platts 9 annual pipeline development and expansion...tennessee gas pipeline co, l.l.c. northeast...
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Tennessee Gas Pipeline Co, L.L.C.
Northeast Energy Direct (NED) Project
Project Update
Platts 9th Annual Pipeline Development and Expansion
September 22, 2014
Curtis Cole
Forward-Looking Statements / Non-GAAP Financial Measures
This presentation contains forward-looking statements. These forward-looking statements are identified as any statement that does not relate strictly
to historical or current facts. In particular, statements, express or implied, concerning future actions, conditions or events, future operating results or
the ability to generate revenues, income or cash flow or to make distributions or pay dividends are forward-looking statements. Forward-looking
statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Future actions, conditions or events and future
results of operations of Kinder Morgan Energy Partners, L.P., Kinder Morgan Management, LLC, El Paso Pipeline Partners, L.P., and Kinder Morgan,
Inc. may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results are beyond
Kinder Morgan's ability to control or predict. These statements are necessarily based upon various assumptions involving judgments with respect to
the future, including, among others, the ability to achieve synergies and revenue growth; national, international, regional and local economic,
competitive and regulatory conditions and developments; technological developments; capital and credit markets conditions; inflation rates; interest
rates; the political and economic stability of oil producing nations; energy markets; weather conditions; environmental conditions; business and
regulatory or legal decisions; the pace of deregulation of retail natural gas and electricity and certain agricultural products; the timing and success of
business development efforts; terrorism; and other uncertainties. There is no assurance that any of the actions, events or results of the forward-
looking statements will occur, or if any of them do, what impact they will have on our results of operations or financial condition. Because of these
uncertainties, you are cautioned not to put undue reliance on any forward-looking statement. Please read "Risk Factors" and "Information Regarding
Forward-Looking Statements" in our most recent Annual Reports on Form 10-K and our subsequently filed Exchange Act reports, which are available
through the SEC’s EDGAR system at www.sec.gov and on our website at www.kindermorgan.com.
We use non-generally accepted accounting principles (“non-GAAP”) financial measures in this presentation. Our reconciliation of non-GAAP financial
measures to comparable GAAP measures can be found in the appendix to this presentation and on our website at www.kindermorgan.com. These
non-GAAP measures should not be considered an alternative to GAAP financial measures.
2
Kinder Morgan: North American Assets
3
4th largest energy company in North
America with combined enterprise
value of approximately $105 billion
Largest natural gas network in U.S.
— Own an interest in / operate
approximately 68,000 miles of natural
gas pipeline, and 643 Bcf of storage,
incl. 18 Bcf of LNG storage
— Connected to every important U.S.
natural gas basin, including: Eagle
Ford, Marcellus, Utica, Uinta,
Haynesville, Fayetteville, Barnett
Largest independent transporter of
petroleum products in U.S.
— Transport ~2.3 MMBbl/d (b)
Largest transporter of CO2 in U.S.
— Transport ~1.3 Bcf/d of CO2 (b)
Largest independent terminal operator
in U.S.
