The Source - Winter 2008 - (Page 30)

 NATURAL GAS PREPAYS, from page 28 of a structured finance program, it fundamentally remains a gas transaction. The prepaid gas supply contract with the prepaid supplier is a gas contract, and the operational and commercial terms of that contract must be viewed from a gas standpoint, as well as from the standpoint of protecting the joint action agency and its public gas system members from risks associated with nonperformance by the supplier and other project participants. At the end of the day, the public gas distribution system purchaser must be ensured that it will only be obligated to pay for gas that is delivered. While the prepaid gas supply contract is typically a take-and-pay contract, it is not a take-or-pay contract. This feature must be negotiated in the natural gas prepayment transaction. Since 2006, a competitive market among prepaid gas suppliers has developed, and altogether 27 transactions have now been completed, bringing the benefits of secure, long-term gas supplies to public gas distribution systems at discounts to market prices. The discounts achieved have been dependent upon a number of factors, among the most important of which are market conditions (both interest rates and forward gas price curves) at the time of the completion of the transaction and the term of the transaction. Since 2006, savings have been achieved in a range of approximately $.18 per MMBtu for a 10-year transaction to over $1.00 per MMBtu for a 30-year transaction. As of this writing, at least a dozen new transactions are in various stages of development, waiting for market conditions to develop that will enable the participating public gas systems or municipal electric generators to achieve targeted levels of savings. James R. (“Jim”) Choukas-Bradley has been practicing energy law, with a specialization in the natural gas industry, since 1980 and has been a Shareholder in Miller, Balis & O’Neil, P.C. since 1985. Contact him at jchoukasbradley@mbolaw.com. supplies to the consumers they serve and for whose benefit they exist, including reducing the costs paid by industrial customers that employ many of the municipality’s citizens and that are essential to the economic well being of the community. They may enable the public gas systems to undertake infrastructure improvements or expansions, safety enhancements, and other programs that might otherwise require an increase in rates or borrowing. Negotiation of a gas prepayment transaction The negotiation of a natural gas prepayment transaction requires the involvement and interplay of gas, finance, and legal personnel. It is important for the joint action gas supply agency to bear in mind at all times, and to stress to other participants in the transaction, that while a prepayment is a public finance transaction and contains many complex elements High or Low Pressure Control! Pietro Has You Covered. Our extensive line of gas pressure regulators includes models speci cally designed to handle high and low pressures. Pietro gas pressure regulators are known throughout the world for their accuracy, bubble-tight shut off and reliable operation. We re now in the USA – fully stocked and ready to serve you with products, parts and technical personnel. Call us today at 888.618.8787. www.ﬁousa.com Atlanta-Houston 30 THE SOURCE | THE VOICE AND CHOICE OF PUBLIC GAS http://www.fiousa.com

Table of Contents Feed for the Digital Edition of The Source - Winter 2008

The Source - Winter 2008 Contents First Person The Bridge to Renewable Energy Future Natural Gas: The Comfortable, Responsible Energy Solution Gas Hydrates: Poised for the Next Phase The Role of Natural Gas in a Carbon-Constrained World Natural Gas Prepays Taking the Leap to Natural Gas Vehicles The Pipeline Legislative Outlook Advertiser's Index Advertiser.com At Last

The Source - Winter 2008

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