Algonquin Gas Transmission, LLC
Fifth Revised Volume No. 1
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Effective Date: 03/01/2009, Docket: RP07-139-006, Status: Effective
Original Sheet No. 513A Original Sheet No. 513A
GENERAL TERMS AND CONDITIONS
(continued)
2. REQUEST FOR TRANSPORTATION SERVICE (continued)
existing unsubscribed capacity and shall not be applied to any bidders that have a
credit rating at or above those credit ratings listed in Section 2.5(e)(1) below,
or whose parent company or guarantor has such a credit rating, provided that such
parent company or guarantor has provided a guarantee for all of the obligations
under the specific service agreement at issue pursuant to Section 2.5(e)(3)(a).
The application of the Risk of Default Factor is governed by the following:
(1) A bidder with a credit rating below (a) an S&P rating of BBB-, (b) a Moody's
rating of Baa3, (c) a Fitch rating of BBB-, or (d) a Dominion Bond Rating
Service rating of BBB (Low), and who does not have a parent company or
guarantor with a credit rating at or above those credit ratings just listed,
provided that such parent company or guarantor provides a guarantee for all
of the obligations under the specific service agreement at issue pursuant to
Section 2.5(e)(3)(a), shall have a probability of default of zero for bidding
purposes if such bidder indicates on its bid form that it will post
sufficient collateral to equal the difference between (i) the net present
value of the revenue in the bid, adjusted by the bidder's Risk Default Factor
(assuming that it would be applied), and (ii) the net present value of a bid
from a bidder with a minimum rating(s) equal to the above rating(s) herein
with the same term, and such bidder does subsequently post such collateral as
specified in Section 2.5(e)(7). For these bid evaluation purposes,
collateral is defined as a letter of credit from a financial institution with
at least an A- rating, or a cash deposit. Collateral will be capped, for
purposes of the bid evaluation, at 50% of the revenue for the term included
in the bidder's bid.
(2) For a bidder described in Section 2.5(e)(1) that does not indicate on its bid
form that it will post such collateral, Algonquin will adjust the bid by
applying the Risk of Default Factor derived from the S&P Table, as set forth
in Section 2.5(e). Although a bidder under this Section 2.5(e)(2) is not
posting sufficient collateral to satisfy the requirement set forth in Section
2.5(e)(1)above, such a bidder nevertheless may increase the net present value
of its bid by posting some collateral but less than the amount described
above in Section 2.5(e)(1) which must be in a form allowed under Section
2.5(e)(1) contemporaneously with submitting its bid in the open season,
provided that such bidder cannot increase the net present value of the bid to
greater than the net present value of the same bid if the bidder had posted
the collateral as described in Section 2.5(e)(1).
(3) The following rules will apply to ratings for purposes of evaluating multiple
bids as part of the NPV bid evaluation process:
(a) Substitute Ratings. Algonquin will substitute the credit rating of a
bidder's guarantor, or parent company, whichever is higher, provided
that such guarantor or parent company has provided a guarantee for all
of the obligations under the specific service agreement at issue and
satisfies the requirements of Section 3.2(d).
(b) Equivalent Ratings. For any bidder that does not have, or whose parent
company or guarantor does not have, a credit rating from one or more of
the credit rating agencies noted above, Algonquin will assign an
equivalent rating using a credit scoring methodology, applied on a non-
discriminatory basis, provided such parent company or guarantor has
provided a guarantee for all of the obligations under the specific
service agreement at issue.
(4) Releasing shippers who propose to release capacity for a term of more than
one year will have the option of specifying, pursuant to the capacity release
procedures in Section 14.4, that the same NPV and Risk of Default processes
as set forth herein will be used by Algonquin when evaluating bids by
replacement customers for such released capacity. If a releasing shipper
makes such an election, Algonquin will follow the time line for non-standard
capacity release bid evaluation.