Transco – Reduced value for capacity Southern - Reduced capacity available and lower value

- 9 -

2010 Financial ResultsCapacity Management Credits

2005 2006 2007 2008 2009 2010 2011$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000Capacity Release Goals & Actual Amounts by Year

Goal Actual




Background: Southern Storage (CSS) assets were acquired and financed

in 1994 with Storage Revenue Bonds All debt and deferred balances were fully paid in 2009 Initial returns to Members began in 2009 Transco ESS storage assets were transitioned to active price

management in early 2009

- 10 -

2010 Financial ResultsStorage Programs




Current Operations: Storage assets are critical to managing load swings during peak

periods Spreads between summer and winter gas prices are used to pay

operating and working capital costs Remaining margins are available for Member returns

Summary of Results Annual net operating income has been strong and reliable as

spread trades have been an effective hedging strategy for several years

Current storage year (2011-12) is partially hedged (40%) Next storage year (2012-13) is 20% hedged Future years are not yet hedged

Propose Member returns of $1.73 million (CSS) and $138,000 (ESS)

- 11 -

2010 Financial ResultsStorage Programs




- 12 -


Total $/Dt** Total $/Dt*** Total $/Dt*** Total $/Dt*** Total $/Dt***

Operating Margin 3,757,999$ 1.25$ 3,025,000$ 0.96$ 1,700,000 $ 0.54$ 1,350,000 $ 0.43$ 1,150,000 $ 0.36$

Non-Operating Expense* 220,789$ 0.07$ 297,000$ 0.09$ 350,000 $ 0.11$ 350,000 $ 0.11$ 350,000 $ 0.11$

Net Income 3,537,210$ 1.18$ 2,728,000$ 0.87$ 1,350,000$ 0.43$ 1,000,000$ 0.32$ 800,000$ 0.25$

Member Returns 1,650,000$ 0.55$ 1,737,000$ 0.55$ 1,737,000$ 0.55$ 1,737,000$ 0.55$ 1,737,000$ 0.55$

Project Balance 1,887,210$ 2,878,210$ 2,491,210$ 1,754,210$ 817,210$

Storage Withdrawals (Dt) 2,900,000 3,000,000 3,000,000 3,000,000 3,000,000

% Hedged 100% 40% 20% 0%

* Primarily internal interest expense charged project on working capital ** $/Dt based on maximum storage quantities of 3,013,804 Dt*** Addition of Dublin increased maximum storage quantities to 3,158,371 Dt starting 2010-11

2013-14 Projected

CSS Storage2009-10 Actual 2010-11 Estimated 2011-12 Projected 2012-13 Projected




- 13 -


Total $/Dt** Total $/Dt** Total $/Dt** Total $/Dt** Total $/Dt**

Operating Margin 412,000$ 1.65$ 205,000 $ 0.82$ 125,000 $ 0.50$ 86,000$ 0.34$ 85,000 $ 0.34$

Non-Operating Expense* 35,000$ 0.14$ 20,000 $ 0.10$ 28,000 $ 0.11$ 28,000 $ 0.11$ 28,000 $ 0.11$

Net Income 377,000$ 1.51$ 185,000$ 0.72$ 97,000$ 0.39$ 58,000$ 0.23$ 57,000$ 0.23$

Member Returns 138,000$ 0.55$ 138,000$ 0.55$ 138,000$ 0.55$ 138,000$ 0.55$ 138,000$ 0.55$

Project Balance 239,000$ 286,000$ 245,000$ 165,000$ 84,000$

Storage Withdrawals (Dt) 240,000 240,000 240,000 240,000 240,000

% Hedged 100% 40% 0% 0%

* Primarily internal interest expense charged project on working capital** $/Dt based on maximum storage quantities of 250,442 Dt

2009-10 Actual 2010-11 Estimated 2011-12 Projected 2012-13 Projected 2013-14 ProjectedESS Storage




- 14 -


Gas Reserves Gas Authority

Alabama and Kansas Coalbed Methane reserves PGP - Portfolios of producing reserves

