Natural Gas Update & Overview Prepared for 2014 South Carolina Energy Users Annual Meeting

Gary Alexander

Director, Customer Services & Business Development

April 25, 2014

Topics of Discussion

• Overview of CGT

• Update on Supply Picture

• Crazy Winter

• Capacity Considerations

• Economic Development

• Open Discussion

Key Points

• Supply Continues to Grow

• Capacity Constraints Impact Pricing Volatility

• New Infrastructure is Costly

• Timeline for New Infrastructure Can Exceed 3 Years

Overview of CGT

• Wholly owned subsidiary of SCANA

• FERC regulated interstate pipeline

• Formed November 2006 through the merger of SCG

Pipeline Inc. and South Carolina Pipeline Corporation

• 1500 miles of pipeline in Georgia and South Carolina

– Pipe sizes up to 24”

– Up to 1200 PSIG operating pressures

• Approximately 225 delivery meters

• Customers include LDC‟s, municipalities, power

generators, industrials, and marketers

CGT Overview Safe & Reliable

• Safety - CGT continued emphasis on safe operations

- Over 3 years without a lost time incident

- Benefits employees, customers, and the community

• Reliability - Operate pipeline to ensure ability to meet firm capacity obligations

- Extensive efforts in pipeline integrity and system maintenance to

ensure reliability and safety

- Proactive communications with customers on required activities to

minimize customer impact and assure reliability

Overview of CGT CGT Services

• Firm Services

– Firm Transportation (FT) • Reserved pipeline capacity

• Monthly demand charge based on daily demand

• Nominal usage fee

– Rate Schedule BH • Similar to FT

• Primary delivery point is displacement point

• Interruptible Services

– Interruptible Transportation (IT) • Serve as available

• Usage fee designed to be equal to 100% load factor FT

– Park & Loan (PAL)

CGT does not sell commodity

CGT‟s Place in Natural Gas Value Chain Interconnecting Pipelines

CGT Overview Throughput and Supply

• CGT transports over 125 billion cubic feet annually on

behalf of our customers

• Customers have access to global sources of supply through

connections with Southern Natural Gas, Elba Island, and Transco

CGT Supply Source Mix Physical Receipts

2008 2009 2010 2011 2012 2013

SNG 46% 36% 43% 36% 34% 29%

Southern LNG

(Elba Island) 37% 48% 31% 46% 40% 34%

Transco 17% 16% 26% 18% 26% 37%

Interconnect Trends Scheduled Receipts 2009 – 2013 (before netting displacement deliveries)

-

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

2009 2010 2011 2012 2013

Transco

SNG Aiken

SLNG Elba/PW

CGT Overview 2014 Throughput

2014 throughput down 3% versus 2013 YTD

(2013 was a record throughput year)

2014 YTD Throughput versus 2013 (Through April)

Industrial Municipal/LDC Power

Generation

Displacement

Up 2% Up 4% Down 14% Down 13%

• Cold Winter

• Number of OFOs likely reduced throughput

• Industrial throughput continues stable growth

CGT Overview 5 Year Trend by Sector (2013 was a record year for Throughput)

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000

Industrial LDC Power Gen Displacement Total Throughput

5 Year Trend By Sector

2009

2010

2011

2012

2013

Sector 2009 2010 2011 2012 2013

Industrial 19,037,295 22,280,329 23,834,846 26,799,508 27,029,305

LDC 57,582,694 64,928,529 59,154,958 54,033,592 58,901,150

Power Gen 34,674,171 37,422,769 45,483,391 38,825,992 42,266,026

Displacement 0 644,061 460,090 2,116,632 7,322,987

Total Throughput 111,294,160 125,275,688 128,933,285 121,775,724 135,519,468

CGT Operational Challenges

• In a capacity constrained environment, operating a

reticulated pipeline is impacted by a number of issues

– Receipt and delivery combinations

– Inlet pressures and volumes

– Uniform hourly flow rates

– Non uniform hourly flow rates (6%)

– System pressures

– Line pack and BTU content

• All of the above affect the operation of the pipeline and

can impact the ability to schedule IT on any given day

CGT Overview OFO Summary

Summary of Operational Flow Orders

• During OFO‟s customers need to be within a defined tolerance of their

scheduled quantities (daily balancing on these days)

• OFO‟s do not necessarily require a capacity allocation

Winter of # OFOs Issued # OFO Days

06-07 4 6

07-08 2 4

08-09 2 4

09-10 2 14

10-11 7 23

11-12 (incl. Apr. and May 2012) 5 38

12-13 8 34

13-14 10 40

Challenge and Opportunity Infrastructure needed to link growing supply with increasing demand

The American Shale Revolution

PGC: 2012

1,073 TCF shale

2,688 TCF total

24% INCREASE

in just two years

Source: Potential Gas Committee

(Includes Proved Reserves)

No nation produces more natural gas than the United States, and

the U.S. is forecast to become the world's top oil producer by 2015.

