Expanding Horizons - Municipal Gas Authority of Georgia
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MUNICIPAL GAS AUTHORITY OF GEORGIA Table Of Contents Mission, Corporate Profile Inside front cover President & Chairman’s Message 2 Board Members and Officers 14 Key Operating Statistics 15 Financial Statements 16 - Auditors’ Report - Management’s Discussion & Analysis - Financial Statements General Corporate Information Outside back cover Our Mission To provide municipalities a reliable, economical supply of natural gas and to assist them in developing and growing their gas systems to optimize the benefits of public ownership. Corporate Profile The Municipal Gas Authority of Georgia (the Gas Authority) is the largest non-profit natural gas joint- action agency in the United States, serving 79 Members in Georgia, Alabama, Pennsylvania, Tennessee, and Florida that meet the gas needs of more than 242,000 customers. In addition, the agency provides services to 11 other agencies and public systems referred to as “Municipal Customers”. The Gas Authority serves as the manager of both Public Gas Partners, Inc. (PGP) and Main Street Natural Gas, Inc. (Main Street), which acquire and provide economical natural gas reserves, in the case of PGP, and long-term prepaid natural gas supplies, in the case of Main Street, to the Gas Authority and other public systems. The Gas Authority was formed in 1987 by an Act of the Georgia General Assembly to assist municipal Members who own and operate natural gas distribution systems. Member and Municipal Customer systems are located on the pipeline facilities of seven interstate pipelines. The Gas Authority provides a broad array of gas supply, marketing and other related services, which deliver significant benefits to its Members, Municipal Customers and the communities they serve. Services include gas supply and storage management, supply and capacity planning, regulatory representation, industrial customer assistance, budget assistance, rate design, budget forecasting, market development, communications, project financing, risk management assistance, regulatory compliance, and training.
MUNICIPAL GAS AUTHORITY OF GEORGIA “Education is not the filling of a pail, but the lighting of a fire.” - William Butler Yeates
MUNICIPAL GAS AUTHORITY OF GEORGIA As Simple as ABC Natural Gas is cost effective, reliable, safe and environmentally responsible. President and CEO - Arthur Corbin and Chairman of the Board - Daren Perkins 2
MUNICIPAL GAS AUTHORITY OF GEORGIA Reliable, low-cost energy is key to human development and well-being! A cost effective, reliable Members’ Industrial Customer Mix January - December 2018 supply of energy can ensure clean drinking water, feed the hungry, take care of the sick, maintain Timber, 1.08% comfortable homes and buildings, open doors for Textiles, 20.38% education and improve economies. It promotes Poultry, 5.32% freedom and independence. Through available Military, 9.32% resources and American ingenuity and innovation, Medical, 1.10% the United States has the means to lead the world in energy production that is safe, reliable, low cost and environmentally responsible. More homes and businesses in the United States use natural gas today than ever before. Why? For the comfort, cost, convenience and control afforded them through reliable natural gas service. Households that use natural gas for heating (both space and water), cooking and clothes drying save on average $874 per year compared to homes using electricity for those Corrections, 0.31% appliances. Low domestic natural gas prices and Electric Generation, 11.30% an efficient natural gas delivery system have led to Food & Beverage, 5.52% savings of $105 billion for American businesses over Kaolin Mining, 4.19% the last ten years. Natural gas utilities nationwide add Chemicals, 16.31% nearly 630,000 customers each year on average, or Automotive, 0.27% about one new customer every minute. Agribusiness, 1.02% Manufacturing, 23.86% Growing Volumes In 2018, the Gas Authority’s long-term supply service The Gas Authority and its Members experienced to eleven other municipal customers totaled 28.3 Bcf, record growth in throughput volumes in 2018. up more than 2.4 Bcf from 2017. This annual volume Members delivered over 56 Bcf to customers, up growth includes a new, long-term supply agreement 12 percent from 2017. Most of this increase is with Memphis Light, Gas and Water (“MLGW”) and attributable to growth in the industrial sector served expanding supply services to Richmond Gas Works by Members, including both the expansion of (Virginia), City of LaGrange (Georgia), Black Belt operations at existing industrial customers and the Energy (Alabama) and Patriots Energy Group (South addition of new industries. Also contributing to this Carolina). Overall, the Gas Authority set a record in record increase in Member throughput were the total throughput volumes, delivering 84.5 Bcf in 2018, colder temperatures in 2018 compared to 2017 and or 11 percent more than 2017. an overall increase in residential customers served, up about one percent. 3
MUNICIPAL GAS AUTHORITY OF GEORGIA Calculating Our Progress In 2018, the Gas Authority Members experienced record growth in throughput volumes, up 12 percent from 2017. 4
MUNICIPAL GAS AUTHORITY OF GEORGIA Adding Low Cost, Long-Term Supplies & Total Throughput Municipal Customers Weather Comparison to Normal 90 In 2018, the Gas Authority completed two long-term supply prepayments with Royal Bank of Canada 80 (“RBC”) through Main Street Natural Gas to meet Members’ growing requirements and service to 70 Throughput Volumes (BCF/Year) other municipal customers. The first Main Street 60 transaction with RBC closed in February and the second in May. Main Street issued over $2 billion 50 in bonds to fund these supply prepayments that will meet about 30 percent of the Members’ gas supply 40 requirements for the next 30 years, with commodity savings averaging approximately 40 cents per 30 MMBtu through the initial 5.5-year period of these transactions. 20 10 In addition to these Main Street prepayments, the Gas Authority helped Patriots Energy Group 0 Financing Agency (“PEGFA”) complete its first supply 2014 2015 2016 2017 2018 28% Colder 3% Warmer 4% Warmer 12% Warmer 11% Colder Members Municipal Customers These youngsters from Matt Arthur Elementary School are excited to start their day. Their school is in the Houston County School District, where many of its more than 14,000 school children are now riding to and from school in clean-burning and economical compressed natural gas- powered school buses. 5
