Alaska LNG Summit 20121

LNG FOR HAWAI’IALASKA LNG SUMMIT 2012

September 14, 2012

Alaska LNG Summit 20122

THE PROBLEM

Hawaii is too

dependent on oil

THE SOLUTION

Conservation and

renewables ASAP

+ LNG to displace other

oil needs

THE PROBLEM AND TGC’s SOLUTION

THE HAWAI’I GAS ALTERNATIVE

• Start with facilities we have

• Start with existing customers• Start smaller

• Start today

THE PROBLEM WITH THE SOLUTION

Massive upfront LNG investments

Long lead times

BUT…

September 14, 2012

Alaska LNG Summit 20123

HAWAII IS BY FAR THE MOSTOIL-DEPENDENT STATE IN THE US

Nearly 90% of Hawaii’s total energy demand is met by oil.

In 2012, Hawaii’s oil bill is projected to reach $6.2 billion.

About 9% of State GDP will be spent on oil.

Oil costs are probably heading up, not down.

86%

38%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Hawaii US Mainland

Oil as Percent of Total Energy Consumption

September 14, 2012

Alaska LNG Summit 20124

THE REST OF THE COUNTRY HAS MOVED AWAY FROM OIL FOR ELECTRICITY

U.S. Mainland reliance on oil for electricity is now less than 1% of the total

Coal, 48.4%

Oil, 0.8%Other, 1.6%

Wind, 2.3%

Hydro, 6.4%

Gas, 19.1%

Nuclear, 21.4%

US Mainland: Fuel Mix in Power Sector

Oil, 77.5%

Geothermal, 1.8%

Other Renewables,

5.9%

Coal, 14.8%

Hawaii: Fuel Mix in Power Sector

(EIA data for 2010)

Hawaii’s reliance is over 77%

September 14, 2012

Alaska LNG Summit 20125

UNLIKE THE MAINLAND, HAWAII IS EXPOSED TO THE STEEP INCREASES IN OIL PRICES

• Hawaii’s non-fuel costs are typical, but fuel costs are much higher—because of oil.

• Hawaii’s 2012 electricity price is more than 3 times the US average.

• Hawaii’s prices are twice the cost of the second-highest state.

• Post-Fukushima, Hawaii is in competition with Japan for scarce low-sulfur crude oil. -

5

10

15

20

25

30

35

Average,Low-CostStates*

USAverage

Average,High-Cost

States*

Hawaii

cent

s/kW

h

Electricity Rates, Jan-Apr 2012

* Low-Cost: 33 states below US average; High-Cost: 16 states (exc.HI) above US average.

September 14, 2012

Alaska LNG Summit 20126

THE HAWAII CLEAN ENERGY INITIATIVE (HCEI) HAS AGGRESSIVE GOALS

70% clean energy by 2030: 30% from efficiency and 40% from renewable sources.

In 2010, 9.5% of generation was from renewable sources.

Despite the ambitious goals, the plan will still leave Hawaii exposed to the high cost of foreign oil.

0%

5%

10%

15%

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25%

30%

35%

40%

45%

2010 2015 2020 2030

Perc

ent o

f pow

er fr

om re

new

able

sou

rces

September 14, 2012

Alaska LNG Summit 20127

PRICES ARE ONLY ONE REASON IT IS URGENT TO SWITCH AWAY FROM OIL

New federal emissions standards will require eliminating most fuel oil or installing expensive emissions controls.

Increased use of wind and solar will require load-following generation rather than large baseload power plants.

Possible closures of Hawaiian refineries could disrupt existing supply arrangements.

*gas converted at crude heat parity (5.8 mmBtu/b)

$-

$10

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$140

LS Fuel Oil,Oahu

WTI Crude Oil,Cushing

Natural Gas,Henry Hub*

Prices, 1st Q 2012: $/b*

September 14, 2012

Alaska LNG Summit 20128

LNG OFFERS HAWAII HUGE COST SAVINGS

LNG delivered in Hawaii could offer major price discounts over fuel oil—even if current gas prices double.

Price advantage is 35%-50% over recent Hawaii LSFO prices

This is $44-$64 savings per barrel oil equivalent (boe).

*Henry Hub and California gas prices have been tightly linked since 2005. On average, California prices have been 5% lower.

This analysis assumes EIA’s forecast of Henry Hub gas in 2015 at $25/bbl (4.27/mmBTU). 2012 YTD prices are much lower ($14/bbl).

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LNG--LowCost

LNG--HighCost

Low-SulfurFuel Oil

$/m

mBT

U

$/ba

rrel

oil

equi

vale

nt,

deliv

ered

to

Oah

u

115% Henry Hub* Liquefaction CostShipping to Hawaii RegasificationLSFO, Honolulu

$64.49

$44.19

September 14, 2012

Alaska LNG Summit 20129

GAS IS FAR MORE EFFICIENT THAN HAWAII’S FUEL OIL PLANTS

Gas is 35-50% cheaper than fuel oil.

Gas in a CCGT uses only about 55% as much energy to generate electricity as fuel oil requires.

Cheaper fuel plus higher efficiency cuts electricity fuel costs by 60-70%.

Gas is also cleaner—and compliant with new federal emissions standards. -

5

10

15

20

25

LNG--LowCost

LNG--HighCost

Low-SulfurFuel Oil

Fuel

Cos

t, ce

nts/

kWh 70%

60%

September 14, 2012

Alaska LNG Summit 201210

HAWAI’I GAS HAS AN ALTERNATIVE TO THE USUAL “THINK-BIG” APPROACH TO LNG…

Massive Infrastructure Investments - Dedicated terminal and pipelines

Conversion of Existing Equipment - Powerplant conversions

Minimum Economic Scale - 1 million tonnes

Long Lead Times - Begin imports in 2020 or later

The LNG “Hurdles” HAWAI’I GAS Strategy

Begin with existing gas facilities

Supply existing turbine plants first

Start with ISO LNG containers - 8,000 gallons per tank

Start TODAY

September 14, 2012

Alaska LNG Summit 201211

HAWAI’IGAS ADVANTAGES

Local presence and 100+ year history

Infrastructure, statewide operation and utility status

Customer base and baseload demand to immediately shift to LNG

Ability to phase development , without need for prior electric utility commitment

A detailed plan for execution and the commitment for required capital

The Gas Company is positioned to bring LNG to Hawaii in a phased approach – lowering costs and reducing risk

September 14, 2012