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Date: May17,2017

From: CynthiaRowley,DirectorPropertyTaxDivision
Subject:CapitalizationRateStudy

ThePropertyTaxDivisionoftheMinnesotaDepartmentofRevenueisresponsiblefortheassessmentof
utility,pipeline,andrailroadoperatingproperty.WecompleteaCapitalizationRateStudyeachyear.The
ratesdevelopedinthestudyareusedaspartofthevaluationsoftheseproperties.

Wewelcomedpartnersfromutility,pipelineandrailroadcompaniestothedepartmentsSpringForumon
March8,2017.TheysharedindustryspecificinsightattheForum.

WepostedtheinitialCapitalizationRateStudyonApril20,2017andwelcomedcommentsuntilApril28,
2017.Weappreciatedthecommentswereceived.Thecommentswerethoughtfulandprovideduswith
additional ideas for the Study. We apologize for the brief comment period. We remain committed to
providingasmuchtimeforcommentsaspossible,butweneedtobeawareofourstatutorydeadlines.

WerevisedtheStudyafterwereviewedyourcomments.

WhocanIcontactwithquestions?
HollySoderbeck,StateAssessedPropertySection,PropertyTaxDivision
6515566119,sa.property@state.mn.us

Sincerely,


CynthiaRowley,Director
PropertyTaxDivision

600N.RobertSt.,St.Paul,MN55146 Anequalopportunityemployer
www.revenue.state.mn.us Thismaterialisavailableinalternateformats.

2017CapitalizationRateStudy,Revised
AssessmentYear2017
PropertyTaxDivision
MinnesotaDepartmentofRevenue
RevisedMay17,2017

Page | 1 Introduction
TableofContents
Introduction .............................................................................................................................................4
Yield Capitalization Rate.........................................................................................................................5
Guideline Companies 6
Market Rate of Equity 6
Capital Asset Pricing Model (CAPM) 6
Empirical Capital Asset Pricing Model 8
Build-Up Model 8
Dividend Growth Model (DGM) 9
Multi-Stage Dividend Growth Model (Multi-Stage DGM) 11
Market Rate of Debt 11
Market Rate of Preferred Stock 12
Direct Capitalization Rate ..................................................................................................................... 12
Guideline Companies 12
Equity Component 13
Debt Component 13
Flotation Costs....................................................................................................................................... 13
Company-Specific Risk ......................................................................................................................... 14
Illiquidity ............................................................................................................................................... 15
Growth ................................................................................................................................................... 15
Short-Term Growth Rate 15
Long-Term Growth Rate 16
Inflation 17
Market-to-Book Ratios .......................................................................................................................... 18
State Assessed Property Spring Forum ................................................................................................. 18
Revision Comments .............................................................................................................................. 19
Cost of Debt 19
Cost of Equity 19
Illiquidity 21
Flotation Costs 21
Value Line Investment Survey Report Dates 22
Studies Completed by Others 22
Direct Capitalization Rates 22
Questions? ............................................................................................................................................. 22
Appendix A Electric ............................................................................................................................. A-1
Appendix B Gas Distribution ............................................................................................................... B-1
Appendix C Gas Transmission Pipeline .............................................................................................. C-1
Appendix D Fluid Transportation Pipeline .......................................................................................... D-1

Page | 2 Introduction
Appendix E Class I Railroads and Other Railroads ..............................................................................E-1
Appendix F Ex Ante Calculation .......................................................................................................... F-1
Appendix G Guideline Company Addendum ...................................................................................... G-1
Appendix H Comparison of Studies ..................................................................................................... H-1

Page | 3 Introduction
Introduction
The Minnesota Department of Revenue is responsible for the assessment of utility, pipeline, and railroad
operating property. The department considers these market segments State Assessed Property. The
department completes this study to determine unitary valuations of State Assessed Property in Minnesota.

The departments Property Tax Division assesses these properties, in part, using the income approach to
valuation. The income capitalization approach measures the present value of the anticipated future
benefits of property ownership. There are two methods of income capitalization: direct and yield
capitalization.1
Yield capitalization calculates the net present value of the anticipated future income by
discounting cash flows using the yield rate.
Direct capitalization converts an estimate of a single years net operating income expectancy into
an indication of value for the subject property. This conversion is based on the market-observed
relationship between an income level and market value.