— ~180 liquids / dry bulk terminals
— ~112 MMBbls dom. liquids capacity
— ~103 MMtons of dry bulk products
Only Oilsands pipe serving West
Coast
— TMPL transports ~300 MBbl/d to
Vancouver / Washington State;
expansion under way increasing
capacity to 890 MBbl/d
TGP System Overview
Market Area Supply Trends
Overall Annual Throughput
4
System Overview
13,900 Miles Pipe Facilities
79 Bcf Storage
~8.0 Bcf/d Capacity
1.4 Million Horsepower
> 500 FT Customers
Supply & Market Rich
Northeast Production Marcellus and Utica
MARCELLUS
UTICA
UTICA
Utica Area Production
Production in initial stages
~ 4.0 Bcf/d by 2020
TGP well positioned
~0.6 Bcf/d current flow
~0.7 Bcf/d EOY 2014
Marcellus Area Production
Production continues to grow
~ 22 Bcf/d Dry Gas by 2020
TGP largest Marcellus transporter to date
~ 2.5 Bcf/d – Avg 2012 / 2013
~ 3.6 Bcf/d – Winter ’13/14
~ 4.0 Bcf/d – Winter ’14/15 (est)
5 Source: U. S. Capital Advisors
The Need for the Northeast
Energy Direct Project
Unprecedented gas capacity constraints on existing pipelines (Source: ISO-NE, EIA.gov)
Highest and most volatile gas commodity costs in the nation (Source: ISO-NE, EIA.gov)
Northeast Energy Crisis
Northeast Energy Crisis
The energy situation is likely to worsen if no new capacity is constructed;
• Currently, four large New England coal, oil and nuclear power plants are
planning to retire in the next few years due to increasing operating costs and
new emissions standards. This includes the Brayton Point and Salem Harbor
Plants in MA, the Norwalk Harbor Plant in CT, and the Vermont Yankee plant in
VT. (Source: ISO-NE, 2013)
• Unless new capacity is provided, New England’s power system will be
increasingly vulnerable to electric service disruptions and consumer prices will
increase greatly. The region will be at a large economic and competitive
disadvantage to neighboring states and regions due to high energy costs. (Source: New England States Committee on Electricity, 2014)
Solution:
• NESCOE, ISO-NE, and New England’s Governors have all publically
identified natural gas pipelines as a solution to the Northeast Energy
crisis.
According to the Federal Energy
Regulatory Commission (FERC), the New
England market is particularly at risk for
service disruption due to limited pipeline
capacity into the region. This not only
threatens reliability but also results in
more volatile natural gas and power prices
during periods of high demand.”
Energy infrastructure in the region is
simply inadequate to meet demand and
has been a key factor in the energy price
volatility.”
LETTER FROM THE NEW ENGLAND U.S. SENATE
DELEGATION TO DEPARTMENT OF ENERGY
SECRETARY MONIZ – December 13, 2013
“
“
Northeast Energy Crisis
• In Dec. 2013, New England Governors
called attention to the shortage of energy
infrastructure.
• An open letter was signed by Governors
Malloy (CT), LePage (ME), Patrick (MA),
Hassan (NH), Chafee (RI), and Shumlin
(VT).
• “To ensure a reliable, affordable and
diverse energy system, we need
investments in additional energy
efficiency, renewable generation,
natural gas pipelines, and electric
transmission.”
• “These investments will provide
affordable, clean, and reliable energy
to power our homes and businesses;
make our region more competitive by
reducing energy costs; attract more
investment to the region; and protect our
quality of life and environment.”
Governors’ Statement on
Northeast Energy Infrastructure
New England / Northeast Trends
New England’s Gas Burn:
• ~ 52%: Gas-fired electricity generated 2013 (Source: ISO-NE)
• ~ 95%: TGP average Z6 winter load factor
• Various IT services curtailed most days
Supply Sources
• In 2012, the Northeast region received 60%
of its gas supply from Eastern US sources,
mainly shale formations. (Source: Navigant North
American Natural Gas Market Outlook, Spring 2013)
• It is estimated that by 2022, based on
current trends and source supply that the
Northeast will receive 92% of ifs gas supply
from Eastern US sources. (Source: Navigant
North American Natural Gas Market Outlook, Spring 2013)
New England Has Not Developed Gas
Infrastructure to Keep Pace With Growth of Gas-fired Generation
