6 th Annual Natural Gas Conference Focus on the Future

Transcription

1 6 th Annual Natural Gas Conference Focus on the Future Pipeline Expansion: Challenges and Opportunities Moderator: Katie Gray, Maine Public Utilities Commission Panelists: Cynthia Armstrong, Portland Natural Gas Transmission System Blair Hastey, Enbridge, Inc. Todd Piczak, Tennessee Pipeline Rob Furino, Unitil Sean Mahoney, Conservation Law Foundation

2 Portland Natural Gas Transmission System Maine Natural Gas Conference October 18, 2018

3 Portland Natural Gas Transmission System 1999 (In Service): Delivered Western Canadian Sedimentary Basin ( WCSB ) gas from conventional wells, to New England markets at Dracut Now: Delivers WCSB (conventional and shales) and Marcellus gas to New England markets at Dracut and to Maine/Atlantic Canada markets at Westbrook

4 PNGTS Ownership ON NB QC ME VT NY NH MI MA RI CT NJ IA IL IN OH PA PNGTS = Partnership of TCPL and Energir (formerly DE GazMetro) DC MD VA TC PipeLines, LP 61.71% Energir 38.29% 4

5 Dth/day Increasing Demand for PNGTS Capacity 300,000 Gas into PNGTS at Pittsburg, NH 250, , , ,000 50, Annual Nov-Oct

6 Current PNGTS Market Mix (by Flow Volume) PNGTS Markets in NH, ME, MA PNGTS LDC 20% PNGTS Industrial 3% PNGTS Generation 17% Westbrook 53% New England Markets Dracut 7% Maine/Atlantic Canada Markets

7 Dth/day Cross-Border Flows From/(To) Atlantic Canada (Non-LNG) 300, , , ,000 Average Monthly (Non-LNG) Flows From/(To) Atlantic Canada 100,000 50, , ,000 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Baileyville: To US/(From US)

8 Off System Annual Demand: To New England and Atlantic Canada/Maine

9 The Portland Xpress Project ( PXP ) Project Scope: LDC-based Project Total Project Capacity of ~183,000 Dth/d Construction (in Canada) on the TransCanada Mainline Construction of Compression only on PNGTS Joint Facilities Nov-20 Target In-Service Date (phased-in over 3 year period ) 9

10 Firm Transport Commitments by New England and Maine/Atlantic Canada Markets 300,000 PNGTS Delivery Point Mix 250, , , ,000 50,000 0 Nov 18 Nov 19 Nov 20 Dracut Westbrook 1 0

11 For More Information, Contact: Cynthia L. Armstrong Marketing Director Portland Natural Gas Transmission System One Harbour Place, Suite 375 Portsmouth, NH Office: (603) Fax: (603) Cell: (603) LinkedIn: 11

12 Pipeline Expansion: Challenges and Opportunities Falmouth, Maine October 18, 2018 C. Todd Piczak Chief Compliance Officer, Vice President, Assistant General Counsel

13 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 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, 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 Report on Form 10-K and our subsequently filed Exchange Act reports, which are available through the SEC s EDGAR system at and on our website at 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 our Analyst Day presentation, dated 1/28/2015, on our website at These non-gaap measures should not be considered an alternative to GAAP financial measures. 13

14 Kinder Morgan Natural Gas Segment Unparalleled Asset Footprint One of the Largest Energy Infrastructure Companies in North America Largest natural gas network in North America Own or operate ~70,000 miles of natural gas pipeline Connected to every important natural gas resource play in the U.S. Largest independent transporter of petroleum products in North America Transport ~2.1 MMBbl/d (a) Largest transporter of CO 2 in North America Transport ~1.3 Bcf/d of CO 2 (a) Largest independent terminal operator in North America Own or operate ~155 terminals (b) ~152 MMBbls liquids capacity Handle ~53 MMtons of dry bulk products (a) Own 16 Jones Act vessels (including 4 under construction) Only Oilsands pipeline serving the West Coast Transports ~300 MBbl/d to Vancouver / Washington State; planned expansion takes capacity to 890 MBbl/d (a) 2017 budget. (b) Excludes assets to be divested. 14

