EBB Notice – Sierrita Pipeline Open Season
SUMMARY
In response to expressions of interest, this Binding Open Season is being conducted for expansion capacity on the facilities of Sierrita Gas Pipeline LLC (“Sierrita”).
The expansion capacity would be made available by the installation of compression facilities at the northern end of the pipeline near the interconnection with the pipeline facilities of El Paso Natural Gas Company, L.L.C. (“EPNG”). The size of the new compression facilities will be finalized based on the level of interest expressed during the Open Season, but is anticipated to be between 230 MDth/day and 310 MDth/day.
The anticipated in-service date of the expansion capacity would be as early as April 1, 2020.
LENGTH OF OPEN SEASON
This Open Season will commence at 12:00 noon, Mountain Time, on Monday, September 14th, 2015, and will close at 1:00 p.m., Mountain Time, on Monday, October 5th, 2015. Sierrita reserves the right to extend or modify this Open Season by posting a notice on its Electronic Bulletin Board ("EBB").
DESCRIPTION OF AVAILABLE CAPACITY
It is anticipated that between 230 MDth/day to 310 MDth/day of expansion capacity (“Expansion Capacity”) will be made available commencing in April of 2020. The capacity will be available from a primary point of receipt at the San Joaquin Receipt Point at the interconnection with EPNG to the Sasabe Delivery Point located at the U.S. – Mexico border. The Expansion Capacity will be provided under Sierrita's Rate Schedule FT.
Consistent with Section 24 of the General Terms and Conditions of Sierrita's FERC Gas Tariff, the Arizona Transaction Privilege Tax will be applicable to the transportation services offered in this Open Season. Similarly, all other applicable transaction privilege taxes that are paid by Sierrita for transportation services provided to shippers will also be assessed to shippers, and winning bidders shall confirm their understanding and acceptance of their responsibility to reimburse Sierrita for those taxes.
Sierrita shall use commercially reasonable efforts to achieve an Expansion Capacity in-service date no later than July 1, 2020. Bidders may request that the Expansion Capacity In-Service Date occur no earlier than April 1, 2020 and/or may request that if the in-service date occurs prior to July 1, 2020, any charges for the Expansion Capacity that are paid by winning Bidder prior to July 1, 2020 and prior to the first month in which the Bidder uses all or any portion of the Expansion Capacity will be applied as a credit against charges that are due from that Bidder during the final three months of the term of the winning Bidder's TSA for the Expansion Capacity.
Sierrita's obligation to provide firm transportation service using the Expansion Capacity is subject to the satisfaction of the following conditions precedent:
A. Approval of the expansion of the capacity of the Sierrita Pipeline by the Management Committee of Sierrita within 60 days of the close of this Open Season; and
B. The receipt by Sierrita of all necessary regulatory approvals, permits, and other authorizations required for the construction and operation of the compression facilities and the expansion of the capacity of the pipeline, in form and substance satisfactory to Sierrita by July 1, 2019.
C. Achievement of an In-Service Date for the Expansion Capacity prior to July 1, 2021.
If either of the conditions is not satisfied by the date specified above, then Sierrita shall be relieved of any obligation to proceed with the installation of the facilities required for the Expansion Capacity or provide the Expansion Capacity.
SUBMISSION OF BIDS
1. Parties interested in bidding in this Open Season should submit bids to Sierrita in the form attached hereto before the close of the open season via email at the following address: KMWestBids@KinderMorgan.com. By submitting a bid, the bidding party will be representing that it has full authority to bind the requesting company.
2. The bid rate must be presented as the reservation rate per Dth/month or stated as the maximum tariff rate. The current recourse maximum monthly reservation rate for the transportation service on the Sierrita Pipeline is $14.9009/Dth.
3. In addition to the bid rate, each bidding party shall be subject to the applicable maximum usage rate and maximum usage surcharges, all other maximum rates, charges and surcharges, including ACA, Fuel and L&U, and any other authorized surcharges assessed under Rate Schedule FT.
4. A Bidder may condition its bid on a right to terminate its commitment for Expansion Capacity in the event the Expansion Capacity in-service date is later than July 1, 2021.
