1. APPA Annual Conference June 21, 2005 Mark Shea Banc of America Securities (720) 956-3326 Natural Gas Supply Acquisition Options Banc of America Securities provides investment banking and securities products domestically and, on a limited basis, offshore. Other products and services, including products and services that may be referenced in the accompanying materials, may be provided through affiliates of Banc of America Securities. Copyright 2001 Banc of America Securities LLC. Banc of America Securities LLC, member NYSE/NASD/SIPC, is a subsidiary of Bank of America Corporation. American Public Power Association

2. BAS Experience  $425,000,000 Municipal Gas Authority of Mississippi, Series 2005May 2005 Sole manager Located supplier and led supply agreement negotiations  $55,000,000 Municipal Gas Authority of Georgia, Portfolio III Series 2003BJuly 2004 Partial conversion of Portfolio III Series 2003A to tax-exempt Lead manager  $44,280,000 Southeast Alabama Gas District, Series 2003BJune 2004 Partial conversion of Portfolio III Series 2003A to tax-exempt Lead manager  $305,960,000 American Public Energy Agency, Series 2003 A&BDecember 2003 First natural gas prepay closed under the new IRS regulations Book-running manager Located supplier and led supply agreement negotiations  $83,395,000 Southeast Alabama Gas District, Series 2003AMay 2003 Working interest acquisition Book-running manager Identified, analyzed and advised Southeast Alabama Gas District on the reserve purchase.  $121,000,000 Municipal Gas Authority of Georgia, Portfolio III Series 2003AJanuary 2003 Working interest acquisition Book-running manager Identified, analyzed and advised Municipal Gas Authority of Georgia on the reserve purchase. Select Banc of America Securities Energy Group Natural Gas Transactions 2003 to Present

3. Long-Term Supply Goals  Municipal long-term gas acquisition goals Enhance delivery reliability Achieve competitive purchase price Reduce price volatility Avoid supplier credit issues Complement existing pipeline positions Build diversified supply portfolio  Primary acquisition methodologies Prepaid forward natural gas contracts Working ownership interests in gas reserves Structured ownership interests in gas reserves

4. Long-Term Supply Overview Risk Reward Prepays Structured Reserve Ownership Working Interest Ownership $0.15/MMBtu $0.50/MMBtu Discount to Index

5. Global Factors  Exploration & production companies: Have significant excess cash flow Are unwilling to collateralize or credit enhance prepays Have paid down most redeemable debt Are aggressively bidding up prices on producing assets  Interest rate environment is problematic (but improving) Interest rates are low (but rising) Taxable - tax-exempt spreads at historical lows (but increasing) Record municipal issuance (but falling) The above factors make it difficult to economically execute any natural gas acquisition strategy at this time.

6. Prepay Economic Factors “AA” “A” “BBB” “BB” Structural Economic Municipal Dual Supplier Long Short TENOR CREDIT STRUCTURE COUNTERPARTY SWAPS Risk Economics

7. Contractual Natural Gas Risks Explicit Risks  Natural Gas Price Risk  Supplier Risk Acquiring and owning natural gas reserves entails explicitly accepting many risks which heretofore municipalities have only accepted implicitly. Implicit Risks  Reserve Risk  Production Risk  Operating Cost Risk  Delivery Risk  Environmental Risk  Other Risks

8. Ownership - Rewards & Risks  Significant Economics Savings  Improved Supply Security  Supplier Credit Risk Eliminated  Asset Specific Rather Than Global Risk  Price Environment: Discreet vs. Continuous

9. Ownership Structures Working Interests Volumetric Production Payment Overriding Royalty Interest Net Profits Interest Finance able with tax- exempt debt YesNoYes Term of transactionLife of field Specific number of years Life of field Reserve risk to buyerYesLimitedYes Responsible for opex or capex YesNo Yes (with limits) Seller accounting treatment * True Sale Deferred revenue True sale Seller tax implications*Capital GainNoneCapital gain Buyer’s credit risk to seller None Control of AssetYesNo * Participants should consult their tax and accounting advisors with regards to the tax and accounting treatment of these transactions.

10. Execution  Portfolio Construction Acquisition Structure Price Environment Counterparty Geography  Joint Action – Spread the Risk Natural gas is no different than almost all other assets; risk is substantially decreased by building a portfolio. The goal is to build, over time, a portfolio of supply transactions where the economic benefits received more than compensates for the change in risk profile.

11. Conclusions  Difficult market for long-term transactions Overheated E&P sector Low interest rates  Limited number of prepays are getting done  Be patient – take a long-term view  Take what the market gives you  Understand how the economics are being generated  Acquire assets in a disciplined manner