Under the income approach, yield capitalization rates are used in yield capitalization models and direct
capitalization rates are used in direct capitalization models. The table below summarizes the rates derived
from this study, by market segment.

MarketSegments Yield Direct Implied ShortTerm LongTerm Implied


Capitalization Capitalization Growth Growth Growth Inflation
Rate Rate Rate2 Rate3 Rate4 Rate5
Electric 7.13% 5.20% 1.93% 5.38% 2.60% 1.57%
GasDistribution 6.81% 4.70% 2.11% 5.25% 2.60% 1.57%
GasTransmission 8.96% 7.11% 1.85% 7.74% 2.60% 1.57%
Pipeline
FluidTransportation 10.08% 7.21% 2.87% 8.97% 2.60% 1.57%
Pipeline
ClassIRailroads 9.16% 5.38% 3.78% 8.75% 2.60% 1.57%
OtherRailroads 9.78% 6.00% 3.78% 6.50% 2.60% 1.57%

The band of investment method is used for both the yield capitalization and direct capitalization rates.
This method calculates the combined rate of the debt and equity components using the capital structure
indicated by the market. The table below shows an example of the band of investment method:

CapitalStructure MarketRate = WeightedRate


Debt 50% 6% = 3%
Equity 50% 10% = 5%
CombinedRate = 8%

1 Appraisal Institute (2013). The Appraisal of Real Estate, 14th Edition, Page 46
2 This is the difference between the yield capitalization rate and the direct capitalization rate for each market segment.
3 Mean five-year growth rates from Yahoo! Finance for Gas Transmission Pipeline and Fluid Transportation Pipeline. Mean
growth rates from five year projected earnings growth Value Line Investment for Electric, Gas Distribution, Class I Railroads,
and Other Railroads.
4 This is the estimated long-term growth rate of the United States Economy, explained in further detail in the Growth section of
this narrative.
5 See the Inflation Section

Page | 4 Introduction
YieldCapitalizationRate
The yield capitalization model is based on the premise that the value of a property is equivalent to the
present value of all future benefits.6 Yield capitalization calculates the present value of the anticipated
future income by discounting cash flows using the yield rate (Y0).

The present value of future benefits as of the assessment date is what the current owner would be giving
up by selling the property and what the new owner would be
receiving by purchasing the property. KeyVariablesusedinequations

Discounted Cash Flows is the most sophisticated form of Y0 YieldRateforCurrentAssessment


yield capitalization and is used when explicit forecasts of net Period
cash flows (NCF) are available and when these forecasts NCF NetCashFlows
show that the rate of change in the cash flows is not constant.
Net cash flows are equal to net operating income (NOI) plus NCF1 NetCashFlowsforNextPeriod
non-cash expenses minus capital expenditures minus change nthPeriod
n
in working capital. Net operating income is an after-tax
accounting income prior to any deductions for interest or g Expectedlongtermgrowthratein
dividends. Net operating income includes an expense for netcashflows
actual income taxes paid or imputed income taxes paid if the NOI NetOperatingIncome
company does not pay income taxes at the operating level.

Value = NCF1 / (1+Y0)1 + NCF2 / (1+Y0)2 + NCF3 / (1+Y0)3 + + NCFn / (1+Y0)n

Because explicit forecasts of cash flows are generally not made into perpetuity, after the period of explicit
forecasts the assumption is made that the growth rate will become stable and a long-term growth rate (g)
is applied to the cash flows into perpetuity. This step is called the reversion. The formula below shows
three periods of explicit forecasts followed by the reversion.

Value = NCF1 / (1+Y0)1 + NCF2 / (1+Y0)2 + NCF3 / (1+Y0)3 + ((NCF3 * (1+g)/ (Y0-g)) / (1+Y0)3)

Stable Growth Yield Capitalization is used when explicit forecasts of net cash flows are not available or
when the forecasted growth in net cash flows is stable. This model is simplified, but is mathematically
identical to the Discounted Cash Flows model when the forecasted growth rate (g) is constant.