MUNICIPAL GAS AUTHORITY OF GEORGIA Our Origins and Discoveries Joint action is at the core of all the Gas Authority does, leveraging its Members’ collective strengths for the benefit of all. 6
MUNICIPAL GAS AUTHORITY OF GEORGIA prepayment with RBC. Most of the prepay supplies the Gas Authority purchased from PEGFA will be used to meet the new supply service to MLGW and to expand and extend the existing supply service to the City of LaGrange (Georgia). Both Main Street transactions and the PEGFA transaction used PGP Pool 4 to serve as the commodity swap counterparty and the upstream supplier to RBC. Through a services agreement with PGP, the Gas Authority provides all the necessary functions to perform these important services within The Georgia Utilities Training Academy in Monroe, Georgia, conducts the supply prepayment structure. The service fees utility training for employees in natural gas distribution, water and waste- the Gas Authority collects help to lower overhead water management. The training facility is a complex of small buildings outfitted with pipelines and equipment to provide hands-on instruction on costs billed to Members. a variety of technical and safety-related topics. Near the end of 2018, the Gas Authority completed issuing approximately $700 million in bonds to meet the negotiations and structuring of a Main Street 8 percent of Member requirements and to provide prepayment with Macquarie Bank. Unlike the other new supply service to four municipal customers: prepayment transactions completed in 2018, this Florida Gas Utility (which includes Florida Municipal Main Street prepayment with Macquarie is fixed for Power Agency), Jacksonville Electric Authority, the full 30-year term. In February 2019, Main Street Orlando Utilities Commission and Philadelphia Gas closed on this prepayment with Macquarie Bank, Works. Gas Prepayment Supplies to Municipal Customers 35,000,000 30,000,000 Total Yearly Sales (MMBtu) 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0 2016 2017 2018 2019 2020 2021 Richmond Cartersville LaGrange MEAG Power SEAGD PEG Tallahassee Clarke-Mobile Black Belt Energy FGU (including FMPA) JEA MLGW OUC PGW 7
MUNICIPAL GAS AUTHORITY OF GEORGIA Maintaining Our System In 2018, market conditions were favorable for new prepayment transactions, which ensure economic natural gas prices for Members and Municipal Customers. 8
MUNICIPAL GAS AUTHORITY OF GEORGIA Stable Member Returns Over 50 percent of the Members’ supply years, the Gas Authority was able to maintain stable requirements are now being met with prepay Member storage returns of $1.1 million for 2018. supplies. The addition of these long-term supply With the return of more dramatic price volatility, the prepayments, with their significant commodity Gas Authority used all the amounts collected through savings, will help to stabilize portfolio returns to the swing supply charge last year to meet Member Members in the short-term with the potential for load swings while still maintaining first of the month increases in the future. For 2018, Members received spot pricing for all volumes delivered. annual returns from the long-term supply portfolio of $6.2 million, an increase of $700,000 from 2017. Total 2018 returns to Members, both operational and supply portfolio, were $11 million, up $500,000 from Through Gas Authority operations, Members 2017. These Gas Authority returns contribute directly received $2.7 million in pipeline capacity release to Members’ margins on their natural gas systems. revenues in 2018, up 13 percent from 2017. This increase was primarily driven by amending the asset management agreement (“AMA”) executed for Members that own Pine Needle LNG peaking capacity on Transco and incorporating our Transco Zone 3 to 6 capacity in this AMA. Net margins on storage fell dramatically due to market pressure on storage values, dropping to $0.6 million, down 40 Figured percent from 2017. However, by using a portion of it out. the surplus in storage earnings achieved in previous Knew You Would. One day it clicked: Home is bigger than just its square feet. So, now you measure it in different ways, like how many more minutes the kids beg to play in the always warm tub. You say you’re no math major, but you’ve definitely found the right answer. See how natural gas turns homes into havens at www.NaturalGasGenius.com or #NaturalGasGenius Through partnerships with the Technical College System of Georgia, the The American Public Gas Association (APGA) is one of many industry Gas Authority provides continuing education units (CEUs) to its network advocates raising awareness for natural gas. Its “Natural Gas. Genius.” of plumbing and HVAC contractors installing natural gas appliances as campaign recognizes that consumers rank energy decisions on par part of the on-bill financing program. The technical schools certify that with lifestyle choices for their homes. It capitalizes on the public’s the instruction provided during contractor training events held around the desire to provide better for their families and friends through improved state meets their requirements for CEUs. homeownership. 9
MUNICIPAL GAS AUTHORITY OF GEORGIA Communicating Our Story Empowering consumers to make wise decisions for their households is now central to natural gas marketing. 10
MUNICIPAL GAS AUTHORITY OF GEORGIA Expanding Services At the end of 2018, the Gas Authority launched a new with the American Public Gas Association in the business called Natural Gas Connection (“NGC”) development of a new consumer campaign called to serve its Members. NGC offers a convenient, “Natural Gas. Genius”. Plans are already underway easy and enjoyable, one-stop, shopping experience to utilize these marketing materials by NGC, the Gas for participating Members’ customers to purchase, Authority regional marketing groups as well as the finance and schedule installation and repairs of Natural Gas Association of Georgia. natural gas appliances. Initially, NGC will serve a limited group of Members in Northwest Georgia The Subscribed Regulatory Compliance Service (Adairsville, LaFayette, Summerville and Trion) (“SRCS”) and the Main Street On-Bill Financing to refine the business model and service delivery Program continue to provide valuable services to system before expanding its operations to other Members, customers and other organizations. The regional Member groups. NGC opened a regional SRCS helps 96 participating entities, including 66 appliance showroom in Trion Town Hall, featuring municipal gas systems and 30 other participating “good, better, best” offerings for water heaters (tank companies and organizations, to comply with pipeline and tankless), space heaters, logs, ranges, cooktops, safety regulations. The Main Street On-Bill Financing clothes washers and dryers. Program is a $7 million, interest free, revolving loan fund available to Members for their residential Through the Gas Authority’s Emerging Technology customers to use for the purchase and installation of Program, eight Members have commercial gas heat new or replacement natural gas appliances. Twenty- pump installations utilizing the Yanmar 3-pipe gas five Members currently access the Program with engine heat pump with total gas cooling capacity 1,400 loans outstanding for a total of $2.9 million. approaching 400 tons. In 2018, the Gas Authority’s marketing and advertising team worked closely Natural Gas Connection (NGC) has opened its first regional appliance showroom in Trion, Georgia, as well as three satellite locations in Adairsville, LaFayette, and Summerville. NGC provides a convenient one-stop shopping experience and offers sales, installation, financing and maintenance of residential natural gas appliances. 11