15 Macro Trends Supply and Demand NE Bcfd Bcfd +8.2 Bcfd Permian +9.6 Bcfd Continued supply increases U.S. becomes net exporter More Gas-fired generation Ind +3.2 Bcfd Res +1.9 Bcfd -1.4 Bcfd +3.2 Bcfd Industrial demand growth Less Canadian Exports to U.S. More U.S. Exports to Mexico Source: ICF International and Kinder Morgan Analysis 15

16 Tennessee Gas Pipeline Operations Proudly providing reliable service to New England for over 60 years Delivering gas to LDCs, End Users and Electric Generators Cheap, Abundant & Growing Supply, available to New England with 200 Line 300 Line 100 Line 500 Line 800 Line 16

17 New England Winter Power Generation Source: US EPA CEMS 17

18 The Opportunity Meeting Generator Needs for Firm Service PowerServe The Basics Tennessee Gas Pipeline Company (TGP) is offering its PowerServe 1 firm service as part of an expansion of its facilities (TBD). PowerServe is firm service specifically tailored to meet the needs of Power Generators Power generators may access natural gas supply on a no-notice basis Pipeline and natural gas storage facilities required to provide the essential backbone of the suite of services offered through PowerServe PowerService is a registered trademark of Kinder Morgan, Inc. 18

19 The Opportunity Meeting Generator Needs for Firm PowerServe aligns the realistic demands of a Power Generator and the physical capabilities of the pipeline by providing the capability to burn at variable hourly rates on a firm basis 19

20 The Challenge Solving the Regulatory Puzzle The Problem: Expanding Constrained Pipelines to Serve Generators in Deregulated Markets FERC Wholesale Electric Markets Pipelines 20

21 The Challenge Solving the Regulatory Puzzle FERC FERC requires long-term contracts to support finding that a pipeline expansion is in the Public Convenience and Necessity Requires Straight-Fixed Variable Rates for firm capacity Wholesale Electric Markets Generators may not be competitive in wholesale electric markets if they hold long-term firm contracts Generators willing to pay for capacity, but only when they use it Pipelines Require a reasonable return on investment in order to deploy capital Predictable recovery of costs under long-term contracts Pipelines provide firm service under two-part SFV rates, reservation rates reserve capacity and commodity rates for gas transported Some ability to deviate from SFV with negotiated rates 21

22 The Challenge Constructing Energy Infrastructure State Permitting Challenges Interdependency Requirements vary significantly by state Impacts Costly and time consuming Uncertainty and delays in obtaining permits More stringent requirements Litigation Filed by opposition Against project, agency, state Delay and stop tactics Filed by pipeline Protect rights Ensure timely issuance of permits Federal preemption 22

23 The Challenge Constructing Energy Infrastructure Alta Wind Energy Center in Mojave Desert is largest wind farm in U.S. 600 turbines on 3,200 acres, 1550 MW West County Energy Center in Florida is the largest gas-fired electric generator in the U.S. 13,400 MW on 220 acres Assuming average capacity factors WCEC generates 5x the power on 1/14 th of the land Bingham Wind, Western Maine, 56 turbines, 185 MW One mile of pipeline right of way requires approximately 7.2 acres For the same amount of land disturbance as the Alta Wind Farm you could construct 444 miles of pipeline Restored right of way, TGP CT Expansion, Stony Brook, CT. 23

24 Tennessee Gas Pipeline Line 261 Upgrade Project Details Commercial Driver: Residential/commercial gas demand growth Capacity: 101,400 Dth/d Customer: Columbia Gas of Mass (96,400 Dth/d) / Holyoke (5,000 Dth/d) Phased In-service timeframe Project Scope: New delivery meter HP Replacement at Station miles of looping Springfield Lateral Station 261 Area 24

