Natural Gas Distribution System for the Unserved Portions of the FNSB A Community Plan Fairbanks City Council 6/10/13

IGU - Vision Deliver Low Cost Gas: A non-profit business delivering gas Borough-wide at $15/mmBTU, a cost competitive with wood to improve area-wide PM 2.5 air quality levels. As Soon As Possible: Complete the gas distribution system within the next 5 to10 years To As Many As Possible: Gas service to the high and medium density areas surrounding Fairbanks (to 12,000+ homes and businesses) 2

Governor’s Finance Package SB 23 3

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City of Fairbanks Ordinance No Page 2: “b. Direct competition in an area covered by a Certificate of Public Convenience & Necessity by the Regulatory Commission of Alaska will not be initiated without approval of the Fairbanks North Star Borough, the City of Fairbanks and the City of North Pole by separate resolutions. In the event such authority is given, IANGU is only authorized to operate via a contract with a private entity unless this option is not available.” 5

IGU & FNG CPCN Timeline 6 IGU - RCA Presentation FNG RCA Filing IGU RCA Filing RCA Accepted Applications RCA Decision Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13

RCA Applications Utility Business Profile IGUFNG Business Profile Municipal Utility, tax-exempt, owned by FNSB, since 11/2012 (6 months) Private Company, owned by Pentax LLC, in business since 1998 (14 years) Business Focus (Mission) Provide low cost gas to FNSB residents and businesses ASAP Maximize return on business investment; Focused on commercial & industrial customers Business Assets (2013)$0 $29 Million Planned Investment (by 2021) $472 Million (State Grant & AIDEA Loan) $100 Million ($21M Equity with $14M Conventional & $66M AIDEA loans) 7

RCA Applications Gas Supply & Distribution IGU FNG LNG SupplyANS - AIDEA LNG Plant & Cook Inlet - LNG Plant Existing Gas Distribution Network None at present 70 miles gas distribution lines - Fairbanks Area Proposed Distribution System Expansion Over 1,000 miles of buried transmission, distribution and service lines plus LNG Storage Buried transmission lines (from FNG Facility to North Pole and to Johansen/Steese Hwy) plus LNG Storage 8

RCA Applications Natural Gas Customers IGUFNG Year2016 / New Residential Customers1,324 / 12,8391,926 / 8,549 - New Commercial Customers79 / / New Industrial Customers0 / 01 / 1 Total Customers1,403 / 13,3161,980 / 9,026 Financial Investment ($ Million) LNG Storage Tanks $ 60 / $120$ 20 / $20 Distribution System$208 / $352$27 / $80 Total Investment$268 / $472$ 47 / $100 9

RCA Applications Natural Gas Retail Price IGUFNG Natural Gas Price (today) n/a $23.90/mcf 2016 Proposed Gas Price (2016) $15.45/mcf (Postage Stamp Rate) $15.90/mcf (Residential & Commercial) $15.43/mcf (Industrial) 2021 Proposed Gas Price (2021) $15.45/mcf (Postage Stamp Rate) $13.08/mcf (Residential & Commercial) $12.69/mcf (Industrial) 10

RCA Applications Required Revenue (2021) IGUFNG Residential/Commercial3.4 Bcf/Year1.4 Bcf/Year Industrial Bcf/Year Total Gas Sales - Bcf/Year3.4 Bcf/Year4.4 Bcf/Year O & M Expenses$ 38.8 M$ 49.2 M Depreciation$ 8.5 M$ 2.0 M Return on Rate Base$ 3.8 M$ 4.1 M State & Federal Taxes$ 0 M$ 1.5 M Total Annual Cost$ 51.1 M$ 56.8 M Average Gas Cost ($/mcf)$ 15.00/mcf$ 12.90/mcf 11

FNG’s Comments on IGU Application 1. IGU does not have a natural gas supply contract 2. IGU’s financing based on 50 year loans at 1% interest is not possible (AIDEA requires 30 year loans at higher interest (3% tax-free to 4.5% taxable bonds) 3. IGU’s residential gas demand is too high 245 mcf/year compared to 125 mcf/year) 4. lGU’s retail natural gas delivery price will be higher than FNG’s due to higher cost AIDEA financing and lower residential customer gas demand 12

IGU’s Comments on FNG Application 1. Thousands of residents in FNG’s existing service area have been waiting over a decade for gas service 2. FNG’s 3 Bcf/year gas sales to a North Pole industrial customer - no commitment provided for this gas demand or quantity 3. FNG investing a fraction of what is needed for LNG storage and distribution system expansion necessary to serve new area 4. FNG is diverting financial resources needed to provide adequate service within its existing service area in an attempt to foreclose IGU from serving the surrounding FNSB community 13

AIDEA Report vs. IGU & FNG Plans IGUAIDEAFNG Service AreaFNSBFBKS + FNSBFNSB Customers (by 2021)13,31617,000+9,026 Gas Distribution System$352 MM$170 MM$ 80 MM Customer Service Lines Included$ 35 MM Included LNG Storage Tanks$120 MM$ 58 MM$ 20 MM LNG Plant Addition (2019)N/A$ 83 MM? LNG Trucks Needed2580? Total Estimated Cost$472+ MM$346+ MM$100+ MM 14

IGU – Plans for this Year Reconcile AIDEA and IGU Cost Estimates Work with AIDEA/AEA - Secure gas distribution system financing (Grant & Loan) Establish RCA Service Territory for the Unserved Area Create Public/Private Partnership – Operator Agreement Work with AIDEA – Secure LNG Supply Work with GVEA - LNG Trucking & Storage Determine Engineering, Permitting and Right-of-Ways for Construction of Phase I (North Pole area) 15

IGU Issues Matrix

Outstanding Issues/Summary Mission Cost Efficiency Experience Timing Impact on Financing “Competing” Expectations for any gas utility COF Focus 17

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