Pool 1 – MGAG 46% share Pool 2 – MGAG 54% share Pool 3 – MGAG 70% share

Prepayment transactions TEAC and PEAK participation Main Street transactions – JPMorgan, Merrill (2), and RBC

Long-Term Supply Projects




- 15 -


Reserve Diversity Mix of conventional and unconventional reserves Oil reserves are adding significant value

Geographic Diversity 16 states – Greatest Value in Texas / Oklahoma 5,500 + wells – Greatest number in Texas / Alabama

Solid Operating Partners Mix of large / small private and large public companies Generally using industry standard agreements

Operational exposure and risks Hedged commodity prices for 5 – 6 years Ongoing development opportunities

Long-Term Supply Projects – Gas Reserves




- 16 -


Alabama CBM (Energen Operates) Production at 12,000 Mcfe/day Final year of 100 well drilling program (81

complete) Kansas CBM (Dart Oil & Gas Operates)

Production at 8,400 Mcfe/day Project economics have improved due to operating

efficiencies Dart is continuing to market their interest Small oil play may be developing

Long-Term Supply Projects – Gas Authority Reserves




- 17 -

Saga

Saga

2010 Financial Results – PGP Pool 1 Map

Cedar CoveMcNicCheyenne-Putnam/McNic IICymreac ExplorationJetta/PermianHSA/WardFGL/FuturePotash Dome/Greka Tiger/Exco

Field/Sundown

$268.9 Jan. 2006TX, AR, OK, NM, AL, MS, LA

Sundown

Locations

Saga MT, WY, CO, AL 308 Jan. 2008 $61.0 $329.9

2000

Transaction#

Wells Closed Price





Pool 1 Continuing to transition administrative services from largest

operating partner (Sundown) to the Gas Authority Net savings of $1.2 million per year Better decision-making capabilities and visibility Most planned development is focused on oil reserves in West

Texas Developed new database for managing operating decisions and

additional accounting activity Over $20 million in development expected for 2011 Fixed assessments, which began in January 2011, will be

used to accelerate debt repayment- 18 -

Long-Term Supply Projects – Public Gas Partners




2010 Financial Results - Pool 2 Map

- 19 -

TransactionApacheDavis

Four CornersEdna HollowEast LibertyPine Hollow

Kerr McGeeOrionPetroNovaSagaTGP

LocationsTX, OK, LA

TXKS/OK

KSOKTXOKAL

MT, WY, ALTX, MS, NM

# Wells170

5302082846

20040

ClosedJune 2005

Dec. 2005Oct. 2005Nov. 2006Apr. 2007Nov. 2006Oct. 2007May 2007Jan. 2008

June 2005

Price$ 67.0

7.51.83.97.1

20.03.33.0

19.05.7

$138.3

Apache TGPDavis – OK/KS OrionDavis – TX PetroNovaKerr-McGee Saga




Pool 2 Wide range of results among various projects / operators Potential opportunities could provide significant upside

Texas Gas Partners – S. TX wells Considering partial sale of partnership interests to capture value from

high current oil prices Continuing drilling of oil related reserves

Orion - Oklahoma tight sands project Shallow oil play is developing in the area Pool 2 has interests in 20,000 acres that may be productive Recent core analysis had encouraging results


- 20 -

Long-Term Supply Projects – Public Gas Partners




Pool 2 Challenges

Fixed assessments, which began in January 2011, will be used to accelerate debt repayment

Davis Oklahoma reserves- Prior operator sold out and transferred operations to the new owner in

late 2010 without proper authorization- New owner has limited experience and financial resources

– PGP has filed suit against new owner to take over operations Alabama CBM assets

10-well pilot program to establish a new field has been very disappointing and may need to be plugged and abandoned

- 21 -

2010 Financial ResultsLong-Term Supply Projects – Public Gas

Partners




2010 Financial Results – PGP Pool 3

- 22 -

Louisiana

Oklahoma

Transaction Location

# PDP

WellsOrion-North Fork OK

LA020

180300

May 2008Sept 2008

Closed

PurchasePrice Description

$ 7.0$11.0$18.0

Hunton Dev ProgramCBM PDP + Dev Program

Total Possibl

eWells

CHC Energy




Pool 3 Two existing projects

Early-stage Louisiana CBM project 20-well pilot program has continued to have operational issues No additional activity while we wait for adjacent operator to complete new

wells and share results Oklahoma Dolomite de-watering project

Drilled 8 wells with existing partners in 2009 – 2010 Currently drilling 6 additional wells