Source: ISO-NE
(Sept 2014)
Since 1995, New England has built 25 natural gas-fired power plants to replace an
old fleet of huge oil and coal-fired generators, but hasn’t expanded its natural gas
pipeline capacity to keep pace with its demand for natural gas
Current Pipeline Infrastructure is
Inadequate to Serve Region’s Natural Gas-fired Generation
Source: ISO-NE (Sept 2014)
New England is overly reliant on “inadequately piped” natural gas-fired generation
$0.0000
$5.0000
$10.0000
$15.0000
$20.0000
$25.0000
Winter10-11
Winter11-12
Winter12-13
Nov-13 Dec-13 Jan-14 Winter13-14
Winter14-15
Winter15-16
New England New York
* *
14
Historical Pricing • New England and New York traded at parity November 2013 NY/NJ expansions in-service • New York basis significantly reduced
• TGP’s NEUP Project
• Spectra’s NJ-NY project
• Transco’s NE Supply Link • New England basis remained high January 2014 price spikes
• Limited fuel switching capability in NY, demand for gas stayed high
• LDC’s with firm capacity to gate had minimal exposure to high spot prices
Forward pricing Winters 2014 - 2016
• New York: lower basis continues due to added infrastructure
• New England: basis remains strong and volatility increases
Basis Differential Solution
• TGP’s Northeast Energy Direct Project is expected to reduce the New England basis and price volatility, providing long-term measurable benefits to New England and Atlantic Canada markets
Pipeline Expansion - Pricing Impact
Mild Winter
High Power Load
Reduced LNG Imports
• Average settled cash prices for winters 2010/11 through 2013/14 (Source: ICE)
• Current forward index prices for winters 2014/15 through 2015/16 (Source: Inside FERC)
2013 Expansions to
NY/NJ, not NE
Extreme Peaks
* - Impact of NE
Infrastructure
constraints
*
TGP’s Recent Development
Project Dth/d Shippers In-Service Status
300L Project 350,000 EQT Energy Nov 1, 2011 In-service
NSD 250,000 Cabot, Seneca, Anadarko, Mitsui Nov 1, 2012 In-service
Northampton 10,400 Berkshire, Bay State Nov 1, 2012 In-service
MPP Project 240,000 Chesapeake, Southwestern Nov 1, 2013 In-service
NE Upgrade 636,000 Chesapeake, Statoil Nov 1, 2013 In Service
Utica Backhaul 500,000 Various Producers April 1, 2014 In-Service
Rose Lake 230,000 South Jersey Res., Statoil Nov 1, 2014 Under Construction
Uniondale 34,000 UGI Resources Nov 1, 2014 Under Construction
CT Expansion 72,100 Yankee, Southern Ct,
Connecticut Natural
Nov 1, 2016 P.A.s executed, Filed at FERC
Broad Run Projects 790,000 Antero Resources Nov 1, 2017 P.A.s executed, FERC Filing Prep
SW Louisiana Supply 900,000 Mitsubishi, MMGS Nov, 2017 P.A.s executed, FERC Filing Prep
NED - Market 1.2 – 2.2B In Active Development Nov 1, 2018 In Active Development
NED – Supply 0.8 – 1.0B In Active Development Nov 1, 2018 In Active Development
15
Proven Track Record
Northeast Energy Direct
Project Introduction
Northeast Energy Direct Project – Full Path
17
Transformative NED Project links Large Volume and
Prolific Marcellus supplies to New England
* Any final route determination is subject to surveying, land acquisition and
easements, environmental impact assessments, permitting and stakeholder
input. Final route will be finalized in any FERC Certificate that has been issued.
18
Northeast Energy Direct Project – Supply Path
Project Details In-Service: November 2018
Scalable Volume: 0.6 – 1.0 Bcf/d
Provides incremental, direct
access to Northeast supply
~135 miles of greenfield 30” pipe
1440 psig
~32 miles of 36” looping (TGP 300
Line)
Three new C/S including booster
C/S to deliver gas into Iroquois at
Wright
Direct access to:
TGP’s existing regional
network
Broad range of suppliers
Large geographical area
The TGP Advantage Incremental supply liquidity at
Wright, NY
Serves existing and
proposed market needs
Access to various producers
Benefit of integration with TGP’s
existing pipeline network.
Proven on time project execution
Route previously reviewed
Provides Northeast customers with direct access to prolific
Marcellus supplies.
Provides access to a diverse set of producers located in the various
counties within the core of the Marcellus.