MUNICIPAL GAS AUTHORITY OF GEORGIA Our Innovative Solutions Our mission to provide reliable, low-cost natural gas service to Members, customers and communities drives our operation, innovation and progress. 12
MUNICIPAL GAS AUTHORITY OF GEORGIA 2019 and Beyond The Gas Authority is committed to helping its Members provide reliable, low-cost natural gas service to their customers and communities. We’re expanding horizons through offering new services that make it easy for our Members’ customers to use natural gas in their homes and businesses. We’re adding other municipal customers to our supply projects to enhance the economics for all. We’re exploring ways to improve our operations to be more efficient and provide the best, most effective service at more locations on more pipelines. The Gas Authority has an outstanding team of professionals dedicated to helping its Members and other Municipal Customers serve their customers and communities and achieve their gas distribution system goals. On behalf of our Board and employees, we thank you for the opportunity to serve you, your customers and your communities and pledge to always work hard to deserve the confidence and trust you have placed in us. Arthur Corbin President & CEO Morgan County High School’s College and Career Academy is located in a new state-of-the-art facility in Madison, Georgia. All students participate in one of four “academies”: Arts and Humanities, Health and Human Services, Media and Communication, and Science and Industry. Students can “test drive” a variety of career paths or build the foundation for a lifelong career in one specific track, like these students in the Culinary Daren Perkins Arts Program. Chairman of the Board 13
MUNICIPAL GAS AUTHORITY OF GEORGIA Officers From left to right: Chris Strippelhoff, Chief Membership Officer Susan Reeves, Chief Financial Officer Mike Frey, Chief Operating Officer Arthur Corbin, President & CEO Peter Floyd, General Counsel – Alston & Bird Board of Directors From left to right: Howard McKinnon, Town Manager – Havana, FL, Jonathan Mason, Assistant Gas Superintendent – Chambersburg Gas Department, Kenneth L. Usry (Vice Chairman), Mayor of Thomson, Steve Sykes, City Manager – Camilla, Charles K. Shaheen, former City Council Member – Warner Robins, Daren Perkins (Chairman), Gas Superintendent – Buford, Luther L. (Buddy) Duke, III, Mayor – Adel, Chris Hobby, City Manager – Bainbridge, Todd Hardigree, Gas Director – Lawrenceville, David Aldrich (Secretary/Treasurer), City Manager – Hartwell, Irving Thompson, General Manager – East Central Alabama Gas District, Michael Clay, Director of Utilities – Dublin 14
MUNICIPAL GAS AUTHORITY OF GEORGIA Key Operating Statistics 2014 2015 2016 2017 2018 Number of Members/Municipal Customers Members on Southern Natural 25 25 26 26 25 Members on Southern Natural - South Georgia Facilities 27 28 28 29 29 Members on Transco 23 23 23 23 23 Members on Texas Eastern 3 3 2 2 2 Municipal Customers on Various Pipelines 9 9 9 10 11 Regulatory Compliance Customers 25 25 31 33 36 Total 112 113 119 122 126 Total Throughput By Member & Municipal Customers (000 MMBtu) Member 53,875 52,381 51,501 50,035 56,209 Municipal Customers 27,097 26,600 26,535 25,888 28,327 Total 80,972 78,981 78,036 75,923 84,536 Total Throughput By Pipelines (000 MMBtu) Southern Natural 21,347 21,774 23,708 21,806 23,133 Southern Natural - South Georgia Facilities 14,289 14,802 14,369 15,334 16,766 Transco 32,131 29,764 29,813 28,675 32,995 Texas Eastern/Midwestern 4,900 4,383 1,796 1,748 1,999 Florida Gas Transmission 4,242 4,242 4,256 4,242 4,548 Other 4,063 4,016 4,094 4,118 5,095 Total 80,972 78,981 78,036 75,923 84,536 Heating Degree Days - Actual South Georgia 1,611 1,016 1,128 1,020 1,367 Middle Georgia 2,745 2,021 1,964 1,742 2,175 North Georgia 2,951 2,272 2,254 2,068 2,630 Heating Degree Days - 10 Year Average South Georgia 1,477 1,428 1,412 1,376 1,423 Middle Georgia 2,307 2,291 2,279 2,244 2,300 North Georgia 2,656 2,609 2,590 2,560 2,567 Average Spot Price ($/MMBtu) $4.41 $2.66 $2.46 $3.11 $3.09 Members’ Customers - By Pipeline Southern Natural 49,642 49,950 51,379 50,155 49,977 Southern Natural - South Georgia Facilities 38,261 37,435 37,110 36,768 36,619 Transco 135,110 137,131 138,818 141,495 143,594 Texas Eastern 21,680 21,731 11,988 12,065 12,255 Total 244,693 246,247 239,295 240,483 242,445 15
MUNICIPAL GAS AUTHORITY OF GEORGIA Financial Statements As of and for the Years Ended December 31, 2018 and 2017 Report of Independent Auditors 17 Management’s Discussion and Analysis (Unaudited) 19 Financial Statements 31 16
MUNICIPAL GAS AUTHORITY OF GEORGIA Report of Independent Auditors The Board of Directors Municipal Gas Authority of Georgia We have audited the accompanying financial statements of the Municipal Gas Authority of Georgia as of and for the years ended December 31, 2018 and 2017, and the related notes to the financial statements, which collectively comprise the basic financial statements listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Municipal Gas Authority of Georgia at December 31, 2018 and 2017, and the changes in its financial position and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles. 17
MUNICIPAL GAS AUTHORITY OF GEORGIA Required Supplementary Information U.S. generally accepted accounting principles require that management’s discussion and analysis on pages 19-30 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, which considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audits of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Atlanta, Georgia April 15, 2019 18
