Northeast Combined Heat and Power Initiative

1
Northeast Combined Heat and Power Initiative

• Natural Gas Purchasing Issues
• John A. Belgiovine
• Select Energy New York, inc.
• April 6, 2005

2
Gas Purchasing Strategies

• 1. Its all about an Individual Project Economics
  and Project Goals....
• 2. Its not about anything else...
• 3. Period.

3
Project Economic Risk.....What are the Goals

• Provide Heat and Power at predictable prices
  Budget Driven.
• Provide Heat and Power at costs less then what
  would have otherwise been paid Cost Avoidance.

4
Project Economic Risk.....What are the Goals

• Budget Driven (Reliability, Price Volatility
  projects)
• Bias toward Fixed Price Agreements
• Indexed with Cap or Triggers may also work.
• If you can get natural gas prices that make
  project economics work, buy and dont look back.
• Cost Avoidance (CapEx Avoidance, Power Quality,
  Cost Savings projects)
• Bias toward Indexed Gas Agreement due to
  flexibility.
• The more the utility prices are tied to ISO
  market prices, rather then regulated rates the
  better this strategy will work.
• If ISO Prices are correlated with natural gas
  prices, better still.
• Indexed with Cap may improve economics
• Caps come with a premium for most small co-gen
  projects

5
Where is the NYMEX Market Heading?
Thoughts, Opinions and Facts...
6
Thank You Questions ?