Wyoming Pipeline Authority
July 22, 2003
Nicor, Inc.
$2 billion NYSE market cap
 Debt is rated “AA” by S&P
 Corp has several gas-related unregulated
ventures in addition to one of the largest
gas-only utilities in the country

Nicor Enerchange
Nicor, Inc.
Nicor Enerchange LLC
Accounting & Risk Control
Mid-Stream Development
Enerchange Trading
Hub Administration
History and Formation

Originally a joint venture between Nicor
Gas, Dynegy, Socal Gas and National
Fuel (1993) forming Enerchange, LLC
–
Nicor bought out Dynegy’s interest in 1998
Nicor Enerchange
Enerchange Trading
Hub Administration

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commodity-based services
optimization of regulated
assets
Enerchange Trading Profile

Commodity based wholesale trading
company with major focus in the Midwest
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Asset-Based Services
 Balancing
Services
 Storage Services
 Transportation Services
–
Risk & Financial Management
Hub Admin Profile

Storage and Transportation Optimization
agreement with Nicor Gas
–
–

Optimize 15-25 Bcf of storage
Annual throughput approximately 200 Bcf
Working on other a similar arrangements with
with various third parties
 Established Front and Back Office
Enerchange Strengths
People
Assets
Midwest
Knowledge
Risk and
Financial
Management
Why Pipeline Expansion?

Supply
–
–

Demand
–
–
–

Decreasing Mid-Continent Supplies
Abundant Rockies Supply
Large Mid-Continent Market Demand (IL, IN, MN, MI, WS,
and OH)
Continued Market Growth
Mix of baseload industrial demand, power generation load
and heat sensitive residential load
Pricing
–
–
Strong Basis Differentials
Market indicators remain strong
Pipeline Expansion
“Advantages”
“Issues”


New market for
Cheyenne Hub
supplies
 Access to multiple
major markets
 Competitive pricing
 New long-term supply
for mid-continent
LDC’s

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Pipeline contracting
party
Supply aggregation
Scheduling
Optimization
Balancing
Administration
Marketing and
Trading
Nicor’s Proposed Role
for the WPA

WPA Goals:
–
–
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Raise price of Wyoming gas relative to Henry Hub
Eliminate infrastructure constraints
Develop Liquid Hubs – Cheyenne

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Promote liquidity
Price Transparency
Security of Supply
WPA Actions
–
–
Aggregate Supply
Provide Back Office Services
Nicor Enerchange’s Role
Partner with WPA providing support to their
aggregation efforts
–
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–
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Manage Supply Pool
Agent and/or Holder of WPA’s Pipeline Transportation
Contracts from the well head to the Mid-Continent
Manage/Optimize Pipeline Capacity
Provide Risk Management Support
Provide Credit Support
Contract Support (invoices, payments, etc.)
WPA would pay a minimal flat fee with sharing on
optimization and risk management services
Benefits to the WPA




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Creates a liquid marketplace with pricing
based off higher priced markets
Allows producers to focus on increasing
production not back office activities
Provides a central marketplace for Producers
Provides Production and Price Transparency
Low cost services with sharing arrangement
Expedites the development of needed
infrastructure in places supported by the WPA
Benefits to Producers

Stable pricing linked to higher valued markets
 Focus will be on E&P efforts not back office issues
 Low cost services with sharing arrangements that
Producers can customize to meet their needs.
 System that allows Producers to choose their level of
participation in pricing and volatility
 System that eliminates/reduces credit risk
 System that uses royalty dollars to improve the
marketplace
 System that provides a consolidated outlet to get
production to market
The “Nicor Enerchange” Advantage


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Strong Balance Sheet
Service oriented with 11 years experience
optimizing natural gas assets
Experienced Marketing and Trading staff with
established Mid-continent track record
Weekly fundamental analysis of the gas
market
Position reporting
Timely and accurate Back Office support for
all trading, reporting and collection functions