State of Wyoming Pipeline Authority Discussion of Capital Market Financing August 26, 2003.

State of Wyoming Pipeline Authority

Discussion of Capital Market Financing

August 26, 2003

Introduction to UBS

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Corporate Organization

Named 2002 “Bank of the Year” by Investment Dealer’s Digest

Named “World’s Best Investment Bank” in EuroMoney’s Awards for Excellence 2002


UBS’s US Utility Sector Advisory Experience During this past cycle of utility transactions, UBS has advised on over $70

billion of US electric and gas advisory assignments (1)

(1) Dates represent transaction announcements and figures represent enterprise values; UBS client in bold, since 1994


A Dominant Force in the US Power Industry

UBS Investment Bank has been an advisor in five of the last ten utility deals in the United States

Ten Most Recent US Electric M&A Deals

DateAnnounced Acquirer Target Acquirer Advisors Target Advisors

4/29/2002 Ameren Corporation CILCORP Goldman Sachs Lehman Brothers

2/21/2001 Energy East RGS Energy UBS Investment Bank Morgan Stanley

2/12/2001 Potomac Electric Power Conectiv Inc. Merrill Lynch CSFB

9/5/2000 National Grid Plc Niagara Mohawk Rothschild CSFB

8/8/2000 FirstEnergy Corp GPU Inc Morgan Stanley SSB

7/17/2000 AES Corp IPALCO Enterprises Lehman Brothers UBS Investment Bank

2/28/2000 PowerGen Plc LG&E Energy UBS Investment Bank, DKW Blackstone Group

2/28/2000 NiSource Inc. Columbia Energy Group CSFB, DKW Morgan Stanley, SSB

10/25/1999 Investor Group/Berkshire Hathaway

MidAmerican Energy CSFB UBS Investment BankLehman Brothers

10/5/1999 DTE Energy Co. MCN Energy Group UBS Investment Bank Merrill Lynch

SOURCE: Thomson Financial Securities Data

Advisors Involved in Recent Utility DealsUBS Investment Bank 5/10 Merrill Lynch 2/10Credit Suisse First Boston 4/10 Dresdner KW 2/10Morgan Stanley 3/10 Blackstone Group 1/10Lehman Brothers 3/10 Rothschild 1/10Salomon Smith Barney 2/10 Goldman Sachs 1/10


Dominant Force in the US Utility Capital Markets

Equity

Debt

200343,000,000 sharesUS$7.00 per shareFollow-On Offering







200254,500,000 sharesUS$18.35 Per shareFollow-On Offering



2003Joint bookrunner on US$300 million 5.25% 12-year senior notesJoint bookrunner on US$500 million 5.375% 7-year senior notesCo-manager on US$2.025 billion OpConotes consisting of nine tranchesat four subsidiaries

2003Joint bookrunner on US$500 million notes due 20082002Sole bookrunner on US$350 million senior notes due 2032Joint lead manager on US$250 million floating rate notes due 2005 and US$750 million senior notes due 2012

2003Joint bookrunner on US$195million 3.4% 5-year senior unsecured noteJoint bookrunneron US$250 million 4.875% 10-year First Mortgage Bonds for Public Service Company of Colorado

2003Joint lead manager on US$1.8 billion second priority senior secured notes issued in two tranches: $1.2 billion 10-year 8.75% notes and $600 million 12-year 9.00% notesJoint dealer manager on US$1.2 billion tender offer for its senior unsecured and subordinated debt outstandingSole bookrunnerand joint lead manager for AES Chigen’sUS$175 million 10.125% 7-year high yield bond

2003Joint bookrunner on US$510 million 5.25% 30-year/12-year puttable senior unsecured notes due 20032002Joint bookrunneron US$385 million preferred notes due 20422001Senior Co-manager on US$300 million retail preferred notes

Equity

Debt












200254,500,000 sharesUS$18.35 Per shareFollow-On Offering






2003Joint bookrunner on US$500 million notes due 20082002Sole bookrunner on US$350 million senior notes due 2032Joint lead manager on US$250 million floating rate notes due 2005 and US$750 million senior notes due 2012



2003Joint lead manager on US$1.8 billion second priority senior secured notes issued in two tranches: $1.2 billion 10-year 8.75% notes and $600 million 12-year 9.00% notesJoint dealer manager on US$1.2 billion tender offer for its senior unsecured and subordinated debt outstandingSole bookrunnerand joint lead manager for AES Chigen’sUS$175 million 10.125% 7-year high yield bond

2003Joint bookrunner on US$510 million 5.25% 30-year/12-year puttable senior unsecured notes due 20032002Joint bookrunneron US$385 million preferred notes due 20422001Senior Co-manager on US$300 million retail preferred notes


UBS Financial Services Inc.