Existing partners did not participate due to lack of funding Seismic information on one section indicates an unexpected shallow oil-producing

formation that could be significant New well has been authorized and will be drilled in May / June

- 23 -

2010 Financial ResultsLong-Term Supply Projects – Public Gas

Partners




Key Assumptions All key project reserve reports are updated annually by

nationally recognized engineering firms NYMEX pricing for 6 years and then $6.50 flat for gas and

$80 flat for oil Alabama CBM pricing is based on $5.00 long-term gas

prices for conservatism Interest rates averaging 3 – 4 %, based on current debt

components and continuing blend of fixed and floating rates

- 24 -

2010 Financial ResultsLong-Term Supply Projects – Expected

Results




- 25 -

2010 Financial ResultsLong-Term Supply Projects – Expected

ResultsTransaction Description Supplier / Operator

Member Volumes

(MMBtu/d) Term ThroughCents

Under SpotPortfolio III Series A Energen CBM 12,000 2025 + $1.30Portfolio III Series B DART CBM 8,500 2025 + ($0.20)Portfolio III - PGP Pool 1 Sundown and Saga 10,000 2025 + ($0.60)Portfolio III - PGP Pool 2 Apache, Davis, others 3,000 2025 + ($0.50)Portfolio III - PGP Pool 3 Orion, CHC 1,000 2025 + TBDTotal Portfolio Projects 34,500PEAK prepay BP Corporation 1,600 J uly-16 $0.25TEAC prepay Goldman Sachs 8,400 J uly-26 $0.59Main Street - 2006 A J P Morgan 13,000 J anuary-22 $0.46Main Street - 2006 B Merrill Lynch 13,000 J anuary-22 $0.46Main Street - 2007 A Merrill Lynch 5,500 August-28 $0.67Main Street - 2010 A RBC 5,000 J uly-40 $0.20Total Prepayment Projects 46,500Total Long-Term Supply Projects 81,000




Portfolio project obligations include Direct debt and liquidity at the Gas Authority, and Indirect debt owed by PGP

$307 million total debt, including proportionate share of PGP debt Combination of long-term bonds, short-term notes and bank lines

of credit Combination of fixed and floating interest rates with

approximately half in committed, fixed-rate obligations Maintaining portion of debt in short-term, variable-rate structures

is avoiding significant additional interest expense $100 million at 3% higher fixed-rate bonds would cost an additional

$3,000,000 in interest per year Short-term rates have averaged less than 3.5% over last 10 years

- 26 -

2010 Financial ResultsLong-Term Supply Projects – Debt

Management




- 27 -

2010 Financial ResultsLong-Term Supply Projects – Debt

ManagementFebruary 2011(In $ millions) MGAG Total Current Fixed

Pool 1 Pool 2 Pool 3 rates VariableAvailable capacityLines of credit - unfunded Liquidity for ST Notes 25 33 17 75 0.50% V Liquidity for Ops & Capex 4 4 8 0.50% V PGP LOCs - liquidity 38 38 0.60%Total available 29 37 38 17 121

Short-term debt MGAG LOC - Wells Fargo 13 2 20 35 2.00% V MGAG LOC - J P 12 12 2.00% V PGP LOCs - Wells/J P/Scotia 37 37 2.00% V MGAG Short-Term tax-exempt 47 61 31 139 1.00% VTotal short-term debt 72 63 37 51 223

Long Term Debt:MGAG Taxable 10-yr bonds 44 9 36 89 5.30% FPGP Tax-Exempt Bonds 123 123 3.20% FTotal long-term debt 167 9 0 36 212

Total Debt - MGAG 116 72 0 87 275Total Debt - PGP 123 0 37 0 160Total Debt - MGAG and PGP 239 72 37 87 435Long-term as % of total funded debt 70% 13% 0% 41% 49%Wtd avg interest rate 3.09% 1.82% 2.62% 3.11% 2.84%MGAG Proportionate Share 143 50 26 87 307