Value = NCF1 / (Y0 g) 1

A version of this model that assumes that the constant growth rate is 0%, which means that the income
with remain the same over time is called a Zero Percent Stable Growth Yield Capitalization Model.

Value = NCF1 / (Y0 0%)1

If the further assumption is made that the net cash flows will be equal to the net operating income
which means that depreciation will be equal to capital expenditures over time the formula becomes:

Value = NOI1 / (Y0 0%)1

This model assumes 0% growth into perpetuity.

6Western States Association of Tax Administrators, (2009). Appraisal Handbook Unit Valuation of Centrally Assessed
Properties, Page III-13
Page | 5 Yield Capitalization Rate
GuidelineCompanies
The department reviews the Standard Industrial Classification Code and market segments listed by Value
Line Investment Survey when selecting guideline companies. The department began with the Value Line
Investment Survey industry because Value Line is a well-respected, widely used publication. Value Line
classifies equities into 100 unique industries and groupings. Value Line creates their industries in-house
and every company is constantly evaluated to make sure that they are located in the proper sector.7

The department may not have included companies that underwent a merger or acquisition in the previous
calendar year or companies that have announced an upcoming merger or acquisition during the current
calendar year.

The department reviewed possible guideline companies for comparability in their market segments to the
companies doing business in Minnesota. See the Guideline Company Selection beginning on page G-1 for
details on the companies reviewed for each market segment.

MarketRateofEquity
The department used the Capital Asset Pricing Model (CAPM) and the Dividend Growth Model (DGM)
to determine the market rate of equity for each market segment. The Build-Up Model was also
considered. The market rate of equity for each market segment was selected after considering five
different CAPMs and two different DGMs. The models allowed the department to establish a range of
acceptability. The department arrived at the indicated rate of equity by placing the most reliance on the
Dividend Growth Model, using earnings growth, and secondary reliance on Dr. Aswath Damodarans
forward-looking model and the Ex Post model. The department explains these models in more detail
below.

CapitalAssetPricingModel(CAPM)
The CAPM is based on the theory that all investors will independently optimize their portfolios. The
expected return on an asset is related to its risk. The department uses this model to determine the market
rate of equity. The department used the U.S. Treasury 20-year coupon bond yield as of December 30,
2016, as the risk-free rate in the CAPM. It also uses a market specific beta that is calculated using data
from the Value Line Investment Survey.

Risk Free Rate


The risk-free rate reflects the actual market conditions as of the assessment date of January 2, 2017.
According to Ben Bernanke, Low interest rates are not a short-term aberration, but part of a long-term
trend. He continued that the Federal Reserve is keeping the interest rates low, only in a very narrow
sense, and stated, The Feds [Federal Reserve] ability to affect real rates of return, especially longer-term
real rates, is transitory and limited.8

Damodaran also spoke on the subject, stating, There is only one rate that the Federal Reserve sets, and it
is the Fed Funds rate. It is the rate at which banks trade funds, that they hold at the Federal Reserve, with
each other. He goes on to say, interest rates in the U.S. (and Europe) have been low because inflation
has been non-existent and real growth has been anemic.9

7 Severo Nieves, (9 March 2016). Value Line Institutional Services, Institutional Sales & Marketing, Analyst, email
8 Bernanke, Ben. (30 March 2015). Why are interest rates so low? Retrieved from http://www.brookings.edu/blogs/ben-
bernanke/posts/2015/03/30-why-interest-rates-so-low.
9 Damodaran, Aswath, Dr. (4 September 2015). The Fed, interest rates, and stock prices: fighting the fear factor. Retrieved
from http://aswathdamodaran.blogspot.com/2015/09/the-fed-interest-rates-and-stock-prices.html.

Page | 6 Capital Asset Pricing Model


As provided by Damodaran, In the long term, the real riskless rate will converge on the real growth rate
of the economy and the nominal riskless rate will approach the nominal growth rate of the economy. A
simple rule of thumb on the stable growth rate is that it should not exceed the riskless rate used in the
valuation10.

Beta
The beta selected for each market segment indicates the market segments risk relative to the market. The
effects of unlevering and relevering guideline companies betas for the selected capital structure for each
market segment were analyzed. The income tax liability data was not reliable for Gas Transmission
Pipeline or Fluid Transportation Pipeline companies because the companies are limited partnerships and
most or all of the income tax liability is passed-through to the shareholders.