Full-service national securities firm

In June 2003, UBS PaineWebber became UBS Financial Services, a division of UBS AG, the largest private bank in the world

$1.5 trillion in assets under management in the combined firm

UBS Financial Services' Core Businesses:

— Private Client Investment Services— Asset Management— Research— Investment Banking— Global Fixed Income— Global Equity Sales and Trading— Municipal Securities Group

UBS Financial Services’ Domestic Offices

MEME

CENTRALNORTHEAST

WESTERN

SOUTHERN

MASS.Boston (7)HinghamHyannisPeabodySpringfieldWellesleyWorcester

Bangor

PortlandNHNHConcord

VTVT

Burlington

Plattsburgh

RHODE IS.Providence CONN.

DarienGreenwichHartford (2)MiddleburyNew HavenNew LondonNorwichRidgefieldStamford (2)Westport

NYNYGlens Falls

Syracuse

Buffalo

AlbanyWhite PlainsTarrytown

PAPA

OHOH

WVWV

VAVAKYKY

TNTN

ARARMSMS

LALA

ALAL

GAGA

FLFL

SCSC

NCNC

MIMI

WIWI

ILIL

MNMN

NDND

SDSD

NENE

KSKS

OKOK

TXTX

MOMO

IAIA

ININ

COCO

NMNMAZAZ

UTUT

WYWY

MTMT

IDID

AKAK

HIHI

CACA

NVNV

OROR

WAWA

PENN.AltoonaBethlehemErieGreensburgNew KensingtonNewtonPhiladelphia (3)Pittsburgh (3)RadnorRydalWilkes-Barre

CT

MDBaltimoreHunt ValleyBethesdaRockvillePrince Georges Cty

MDMD

NEW JERSEYBedminsterCherry Hl.HackensackManalapanMetro Ctr. (2)MorristownNorthfieldParamusPrinceton Red BankWestfield

DEDE

RIRIMAMA

MelvilleMt. Kisco New York (13)Pear RiverPort JeffersonSmithtown

NEW YORKFishkillFlushing S. HamptonGarden City (3)HuntingtonManhasset

WASHINGTON, D.C.

Bristol

Roanoke (2)

McLean

Va. BeachNorfolk

Richmond (3)Charlottesville

Charlotte (2)

Wilmington

DurhamGreensboro (2)Winston-Salem(2)

Hendersonville

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Greenville (2)

Atlanta (5)

Savannah

Birmingham(2)

Jackson (2)

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Memphis(2)Jackson

Nashville (2)Oak RidgeKnoxville

(2)Maryville

Louisville (2)

Lexington

Fort Wayne

Indianapolis

Toledo BeachwoodClevelandAkronYoungstown

Troy

Dayton (2)Cincinnati (2)

Columbus

TraverseCity

Muskegon

GrandRapids

Lansing

MICHIGANBirminghamDetroitFarmington HillsFlintLivoniaRochesterTroy

MadisonWauwatosa

MilwaukeeNorthbrookChicago (3)Schaumburg

HinsdaleOak Brook

Des MoinesAtlanticOmaha

Lincoln

Sioux Falls

Grand ForksVirginia

Duluth

St. Paul

Minneapolis

Minnetonka

Wayzata

Kansas City (2)

St. CharlesChesterfield

Wichita

TopekaOverland Pk

Little RockOklahoma City

TulsaMuskogee

LafayetteBaton Rouge (2)

NewOrleans

(2)

JacksonvillePonte Verde

Daytona Beach

OrlandoOcala

GainesvilleMelbourneVero BeachStuartPalm Beach (2)

Ft. LauderdaleBoca Raton (3)MiamiAventura

Coral Gables/Int’l

Midland

Austin (2)

Hurst

Ft. Worth (2)Dallas (4)

MexiaWaco

San Antonio (2)

Corpus Christi

McAllen

Houston (10)

Sugar LandKingwood

BeaumontBryan College Sta.