MUNICIPAL GAS AUTHORITY OF GEORGIA Management’s Discussion and Analysis (Unaudited) Overview Corporate Structure Municipal Gas Authority of Georgia (the Gas Authority) is a nonprofit, joint-action agency created in 1987 by an Act of the General Assembly of the State of Georgia (the Act). The Gas Authority is a public corporation whose primary purpose is to provide municipalities reliable and economic gas supplies and to assist them in developing and growing their systems to optimize the benefits of public ownership. Members and Customers Seventy-nine municipal gas utilities (the Members), serving approximately 240,000 retail customers in Georgia, Alabama, Florida, Pennsylvania, and Tennessee, have signed long-term gas supply contracts through 2050 requiring that they take their entire gas supply from the Gas Authority and requiring the Gas Authority to provide that supply. Each utility is locally owned and operated; however, municipal utilities share common interests and concerns that can best be solved by working together. For example, by contracting with the Gas Authority, the municipal utilities can diversify their source of supplies through a portfolio of supply arrangements rather than depending on the services of a single provider. Through joint action, these municipal utilities use economies of scale to reduce the overall cost of natural gas to their ultimate customers. The Gas Authority also provides gas supplies and related services to 11 other agencies and municipal utilities (Municipal Customers) on a limited basis for the benefit of the Members. Additionally, the Gas Authority provides regulatory compliance services to 36 other entities (Regulatory Compliance Customers, and collectively with Municipal Customers, the Customers). The Gas Authority is governed by a nine-member Board of Directors, which is elected from the membership and serves in staggered three-year terms. The Board also has three nonvoting out- of-state directors. Authority The Act provides that the Gas Authority will establish rates and charges to produce revenues sufficient to cover its costs, including debt service. It may not operate for profit unless such profit inures to the benefit of the public. The Gas Authority is specifically authorized by the Act to undertake joint projects for its Members and to issue tax-exempt bonds and other obligations to finance the costs of such projects. 19
MUNICIPAL GAS AUTHORITY OF GEORGIA Management’s Discussion and Analysis (continued) (Unaudited) Long-Term Gas Supply Members can elect to participate in joint projects undertaken by the Gas Authority and authorize issuance of project debt by entering into a supplemental contract (Supplemental Contract). These Supplemental Contracts authorize the Gas Authority to issue gas revenue bonds and other debt obligations to acquire a portfolio of gas supplies and gas-related assets to fulfill, in whole or in part, its obligation to supply gas to Members. The Portfolio III project was initiated in November 2002 with the execution of amended Gas Supply Contracts and Supplemental Contracts with all Members. Those contracts were amended in 2008 to extend the full requirements gas supply services to Members through at least the date on which all Portfolio III bonds are fully retired and authorize the issuance of up to $1,500,000,000 in debt to secure long-term gas supplies. Through these contracts, the Gas Authority was authorized to issue additional debt through December 31, 2014, with maturities not exceeding 15 years from issuance. The Portfolio IV project was initiated in November 2014 with the execution of Supplemental Contracts. Under the Portfolio IV contracts, the Gas Authority may issue up to $1,100,000,000 in debt through December 31, 2020, increasing to $1,500,000,000 as Portfolio III principal payments are made, with maturities not exceeding 20 years from issuance, to secure long-term gas supplies. The Gas Authority completed two gas reserve acquisitions in Portfolios III and IV. In January 2003, the Gas Authority executed its first Portfolio III transaction with the acquisition of working and royalty interests in coalbed methane reserves in Alabama’s Black Warrior Basin for $72,000,000. In January 2006, the Gas Authority acquired coalbed methane natural gas reserves and a related gathering system in Kansas’ Cherokee Basin for $61,250,000. The Kansas Cherokee Basin project was sold in August 2017. Price risk related to the future sales of gas in these reserve projects has been partially hedged through the use of natural gas swaps and options that convert the revenues that the Gas Authority will receive for future sales of gas from a variable price based on a spot market index to a fixed price. The use of these derivatives ensures the Gas Authority’s Members and Customers that future billings will be consistent with prevailing market pricing while preserving the discounts expected in the original acquisitions. 20
MUNICIPAL GAS AUTHORITY OF GEORGIA Management’s Discussion and Analysis (continued) (Unaudited) In November 2004, June 2005, and May 2009, the Gas Authority executed Natural Gas Production Sharing Agreements (PSAs) with Public Gas Partners, Inc. (PGP), an autonomous Georgia nonprofit corporation that acquires and manages pools of gas supplies and provides other services for its municipal members, and whose day-to-day activities are managed by the Gas Authority. The first two PSAs authorized PGP to acquire specified gas supplies for the benefit of the Gas Authority and other pool participants over three-year acquisition periods, which ended in 2008. PGP completed reserve acquisitions of $327,900,000 in Pool 1 and $151,500,000 in Pool 2. The Gas Authority utilized a portion of the Portfolio III and IV debt to make advance payments to PGP for its share of acquisitions and finance PGP’s liquidity requirements. See further discussion in liquidity and capital resources below. The third PSA authorizes PGP to acquire specified gas supplies for the benefit of the Gas Authority and other pool participants for as long as those participants have nominations in effect with PGP. PGP has completed $190,500,000 in reserve acquisitions in Pool 3. In January 2018, the Gas Authority executed a Participation Agreement with PGP related to PGP Pool 4, which was created to serve as a gas supplier and gas commodity swap counterparty for prepayment transactions. Through March 2019, the Gas Authority is a party to 11 long-term supply arrangements, including seven with Main Street Natural Gas, Inc. described below, that are expected to deliver a firm supply of discounted gas over various terms ending in 2049. Under these pay-as-you-go arrangements, the Gas Authority has committed to buy specified volumes of gas at prevailing market prices less a discount