See each market segments Beta Analysis page in the appendices for more information on how the
department arrived at the indicated beta.

Equity Risk Premium


The equity risk premium, as defined by Shannon Pratt and Roger Grabowski, is the extra return over the
expected yield on risk-free securities that investors expect to receive from an investment in a diversified
portfolio of common stocks.11 Bradford Cornell has a similar definition for the equity risk premium,
noting it is the difference between the return on common stock and the return on government securities.12

As provided by Damodaran, Broadly speaking, there are two ways of estimating equity risk premiums,
with the first being a historical premium estimated by looking at the difference between past returns on
stocks and the risk free investment and the second being a forward looking estimate, where you back out
from stock prices what investors are building in as an expected return on stocks in the future.13

The department reviewed five different calculations of the equity risk premium:

Ex Post, long-term expected equity risk premium from Duff & Phelps Annual Valuation
Handbook: Guide to Cost of Capital

Supply Side, long-term expected equity returns forecasted by the use of supply side models from
Duff & Phelps Annual Valuation Handbook: Guide to Cost of Capital

Ex Ante, forward looking model using a three-stage dividend growth model of the Standard &
Poors 500

Damodaran, forward looking equity risk premium as calculated by Dr. Aswath Damodaran,
Professor of Finance at the Stern School of Business at New York University

Duff & Phelps, recommended equity risk premium (conditional). The Duff & Phelps
recommended equity risk premium was developed in relation to (and should be used in
conjunction with) a 3.50% normalized risk-free rate.14

10 Damodaran, A. Chapter 2, Intrinsic Valuation, Page 32, Retrieved from


http://people.stern.nyu.edu/adamodar/pdfiles/DSV2/Ch2.pdf
th
11 Pratt, Shannon and Grabowski, Roger, (2010). Cost of Capital Applications and Examples, 4 Ed., Pages 115-116
12 Cornell, Bradford, (1999). The Equity Risk Premium, Page 18
13 Damodaran, Aswath, Dr. (April 2016). The Cost of Capital: The Swiss Army Knife of Finance, Page 11. Retrieved from
http://people.stern.nyu.edu/adamodar/pdfiles/papers/costofcapital.pdf
14 2016 Valuation Handbook Guide to Cost of Capital

Page | 7 Capital Asset Pricing Model


The equity risk premium (RPe) is multiplied by the market segment
specific beta (). The product is then added to the risk-free rate (Rf) KeyVariablesusedinequations
to estimate the market rate of equity for the market segment.
RPe Equityriskpremium
Market Rate of Equity for Market Segment = (RPe x ) + Rf Rf Riskfreerate

Historical risk premiums have high standard errors and they assume Beta
that U.S. equity markets will revert to what they have historically
delivered as returns. Yet, the difference between annual returns on investments of stocks and the 10-year
Treasury Bond as provided by Damodaran have changed significantly over time, as shown in the below
chart15:

TimePeriod Stocksminus10year
TreasuryBond
19282016 6.24%
19672016 4.37%
20072016 3.62%

EmpiricalCapitalAssetPricingModel
The Empirical Capital Asset Pricing Model (ECAPM) is modified from the above CAPM Model. The
ECAPM applies 25% weight to the equity risk premium component and 75% weight to the beta times the
equity risk premium component. This reduces the sensitivity of the cost of equity estimate.

According to Steven Kihm, Andrew Satchwell, and Peter Cappers, the model mutes the sensitivity of the
cost of equity estimate to changes in the beta coefficient, consistent with the adjustment suggested by the
empirical research.16

The equity risk premium (RPe) is multiplied by the market segment-specific beta () and 75%. The
product is then added to the equity risk premium (RPe) multiplied by 25%. The two products and the risk
free rate are added tighter to estimate the market rate of equity for the market segment.

Market Rate of Equity for Market Segment = (RPe x x 75%) + (RPe x 25%) + Rf

We completed five ECAPM models for each market segment, using the equity risk premiums described in
the Capital Asset Pricing Model section above.