LongviewTyler

Santa FeAlbuquerque

Colorado SpringsHighlands RanchAspen

Fort CollinsGreeley

Denver (2)Boulder

Tucson

SedonaSun City

ScottsdalePhoenix

Las Vegas

Reno Salt Lake City

Billings

Sun ValleyMedford

Portland

Spokane

SeattleBellevue

ClearwaterSt. Petersburg

SarasotaTampa

Naples

VeniceFt. Meyers

WailukuHonolulu

Anchorage

Chico

Santa RosaGrass Valley

Roseville

StocktonMercedFresno

Santa BarbaraBakersfield

Walnut Creek, Alameda

Beverly HillsCentury CityEncinoLong BeachLos Angeles (3)Newport Beach PasadenaWoodland Hills

Palm DesertLa JollaRancho BernardoSan Diego

BreaCarlsbadMission ViejoOrangeRedlandsRiverside

Spartanburg

ColumbiaSumterMt. Pleasant

Charleston (2)

Kennewick

Bend

Incline VillageOgden

Pinnacle PeakVillage

Sonoma

Ventura

NapaSan Francisco (2)Palo AltoSan Jose San MateoMenlo Park Carmel

Sacramento

Tehama Bank

Hilo

St. Louis

LubbockGrapevine

San Angelo

Plano

Gulfport

Meridian

Columbus

Montgomery

Mobile

TuscaloosaColumbus

AugustaMacon

AshvilleHigh Point Greenville

SmithfieldHickoryHendersonville

Chattanooga

CookevilleBrentwood

Franklin

Kingsport (2)

Murfreesboro

Plymouth

Rochester

Naperville

Indian Hills

Bowling GreenPaducah

Albany

CantonMarysville

San JuanPRPR

Bedford

RochesterWilliamsville

Edmond

ü W orld ’s la rgest priva te bank

ü S trong cred it ra tings (A a2/A A +/A A A )

ü Tota l c lien t assets o f $1 .42 trillion

ü Top 10 financia l services firm by m arket cap ita liza tion ($49.4 b illion)

ü Lead ing globa l research p la tfo rm(#3 in E urope, #3 in A sia and#4 worldw ide)

UBS Financial Services Inc.

ü 391 o ffices th roughout U .S .em ploying 8 ,789 investm entexecutives

ü M anaging 5 .2 m illion priva teclien ts w ith invested assets o f$427.4 b illion

ü P rem ier m un icipa l investm entbanking un it (curren tly ranked #1in U .S .)


UBS Financial Services is a National Municipal Powerhouse

2002 Negotiated Rankings2003 YTD Negotiated Rankings 2001 Negotiated Rankings

Source: Securities Data Corporation; Includes Senior Managed Negotiated transactions.

National Distribution

UBS OfficesMunicipal Committing Center


UBS Taxable Municipal Bond Firm Rankings

UBS has consistently been ranked #1 in the taxable municipal market with over $21.94 billion of issuance since 1993 and resources from UBS Securities sales and trading available as well

Senior Managed Taxable ExperienceJanuary 1, 1993 to June 2003(# of issues/$ in millions)

$3,869.6

$4,449.4

$4,984.3

$5,193.6

$8,971.3

$9,254.6

$10,535.2

$11,431.1

$19,651.0

$21,939.1

0 5,000 10,000 15,000 20,000 $25,000

J P Morgan

RBC Dain Rauscher

Morgan Stanley

William R. Hough

Bear, Stearns

Merrill Lynch

Lehman Brothers

Goldman, Sachs

Citigroup

UBS Financial Services 420

305

253

199

171

149

178

93

321

8

Number of Issues


UBS Financial Services Credentials

UBS works with many power agencies to develop finance plans and issue municipal debt