Public Gas Partners




- 28 -

2010 Financial ResultsAnalysis of Individual Projects Within LT

SuppliesActual Proposed Est Est Est Proposed09/10 10/11 11/12 12/13 13/14 $/Dt

PIII - Alabama CBM 5,000,000 5,200,000 7,000,000 7,000,000 6,500,000 1.19$ PIII - Kansas CBM (500,000) (500,000) (500,000) (500,000) (0.16)$ PIII - PGP - Pool 1 500,000 (6,000,000) (4,600,000) (3,800,000) -$ PIII - PGP - Pool 2 (2,600,000) (2,100,000) (1,800,000) -$ PIII - PGP - Pool 3Portolio Total 5,500,000 4,700,000 (2,100,000) (200,000) 400,000

TEAC - Goldman 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000 0.59$ PEAK - BP Corp 100,000 100,000 100,000 100,000 100,000 0.17$ MS - ML and J P 2006 A&B 4,100,000 4,400,000 4,400,000 4,400,000 4,400,000 0.46$ MS - ML 2007A 24,400,000 1,600,000 1,600,000 1,600,000 1,600,000 0.67$ MS - RBC 2010A 500,000 500,000 500,000 -$ Total Prepaid Supplies 30,400,000 7,900,000 8,400,000 8,400,000 8,400,000

Sale to Richmond (J P & ML) incl G&A (2,100,000) (2,100,000) (2,100,000) (2,100,000) (2,100,000) ML 2007A G&A deferral (2,800,000) Retained MS and PGP Cash 4,200,000 2,300,000 1,700,000Total Offsets / Sales to Others (4,900,000) (2,100,000) 2,100,000 200,000 (400,000)

Total LT Supply Rebates 31,000,000 10,500,000 8,400,000 8,400,000 8,400,000




- 29 -

2010 Financial ResultsExpected Long-Term Supply Project Results

Actual Proposed Est Est Est09/10 10/11 11/12 12/13 13/14

Total LT Supply Rebates 31,000,000 10,500,000 8,400,000 8,400,000 8,400,000Monthly Project Credits 1,700,000 1,900,000 0 0 0Monthly Credits - Cents per dt 0.05 0.05Annual LT Supply Rebates 29,300,000 8,600,000 8,400,000 8,400,000 8,400,000 G&A Transfer 250,000 Working Capital Reserve (20,000,000) Total Cash Available - LT Supplies 9,550,000 8,600,000 8,400,000 8,400,000 8,400,000Annual LT Returns - Cents per dt 0.28$ 0.25$ 0.24$ 0.24$ 0.23$ Other Returns Storage returns - Southern 1,650,000 1,737,000 1,737,000 1,737,000 1,737,000 Storage returns - Transco 100,000 138,000 138,000 138,000 138,000 Portfolio Reserve Interest 100,000 30,000 30,000 50,000 50,000Total Cash Returns 11,400,000 10,505,000 10,305,000 10,325,000 10,325,000Total Benefits - Cents per dt 0.34$ 0.31$ 0.29$ 0.29$ 0.29$ Estimated Volume 34,000,000 34,000,000 35,000,000 35,560,000 36,120,000




Based on Net Benefits to Members Cost of Membership above Spot Index

General & Administrative Costs (G&A) Swing Supply Charge

Less: Savings from Membership Portfolio Savings and Current Year Reserves Capacity Release Revenues and Swing Supply Returns Storage Project Net Operating Revenues/Expenses

Drives Incentive Compensation Plan Pays out only if Corporate Goal achieved 80% based on Corporate results 20% based on Group results Multiplier between 0 and 1.1 for individual performance

