Expanding Horizons - Municipal Gas Authority of Georgia
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Expanding
Horizons
Municipal Gas Authority of Georgia
Annual Report 2018
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.
9MUNICIPAL 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.
11MUNICIPAL 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
13MUNICIPAL 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
14MUNICIPAL 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
15MUNICIPAL 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
16MUNICIPAL 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.
17MUNICIPAL 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.
19MUNICIPAL 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.
20MUNICIPAL 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.
21MUNICIPAL 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.
22MUNICIPAL 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.
23MUNICIPAL 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
24MUNICIPAL 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.
25MUNICIPAL 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
26MUNICIPAL 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.
27MUNICIPAL 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.
28MUNICIPAL 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.
29MUNICIPAL 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.
30MUNICIPAL 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
31MUNICIPAL 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.
32MUNICIPAL 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.
33MUNICIPAL 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.
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