Senior Managed Public Power Financing Expertise

S o u t h e r n C a l i f o r n i aP u b l i c P o w e r A u t h o r i t y

N e w Y o r k S t a t eP o w e r A u t h o r i t y

F l o r i d a G a sU t i l i t y

S a m R a y b u r nM u n i c i p a l P o w e r A g e n c y

N o r t h e r n C a l i f o r n i aP o w e r A g e n c y

M u n i c i p a l E n e r g yA g e n c y o f G e o r g i a

C o l o r a d o S p r i n g sU t i l i t i e s

N e b r a s k a P u b l i cP o w e r D i s t r i c t

A m e r i c a n M u n i c i p a l P o w e rO h i o

S a n A n t o n i o C i t yP u b l i c S e r v i c e

E n e r g yN o r t h w e s t

L o n g I s l a n d P o w e rA u t h o r i t y

Wyoming Natural Gas Pipeline AuthorityCapital Financing Issues

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Transaction Environment

Authority can’t own pipeline, but can own pipeline capacity

Authority can initiate a project, but needs owner/partner

Difficulty securing long-term contracts with pipeline users

Regulatory lead time

Preference/requirement to ship Wyoming origin gas

Gaining access/control over RIK gas


Transaction Relationships

PipelineOwner

PipelineOwner

Natural GasPipeline

Authority

Natural GasPipeline

Authority

State ofWyoming

State ofWyoming

Business Partnership

Credit Support

Producers

LMD

Utilities

RIK Gas

DebtStructure

Banks(Foreign & Domestic)

PensionFunds

InsuranceCompanies

Individual/Institutional

Investors


Transaction Structure – Critical Issues

Quantify economic value from promotion of gas development in Wyoming

Analyze the most efficient means of creating this economic value, e.g. credit support, pipeline capacity ownership

Determine what influence or input into a project is desired

Several implementation alternatives are available— choose a partner and jointly develop a project— choose a preferred project— solicit interest from several parties and move forward with one or more

Negotiate outline of agreement with preferred company(ies)

Organize financing and prepare contracts and agreements with pipeline company

Offer bonds or execute alternative financing agreement

Close on financing and pipeline agreement


Establishing a Term for the Borrowing

Length and structure of transportation agreements are the critical issues

30 years is generally the longest maturity date

10 year debt has been used for some pipeline projects

Debt is most often non-callable (no pre-payment) or includes “make-whole” features, creating financial impediments to pre-payment


Debt Structure Options

Senior lien debt – all bondholders enjoy a shared first lien on pipeline revenues

Subordinate lien debt - position of subordinate bondholders is below holders of senior debt; return on investment is higher

Fixed rate – Viewed as attractive in light of current low interest rates and its resulting known, fixed annual cost

Adjustable rate – Creates lowest cost of capital, greatest debt management flexibility but is not congruent with FERC process that seeks to establish fixed costs (can be fixed synthetically)


Forms of Credit Support

External

Bond Insurance – a “AAA” rated guaranty that assures payment of principal and interest

Letters of Credit – guaranty from a bank securing principal and interest; often used in variable rate financings

State Sponsored

Moral Obligation Pledge – statement by one governmental entity, e.g. a state, that it will support the debt of another public entity

State Investment in Authority Bonds – this could involve the Sate purchasing bonds with terms or conditions not available from other investors (as senior or subordinate bondholder). Such terms could reflect a form of credit enhancement

Pledge of assets, potentially in conjunction with other State entities. This would be organized as a standby bond purchase agreement


Solving for the Most Advantageous Financing

The Authority can analyze several options by grading each option or casting it one of several categories

The matrix below illustrates how this would work

There are probably more combinations that can be added to those shown

Form of Support

Buy Capacity CostOperationalRequirement

Level ofState Support Return

Back-end or backstop contracts

Stand-by bondpurchase pledge

State Investment

Senior Subordinate Equity Kicker

Conclusions

2021196N.ppt 19


Conclusions

The revised statutory powers granted to the Authority by SF85 (Enrolled Act 55) will enable the Authority to access the debt markets

At least one financing option can achieve a rating for the Authority, without external credit enhancement of “AA” and possibly “AAA”

The debt structure could be as short as 10 years or out to 30 years

Interest rates on the Authority’s debt would be a spread to US Treasury rates

The Authority can realize additional financial benefits from its non-taxpaying status

The Authority can finance its project share with 100% debt – no equity requirement

The Taxable Bond Market

2021196N.ppt 21


Targeted Investors – U.S., Europe and Asia

Select Institutional Investors

AIG Global Sachen LB Leipzig Allstate Deutsche Bank Rhein Hyp

Dexia Credit Local Seagate Global Swiss AM State Farm Fidelity

Fannie Mae Federal Home Loan Banks Freddie Mac

Taxable Investors

Insurance Companies

30%

Banks/Mutual Funds32%

Individuals/Bank Trust

7%

Other3%

Corporations/Private

Business19%

Pension9%

Composition of Taxable Demand Domestic and International


Potential US Roadshow – Major Investor Centers


10986742135981467

10235

1111

AeltusAetnaCignaHartford Life

Hartford

AllmericaBack BayFidelityFleetJohn HancockLiberty MutualLoomis SaylesMass FiMass MutualPutnamState Street GlobalState Street ResearchStandishWellington