when, and if, gas is delivered. Main Street Natural Gas, Inc. Main Street Natural Gas, Inc. (Main Street) is a nonprofit corporation organized under Georgia law, formed on November 6, 2006. Main Street was formed to facilitate long-term supply transactions on behalf of the Gas Authority, as well as other municipal customers within and outside the state of Georgia (collectively, the Participants). Main Street is authorized to issue tax- exempt bonds on behalf of the Gas Authority. Main Street is governed by a board of directors consisting of five directors of the Gas Authority. Accordingly, Main Street is considered a blended component unit of the Gas Authority under governmental accounting standards and is included within the Gas Authority’s financial statements. Audited financial statements of Main Street are available from the Gas Authority. Main Street’s daily activities are managed by the Gas Authority under services agreements with durations consistent with the related supply agreements. 21
MUNICIPAL GAS AUTHORITY OF GEORGIA Management’s Discussion and Analysis (continued) (Unaudited) Main Street has acquired gas through long-term prepaid gas purchase agreements (GPAs) and delivers gas to Participants through long-term gas supply contracts for specified volumes of gas. In some cases, the obligation of each Participant to pay Main Street the contract price for its contract quantity of gas is insured pursuant to a separate financial guaranty insurance policy. Gas is priced to Participants at a discount to spot market pricing. Additional discounts may be distributed annually to each project’s Participants at the discretion of the Main Street Board. Following is a summary of Main Street’s active prepayments as of December 31, 2018. Original Bond Bond Original Volume Series Supplier Prepayment Term Amount (Mcf) 2006A J.P. Morgan February 2007 – January 2022 $ 528,255,000 108,600,131 2006B Merrill Lynch February 2007 – January 2022 527,630,000 108,600,131 2007A Merrill Lynch December 2007 – July 2028 496,710,0001 118,783,7501 2010A Royal Bank of Canada July 2010 – June 2040 774,000,000 153,957,600 2018A&B Royal Bank of Canada March 2018 – February 2048 1,021,675,000 405,466,619 2018C,D,&E Royal Bank of Canada July 2018 – June 2048 1,000,215,000 409,761,987 1 In May 2009, Main Street redeemed $225,105,000 of bonds through a tender offer. The remaining volumes to be delivered under the related gas supply agreement were reduced by 51,508,348 Mcf. The Series 2018A&B bonds and Series 2018C,D,&E bonds have maturity dates in 2048, but are required to be purchased pursuant to a mandatory tender on September 1, 2023 and December 1, 2023, respectively, and remarketed or refunded. If the remarketing fails or the bonds are not refunded, bondholders are required to be repaid through a termination payment due from the supplier under the GPA and the prepayment transaction will terminate. In February 2019, Main Street issued revenue bonds totaling $695,595,000 to fund a 30-year natural gas prepayment transaction for 351,437,400 Mcf supplied by Macquarie US Gas Supply LLC, a subsidiary of Macquarie Group Limited. 22
MUNICIPAL GAS AUTHORITY OF GEORGIA Management’s Discussion and Analysis (continued) (Unaudited) Price risk related to the future deliveries of gas under these prepayments has been fully hedged through the use of natural gas swaps that convert the revenues that Main Street will receive from customers for reselling future deliveries of gas from a variable price based on a spot market index to a fixed price. These fixed prices are sufficient to pay project costs, while preserving the discounts obtained in the original prepayments. Main Street’s prepayments for these rights are secured by guaranties provided by large financial institutions. The Series 2006A, 2006B, 2007A, 2018A, 2018C, and 2019A bonds have fixed interest rates. The Series 2010A bonds have a variable interest rate along with two interest rate swaps. The Series 2018B, 2018D, and 2018E bonds have variable interest rates along with interest rate swaps. Short-Term Gas Supplies and Sales In addition to gas supplies obtained from long-term arrangements, the Gas Authority obtains short-term supplies on a daily, monthly, and seasonal basis from a variety of suppliers. These supplies are used by the Gas Authority to fulfill and balance its Members’ and Customers’ daily requirements. Because of the volatile and highly seasonal nature of its Members’ and Customers’ gas supply requirements, the Gas Authority also occasionally remarkets excess gas supplies on a short-term basis to a variety of suppliers. The Gas Authority uses derivative instruments, including swaps and options, to hedge its commodity price risk associated with forecasted natural gas supply and sales transactions. Proprietary Fund Accounting The Gas Authority follows proprietary fund accounting under governmental accounting standards. Proprietary funds are used to report business-type activities, as contrasted with tax-supported governmental activities. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the Gas Authority’s basic financial statements. These financial statements are designed to provide readers with a broad overview of the Gas Authority’s finances in a manner similar to a private-sector business. 23
MUNICIPAL GAS AUTHORITY OF GEORGIA Management’s Discussion and Analysis (continued) (Unaudited) The statements of net position present information on all the Gas Authority’s assets, liabilities, and deferred inflows/outflows of resources, with the differences between these amounts reported as net position. Because billings and revenues in excess of actual costs are generally returned to Members in the form of billing credits and annual cash returns, net position is somewhat limited. The only significant exception is net position that has been designated by the Gas Authority’s Board of Directors as reserve accounts and that has been funded by a reduction in Member billing credits or returns. The statements of revenues, expenses, and changes in net position present information showing how the Gas Authority’s net position changed during the periods presented. All changes in net position are reported on the accrual basis as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Therefore, revenues and expenses are reported in these statements for some items that will result in cash flows in future fiscal periods (e.g., deferred inflows/outflows for costs recoverable from future billings). Notes to Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the financial statements. Financial Analysis – 2018 Compared to 2017 Following are condensed statements of net position as of December 31: 2018 2017 Total assets $ 4,796,613,731 $ 2,609,203,155 Deferred outflows of resources 291,177,386 238,667,563 Current liabilities 300,250,798 208,629,126 Noncurrent liabilities 3,650,878,858 1,739,995,254 Total liabilities $ 3,951,129,656 $ 1,948,624,380 Deferred inflows of resources $ 1,101,487,038 $ 864,582,648 Net position: Invested in capital assets 2,825,156 2,986,025 Unrestricted 32,349,267 31,677,665 Total net position $ 35,174,423 $ 34,663,690 24