- 30 -

Corporate Goals and Incentive Compensation Plan

2010 Corporate Goal




- 31 -

Corporate Goals and Incentive Compensation Plan

2010 Corporate Goal

2010 2010Goal

AverageActual

AverageGoal

IndividualActual

IndividualGoal Actual ($/MMBtu) ($/MMBtu) ($/MMBtu) ($/MMBtu

Cost of Membership Above Index:G&A Budget Estimate 3,620,551$ 3,715,305$ 0.106$ 0.109$ 0.090$ 0.100$ Swing Supply Charge 2,000,000 1,975,348 0.059 0.058 0.088 0.089

Total Cost 5,620,551$ 5,690,653$ 0.165$ 0.167$ 0.178$ 0.188$

Savings from Membership:Portfolio Cash Returns (monthly and annual) 12,200,000$ 10,500,000$ 0.359$ 0.309$ 0.328$ 0.288$ Portfolio Reserve Interest 100,000 30,688 0.003 0.001 0.001 0.000 Swing Supply Savings 1,500,000 2,067,795 0.044 0.061 0.066 0.093 Capacity C redits 2,700,000 2,966,474 0.079 0.087 0.017 0.014 Storage Net Income * 2,400,000 2,913,000 0.071 0.086 - -

Total Savings: 18,900,000$ 18,477,957$ 0.556$ 0.543$ 0.412$ 0.395$

Net Benefit of Membership below Index: (13,279,449)$ (12,787,304)$ (0.391)$ (0.376)$ (0.234)$ (0.207)$ Smyrna 2010 Projected Low Member




- 32 -

Corporate Goals and Incentive Compensation Plan 2010 Corporate Goal Results - ¢ Below Spot

Goal - Average Payout % Goal - Individual Payout %Maximum (0.441) 125% (0.284) 125%Stretch (0.416) 100% (0.259) 100%Target (0.391) 75% (0.234) 75%Actual (0.376) 0% (0.207) 0%

Weighted Average Payout – 0%




- 33 -

Proposed 2011 Corporate Goal

2010 2010 20112011

Average2011

IndividualGoal Actual Goal ($/MMBtu) ($/MMBtu)

Cost of Membership Above Index:G&A Budget Estimate 3,620,551$ 3,715,305$ 3,718,457$ 0.106$ 0.098$ Swing Supply Charge 2,000,000 1,975,348 2,000,000 0.057 0.088

Total Cost 5,620,551$ 5,690,653$ 5,718,457$ 0.163$ 0.186$

Savings from Membership:Portfolio Cash Returns 12,200,000$ 10,300,000$ 8,400,000$ 0.240$ 0.222$ Portfolio Reserve Interest 100,000 30,688 50,000 0.001 0.000 Swing Supply Savings 1,500,000 2,067,795 1,250,000 0.036 0.059 Capacity Credits 2,700,000 2,966,474 2,200,000 0.063 0.014 Storage Net Income 2,400,000 2,913,000 1,600,000 0.046

Total Savings: 18,900,000$ 18,277,957$ 13,500,000$ 0.386$ 0.296$

Net Benefit of Membership below Index: (13,279,449)$ (12,587,304)$ (7,781,543)$ (0.222)$ (0.110)$

Note: 2011 Averages $/MMBtu are based on 2011 budgeted volumes versus 2010 actual volumes to minimize the impact of weather related fluctuations




- 34 -

Proposed 2011 Corporate Goal

2010 and 2011 Corporate Goal Comparison

2010 Average

2011 Average

2010 Individual

2011 Individual

Maximum (125%) (0.441) (0.272) (0.284) (0.160) Stretch (100%) (0.416) (0.247) (0.259) (0.135) Target (75%) (0.391) (0.222) (0.234) (0.110)




Conasauga Shale Shale in Eastern Alabama / Northwest Georgia Dry gas - shale in excess of 9,000’ thick

Mitchell Resources Small firm from Atlanta has leased mineral rights on 33,000 acres in

Chattooga County, GA and Cherokee County, AL Mitchell Resources says it has operator lined up and financial backing

to build gathering system and drill 3-4 test wells Learned from mistakes of 16 wells drilled in Alabama

Opportunity Production to be physically connected to Summerville, Trion and

LaFayette transmission system to feed all cities MGAG to acquire 100% of production on behalf of all members at

discount to market / avoid transport & fuel Economic benefits with direct connect cities / portfolio