Boston

GNA/GE Financial

MicrosoftSafecoState of Washington

Seattle

ELCA PensionIDSLutheran BrotherhoodReliastar

Minneapolis

Allstate CorporationAonContinental AssuranceHarris IMLincoln CapitalPPM AmericaScudder ZurichStein Roe FarnhamUBS BrinsonVan Kampen

Chicago

NISANorthwest Mutual LifeStrong

Milwaukee

Roadshow DestinationsLocation Recommendation Type

1-3 West Coast Recommended One-on-One/Conference call6 Chicago Recommended Group/One-on-One8 Boston Recommended Group/One-on-One10 New York Recommended One-on-One/Group11 D.C. Recommended One-on-One4 Minneapolis Possible Group5 Iowa Possible One-on-One7 Milwaukee Possible Group9 Hartford Possible One-on-One

AegonAIGGEOhio PersFiduciaryFNMAFHCMCVanguard (PA)Alliance CapitalAmerican Express/IDSBlackrockChase AMContinental

New York City/NJ

GuardianJPMIMMetLifeMLAMMiller AndersonMutual of NYNYLifePrudentialState FarmState of New JerseyTeachers InsuranceTravelersWeiss Peck

Barclays

CALPERSCALSTERSFranklinWells Capital

San Francisco/Sacramento

Cap Re

PIMCOTransamericaTCWWamco

Los Angeles Area

Principal FinancialAegon

Iowa

Fannie MaeFreddie Mac

District of Columbia/Virginia


European Roadshow – Potential Locations


London

Paris

Frankfurt / Munich

Zurich / Geneva

Amsterdam / Benelux

Madrid

Milan

Dublin

ABPAegonAchmeaDexiaING Investment ManagementPhilips Pension FundRabobankRobeco

Amsterdam / Benelux

BarclaysBaringsFidelityGreen TGSAMJP Morgan Investment ManagementJulius Baer MAMPrudential (M&G)RoggeRothschild Asset ManagementSaudi International Investment ManagementScudder/Threadneedle

London

AGF–AllianzAXACDCGroupamaHSBC (CCF)IndocamSoc Gen Asset ManagementSogeposte

Paris

AllfondsAllianzDePfaDEKADeAMDWSGZ BankUnion Invest

Germany

Bank of IrelandRheim HypEuropean Hypo DublinBW BankEagle StarIntesa

Dublin


Examples of Risk Weighting

0% 20% 50% 100%

Cash, Treasuries,Sovereign debt of OECDcountries

General obligation bondsof municipalities,Agencies, liquid debt orequity

Revenue obligations ofany public-sector entity inan OECD, loans securedby first mortgages onone-to-four familyresidential properties andmultifamily property

Real estate, privateactivity bonds, all othernot aforementioned

BIS Risk Weighting

Extremely important to taxable buyers, particularly international investors— Direct impact on banks

Indirect impact on secondary market liquidity

Important to achieving lowest taxable interest cost— Estimated interest cost impact: 20%-50%

BIS rules clearly state that bonds subject to appropriation may be treated as general obligations, eligible for 20% risk weighting

“Obligation supported exclusively by excise taxes…. is not a general obligation… [unless] the obligation is also supported by the general revenues of the State or a political subdivision possessing general powers of taxation”

Investors must assess probability of achieving a particular risk weighting if ruling has not been made


Marketing Plan – Listing on Luxembourg Exchange

Listing on Luxembourg Exchange creates liquidity in the European markets

Requires the use of a listing agent (e.g., Dexia) who will assist the Issuer with the application process

A local Luxembourg counsel will also need to be retained

Global Book-Entry System

Global Book-Entry System will allow the Issuer’s Bonds to be traded in “real time”

DTC, Clearstream and Euroclear comprise the Global Book-Entry System

State of Wyoming Pipeline Authority Discussion of Capital Market Financing August 26, 2003.

Documents

Transcript of State of Wyoming Pipeline Authority Discussion of Capital Market Financing August 26, 2003.