5. Sierrita reserves the right to not accept bids that have rates less than the maximum recourse rate discussed in Paragraph No. 2 above, as well as bids stated as the dollar equivalent of the anticipated maximum recourse rate. Sierrita also reserves the right to reject any and all bids that do not satisfy the requirements set forth in this Open Season or that are incomplete, contain additional or modified terms.
6. Negotiated rate bids will be considered. It is anticipated that if a 230 MDth/day expansion is constructed, negotiated monthly reservation rate bids below $4.3279/Dth will not be accepted; and if a 310 MDth/day expansion is constructed, negotiated monthly reservation rate bids below $3.4553/Dth will not be accepted.
Bidders may include provisions in their negotiated rate bids that adjust the negotiated monthly reservation rate that is bid based on whether the size of the expansion is 230MDth/day or 310 MDth/day. Negotiated rate bids must also provide that, subject at all times to FERC's approval of the particular costs, Sierrita shall be entitled to recovery of Greenhouse Gas Emissions Costs incurred by Sierrita attributable to natural gas transported by Sierrita on its system. As used herein "Greenhouse Gas Emissions Costs" means (i) the cost of any carbon emissions tax or other greenhouse gas assessment that is imposed on Sierrita, (ii) the cost of any greenhouse gas mitigation efforts, including the costs of credits and offsets, that Sierrita incurs to comply with any greenhouse gas laws, rules or regulations, and/or (iii) costs incurred under a voluntary program of greenhouse gas mitigation. If (i) Sierrita is unsuccessful in having the FERC-approved Greenhouse Gas Emissions Costs incurred by it recovered through a FERC-approved surcharge applicable to all shippers, and (ii) such amounts are recoverable only through Sierrita's FERC-approved recourse rates, then shipper must agree to modify its negotiated fixed monthly reservation rate by the amount of Sierrita's maximum reservation rate under Rate Schedule FT that is attributable to such costs.
7. Following the close of the Open Season and the awarding of the Expansion Capacity, Sierrita will provide successful bidders the opportunity to increase their awards of Expansion Capacity by a pro rata share of the difference (if any) between the total amount of awarded capacity and 310 MDth/day. Successful bidders desiring to increase their awards of the Expansion Capacity must so notify Sierrita on or before December 31, 2015. Any portion of the increase in the Expansion Capacity up to 310 MDth/day that is not taken by one or more successful bidders will be made available to any successful bidders that have provided notice of a desire to increase their awards of Expansion Capacity. Sierrita will have no obligation to increase the amount of awarded Expansion Capacity unless successful bidders have requested all of the 80 MDth/day of the potential increase in the Expansion Capacity.
EVALUATION CRITERIA FOR ALLOCATION IN THE OPEN SEASON
If Sierrita receives bids for capacity in excess of the actual amount of available capacity, then the capacity will be allocated based on the net present value of each bid.
The net present value of a bid will be the sum of the present values for all of the months beginning with the first month of service through the end date of the bid term.
The present value for each month will be calculated as follows:
PV = (R X Q)/((1+i)to the power of n)
Where:
R = the monthly reservation bid rate
Q = the monthly bid quantity
i = the monthly discount rate of .2708% (This is the annual discount rate of 3.25% divided by 12).
n = the number of months from the earliest date the capacity is available in the open season to the month the revenue will be received (the first month capacity is available n = 1, the second month n = 2, and so on).
If there is not sufficient capacity available to meet all acceptable bids, and if two or more acceptable bids are of equivalent net present value, then the capacity will be allocated pro rata among those bidders, unless one or more of the bidders have elected not to have their bids prorated (as indicated on their Open Season Bid Sheet).