That Much Supply in the Market Area?

You Better Believe it!

• About half of U.S. natural gas

production growth to come

from this region by 2020.

• If the Marcellus Shale were a

country, its gas output would

rank seventh in the world,

surpassing Saudi Arabia, China

and Norway.

• Marcellus production could

surpass Canada before the

end of this year, leaving only

Iran, Qatar, and Russia as

larger producers.

Source: Platts; EIA

Hydraulic Fracturing (Fracking)

Fracking Site

Infrastructure Constraints

• Increased supply resulting from shale gas production

has stabilized long term prices and driven demand

– Existing infrastructure is insufficient to bring all the

additional supply to markets

– Pipeline expansion projects are costly and time consuming

• Typically 3+ years to bring new capacity online

What Happened in January? OFOs and Pricing Spikes

• OFOs during January 2014

– Transco: 15 days

• $50 penalties

– SNG: 21 days

• $15 penalties

– CGT: 21 days

• $5 penalties

• Pricing Spikes

– Infrastructure

constraints coupled with

extreme demand led to

prices > $120/Dt for

delivered gas in some

areas

CGT Capacity Essentially Full Depending on specific combination of Receipts and Deliveries

Market Area Constraints North System - depends on

receipt

South System – posted as full

CGT Receipt Capacity Transco: Will likely require facilities

SNG: Available capacity on CGT

Growth and Future Expansions

• Since Nov. 2012, CGT has added 71,432 Dt of new FT

- Represents 21 contracts with 18 different companies

• General solicitation posting

– Oct. 29, 2012 – Nov. 30, 2012

– Customer commitments supporting two major projects

• 28,000 Dt commencing in mid-2014

– 2 companies

• 45,000 Dt commencing in 2015

– 2 Companies

• Other parties have inquired about additional expansions

Update: Second General Solicitation Posted May 30 through July 19

Posting was for new pipeline interconnect with Transco

to serve existing and new CGT markets. Contemplated

20 year terms and indicative demand charge of $16

• Significant interest received across system

• Have modeled over 70 different scenarios to identify optimal

commercially viable project

• Rates vary depending on participation level in the project

• For project identified, in discussions with parties responding to

General Solicitation with target in-service date of Nov 2017

• Models have indicated that future expansions may require even

higher rates – especially true for southern part of CGT system

What is driving expansion costs?

• CGT system generally consists of smaller

diameter pipe – approximately 72% of system

is 12 inch or smaller

• Key parts of CGT system limited by MAOP

• Recent expansions primarily compression

• Expansions involving new pipe are a more

expensive option

2013 SC Department of Commerce Announcements Representative list from multiple sources (70 Companies, 8043 jobs, $1.6 B investment)

Company Location Jobs Investment Time Warner Cable Lexington County 644 $24,000,000

Canfor Southern Pine Horry County 56 $3,600,000

Kiswire Inc. Newberry County 30 $15,000,000

Bericap North America Cherokee County 50 $29,000,000

Swift Group of Industries Clarendon County 60 $3,500,000

Lap Tech Industries York County 60 $4,500,000

Michelin North America Anderson County 100 $200,000,000

ICE Recycling LLC Florence County 15 $1,050,000

Outokumpu Stainless Bar Chester County 20 $18,000,000

Essex Holdings Inc Marion County 215 $54,400,000

Constantia Hueck Foils LLC Richland County 15 $12,000,000

Harbor Freight Tools USA Inc Dillon County 200 $75,000,000

Sunny Z Foods Inc Saluda County 150 $12,000,000

McLaughlin Body Company Anderson County 250 $22,000,000

Owens Corning Aiken County N/A $7,000,000

Alupress AG Laurens County 57 $19,900,000

Aqua City Inc Marion County 50 $1,500,000

PDM US Corp. York County 20 $1,330,000

Contec Inc Spartanburg County 60 $6,250,000

HARTMANN USA Inc York County 75 $18,000,000

SKF Group Charleston County 25 $3,000,000

Advanta Southeast Clarendon County 30 $3,500,000

Mediterranean Shipping Company Charleston County 30 $1,700,000

Angus-Palm Florence County 55 $13,000,000

Smooth-Bor Plastics Spartanburg County 22 $1,000,000

Davis Aircraft Products Georgetown County 100 $5,500,000

Fancy Pokket Corporation Lancaster County 68 $13,000,000

National Beverage Screen Printers Inc Barnwell County 80 $2,500,000

Dayco Products LLC Barnwell County 15 $2,000,000

continued

2013 SC Department of Commerce Announcements Representative list from multiple sources (70 Companies, 8043 jobs, $1.6 B investment)