MUNICIPAL GAS AUTHORITY OF GEORGIA Management’s Discussion and Analysis (continued) (Unaudited) Total Assets – The increase in total assets of $2,187,410,576 is primarily due to an increase of $1,905,659,514 in prepaid gas supplies related to the Main Street 2018A&B and 2018C,D,&E transactions, $213,627,259 in the fair value of derivative instruments due to changes in market conditions as well as new hedges related to the 2018 Main Street transactions, an increase in restricted investments of $53,929,932 related to the 2018 Main Street transactions, an increase of $19,191,445 in accounts receivable from Members due primarily to higher sales volumes and higher gas prices in December 2018 as compared to the prior year, and an increase in cash and restricted cash of $9,817,628 due to new bonds issued for the 2018 Main Street transactions. These increases were partially offset by a decrease of $12,640,005 in advance payments from PGP due to repayments by PGP. Deferred Outflows of Resources – Deferred outflows of resources represents costs recoverable from members, which increased $52,509,823 due to timing differences between expense recognition and billings to members. Total Liabilities – Current liabilities increased by $91,621,672 due primarily to 2019 principal payments due on the Portfolio bonds as well as bonds issued for the 2018 Main Street transactions. Noncurrent liabilities increased $1,910,883,604 due primarily to bonds issued for the 2018 Main Street transactions. See “Liquidity and Capital Resources” below. Deferred Inflows of Resources – Deferred inflows of resources represents the net unrealized gain on hedging derivative instruments, which increased $236,904,390 due primarily to changes in market conditions. 25
MUNICIPAL GAS AUTHORITY OF GEORGIA Management’s Discussion and Analysis (continued) (Unaudited) Following is a summary of operations for the years ended December 31: 2018 2017 Operating revenues $ 363,010,776 $ 331,950,590 Operating expenses: Gas operations 157,779,817 170,042,177 Reserve depletion and prepaid gas supply delivery 139,026,123 110,779,397 General and administrative 13,049,633 12,152,337 Total operating expenses 309,855,573 292,973,911 Operating income 53,155,203 38,976,679 Nonoperating expenses, net (52,644,470) (39,700,100) Change in net position 510,733 (723,421) Net position – beginning of year 34,663,690 35,387,111 Net position – end of year $ 35,174,423 $ 34,663,690 Operating Revenues – Operating revenues, which represent gas supplies and related hedge settlements, pipeline charges, and other services provided to Members and Customers, and Participants, increased by $31,060,186 or 9.4%. The increase in revenues is primarily due to 11% higher throughput driven by weather that was 27% colder than 2017 as well as growth in industrial volumes. Revenue volatility is mitigated somewhat by the hedging programs discussed earlier. Operating Expenses – Gas operations, which include production, transportation, storage, and commodity costs of delivering natural gas to Members and Customers, and Participants, increased $16,881,662, or 5.8%, due primarily to the higher throughput discussed above. Reserve depletion and prepaid gas supply delivery expense increased $28,246,726 or 25.5% primarily due to the 2018 Main Street transactions. General and administrative expense increased by $897,296, or 7.4%, due primarily to higher personnel costs and technology expense. Nonoperating Expenses, Net – Nonoperating expenses, net increased $12,944,370 primarily due to an increase in interest expense of $52,213,164 due to the 2018 Main Street bonds and a decrease in investment income of $8,347,995 primarily related to a decrease in the fair value of the Main Street 2010A non-hedging interest rate swap due to changes in market conditions, offset by a decrease in deferred outflows of resources of $47,616,789 representing the timing differences between expense recognition and billings to Members and Customers. Liquidity and Capital Resources – The Gas Authority had cash and investment securities of $216,761,452 at December 31, 2018, as compared to $153,013,892 at December 31, 2017. See the cash flow statement for details of cash activity during 2018. 26 26
MUNICIPAL GAS AUTHORITY OF GEORGIA Management’s Discussion and Analysis (continued) (Unaudited) Following is a summary of debt activity in 2018: December 31, Payments/ December 31, 2017 Issuances Amortization 2018 Maturity Lines of credit $ 30,250,000 $ 35,150,000 $ (30,000,000) $ 35,400,000 Mar 2020 Series F 22,220,000 - (11,110,000) 11,110,000 Aug 2019 Series Q 12,000,000 - - 12,000,000 Oct 2022 Series S 27,000,000 - - 27,000,000 Oct 2027 Series T 15,000,000 - - 15,000,000 Oct 2020 Series U 51,000,000 - (12,000,000) 39,000,000 Oct 2024 Series A 80,000,000 - - 80,000,000 Oct 2024 Bond premium 16,781,971 - (5,089,618) 11,692,353 N/A Total $ 254,251,971 $ 35,150,000 $ (58,199,618) $ 231,202,353 Limited obligation debt: Main Street bonds $ 1,442,865,000 $ 2,021,890,000 $ (94,270,000) $ 3,370,485,000 2022–2048 Bond premium 13,882,235 99,342,218 (17,150,451) 96,074,002 N/A Direct financing leases 20,006,923 11,910,000 (3,180,103) 28,736,820 2019–2033 Total $ 1,476,754,159 $ 2,133,142,218 $ (114,600,554) $ 3,495,295,822 All bonds except four series of Main Street bonds are fixed rate, and all debt supports financing of gas prepayments, gas reserve acquisitions, advance payments to PGP, storage operations, and other gas supply activities. The Gas Authority has lines of credit (LOCs) with an aggregate capacity of $80,000,000 and $44,600,000 available to be drawn at December 31, 2018. The LOCs mature on March 31, 2020. See the financial statement notes for further discussion of the Gas Authority’s long-term debt. From the proceeds of these financings, $232,809,890 has been advanced to PGP as of December 31, 2018. Under advance payment agreements, PGP is obligated to repay these funds by the final maturity of any related Gas Authority debt. 27