BuildUpModel
The Build-Up Model is another model used to estimate the market rate of equity. Some view this as a
version of the Capital Asset Pricing Model without specifically incorporating systematic risk.17 A
fundamental assumption of the CAPM is that the risk premium portion of a securitys expected return is a
function of that securitys systematic risk.18

15 Damodaran, A. January 2017 Data Update 2: The Resilience of US Equities. January 13, 2017.
http://aswathdamodaran.blogspot.in/2017/01/january-2017-data-update-2-resilience.html
16 Kihm, Steven; Satchwell, Andrew; and Cappers, Peter. The Financial Impacts of Declining Investment Opportunities on
Electric Utility Shareholders, Electricity Markets & Policy Group, Technical Brief, Page 20
th
17 Pratt, Shannon and Grabowski, Roger, Cost of Capital Applications and Examples, 4 Ed., Page 102 (2010)
18 Ibid, p. 105

Page | 8 Capital Asset Pricing Model


An investor can diversify their portfolio to remove unsystematic risk (market segment-specific risk).
Systematic risk (market risk) is the risk related to an
investment return that cannot be eliminated through KeyVariablesusedinequations
diversification.19
RPe Equityriskpremium
In the Build-Up Model, the market rate of equity for the Rf Riskfreerate
market segment is equal to the risk free rate plus the equity
risk premium plus the risk specific to the market segment for Marketsegmentspecificrisk
unsystematic risk. RP U premium(unsystematic)

Market rate of equity for Market Segment = Rf + RPe + RPu

The Build-Up Model can be used when the inputs are not available to complete CAPM. The department
was able to complete the CAPM for each market segment and did not need to resort to the Build-Up
Model.

DividendGrowthModel(DGM)
The department also uses the DGM to determine the market rate of equity. It is based on the theory that
the prices paid for a share of stock reflect the investors discounted present value of future expected
earnings.20 The DGM is a widely used method and is also called the Discounted Cash Flows Model or
Gordon Growth Model. The formula for this model is the same as the simplified Discounted Cash Flows
Income Model explained above, referred to as Stable Growth Yield Capitalization, using a stable growth
rate. Estimating the sustainable growth rate is explored below in this section and the Growth section.

Theoretically, the growth estimate in the DGM is the estimated growth in dividends, which are cash flows
to equity shareholders after reinvestment. Dividend growth estimates may track earnings growth
estimates. However, companies may change dividend payment policies drastically, resulting in large
differences between earnings growth estimates and dividend growth estimates.

A consensus based on substantial academic literature indicates analysts forecasts of earnings take account
of all the information provided by more formulaic forecasting rules and incorporate other information as
well. Based on these findings, the most common solution is to assume that the dividend payout rate remains
effectively constant and to use analyst forecasts of earnings growth as a proxy for the growth rate of
dividends.21

Another issue that leads the department to question the usefulness and reliability of the dividend growth
rate in this model is the trend for U.S. companies to include stock buybacks in their dividend payment
policies. This is discussed in detail in the Stock Buybacks section.

The formula uses Dividend Yield (DY), which is next years expected dividends per share divided by the
current market price per share of stock, plus an estimate of growth. Both dividend and earnings growth
models were reviewed.

th
19 Keown, Arthur; Martin, John; and Petty, J., Foundations of Finance: The Logic and Practice of Financial Management, 8
Ed., (2014). Page 195
20 Western States Association of Tax Administrators (2009)., Appraisal Handbook Unit Valuation of Centrally Assessed
Properties, Page III-20
21 Cornell, Bradford, (1999). The Equity Risk Premium, Page 105

Page | 9 Dividend Growth Model


Dividend Growth (DG), analysts estimates of dividend growth is KeyVariablesusedinequations
used in the model:
DY DividendYield
Market Rate of Equity for Market Segment = DY + DG
DG DividendGrowth
Earnings Growth (EG), analysts estimates of earnings growth EG EarningsGrowth
is used in the model:

Market Rate of Equity for Market Segment = DY + EG

Another formulaic expression of the Dividend Growth


KeyVariablesusedinequations
Model is:
KE CostofEquity
KE = D1 / P0 + G1
D1 ExpectedDividends
In this expression, the Cost of Equity is estimated by taking P0 RecentStockPrice
the Dividend Yield (Expected Dividends in the next period
divided by the Recent Stock Price) plus expected growth. G1 Proj.5yearGrowthRate
This model is the same model as the simplified Discounted Y0 YieldRateforCurrentAssessment
Cash Flows Income Model that the department referred to Period
as the Stable Growth Yield Capitalization, mentioned
above. The formula is stated again here: g StableGrowth
NCF1 NetCashFlowsforNextPeriod
Value = NCF1 / (Y0 g).