25 Conclusion Solving the Regulatory Puzzle TGP is willing to design services and construct capacity to meet the unique operating needs of generators, but someone has to contract for the services. FERC and ISO-NE, while recognizing the problem, but have not offered any solutions to the contracting problem of Gas-Electric Coordination. FERC has proved adept at addressing challenges to the gas and electric industries with regulatory solutions. The statutes FERC administers are flexible enough to accommodate solutions to challenges in evolving markets. 25

26 Conclusion Solving the Regulatory Puzzle The U.S. Should Embrace the Opportunity Presented by its Natural Gas Resource Base Natural gas has been and remains critical to reducing greenhouse gas emissions. Since 1993, the U.S. population increased by 60 million, real GDP rose 70 percent and overall electric power generation went up by 28 percent. At the same time CO2 emissions are back to 1993 levels, mainly because natural gas-fired generation increased its share of the total from 13 percent to 33 percent, while coal dropped from 53 percent to 33 percent. We can all work to address the challenges that we face. 26

27 Contact Information C. Todd Piczak Chief Compliance Officer, Vice President Assistant General Counsel Kinder Morgan, Inc Louisiana Houston, TX (office) 27

28 Delivering Energy to the Northeast Blair Hastey Natural Gas: Focus on the Future October 18, 2018

29 Safe Harbor Safe Harbor Statement / Forward-looking Information This presentation includes certain forward looking statements and information (FLI) to provide potential investors and shareholders of Enbridge Inc. ( Enbridge ), Enbridge Income Fund Holdings Inc. ( ENF ), Enbridge Energy Partners, L.P. ( EEP ) and Spectra Energy Partners, LP ( SEP ) with information about Enbridge, ENF, EEP, SEP and their respective subsidiaries and affiliates, including management s assessment of their future plans and operations, which FLI may not be appropriate for other purposes. FLI is typically identified by words such as anticipate, expect, project, estimate, forecast, plan, intend, target, believe, likely and similar words suggesting future outcomes or statements regarding an outlook. All statements other than statements of historical fact may be FLI. In particular, this presentation contains FLI pertaining to, but not limited to, information with respect to the following: strategic priorities and capital allocation; guidance with respect to any or all of 2017 through 2020; adjusted EBIT and EBITDA; ACFFO; distributable and free cash flow; payout ratios; debt/ebitda ratios; funding requirements; financing plans and targets; secured growth projects and future development program; future business prospects and performance, including organic growth outlook; annual dividend growth and anticipated dividend increases; shareholder return; run rate synergies; integration and streamlining plans; project execution, including capital costs, expected construction and in service dates and regulatory approvals; system throughput and capacity; industry and market conditions, including economic growth, population and rate base growth, and energy demand, capacity, sources, prices, costs and exports; and investor communications plans. Although we believe that the FLI is reasonable based on the information available today and processes used to prepare it, such statements are not guarantees of future performance and you are cautioned against placing undue reliance on FLI. By its nature, FLI involves a variety of assumptions, which are based upon factors that may be difficult to predict and that may involve known and unknown risks and uncertainties and other factors which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by the FLI, including, but not limited to, the following: the realization of anticipated benefits and synergies of the merger of Enbridge and Spectra Energy Corp; the success of integration plans; expected future adjusted EBIT, adjusted EBITDA, adjusted earnings and ACFFO; estimated future dividends; financial strength and flexibility; debt and equity market conditions, including the ability to access capital markets on favorable terms or at all; cost of debt and equity capital; expected supply, demand and prices for crude oil, natural gas, natural gas liquids and renewable energy; economic and competitive conditions; expected exchange rates; inflation; interest rates; changes in tax laws and tax rates; completion of growth projects; anticipated construction and in-service dates; changes in tariff rates; permitting at federal, state and local level or renewals of rights of way; capital project funding; success of hedging activities; the ability of management to execute key priorities; availability and price of labour and construction materials; operational performance and reliability; customer, shareholder, regulatory and other stakeholder approvals and support; hazards and operating risks that may not be covered fully by insurance; regulatory and legislative decisions and actions and costs complying therewith; effectiveness of the various actions resulting from strategic review processes; public opinion; and weather. We caution that the foregoing list of factors is not exhaustive. Additional information about these and other assumptions, risks and uncertainties can be found in applicable filings with Canadian and U.S. securities regulators (including the most recently filed Form 10-K and any subsequently filed Form 10-Q, as applicable). Due to the interdependencies and correlation of these factors, as well as other factors, the impact of any one assumption, risk or uncertainty on FLI cannot be determined with certainty. Except to the extent required by applicable law, we assume no obligation to publicly update or revise any FLI made in this presentation or otherwise, whether as a result of new information, future events or otherwise. All FLI in this presentation and all subsequent FLI, whether written or oral, attributable to Enbridge, ENF, EEP or SEP, or any of their subsidiaries or affiliates, or persons acting on their behalf, are expressly qualified in its entirety by these cautionary statements. 29

