%ED IN THE MATTER OF THE JOINT SOUTHWESTERN ENERGY COMPANY SOURCEGAS LLC TO ACQUIRE ALL ON BEHALF OF AGREEMENT TIMOTHY 5.

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Jayson Isaac Garrison
5 years ago
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1 BEFORE THE ARKANSAS PUBLIC SERVICE COMMISSION 1 %ED IN THE MATTER OF THE JOINT APPLICATION OF ARKANSAS WESTERN GAS COMPANY, SOUTHWESTERN ENERGY COMPANY AND SOURCEGAS LLC FOR ALL NECESSARY AUTHORIZATIONS AND APPROVALS FOR SOURCEGAS LLC TO ACQUIRE ALL OUTSTANDING COMMON STOCK OF ARKANSAS WESTERN GAS COMPANY FROM SOUTHWESTERN ENERGY COMPANY PURSUANT TO A CERTAIN STOCK SALE AND PURCHASE AGREEMENT STIPULATION TESTIMONY OF TIMOTHY. O'DONNELL ON BEHALF OF SOUTHWESTERN ENERGY COMPANY

2 f Q. A. Q. A. 7 Q. 8 9 A. IO I Q. 19 A. PLEASE STATE YOUR NAME AND BUSMESS ADDRESS. My name is Timothy J. O DOM~I and my business address is I08 Sain Street, Fayetteville, Arkansas 770. BY WHOM ARE YOU EMPLOYED AND IN WHAT CAPACITY? I am empioyed by Southwestern Energy Company ( SW ) as Treasurer and Vice President of Human Resources. PLEASE DESCME YOUR EDUCATIONAL BACKGROUND AND BUSINESS EXPERIENCE. I graduated from the University of Iowa in 1979, receiving a Bachelor of Business Administration degree with a major in Accounting. I was employed in public accounting for six years in Milwaukee, Wisconsin, and Dallas, Texas, and spent an additional six years working in the commercial real estate business in the Dallas area. In 1991, I joined Arkansas Western Gas Company ( AWG ) as Manager, UtiIity Accounting. In 199, I transferred to SWN as an Accounting Manager and have been employed at SWN in a variety of roles since that time and am now the Treasurer and Vice President of Human Resources for the SWN organization. WHAT IS THE PURPOSE OF YOUR TESTIMONY? The purpose of my testimony is to provide support for approvd by the Arkmas PubIic Service Commission ( Commission ) of the Stipulation and Settlement Agreement by and among AWG, SWN, SourceGas LLC ( SourceGas ), the Office of the Arkansas Attorney General C AG ), and the General Staff of the Commission ( Stafl ) rdating to the sale of AWG and 1

3 1 related matters. Q. PLEASE DESCRIBE THE BUSINESS OF SWN. A. SWN is an integrated energy company primarily focused on the exploration for and production of natural gas. It is aiso engaged in the distribution and transmission of natura1 gas through its wholly-owned subsidiary, AWG. The natura1 gas distribution segment of its business accounted for % of its 7 operating income in Q, ARE YOU FAMILIAR WITH THE PROPOSED SALE BY SWN OF THE 9 10 A. 11 Q. I 1 A. 1 I9 Q. A. STOCK OF AWG? Yes, I am. WOULD YOU PLEASE DESCRIBE HOW THAT PROPOSED WSACTION CAME ABOUT? In the latter half of 07, SWN's management was contacted by GE Energy Financial Services ("GEEFS') regarding the potential acquisition of AWG by SourceGas, which is an affiliate of GEEFS and Alinda Investments, Inc. As the result of that contact, and foilowing a series of meetings, detailed due diligence by ali parties, and extensive negotiations, a Stock Sale and Purchase Agreement (IISSPAI') dated as of November 9,07, between SWN and SourceGas was executed. A copy of the SSPA is attached to the Joint Application in this Docket as Joint Application Exhibit 1. WOULD YOU PLEASE DESCRIBE TEE PROPOSED TRANSACTION? The proposed transaction contemplates SWN seliing one hundred percent of the issued and outstanding common stock of AWG to SourceGas. As a result of the

4 1 Q* 7 8 A I Q. 1 A. Q. 1 A. 19 proposed sale, AWG would become a wholly-owned subsidiary of SourceGas. The SSPA contemplated, among other things, that SWN would retain ownership of the AWG ofice building and that AWG's right of first refusal with respect to the Stockton Storage Facility that is owned by another SWN subsidiary would be terminated at the closing, WKL THE PUBLIC UTILITY STATUS OF AWG BE AFFECTED BY THE PROPOSED TRANSACTION? No. Following the transfer of ownership of the AWG common shares from SWN to SourceGas, AWG wiil continue to be a public utility subject to regulatory oversight of the Commission over AWG's rates and tariffs and the terms and conditions of service provided to its customers. DO YOU HAVE AN OPINION WHET"ER AWG'S CUSTOMERS WILL BENEFIT FROM TJE PROPOSED TRANSACTION? Yes. PLEASE STATE YOUR OPINION. As I indicated, it is SWN's understanding that SourceGas will not make any material changes in AWG's business operations, so the proposed transaction should not have an adverse impact on AWG's customers in that regard. In addition, the Stipulation and Settlement Agreement contains requirements for certain payments and concessions on the part of SWN, AWG and SourceGas which the Staff determined to be necessq in order to provide definitive benefits to AWG's customers. For example, SWN is required to make certain payments in consideration for SWN retaining ownership of the AWG ofice building, the

5 I Q. 10 A Q. 1 A. termination of AWG's right of first refusal for the Stockton Storage Facility seven years foliowing the dosing of the stock sale, and the resolution of an issue raised in a recentiy completed gas cost compliance audit, The StipuIation and Settlement Agreement provides that these payments wili be refunded to ratepayers. The Stipulation and Settlement Agreement aiso contains other provisions relating to SourceGas and AWG once owned by SourceGas which address future ratemaking and provide additional ratepayer protections. AI1 of these provisions provide benefits to AWG's ratepayers. WHAT ACTION OF TKE COMMISSION IS SWN REQUESTING? SWN is requesting the Commission expeditiously approve the Stipulation and Settlement Agreement and enter its Order accordingiy. DOES THIS CONCLUDE YOUR TESTIMONY? Yes. 1 19

BEFORE THE ARKANSAS PUBLIC SERVICE COMMISSION

BEFORE THE ARKANSAS PUBLIC SERVICE COMMISSION IN THE MATTER OF THE APPLICATION ) OF SOURCEGAS ARKANSAS INC. FOR ) DOCKET NO. -0-U APPROVAL OF A GENERAL CHANGE ) IN RATES AND TARIFFS ) REBUTTAL TESTIMONY