Instead of solving for value as the Stable Growth Yield Capitalization Model does, the DGM solves for
cost of equity.

The dividend and earnings growth rates provided by Value Line Investment Survey were used for the
guideline companies for the Railroad, Electric, and Gas Distribution segments. Value Line Investment
Survey provides analysts estimates of change in earnings and dividends from 2013-2015 to 2019-2021.

Guideline companies for the Gas Transmission Pipeline and Fluid Transportation Pipeline segments did
not have sufficient data provided by Value Line for earnings or dividends growth rates. As a result, the
growth estimate for the next five years as provided by Yahoo! Finance was used. There is less information
available for earnings growth and dividend growth estimates in the Gas Transmission Pipeline and Fluid
Transportation Pipeline market segments, causing concern about the reliability of these estimates.

See each market segments Dividend Growth Model page in the appendices for more information on how
the department arrived at the indicated rate.

The growth rate used in the DGM is a short-term growth rate, typically much higher than the growth rate
of the U.S. economy. This model is used to calculate value of a company into perpetuity. It is not possible
for a company to grow at a growth rate higher than the U.S. economy in the long-term. According to
Damodaran, the amount of cash that U.S. companies are returning to stockholders is unstainable, given
the earnings and expectations of growth.22 Pratt and Grabowski also state, Long-term growth rates

22 Damodaran, A. January 2017 Data Update 9: Dividends and Buybacks Damodaran, February 6, 2017.
http://aswathdamodaran.blogspot.com/2017/02/january-2017-data-update-9-

Page | 10 Dividend Growth Model


exceeding the real growth in GDP [Gross Domestic Product] plus inflation are generally not
sustainable.23

MultiStageDividendGrowthModel(MultiStageDGM)
The department completed a multi-stage dividend growth model to account for the short-term growth
estimates available. Unlike the DGM discussed in the previous section, the multi-stage dividend growth
model assumes that growth is not constant. This allows the
department to use analysts short-term growth estimates and the KeyVariablesusedinequations
long-term, sustainable growth estimate.
KE CostofEquity
David Parcell (2010) provides the following multi-stage DGM D1 ExpectedDividends
formula in The Cost of Capital A Practitioners Guide,
published by the Society of Utility and Regulatory Financial P0 RecentStockPrice
Analysts: G1 Projected5yearGrowthRate
G AverageofG1andg
KE = (D1 / P0) + 0.67(G1) + 0.33(g)
g StableGrowth

StockBuybacks
A companys net income represents income that the company can reinvest or distribute to its owners.24
Dividends are often considered the primary approach for publicly traded firms to return cash or assets to
their shareholders. However, companies can also return cash to their stockholders through stock buybacks
buying back outstanding stock in the firm and reduce the number of shares outstanding.25

Because a company cannot act as its own shareholder, the company absorbs repurchased shares, and the
number of outstanding shares on the market is reduced. This increases the relative ownership stake of
each investor because there are fewer shares, or claims, on the earnings of the company.26 The amount of
cash that U.S. companies are returning to stockholders is unsustainable, given the earnings and
expectations of growth. In 2015 and 2016, the companies in the S&P 500 returned more than 100% of
earnings to investors.27

Given the trend of U.S. companies to include stock buybacks in their dividend payment policies, the
department questions the reliability of the expected dividends and expected dividend growth rate inputs of
the Dividend Growth Model (DGM).