Zone 5
Pooling Point
19
Northeast Energy Direct Project – Market Path
Project Details
In-Service: November 2018
Scalable Volume: 0.8 – 2.2 Bcf/d
~177 miles new and co-located
pipe
~73 miles of market delivery
laterals
Market Benefits
Liberates key bottlenecks
Supply Optionality @ Wright, NY
TGP 200 Line
NED – Supply
Constitution / Iroquois Gas
Reduces energy costs region-wide
Spurs economic growth region-
wide
Incrementally enhances TGP
operations and benefits entire
region Transformative NED Project is a long-term market solution that
provides the level of capacity to significantly reduce basis
differentials in New England and provides breadth of access to
current and new electric generation facilities
20
Northeast Energy Direct Project – Market Path
NED Project Market Reach
TGP System (direct)
NY, PA, MA, CT, RI, NH
M&NP & PNGTS (indirect)
NH, Maine, Atlantic
Canada
Potential LNG Export
Algonquin via HubLine
Existing and Future Power
Generation
TGP System (direct)
AGT System (indirect via
AGT’s HubLine)
Pending NESCOE/FERC
action to allow cost
recovery
Expected growth due to
EPA Requirements
CNG/LNG Portable Pipeline Transformative NED Project benefits existing and future electric
gas-fired generation facilities across the Northeast Region
KM Announces Initial Anchor Shippers
21
On July 30, 2014, Kinder Morgan
announced it had reached agreement
with key local natural gas distribution
companies (“LDCs”) throughout New
England to transport approximately
500,000 Dth/d of long-term firm
transportation on the Northeast
Energy Direct Project route.
These LDC’s include;
• The Berkshire Gas Company
• Columbia Gas of Massachusetts
• Connecticut Natural Gas Corporation
• Liberty Utilities (EnergyNorth Natural
Gas) Corp.
• National Grid
• Southern Connecticut Gas
Corporation
TGP Filed NEPA Pre-Filing Application with FERC
22
• On September 15, 2014, TGP filed
a letter at the FERC requesting to
use FERC’s pre-filing procedures for
the proposed Northeast Energy
Direct Project.
• During the pre-filing process, TGP
will engage with FERC staff and
interested stakeholders to refine the
proposed route and draft the
Environmental Report.
• Once pre-filing is complete, TGP will
file a formal certificate application
seeking FERC approval of the
project under Section 7(c) of the
Natural Gas Act, which TGP expects
to file in September 2015.
TGP Files Proposal with Maine PUC
23
• On Sept. 17, Tennessee Gas Pipeline
Company filed a proposal with the Maine
Public Utilities Commission offering the
State of Maine a long-term contract for
natural gas pipeline capacity with the goal
of lowering overall energy costs for Maine
consumers.
• “We believe this is an historic opportunity
for Maine, and we at Kinder Morgan
admire the combined efforts of the
governor, legislature and others to try to
lower the overall energy costs to Maine
families and businesses”
• “As a company that has served markets
in New England safely and reliably for
many decades, TGP is delighted to have
the opportunity to help Maine and its
consumers achieve their goals,” said
Kimberly S. Watson, president, East Region Natural
Gas Pipelines for Kinder Morgan
Northeast Energy Direct Project Overview
24
New England region as a whole stands to benefit from the
proposed NED Project as it will enable New England to
sustain its electric grid, reduce emissions, and lower
energy costs to compete on a more level economic playing
field with other regions with access to low-cost gas
NED Project interconnects with Iroquois serving upstate
and downstate NY, CT, Eastern Canada
NED Project expands the existing TGP system within PA,
NY, MA, NH and Connecticut.
NED Project interconnects with Joint Facilities of M&NP
and PNGTS serving NH, ME, Atlantic Canada, and southern
New England via HubLine to Algonquin’s system
NED Project, as currently configured, would result in the
construction of approximately 418 miles of new pipeline,
additional meter stations, compressor stations and
modifications to existing facilities
The proposed NED Project could bring an estimated
increased capacity of up to 2.2 Bcf/d to the Northeast,
which is equivalent to an additional 1.5MM households
Action Timing
Outreach Meetings Ongoing
Route Selection and
Permit Preparation
Ongoing
Submit FERC pre-filing Letter Sept. 15, 2014
Agency Consultations Ongoing
File for FERC pre-filing October 2014
KM Open Houses Nov – Dec 2014
FERC Scoping Meetings Jan – Feb 2015
FERC filing Sept. 2015
Anticipated FERC approval November 2016
Proposed Start of Construction
Activity
January 2017
Proposed In-Service November 2018
Estimated Project Schedule
4
Contacts
Curtis Cole
Director, Business Development
713-420-3373 (office)
832-217-5161 (cell)