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31 Gas Capacity (Dth/d) Maritimes & Northeast Maine Footprint 280 miles of pipe & seven compressor stations Serving Maine Natural Gas, Bangor Gas, Summit Natural Gas, Northern Utilities, Calpine Westbrook Energy Center, Casco Bay Energy, XNG, Woodland Pulp

32 Algonquin and Texas Eastern Record Setting Deliveries in the Northeast Jan 1 Jan 6 Jan 6 Jan 6 Jan 6 Jan 6 Jan 6 Jan 6 Jan 6 Jan 6 Jan 6 Liberty Utilities Columbia Gas of MA Unitil National Grid Eversource Central Hudson Connecticut Natural Gas Con Edison UGI New Jersey Natural Gas South Jersey Gas Enbridge pipelines delivered 11.4 Bcf of gas to the Northeast on Jan 6, Bcf M&N 2.3 Bcf AGT 2.0 Bcf TE M2 6.3 Bcf TE M3 Pipeline capacity critical to meet Northeast customers energy needs 32

33 Pricing disparity shows additional infrastructure needed Abundant, affordable Appalachian supplies $1.7B New England s cost of natural gas capacity shortage this winter vs last AGT CG $ Winter Avg Daily Pricing (Nov 1 Mar 31) $34.00 VS Winter Top 10 Days Average Daily Pricing $39.57 $31.70 TGP Z4-300 $3.61 Transco Z6-NY $ Dom S. Pt $4.17 TE M3 $94.93 Gas Daily Jan 5, $4.11 $3.66 $2.44 $2.29 TE M2 TGP Z4-300 $5.22 $6.16 TE M3 Transco Z6 $7.40 AGT Citygate Pipeline capacity needed to deliver environmental and economic benefits to the Northeast 33

34 Without natural gas infrastructure, emissions and prices increase The average annual wholesale power price in New England in 2016 was $28.94/MWh 22,000 20,000 ISO-New England Fuel Mix January 5, 2018 (MW, $/MWh) $436.80/ MWh Total Load $500 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 Without adequate pipeline capacity, ~8,500 MW of gas-fired power plants are unable to access affordable, cleaner burning natural gas Coal Power Price Oil Natural Gas Hydro Imports Renewables 2,000 0 Midnight 2AM 4AM 6AM 8AM 10AM Noon 2PM 4PM 6PM 8PM 10PM Nuclear $0 Renewables includes: Wood, Refuse, Wind, Landfill Gas, Solar 34