MarketRateofDebt
The department used the Corporate Bond Yield Averages for Public Utility Bonds from Mergent Bond
Record to estimate the market rate of debt for each company used as a guideline company for the Electric,
Gas Distribution, Gas Transmission Pipeline, and Fluid Transportation Pipeline market segments.

dividends.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+blogspot%2FpHUuM+%28Musing
s+on+Markets%29
th
23 Pratt, Shannon and Grabowski, Roger, (2010). Cost of Capital Applications and Examples, 4 Ed., Page 681
24 Keown, Arthur; Martin, John; and Petty, J., (2014). Foundations of Finance: The Logic and Practice of Financial
Management, 8th Ed., Page 53
th
25 Damodaran, Aswath, Dr. (2015). Applied Corporate Finance, 4 Ed., Page 439
26 http://www.investopedia.com/articles/02/041702.asp
27 Damodaran, Aswath, Dr. (2017, February 06). January 2017 Data Update 9: Dividends and Buybacks. Retrieved February
06, 2017, from http://aswathdamodaran.blogspot.com/2017/02/january-2017-data-update-9-
dividends.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A%2Bblogspot%2FpHUuM%2B%28
Musings%2Bon%2BMarkets%29
Page | 11 Dividend Growth Model
The department used the Corporate Bond Yield Averages for Industrial Bonds from Mergent Bond
Record to estimate the market rate of debt for each company used as a guideline company for the Railroad
market segments.

The department considered using the yield to maturity of the guideline companies for selecting the cost of
debt for each market segment. The department compiled and reviewed data from S&P Capital IQ
McGraw Hill Financial. However, the data was not available for several guideline companies. Given that
the data was incomplete, the department will use the bond yield averages from Mergent Bond Record for
the 2017 assessment. The department will continue to research additional sources for future assessments.

In previous years, the department used a pre-tax cost of debt. The department will continue to review use
of an after-tax cost of debt.

See each market segments Indicated Rate of Debt page for more information on how the department
arrived at the indicated rate of debt.

MarketRateofPreferredStock
Preferred stock makes up a minimal percentage of the capital structure for all market segments. The
amount of capital structure attributable to preferred stock was not materially significant and was not
included in indicated capital structure for each market segment.

DirectCapitalizationRate
Direct capitalization is used to convert an estimate of a KeyVariablesusedinequations
single years net operating income expectancy into an
indication of value in one direct step.28 D0 DirectCapitalizationRate
NOI1 NetOperatingIncomeforthe
The direct rate (D0) is an expression of the market
nextyear
observed relationship between price and income.
Value MarketValue
This market observed direct rate is applied to the net
operating income (NOI) of the property to indicate the market value (value).
Value = NOI1 / D0

GuidelineCompanies
The Standard Industrial Classification Code and market segments listed by Value Line Investment Survey
were used when selecting guideline companies. The department began with the Value Line Investment
Survey industry because Value Line is a well-respected, widely used publication. Value Line classifies
equities into 100 unique industries and groupings. Their industries are created in-house and every
company is constantly evaluated to make sure that they are located in the proper sector.29

Companies that underwent a merger or acquisition in the previous calendar year or companies that have
announced an upcoming merger or acquisition during the current calendar year may have been excluded.

28 Western States Association of Tax Administrators (2009). Appraisal Handbook Unit Valuation of Centrally Assessed
Properties, Page III-8
29 Severo Nieves, Value Line Institutional Services, Institutional Sales & Marketing Analyst, email dated March 9, 2016

Page | 12 Public Comment


Possible guideline companies were reviewed for comparability in their market segments to the companies
doing business in Minnesota. See the Guideline Company Selection beginning on page G-1 for more
detail on the companies reviewed for each market segment.

EquityComponent
An inverse of the Price to Earnings (P/E) Ratio is used to estimate the equity component in the direct rate.

The Price to Earnings Ratio (P/E Ratio) as calculated by Value Line Investment Survey was used. The
Trailing P/E Ratio as calculated by Value Line Investment Survey was used if the P/E Ratio was not
calculated. The P/E ratio most indicative of the market segment data was selected. The inverse of the
selected ratio is the equity component of the direct capitalization rate.

The P/E Ratios for the Fluid Transmission Pipelines and the Gas Transmission Pipelines were adjusted for
income tax because the P/E Ratio for those companies did not include income taxes due to the nature of
their legal organization type. The marginal tax rate used for imputing income taxes was 35.0%.30

The P/E Ratio was not adjusted for income taxes for Electric, Gas Distribution, Class I Railroads, or
Other Railroads because those guideline companies P/E Ratios were already adjusted for income taxes.

