Strategic Asset Development and Natural Gas Pipeline Expansion Plan (2002)

1. Asset Development 2002 Business Plan

2. Mission • Generate new recurring earnings by acquiring and developing strategic assets. • Goals • Expand ETS’ pipeline network- • To capture high growth power markets • To participate in the re-alignment of North American gas supplies • Improve gas market connectivity with new pipeline and storage assets • Selectively invest in on-system power generation assets

3. Projects, opportunities

4. 2002 Commercial Plan

5. 2003 Commercial Plan

6. Natural gas pipeline strategies • Expand existing ETS pipelines in current growth markets. • Upside: Outstanding knowledge of market area, customer prospects, incremental expansions. • Downside: Limited growth opportunities, rising tide of competitors • Extend ETS pipelines into new growth markets • Upside: Situated in close proximity to high growth markets • Downside: Significant cost barriers to entry, highly competitive incumbents • Jointly develop new pipelines into growth markets. • Upside: Risk sharing, leverage access to markets and supplies • Downside: Finding motivated partners, diluted profits.

7. Alaska Highway Gas Pipeline Project Investment: $10+ billion • Concept • Develop a natural gas pipeline connecting the Alaskan North Slope to new and existing pipeline infrastructure in Canada • Develop new pipeline infrastructure projects to transport Alaskan gas to markets in continental US (lower 48 states) • Rationale • Existing legal and regulatory framework in the US and Canada • Last natural gas frontier • Organized pipeline industry response necessary to address enormous investment risks • Risks • Weak gas prices slow down project • Lack of ANS Producer support • Multiple competitors (OTT, UTT) • Timetable • 2007 in-service

8. Sun Devil Project Investment: $580 million • Concept • Loop TW’s San Juan lateral and develop a new lateral from the TW mainline to Phoenix • Rationale • Provide access to new markets for increasing Rocky Mountain gas supplies • Provide access to low cost Rocky Mountain gas supplies for rapidly growing gas-fired power generation sector in Phoenix • Risks • Collapse in San Juan – Permian gas price spreads • Competition from KMI’s Sonoran Pipeline • San Juan gas supplies: growing but not unlimited • Navajo ROW • El Paso vs. CD/FR customers • Status • Open season closed August 30 – 1.3 Bcf/d in bids received • Revised cost estimates in preparation • Negotiating 5 power generators as project anchors (4 under construction)

9. West, southeast gas pipeline expansions Evaluate the west and southeast regions and identify underserved markets, potential pipeline corridors, and jv opportunities • Market analysis: • Assess changing gas supplies into FGT • Declining production in the Gulf • New LNG imports • Evaluate growth in gas consumption • Analyze competing pipelines • Determine strengths + weaknesses • Timetable • Nov ’01 complete studies and present recommendations

10. Power generation strategies • Attract power developers to sites on or near ETS pipelines • Strengths: Excellent knowledge of local communities, gas infrastructure • Weaknesses: Deep understanding of evolving power market legal/regulatory/commercial structures • Identify optimal locations for new power plant site development and use ETS’ operational and financial strengths to participate in projects • Strengths: Engineering, construction, operations, off balance sheet investment vehicles • Weaknesses: Human resource intense, non-traditional business development, credibility • Capture waste heat at compressor stations and generate low cost electricity • Strengths: Multiple locations on TW, FGT, and NNG • Weaknesses: Complex integration issues, lack of power marketing skills

11. Bright Star Energy, LLC Investment: $400 MM • Concept: • Co-develop a 815 MW gas-fired CCGT power plant with ENAlocated in Broward County, FL near FGT and Calypso • Rationale: • Response to FPL/RFP • Anchor customer for Calypso, incremental market for FGT • Opportunity to earn development and operating fees, equity returns • Risks • Highly competitive power market • Multiple new pipeline entrants in FL market (Gulfstream, Calypso, El Paso, AES) • Timetable • 26 Sep: proposals due • Nov ‘01: FPL shortlist • Mar ’02: FPL award • ’05/’06 In-service

12. Transwestern Sta 1 Heat Recovery Investment: $20MM • Concept: • Develop a 15 MW heat recovery/duct-fired power plant at TW-Sta.1 • Rationale: • Test case for comparable projects at other locations (FGT, NNG) • Monetize site infrastructure advantages • Risks • Weak power prices • Status • Preparing updated cost estimates • Seeking LOI with Mohave Electric Co-op • Developing PPA/tolling agreement • Performing power merchant risk assessment • Timetable • ’03 In-service

13. Conclusion • US is experiencing unparalleled growth in gas infra-structure (E+P, power plant development, pipeline expansions) • Asset Development is focused on growing ETS’ core businesses • ETS has many operating and financial skills to leverage its position