Alaska Industrial Development and Export Authority
Alaska Energy Authority
SB 23 AIDEA Development Project Financing for a Liquefied
Natural Gas Production and Distribution System
Mark Davis, AIDEA Deputy Director of Infrastructure Development
January 31, 2013 – Juneau, AK
Status Report
•
•
•
•
Project Goal
Project Team
Approach to Project Finance
Schedule and Milestones
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Project Goals
• Provide lowest cost energy to most Interior
Alaska consumers as soon as possible
• Get gas first to Interior Alaska while
assuring long-term access to gas from
liquefaction plant for all Alaskans
• Utilize private sector mechanisms as much
as possible
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$30.00
$4.00
$28.00
$3.75
$26.00
$3.50
$24.00
$3.25
$3.00
$22.00
$ per Mcf of Gas
Key Assumptions
• 9 Bcf LNG Plant
• LNG plant bifurcated into two
sections (industry and utility)
• $50 million capital cost
reduction applied to the 4.5 Bcf
utility section
• Regas, storage, & distribution
costs are presented as a range
$4.25
$2.75
$20.00
$2.50
$18.00
$2.25
$16.00
Regas, Storage,
and
Distribution
$14.00
$12.00
$2.00
$1.75
$1.50
$10.00
$1.25
$8.00
Trucking
$1.00
$6.00
Expected Utility Price per Mcf
• Wholesale LNG: $10.33
• Natural Gas to Home: $13.63$18.59
$0.75
Liquefaction Plant
$4.00
$2.00
$0.50
$0.25
Natural Gas
$0.00
$0.00
Wholesale Natural Gas
LNG
to the Home
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Fuel Oil
$ Per Gallon of Fuel Oil
LNG Lowers
Energy Costs
$32.00
Project Description
• Natural gas will be liquefied on the North
Slope and trucked to Interior Alaska
• Primary LNG demand anticipated to be
Fairbanks and North Pole
• LNG will be temporarily stored and regasified in Interior Alaska
• Natural gas distribution system with
storage to supply natural gas for heating
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LNG Trucking Value Chain
Space
Heating
Gas
Supply
North Slope
Liquefaction
Plant
Seasonal
Storage
Distribution
Electric
Trucking
Regasification
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Industrial
6
Project Team
• AEA
– Gene Therriault: Deputy Director, State Energy
Policy Development
– Kirk Warren: Technical Engineer
– Nick Szymoniak: Project Economist
• AIDEA
– Mark Davis: Deputy Director, Infrastructure
Development
– Jim Strandberg: Energy Development Finance
Officer
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Collaboration Structure
• AEA is leading the policy development of the
project
– Ensure that project goals are defined and
consistent with the public interest
– Engage the public, industry and elected officials
• AIDEA is developing the financing of the
project
– Examine finance options and commercial
structure in collaboration with private party
participants
– Utilize available finance tools to meet project
goals
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Expert Consultation
• Engineering consultant
– Expect hiring by January 31
– Provide technical project support
• Project management consultant
– Anticipate hiring in February
• Financial consultant
– Mark Gardiner of Western Financial Group
– Retained in November
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Financing Options for North
Slope LNG Plant
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•
•
•
The North Slope LNG Plant may be funded from
multiple sources, the example used here is just one
possibility
This analysis investigates the impact of an AIDEA
SETS Loan interest rate on the final price
The AIDEA SETS Loan is currently expected to be
3% and is compared with lower rates
The finance payback period could be between 15
and 30 years
Financing Sources ($mill)
Storage Credit
General Fund Grant
AIDEA SETS Loan
Other Financing
Plant Total
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$15
$50
$125
$30
$220
Finance Impact on Price
Amortization
Period
15
30
10
Annual
Payment
($mill)
$14
$9
Cost, $
per Mcf
$1.51
$0.95
Plant Financing
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Project Finance Overview
• $325 million for project in Governor's
finance plan
• AIDEA financing can be applied to
different parts of the LNG supply chain
• AIDEA will use this finance package to
leverage private investment
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Governor’s Finance Package
• $50 million General Fund appropriation
– Directly reduces the cost of LNG
• $150 million AIDEA bonds
– 3% interest rate (projected rate based on current market
rates)
• $125 million SETS capitalization
– 3% interest rate
– Flexibility to provide optimal commercial structure
• $325 million total package
• $30 million natural gas storage credit
– $15 million tax credit per qualifying storage tank
– Created through previous legislative action
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Schedules and Milestones
2012
DecemberJanuary
1
Advertise for Letters of Interest
2
Evaluate responses from private sector
3
Issue preliminary analysis of solicitations
4
Develop Contracts for AIDEA support
5
Sign Contracts with engineering support
6
Sign Contracts with project management group
7
Sign Contracts with legal/financial advisors
8
Form Financial Package offering
9
Participate and lead in P3 finance negotiations
North Slope LNG project
Trucking Contracts
Gas Storage project
Fairbanks Distribution build out
10
Engineering Analysis, technology review, underwriting
11
Legislative funds and financing accessible by AIDEA
February
March
2013
April
May
this analysis will assess the need for AIDEA
equity capital investment in the project
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June
July
AIDEA and AEA
Alaska Industrial Development and Export Authority
Alaska Energy Authority
813 West Northern Lights Blvd.
Anchorage, Alaska 99503
(907) 771-3000
(888) 300-8534 (Toll Free in Alaska)
www.aidea.org
www.akenergyauthority.org
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