MUNICIPAL GAS AUTHORITY OF GEORGIA Management’s Discussion and Analysis (continued) (Unaudited) The Gas Authority is exposed to credit risk in its arrangements with financial counterparties, suppliers, Members, Customers, and others. The Gas Authority has adopted policies and procedures to minimize this risk. Cash and investment securities balances consist of working capital and portfolio reserves as well as cash balances generated by the Gas Authority’s long-term supply projects and provide sufficient liquidity for planned operations. In addition to monthly returns, in April 2019, the Board of Directors approved an annual cash return to Members of $10,353,486. Financial Analysis – 2017 Compared to 2016 Following are condensed statements of net position as of December 31: 2017 2016 Total Assets $ 2,609,203,155 $ 2,740,474,560 Deferred outflows of resources 238,667,563 233,774,529 Current liabilities 208,629,126 195,391,469 Noncurrent liabilities 1,739,995,254 1,872,195,630 Total liabilities $ 1,948,624,380 $ 2,067,587,099 Deferred inflows of resources $ 864,582,648 $ 871,274,879 Net position: Invested in capital assets 2,986,025 3,180,289 Unrestricted 31,677,665 32,206,822 Total net position $ 34,663,690 $ 35,387,111 Total Assets – The decrease in total assets of $131,271,405 is primarily due to a decrease of $118,853,901 in prepaid gas supplies and gas properties mostly related to depletion and deliveries of gas and a decrease of $14,173,332 in advance payments from PGP due to repayments by PGP. Deferred Outflows of Resources – Deferred outflows of resources represents costs recoverable from members, which increased $4,893,034 due to timing differences between expense recognition and billings to members. 28
MUNICIPAL GAS AUTHORITY OF GEORGIA Management’s Discussion and Analysis (continued) (Unaudited) Total Liabilities – Current liabilities increased by $13,237,657 due primarily to borrowings from the lines of credit, as well as $129,386,075 of reclassifications from noncurrent liabilities for debt payments due and bond premium to be amortized in 2018 discussed below, offset by $125,466,277 of debt payments and bond premium amortization in 2017. Noncurrent liabilities decreased $132,200,376 due primarily to the reclassification to current liabilities of $129,386,075 of debt due and bond premium to be amortized in 2018. Deferred Inflows of Resources – Deferred inflows of resources represents the net unrealized gain on hedging derivative instruments, which decreased $6,692,231 due primarily to changes in market conditions. Following is a summary of operations for the years ended December 31: 2017 2016 Operating revenues $ 331,950,590 $ 317,742,393 Operating expenses: Gas operations 170,042,177 161,601,212 Reserve depletion and prepaid gas supply delivery 110,779,397 112,836,771 General and administrative 12,152,337 11,313,726 Total operating expenses 292,973,911 285,751,709 Operating income 38,976,679 31,990,684 Nonoperating expenses, net (39,700,100) (31,878,582) Change in net position (723,421) 112,102 Net position – beginning of year 35,387,111 35,275,009 Net position – end of year $ 34,663,690 $ 35,387,111 Operating Revenues – Operating revenues, which represent gas supplies, pipeline charges, and other services provided to Members, Customers, and Participants, increased by $14,208,197, or 4.5%. The increase in revenues is primarily due to higher average index prices offset somewhat by lower throughput due to warmer weather. Revenue volatility is mitigated somewhat by the hedging programs discussed earlier. 29
MUNICIPAL GAS AUTHORITY OF GEORGIA Management’s Discussion and Analysis (continued) (Unaudited) Operating Expenses – Gas operations, which include production, transportation, storage, and commodity costs of delivering natural gas to Members, Customers, and Participants, increased $8,440,965, or 5.2%, due primarily to the higher gas prices discussed above. Reserve depletion and prepaid gas supply delivery expense decreased $2,057,374 or 1.8% primarily due to the sale of the Kansas gas reserves. General and administrative expense increased by $838,611, or 7.4%, due primarily to higher personnel costs and professional fees. Nonoperating Expenses, Net – Nonoperating expenses increased $7,821,518 primarily due to a decrease in deferred outflows of resources of $31,099,571 representing the timing differences between expense recognition and billings to Members, offset by lower interest expense of $4,374,532 and an increase in investment income of $18,903,521 primarily related to an increase in the fair value of the Main Street 2010A non-hedging interest rate swap due to changes in market conditions. 30
MUNICIPAL GAS AUTHORITY OF GEORGIA Municipal Gas Authority of Georgia Statements of Net Position December 31 2018 2017 Assets and deferred outflows of resources Current assets: Cash and cash equivalents $ 43,103,007 $ 52,490,070 Restricted cash and cash equivalents 54,354,029 35,149,338 Investment securities – restricted 98,912,672 65,374,484 Accounts receivable – Members 34,067,950 23,781,904 Accounts receivable – other 21,301,907 20,232,919 Prepaid gas supplies 152,559,453 110,300,959 Gas inventories and other current assets 9,134,333 10,418,445 Fair value of derivative instruments 121,203,681 100,314,716 Total current assets 534,637,032 418,062,835 Noncurrent assets: Gas properties and supplies: Prepaid gas supplies 2,793,439,535 930,038,515 Gas properties, net 2,523,859 3,987,374 Investments: Investment securities – restricted 20,391,744 – Direct financing leases 25,917,522 17,012,123 Operating partnership 1,180,219 1,232,267 Advance payment due from Public Gas Partners 232,809,890 245,449,895 Fair value of derivative instruments 1,180,625,128 987,886,834 Other assets 5,088,802 5,533,312 Total noncurrent assets 4,261,976,699 2,191,140,320 Deferred outflows of resources 291,177,386 238,667,563 Total assets and deferred outflows of resources $ 5,087,791,117 $ 2,847,870,718 Liabilities, deferred inflows of resources, and net position Current liabilities: Accounts payable and accrued expenses $ 54,818,622 $ 36,804,004 Due to Members 20,596,612 10,032,507 Short-term debt 35,400,000 30,250,000 Current portion of long-term debt 63,902,773 28,199,618 Current portion of limited obligation debt 124,491,776 101,543,913 Other liabilities 722,414 798,514 Fair value of derivative instruments 318,601 1,000,570 Total current liabilities 300,250,798 208,629,126 Noncurrent liabilities: Long-term debt 131,899,580 195,802,353 Fair value of derivative instruments 144,043,693 164,162,280 Other liabilities 4,131,539 4,820,376 Limited obligation debt 3,370,804,046 1,375,210,245 Total noncurrent liabilities 3,650,878,858 1,739,995,254 Total liabilities 3,951,129,656 1,948,624,380 Deferred inflows of resources 1,101,487,038 864,582,648 Net position: Invested in capital assets 2,825,156 2,986,025 Unrestricted 32,349,267 31,677,665 Total net position 35,174,423 34,663,690 Total liabilities, deferred inflows of resources, and net position $ 5,087,791,117 $ 2,847,870,718 See accompanying notes. 31 31
