Confidential 2 Agenda Bison Project Overview Powder River Basin Overview Bison Construction Hurdles Summary
Confidential 3 Bison Pipeline Project 289 Miles 24” Pipeline $1.3MM/Mile Capacity 350 MMcf/d 4,200 HP Max. Capacity 619 MMcf/d 47,000 HP In-Service Date: Nov. 2010 SD ND MT Big Horn Fort Union Williston Basin Bear Paw Energy CS #2 CS #3 CS #4 WY Powder River Basin CS #5 CS #6 Bison Compressor Station
Confidential 4 Powder River Basin Pipelines Gi Grasslands 80-200 MMCFD Sheridan Gillette Douglas Casper Glenrock L E G E N D KNI 245 MMCFD CIG 212 MMCFD MIGC 130 MMCFD WBI 96 MMCFD TCGS 450 MCFD FUGG 635 MMCFD Redstone 20 MMCFD BHGG 250 MMCFD WBI BC 150 MMCFD WIC MB 1.08 BCFD Bison up to 619 MMCFD 1.2 Bcfd 200 MMcfd
Confidential 5 Powder River Basin Gas Production Forecast Source: PACE Global Energy Services WPA – 10/24/2006
Confidential 6 Powder River Basin 2011 Netback Comparison
Confidential 7 Services and Equipment Sourcing TransCanada’s procurement strategies are focused on obtaining goods and services that offer the best overall value: Technical Surety of supply Competitive pricing / commercial terms Construction capability All suppliers sourced by TransCanada must meet our pre-qualification criteria: Technical HS&E Financial Project specific sourcing strategies are formalized and approved prior to execution of the sourcing strategy
Confidential 8 Sourcing Approach Key services and equipment requirements will be sourced through a formal competitive process. Leveraging of existing TransCanada preferred supplier arrangements to extract competitive pricing, surety of supply and favorable commercial terms.
Confidential 9 Critical Equipment and Services Requirement Line pipe Large diameter valves Compression facility equipment: Gas turbines Electrical / controls Pipeline installation contractors Surety of supply to support construction is a critical deliverable
Confidential 10 Mill Space Availability and Trends …Global mill availability continues to be constrained, some mills are now booked 24 months out…
Confidential 11 DSAW (Large Diameter) Pipe Prices …Although prices have somewhat stabilized, waiting too long to secure pipe means being forced to use high cost producers and paying market premiums…
Confidential 12 Escalation in Pipeline Projects Costs Pipe and Construction labor costs are main drivers
Confidential 13 Forecast – Pipeline Construction Activity in the United States 20 + large mainline spreads expected in 2007, exclusive of medium-sized jobs and integrity work. 2008 and 2009 spread demand expected to increase from 2007 levels. In order to manage shortages, work seasons have been extended. The traditional work season was from May to October. Currently, the work season lasts from January to December.
Confidential 14 Critical Path Commitments Line Pipe Commitments: 2010 pipe supply January, 2008 commitment Minimum cancellation fee 33% Cancellation fee can be 100% near material ship date Pipeline Construction Contractors: 2010 construction start Q4, 2008 commitment Secure construction contractor 5% Upfront Minimum cancellation fee 25% Cancellation fee can be 100% near construction start Early project planning and commitment from customers is critical for a successful project
Confidential 15 Bison Shipper Benefits - Summary Competitive netback pricing Provides transportation and pricing diversity for Powder River Basin Pipeline grid Efficiently utilizes existing downstream assets to attractive markets Minimal impact on downstream pricing due to displacement of Canadian production North outlet enhances existing gathering capability and value Seamless transportation (one nom, one bill) from PRB to Market
Confidential 16 Bison Construction Hurdles - Summary Mill Space is Constrained Larger Diameter Pipe Prices have escalated since 2004 64% increase in project costs for similar projects Contract Labor market is highly constrained Pipe and Contractor Labor commitments to secure resources are required earlier in the project process Pipeline project environment has become excessively risky Commitment timing requirements versus regulatory approval process Excessive cancellation fees on material and labor contracts