News and Media Releases

Gas Prepay Successful

29/12/2007

Kentucky Gas Agency Succeeds in Completing Gas Prepay

Carrollton, Kentucky – Public Energy Authority of Kentucky Inc. (PEAK) and Société Générale Energie (USA) Corp. (SGE), a subsidiary of Société Générale Corporate & Investment Banking, on December 21, 2007 executed a 20-year prepaid natural gas contract worth $456,095,000. Under the terms of the contract PEAK made the prepayment to SGE, which will deliver a firm supply of 88.6 Bcf of natural gas to PEAK. PEAK will use the supply to serve the base load gas requirements of its municipal members and participants in Kentucky, South Carolina, New Mexico and Alabama. PEAK financed the prepayment with the proceeds of revenue bonds underwritten by Banc of America Securities LLC (BAS).

Simultaneously with the closing of the prepayment transaction, SGE entered into a 20-year gas supply agreement with Coral Energy Resources, L.P., a subsidiary of Shell Energy North America (US), L.P. (Shell Energy North America) under which this subsidiary will supply SGE with the natural gas required for this transaction.

PEAK is a municipal joint action agency organized by the Cities of Carrollton and Henderson, Kentucky. It serves as the agent and instrumentality of its members to develop, acquire, finance and promote secure, reliable and economic sources and supplies of natural gas. The transaction is PEAK’s third natural gas prepayment following a $1,030,769,000 prepayment in 2006 and a $199,790,000 prepayment in 1998. PEAK President and General Manager, Gerald Ballinger, explained the importance of securing long-term reliable natural gas supplies to meet the requirements of municipal gas systems in the current energy environment.

"With the continued volatility in the natural gas market, this supply continues our efforts to build a diversified natural gas portfolio for the municipalities we serve," said Ballinger. "We believe that prepays result in a desirable balance of long-term reliability and economically priced gas supplies for our members and participants and, ultimately, the retail customers they serve."

The PEAK transaction is the first municipal natural gas prepayment that has closed since early October when the subprime turmoil in the financial markets caused the delay of other prepayment transactions. PEAK was able to execute the prepayment utilizing the variable rate bond structure -- first developed by BAS in 2003 and also utilized by PEAK in its 2006 transaction and again in this 2007 transaction -- which is largely unaffected by the current financial market dislocation.  PEAK anticipates concluding a series of prepays in 2008 with the first of these closing in the first quarter.

This is the third 20-year physical natural gas prepayment executed by Société Générale Corporate & Investment Banking during 2007 where the firm combined its physical natural gas trading capabilities with its municipal derivatives, financial products capabilities and client management expertise. In total, Société Générale Corporate & Investment Banking entered into natural gas prepayment transactions with a value of $1,745,790,000.

Société Générale is one of the largest financial services groups in the euro-zone and has a strong and long-lasting presence in North America.  Société Générale Corporate & Investment Banking ranks among the leading banks worldwide in euro capital markets, derivatives and structured finance. Société Générale Corporate & Investment Banking is a worldwide leader in export, project and structured commodity finance with global expertise in energy, infrastructure, real estate and media and telecom finance. Tailoring solutions in terms of capital raising, financing, risk management and investment, Société Générale Corporate & Investment Banking combines expertise, innovation and advisory skills coupled with quality of execution to both issuer and investor clients across the debt and equity markets.

The contract executed by the Shell Energy North America subsidiary marks its entry into the municipal natural gas prepayment market. “We are pleased to have played a key role in helping realize this agreement for the municipal members and their customers,” said Mark Quartermain, senior vice president, Shell Energy North America. “Our ability to provide a tailored energy supply solution is a testament of our experience and commitment to our customers.”

Headquartered in Houston with regional offices throughout the U.S. and Canada, Shell Energy North America (US), L.P. and its subsidiaries are wholly owned by Royal Dutch Shell plc (Shell) and operate throughout North America as an integral part of the global Shell Trading network. A leader in North American gas and power marketing, the company and its subsidiaries trade and market natural gas, wholesale power and risk management products with counterparties and customers throughout the region.

As a part of Shell, Shell Energy North America leverages Shell’s resources, global reach, employee expertise and financial strength to offer integrated and tailored solutions to a variety of customers, including large commercial and industrial users, local gas distribution companies, electric utilities, independent power producers, energy aggregators, and oil and gas producers.

Banc of America Securities is a leading underwriter of structured natural gas prepayments having completed 10 transactions with a total par of $7.38 billion.  In 2007 Banc of America Securities completed 3 gas prepayments with a total par value of $1.75 billion in a total market of 13 transactions of $9.15 billion.

For Media Inquiries, contact:

PEAK Media Contact:  Gerald L. Ballinger (502-732-0991)

SGE Media Contact:  Jim Galvin (212-278-7131)

Shell Media Line (713-241-4544)

BAS Media Contact: John E. Norman (720-932-1382)