35 Incremental deliveries to New England and Atlantic Canada Atlantic Bridge New Regional Supplies Atlantic Bridge FREDERICTON NYC BANGOR PORTLAND BOSTON ST. JOHN HALIFAX Project Scope: ~135 MMcf/d expansion of the Algonquin and Maritimes Pipelines CapEx: $500MM Customers: Various local distribution and industrial companies in New England and Atlantic Canada Project Status: Pre-filed with FERC Jan 2015 Filed FERC application Oct 2015 Received FERC certificate Jan 2017 Placed 40 MMcf/d into service Nov 2017 Place full project volumes into service 2H18 Place full project path into service 2H19 Connecting abundant gas supply to northern New England and Atlantic Canada markets 35

36 Meeting region s fuel security needs Access Northeast Texas Easter n PORTLAND 90% 80% 4% 18% Generation 70% capacity served by firm pipeline 60% BOSTON contracts 22% 50% Algonquin NEW YORK Maritimes & Northeast 100% 40% 30% 20% 10% 0% ISO-New England Fuel Mix 15% 2000 Annual Average 49% 2% 1% 2016 Annual Average 24% 5% 28% Jan :00pm Natural Gas Coal Oil Renewables Hydro Nuclear Connected to 60% of New England s gas fired plants, Enbridge is positioned to supply power generation 36

37 Natural Gas will Complement Renewables While renewables meet an increasing portion of our energy mix, natural gas is needed to meet demand :00 AM Daily Ramping Actual Output vs Plant Capacity (MWs) Plant Capacity 8:00 AM 9:00 AM Natural Gas-fired power required Actual solar power generated 10:00 AM 11:00 12:00 AM PM 1:00 PM 2:00 PM AUGUST DAYLIGHT HOURS 3:00 PM 4:00 PM Source: National Renewable Energy Laboratory; randomly selected August day 5:00 PM 6:00 PM 7:00 PM 22,000 20,000 18,000 16,000 14,000 12,000 10,000 Winter Peak Demand (MWs) Hourly Demand Sunset at 4:31 PM DAYLIGHT HOURS Peak power demand 6-7 PM Source: ISO-NE Hour Solar power cannot resolve the region s winter peak demand 37

38 CHALLENGES AND OPPORTUNITIES PIPELINE EXPANSION CUSTOMER PERSPECTIVE Rob Furino October 18, 2018

39 ABOUT UNITIL Company Overview Natural gas and electric distribution utility with operations in three states serving ~182,000 customers; ~33,000 gas customers in ME Growing operations and customer base - Robust natural gas system expansion - ~ 500 full-time employees with dual storm roles We provide energy for life, safely and reliably delivering natural gas and electricity in New England 39

40 UNITIL BACKGROUND Natural Gas Pipeline Capacity Deliver gas / Sell gas / Assign capacity Capacity Portfolio - Pipeline / Storage / Peaking - Recent Additions 23,500 Dth/day - TGP 24%, AGT 16%, PNGTS 60% Planning customers v. Exempt - Sales & Assignable / Exempt 23,121 Pipeline 42,507 Storage (& Pipe) 6,500 Peaking (LNG) 72,128 Existing 17,500 Pending Pipeline 89,628 Total (Dth/day) 3.6 Residential 7.1 C&I Sales 3.7 C&I Trans - Assign 14.4 Planning Load 4.9 C&I Trans - Exempt 19.3 Total (Bcf/yr) 40

41 CHALLENGES To Pipeline Expansions High cost / Long term commitment / Credit requirements Distance from production multiple pipes / stacking Siting & Permitting / Social disfavor of fossil fuels Peak seasonal needs Low annual utilization Existing infrastructure LNG imports 41

42 OPPORTUNITIES For / From Pipeline Expansion Reliability access to production, operational success Price Stability protection against NE basis risk Stable gas quality / No trucks needed Secondary market value can mitigate some cost Relieve constraints Operational / risk mgmt value 42

43 FINAL THOUGHTS Regarding Pipeline Expansion Reliability is top factor (then price, diversity) Micro view cost effectiveness for Unitil customers Critical evaluation (Year 1 impact) / Explore Alternatives Impact of renewable electric generation / electrification? Thank You 43