Company Location Jobs Investment EcoDual Inc Beaufort County 307 $13,000,000

PTR Industries Horry County 145 $8,000,000

Exel, Inc+A63 York County 133 $38,000,000

Sportsman Boats Manufacturing Dorchester County 50 $35,000,000

Weber Automotive Charleston County 84 $51,000,000

Comact USA Dorchester County 40 $3,000,000

DLS Retreading Lancaster County 53 $2,500,000

Standard Textile Union County 15 $2,500,000

ZF Transmissions Laurens County 450 $175,000,000

Monteferro USA Orangeburg County 10 $2,100,000

2AM Group Richland County 100 $500,000

Edgewater Automation Spartanburg County 53 $3,000,000

Silcotech North America Inc York County 50 $3,500,000

Element Electronics Fairfield County 500 $7,500,000

DUER High Performance Composites Beaufort County 47 $1,000,000

Daimler Vans Manufacturing Charleston County 60 $4,600,000

Associated Hardwoods Cherokee County 28 $9,800,000

JN Fibers Inc Chester County 318 $45,000,000

Coroplast Tape Corporation York County 150 $12,000,000

Palmetto Synthetics Williamsburg County 20 $1,100,000

Colgate-Palmolive Company Greenwood County 300 $196,000,000

Ithaca Gun Company Horry County 120 $6,700,000

WasteZero Williamsburg County 27 $3,100,000

3D Systems York County 145 $10,000,000

American Tactical Imports Dorchester County 117 $2,700,000

Louis Hornick & Company Allendale County 125 $2,500,000

Mergon Corporation Anderson County 22 $4,400,000

Fitesa Simpsonville Greenville County 32 $50,000,000

Borgwarner Inc Oconee County 105 $24,600,000

continued

2013 SC Department of Commerce Announcements Representative list from multiple sources (70 Companies, 8043 jobs, $1.6 B investment)

Company Location Jobs Investment B3C Fuel Solutions Horry County 36 $305,000

Materials Science Corp Greenville County 23 $1,000,000 Ulbrich Procesion Flat Wire Oconee County N/A $5,000,000

Belk Inc Union County 170 $32,000,000 Flame Spray Laurens County 140 $9,100,000 McCall Farms Florence County 140 $19,300,000

Startek Inc Horry County 665 $10,000,000 Keer Group Lancaster County 501 $218,000,000

Canfor Southern Pine Darlington County 50 $8,000,000 Advanced Composite Materials Greenville County 10 $3,000,000

Valley Forge Flag Company Williamsburg County 100 $2,500,000 Quality Model Orangeburg County 26 $3,000,000

Highland Industires, Inc Chesterfield County 24 $4,100,000 8,043 $1,606,635,000

Economic Development Discussion

• Capacity situation can create confusion for some

• Access to natural gas is different than firm capacity

availability

• CGT can work with customers & distribution

companies to provide access (i.e. meter station,

lateral, etc.) in a much shorter time frame than

mainline capacity – service may need to be

interruptible or via capacity release

• Coordinate efforts and message so that capacity

constraints don‟t deter prospective customers and

negatively affect “Site Certification” efforts

CGT Capacity Empowers Customers

Commodity

• Commodity is where volatility

risk resides

• NYMEX futures prices range from

$4.70s to $4.90s thru March „15

• NYMEX futures prices below $5

through 2019

• Pricing spikes generally driving by

capacity constraints

• CGT customers are able to manage

their gas purchases to meet their

individual risk profile

CGT FT (per Dt)

• At 100% load factor, firm

transportation cost less than 29 cents per Dt

• FT ensures pipeline capacity is available to transport gas safely and reliably when needed

• Provides customers access to a global source of wholesale natural gas supply through CGT‟s pipeline interconnects

If you may need service…

• Contact CGT to discuss potential service needs

• Location, volume, pressure and timing are all key data

points

• In many cases, CGT can construct facilities with no

upfront capital costs if supported by firm service

agreement

• Key Point: Commitment to firm pipeline capacity

does not obligate customer to firm gas purchases

• CGT capacity ensures capacity is available to deliver

gas when operational or economic conditions warrant

Customer Service Philosophy

• Continued focus on customer service

• Proactive communications with customers

• Understand customer needs

• Help our customers be as successful as possible

• CGT will grow as our customers grow

Deliver value

Questions?

Thank you for your time!

Gary S. Alexander, PE Director, Customer Services & Business Development

803-217-2131 (office)

803-206-6261 (mobile)

galexander@scana.com