MUNICIPAL GAS AUTHORITY OF GEORGIA Municipal Gas Authority of Georgia Statements of Revenues, Expenses, and Changes in Net Position Year Ended December 31 2018 2017 Operating revenues: Gas operations $ 352,382,323 $ 322,404,400 Other 10,628,453 9,546,190 Total operating revenues 363,010,776 331,950,590 Operating expenses: Gas operations 157,779,817 170,042,177 Reserve depletion and prepaid gas supply delivery 139,026,123 110,779,397 General and administrative 13,049,633 12,152,337 Total operating expenses 309,855,573 292,973,911 Operating income 53,155,203 38,976,679 Nonoperating revenues (expenses): Investment income 10,559,666 18,907,661 Interest expense (115,713,959) (63,500,795) Deferred outflows of resources – costs recoverable 52,509,823 4,893,034 Total nonoperating expenses, net (52,644,470) (39,700,100) Change in net position 510,733 (723,421) Net position: Beginning of period 34,663,690 35,387,111 End of period $ 35,174,423 $ 34,663,690 See accompanying notes. 32
MUNICIPAL GAS AUTHORITY OF GEORGIA Municipal Gas Authority of Georgia Statements of Cash Flows Year Ended December 31 2018 2017 Operating activities Receipts from Members and Customers $ 254,836,674 $ 245,659,057 Payments to suppliers and vendors (156,452,933) (172,258,090) Receipts from derivatives counterparties, net 107,275,572 95,419,338 Payments to Members and Customers (8,919,975) (9,381,103) Payments to employees (9,282,127) (9,326,746) Net cash provided by operating activities 187,457,211 150,112,456 Financing activities Noncapital financing activities: Line of credit receipts 35,150,000 30,000,000 Line of credit payments, net (30,000,000) (20,000,000) Net cash provided by noncapital financing activities 5,150,000 10,000,000 Capital and related financing activities: Capital expenditures and inventory purchases/sales, net – (20,287) Sale of gas reserves and related assets 536,902 4,839,418 Acquisition of prepaid gas supply (2,044,005,085) – Investment in direct financing leases (1,565,974) – Member lease payments 3,701,781 4,022,474 Gas revenue bond payments (23,110,000) (24,110,000) Limited obligation bond proceeds 2,133,142,218 – Limited obligation bond payments (97,481,244) (91,100,303) Interest payments and bond issuance costs (124,684,744) (75,189,914) Net cash used in capital and related financing activities (153,466,146) (181,558,612) Net cash used in financing activities (148,316,146) (171,558,612) Investing activities Investment securities purchases/sales, net (53,929,932) (1,761,529) Investment hedge settlements, net 6,189,421 5,017,923 Interest receipts and other 5,754,360 3,398,877 Repayments from Public Gas Partners, net 12,662,714 14,214,590 Net cash (used in) provided by investing activities (29,323,437) 20,869,861 Net increase (decrease) in cash and cash equivalents 9,817,628 (576,295) Cash and cash equivalents: Beginning of period 87,639,408 88,215,703 End of period $ 97,457,036 $ 87,639,408 Reconciliation of operating income to net cash provided by operating activities Operating income $ 53,155,203 $ 38,976,679 Adjustments to reconcile net cash provided by operating activities: Depreciation, amortization, and accretion 160,868 194,264 Depletion and delivery of gas 139,026,125 110,779,397 Changes in certain assets and liabilities: Accounts receivable (11,355,026) (1,217,660) Gas inventories and other assets 1,749,026 1,741,770 Accounts payable and accrued expenses 4,757,585 879,307 Due to Members (36,570) (1,241,301) Net cash provided by operating activities $ 187,457,211 $ 150,112,456 See accompanying notes. 33
MUNICIPAL GAS AUTHORITY OF GEORGIA Notes to Financial Statements December 31, 2018 1. Summary of Significant Accounting Policies Reporting Entity The Municipal Gas Authority of Georgia (the Gas Authority) is a public corporation created in 1987 by an Act of the General Assembly of the state of Georgia (the Act) to provide reliable and economic gas supplies to municipal gas distribution systems. The Act provides that the Gas Authority will establish rates and charges so as to produce revenues sufficient to cover its costs, including debt service, but it may not operate for profit, unless any such profit inures to the benefit of the public. As of December 31, 2018, 66 Georgia municipalities, 8 Alabama municipalities, 3 Florida municipalities, 1 Tennessee municipality, and 1 Pennsylvania municipality (the Members) have contracted with the Gas Authority for gas supplies for resale to their customers. The Gas Authority also provides gas supplies and related services to 11 other agencies and municipal utilities (Municipal Customers) on a limited basis for the benefit of the Members. Additionally, the Gas Authority provides regulatory compliance services to 36 other entities (Regulatory Compliance Customers, and collectively with the Municipal Customers, the Customers). Pursuant to the provisions of the Act, the Gas Authority and all 79 Members have entered into long-term gas supply contracts (the Gas Supply Contracts), that require Members to take their entire gas supply from the Gas Authority and require the Gas Authority to provide that supply. Members can elect to participate in joint projects undertaken by the Gas Authority and authorize issuance of project debt by entering into a supplemental contract (Supplemental Contract). These Supplemental Contracts authorize the Gas Authority to issue gas revenue bonds and other debt obligations to acquire a portfolio of gas supplies and gas-related assets to fulfill, in whole or in part, its obligation to supply gas to Members. The Portfolio III project was initiated in November 2002 with the execution of amended Gas Supply Contracts and Supplemental Contracts with all Members. Those contracts were amended in 2008 to extend the full requirements gas supply services to Members through at least the date on which all Portfolio III bonds are fully retired and authorize the issuance of up to $1,500,000,000 in debt to secure long-term gas supplies. Through these contracts, the Gas Authority was authorized to issue additional debt through December 31, 2014, with maturities not exceeding 15 years from issuance. The Portfolio IV project was initiated in November 2014 with the execution of Supplemental Contracts. Under the Portfolio IV contracts, the Gas Authority may issue up to $1,100,000,000 in debt through December 31, 2020, increasing to $1,500,000,000 as Portfolio III principal payments are made, with maturities not exceeding 20 years from issuance, to secure long-term gas supplies. 34
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