FAIRBANKS — The Alaska Gasline Port Authority and its partners say a plan to expand natural gas supplies should be ready for financing this spring and could be delivering gas before 2013.
The publicly controlled authority plans to buy privately held Fairbanks Natural Gas, the community’s only natural gas distributor, and expand its supply operation to the North Slope, the Fairbanks Daily News-Miner reported.
The plan calls for selling bonds to raise the roughly $250 million needed.
But the deal’s biggest potential customer, Golden Valley Electric Association, says it will wait for independent analysis before supporting the plan.
For other customers, the deal could trim retail natural gas prices to just under $14 per thousand cubic feet — a reduction of 40 percent, a contractor on the project said.
Project organizers said if significantly more customers sign up, the price could fall to between $10 and $11. Retail natural gas prices in Fairbanks stand above $23.
The organizers also told the Daily News-Miner that criticism that the port authority could overpay for Fairbanks Natural Gas is misguided.
They said the firm’s physical assets are worth roughly half the sale price, and the balance represents access to the firm’s supply contract with Exxon Mobil for North Slope gas and the rights to a 17-acre Deadhorse property lease. They said those assets will save significant preparatory work and thus represent real value.
Doug Smith, a consultant leading the project for Fairbanks Natural Gas, suggested tentative cost estimates are well below those from a “gold-plated” bid submitted by a separate contractor no longer affiliated with the project.
That bid led the port authority and FNG to assume greater direct responsibility for the project, and Smith said the decision shaved tens of millions of dollars from the estimated cost. He said other changes, such as a decision to shrink storage on the North Slope, further lowered the figure.
Smith said the final cost estimate is due within weeks. He said he’s collecting letters of intent from separate subcontractors, which when complete will position Fairbanks Natural Gas and the port authority to submit the plan to their financial partner and underwriter, Citigroup, in hopes of striking a financial deal before May.
Jim Whitaker, chairman of the port authority, said he expects the port authority can borrow at a 7 percent interest rate for the project.
He said that’s 2 or 3 percentage points higher than might have achieved through partnership with the Alaska Industrial Development and Export Authority, the state agency that declined two years ago to finance the project.
But Whitaker and borough Mayor Luke Hopkins said Monday the deal could still represent Fairbanks’ best shot at addressing high energy costs in the next decade or more.