- 35 -

Portfolio SupplyConasauga Shale Opportunity




Existing and proposed Member Debt in excess of the SPP threshold ($1 million) presents an opportunity for Portfolio III investment

PIII is authorized to invest in municipal debt obligations with at least an ‘A’ credit rating

PIII would benefit from investments through higher investment earnings on excess cash

Members would benefit through access to lower current interest rates

- 36 -

Portfolio III Investments in Member Debt




Same legal structure as Small Projects Pool Supplemental Contract General Obligation of the Member

Rates established including small premium over market rates

- 37 -

Portfolio III Investments in Member Debt

Potential investments

0.50%

Lease AmtCurrent Interest

Market Interest

Member Interest Rate

1st Yr Premium

1st Yr Interest

Buford Refunding - matures 2014 2,755,000$ 5.20% 2.00% 2.50% 13,775$ 68,875$ Warner Robins Refunding - matures 2026 4,150,000$ 5.85% 4.25% 4.75% 20,750$ 197,125$ Eatonton Expansion - Reynolds Plantation - 2021 2,000,000$ n/a 3.75% 4.25% 10,000$ 85,000$ Tri-County Expansion - Reynolds Plantation - 2021 2,500,000$ n/a 3.75% 4.25% 12,500$ 106,250$ Total 11,405,000$ 57,025$ 457,250$

Potential Member Debt for PIII Investment




Gas Authority Mission - UnchangedTo provide municipalities a reliable, economical supply of natural gas and to assist them in developing and growing their gas systems to optimize the benefits of public ownership

Outline Introduction Environmental Assessment Strategic Issues Goals & Strategies

- 38 -

Shaping Our Future Today!Draft Strategic Plan 2016




Results from “Vision 2011” Two Corporate Goals

Improve Member margins by 15¢ per MMBtu Achieved 17¢ per MMBtu

Grow annual throughput volumes by 7 Bcf to 77 Bcf Averaged less than 61 Bcf Member throughput +10% Partner throughput -20%

- 39 -





- 40 -


2001 2002 2003 2004 2005 2006 2007 2008 2009 2010*$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

Member Returns

Storage Returns

Capacity Release Revenues

Swing Supply Charge Credits

Agency Returns

Elimination of SDC

Portfolio Reserve Interest

Portfolio Returns (monthly and annual)




- 41 -


2001 2002 2003 2004 2005 2006 2007 2008 2009 2010*0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

Throughput VolumesMMBtu

Members Partners




- 42 -


Environmental Assessment Abundant, affordable supply of

domestic natural gas for a long time

Financial Markets remain uncertain

Natural gas assumes increasing share of U.S. energy mix

Natural gas maintains price advantage over other fuels

Federal and state governments continue to influence gas business through policies and regulations

Strategic Issues Greater Regulatory Burdens &

Obstacles Growing Retail Customers,

Burner-Tips, Membership & Partners

Balancing Risks & Rewards Competition from Alternate

Fuels & Natural Gas Suppliers Finding, Training & Retaining

Quality Staff




- 43 -


Big 5 Shale Regions Projected to Grow Rapidly




Goals & Strategies Corporate Goals Functional Goals & Strategies

Corporate Goals Sustain Member Returns at More Than 3.5 Times G&A Costs

3.5 times 2011 Budget G&A is $13.5 million in Member Returns

Grow Member Throughput by More Than 1.5% Per Year Based on 2010 Member Throughput, 1.5% is 560,000

MMBtu Grow Member Customers by More Than 500 Annually

Member Customers declined over 1,200 from 2009 to 2010- 44 -





- 45 -

Grow Member Throughput more than 1.5% per year (560,000 MMBtu) Grow Member Customers more than 500 per year

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010*$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

Member Returns

Storage Returns

Capacity Release Revenues

Swing Supply Charge Credits

Agency Returns

Elimination of SDC

Portfolio Reserve Interest

Portfolio Returns

Corporate Goal$13.5 Million


board planning session

Documents

gas supply

monthly gas

fuelfavorable variance

unfavorable variance

load price volatility

ga expensesdue

member debtdraft

use of member assets