The GTN System shall not be required to perform or to continue to provide service on behalf of any Shipper who has become insolvent or who, at GTN System request, fails within a reasonable period to demonstrate creditworthiness. GTN System creditworthiness standards are specific to each service type and are described below. Credit limits will be established based on the level of requested service and Shipper creditworthiness.

Firm Transportation Service:

Creditworthiness for firm service may be evidenced by an unenhanced rating for senior unsecured debt of at least BBB or Baa2 from Standard & Poor's or Moody's, respectively , or an equivalent rating as determined by GTN. Shipper may also choose to provide GTN a Guarantee in a form acceptable to GTN from a company that meets these creditworthiness standards. Guarantees must be sufficient to cover the present value of the shipper's contractual obligations.

Shippers who do not meet the standard may provide credit support through the following alternative methods:

• Provide a Standby Letter of Credit (L/C) . Shipper may provide an L/C in a form and from a bank acceptable to GTN in an amount that satisfies the collateral requirement for the services desired. The term of the L/C must be dated at least 60 days past the termination date of Shipper's longest dated contract, or have an automatic renewal of one year, with a ninety (90) day non-renewal notification period.
• Provide a cash security deposit for service via cleared check of wire transfer..

The amount of Letter of Credit prepayment or cash security deposit required to secure a firm contract will depend on whether the capacity is Existing Capacity or Expansion Capacity, as follows:

• Security for Existing Capacity is limited to three (3) months of applicable transportation charges.
• Security required for Expansion Capacity may be up to the shipper's pro-rata share of the cost of the specific expansion project.
• Existing Capacity shall mean capacity that has been in-service beyond the initial terms of Agreements that originally supported the construction of such capacity.   Existing Capacity additionally includes capacity that is still within such initial terms where Shipper Agreements pertaining to the capacity have been terminated by the pipeline.   Existing Capacity additionally includes unsubscribed capacity created as part of a pipeline expansion project.
• Expansion Capacity shall mean capacity that is added to the pipeline system as part of a system expansion project where such capacity is still within the initial contract term(s) of the Agreement(s) that originally supported the construction of such capacity.   Expansion Capacity includes permanent releases of capacity that are within the initial term of an original Shipper's contract.

Capacity Release:

Capacity release contracts have the same credit standards and collateral requirements as Firm Transportation Service. Security requirements applicable to temporary releases of Existing and Expansion Capacity will mirror the security requirements of the releasing shipper.

 

Permanent capacity holders of firm transportation service will always remain liable for credit support, even if they have temporarily released the capacity.

In a capacity release, a creditworthy Releasing Shipper may choose to waive credit for the Replacement Shipper. If this occurs GTN will not require credit support from the Replacement Shipper.

These requirements are consistent for both long-term (greater than 365 days), and short-term capacity releases.

Interruptible Transportation, Authorized Imbalance, and Parking Service:

Creditworthiness for interruptible transportation ("IT"), Authorized Imbalance ("AIS") and Parking Service ("PS") may be established by providing GTN proof of at least two of the following:

1. A long term bond rating from Standard & Poors of BB+, Moody's equivalent to a "Ba1" or better, or a commercial paper rating from Standard & Poors or Moody's equivalent to Prime-3 or better. Shipper may also provide a G uarantee acceptable to GTN from a company that meets these same creditworthiness standards.
2. Audited financial statements for the two preceding years showing good financial strength.
3. An estimated financial strength rating by Dunn & Bradstreet sufficient to cover the credit to be extended, and a corresponding Dunn & Bradstreet composite rating of "fair" or better.
4. A demonstration by the Shipper that the company has sufficient financial capacity or backing to warrant an extension of credit. This demonstration could include a proof of banking relationships sufficient to cover the service agreement, or a detailed listing of credit references within the industry, exhibiting a good credit history.

Shippers who do not qualify on this basis may obtain service through the following alternative methods:

• Standby Letter of Credit up to the maximum amount of the services that may be provided in any three-month period under an interruptible agreement.
• A prepayment in an amount defined by Shipper.
• A cash security deposit up to the maximum amount of the services that may be provided in any given three-monh period under an interruptible agreement.
• Flexible Credit Account allows a shipper to provide any of the above types of collateral in an amount sufficient to cover shipper's forecasted usage. Once Shipper has taken service up to the point where the security provided is insufficient to cover the maximum amount of service that may be provided in one day, Shipper will not be entitled to receive further interruptible service until Shipper 1) pays all or a portion of the amounts due for interruptible service or 2) Shipper provides GTN with additional security

The collateral requirement for Authorized Imbalance (Lending) Service include an amount to adequately account for the value of the gas being lent. The amount of security necessary to collateralize lent gas wil be up to Shipper's maximum quantity times the average annual "Malin" price as reported in Gas Daily's Daiuly Price Survey for the preceding calendar year ending October 31.

For additional information, please contact Ken Nichols at (503) 833-4300, option 3.