Capacity will be awarded in this Open Season only to bidders that are deemed creditworthy. Bidders will be deemed creditworthy if:
(i) the bidder's senior unsecured debt securities are rated at least BBB by Standard & Poor's Corporation ("S&P") or Baa2 by Moody's Investor Service ("Moody's"); or
(ii) the bidder's senior unsecured debt securities are rated at least BBB- by S&P or Baa3 by Moody's or the bidder's long-term issuer rating is at least A- by S&P or A3 by Moody's (in the event the bidder is rated differently by multiple agencies, the lowest rating shall be used in making such determination); and (a) the bidder is not under review for possible downgrade by S&P and/or Moody's to a level below BBB- or Baa3, and (b) the sum of twelve (12) months of anticipated charges for the bidder's awarded capacity and all other transportation agreements that the bidder has with Sierrita is less than ten percent (10%) of the bidder's Tangible Net Worth (defined as total assets – (liabilities + intangible assets); or
(iii) if the bidder and its parent entity(ies) are not rated by S&P or Moody's, the bidder shall satisfy its creditworthiness obligations by making a demonstration to Sierrita that the sum of thirty-six (36) months of anticipated charges under this Agreement and all other transportation agreements that the bidder has with Transporter as of the date of this Agreement is less than ten percent (10%) of the bidder's Tangible Net Worth, and a demonstration that the bidder's credit and financial history and outlook are acceptable to Sierrita.
If the bidder is unable to satisfy (or at any time ceases to satisfy) these standards, the bidder must provide and maintain other adequate credit assurance satisfactory to Sierrita, which may include:
(a) a guarantee of the bidder's obligations hereunder acceptable to Sierrita, by another person or entity which satisfies the creditworthiness standards described above; or (b) an irrevocable letter of credit acceptable to Sierrita equal to the sum of thirty-six (36) months of anticipated charges for the bidder's awarded capacity; or (c) such other credit arrangement which is mutually agreed to by Sierrita and the bidder and which is acceptable to Sierrita on a not unduly discriminatory basis.
Any bidder with concerns about its ability to satisfy the creditworthiness requirement should contact Sierrita to discuss this matter.
NOTIFICATION BY SIERRITA OF ACCEPTANCE
The successful bidder(s) will be notified no later than five (5) business days after the close of the Open Season. Each successful bidder shall enter into a Transportation Service Agreement (“TSA”) reflecting the terms of its bid as awarded.
CONTACT INFORMATION
Questions concerning this Open Season should be directed to:
Greg Ruben 719-520-4870
Ana Procuna 52-55-5202-0820 (Mexico)
Ken Ulrich 719-520-3712
SIERRITA PIPELINE OPEN SEASON
BID SHEET
A. Shipper Name:
B. Shipper Address:
Telephone
Fax
C. Term of service;
Commencing On:
□ the date the facilities required for the Expansion Capacity are completed and ready for service and Transporter is authorized to place the facilities into service (the “Expansion Capacity In-Service Date”).
□ Bidder requests that the Expansion Capacity in-service date not occur any earlier than April 1, 2020.
□ Bidder requests that if the Expansion Capacity in-service date occurs prior to July 1, 2020, then any charges for the Expansion Capacity that are paid by Bidder prior to the first month in which the Bidder uses any portion of the Expansion Capacity will be applied as a credit against charges that are due from the Bidder during the final three months of the term of the Bidder's TSA for the Expansion Capacity.
□ ____________
Terminating On:
D. Maximum Acceptable MDQ: __________Dth per Day
Minimum Acceptable MDQ: _________Dth per Day
E. Primary Receipt/Delivery Point(s):
Primary Receipt Point
MDQ (Quantity in Dth)
Interconnection with EPNG Mainline Facilities near Tucson
Primary Delivery Point
Interconnection with IENova's Sonora Pipeline in Mexico
TOTAL
F. Monthly Reservation Rate per Dth:
□ Transporter's Maximum Authorized Monthly Reservation Rate, plus applicable Commodity Charges, ACA, FL&U, or other authorized surcharges, if any.
□ ________ plus applicable Commodity Charges, ACA, FL&U, or other authorized surcharges, if any.
□ A fixed negotiated monthly reservation rate of ________ if the size of the Expansion Capacity is 230 MDth/day, or ________ if the size of the Expansion Capacity is 310 MDth/day, in each case plus applicable Commodity Charges, ACA, FL&U, or other authorized surcharges, if any.