See each market segments Direct Equity Component page for more information on how the department
arrived at the indicated equity component.

DebtComponent
The department used the Corporate Bond Yield Averages for Public Utility Bonds from Mergent Bond
Record to estimate the market rate of debt for each company used as a guideline company for the Electric,
Gas Distribution, Gas Transmission Pipeline, and Fluid Transportation Pipeline market segments.

The department used the Corporate Bond Yield Averages for Industrial Bonds from Mergent Bond
Record to estimate the market rate of debt for each company used as a guideline company for the Railroad
market segments.

The department considered using the current yield of the guideline companies for selecting the cost of
debt for each market segment. The department compiled and reviewed data from S&P Capital IQ
McGraw Hill Financial. However, the data was not available for several guideline companies. Given that
the data was incomplete, the department will use the bond yield averages from Mergent Bond Record for
the 2016 assessment. The department will continue to research additional sources for future assessments.

In previous years, the department used a pre-tax cost of debt. The department will continue to review use
of an after-tax cost of debt.

See each market segments Indicated Rate of Debt page in the appendices for more information on how
the department arrived at the indicated rate of debt.

FlotationCosts
Flotation costs are costs incurred when a company issues a new security, including fees to an investment
banker, legal fees, accounting, and other out of pocket expenses. The market-determined opportunity cost

30 Organization for Economic Co-Operation and Development, (2017). OECD StatExtracts, Table II.1. Corporate income tax
rate, http://stats.oecd.org//Index.aspx?QueryId=58204#, downloaded March 8, 2017

Page | 13 Public Comment


of capital is not affected by the flotation costs of a particular firm.31 The correct procedure for the
economic analysis of flotation costs does not alter the weighted average cost of capital.32

The yield rates and direct rates in this study are market derived, using market data. Unlike for determining
allowable rates of return in rate cases, the recovery of previously incurred costs is not added to the yield
rates or direct rates used for estimating market value. The yield rate and direct rate are not recovery
mechanisms for the costs of doing business. Flotation cost adjustments were not made to the yield rate or
direct rate in this study.

Dr. Richard Simonds stated in his paper published in the Journal of Property Tax Assessment &
Administration, When capitalizing net operating income in the income approach, a flotation-cost
adjustment cannot be applied to the cost of capital. Advocates of an adjustment may be confusing the
concept of the allowed rate of return on invested capital in a rate-regulated environment with the concept
of the market-determined opportunity cost of capital.33

Thomas Copeland and Fred Weston find that adjusting for flotation costs in the rate of return is incorrect
because it implicitly adjusts the opportunity cost of funds supplied to the firm. The true market-
determined opportunity cost is unaffected by the flotation costs of a particular firm.34

CompanySpecificRisk
The department does not include an adjustment for company-specific risk or a size premium adjustment
for a specific company. The department estimates the market cost of capital for each market segment, per
Minnesota Rules 8100 and 8106.

The department does not agree with a size premium adjustment based on the average market
capitalization size of the guideline companies and does not find this to be generally accepted practice.
Damodaran points out several reasons why a size adjustment to the CAPM is not appropriate, concluding
that the empirical evidence is not as conclusive as it was initially thought to be.35 He also finds that
forward-looking risk premiums are yielding no premiums for small cap [market capitalization] stocks and
much of the additional risk is either diversifiable or double counted.36

Eugene Fama and Kenneth French analyzed size premiums of companies that move to different market
capitalizations and found, the size premium is almost entirely a result of the extreme positive returns of
small-cap [market capitalization] stocks that move to a big-cap [market capitalization] portfolio from one
year to the next.37

31 Western States Association of Tax Administrators, (2009). Appraisal Handbook Unit Valuation of Centrally Assessed
Properties, Page III-31
rd
32 Copeland, Thomas E., & Weston, Fred J. (1988). Financial Theory and Corporate Policy (3 ed.). Addison-Wesley
Publishing Company.
33 Simonds, Richard R., Dr. (2006). Income Capitalization, Flotation Costs, and the Cost of Capital. Journal of Property Tax
Assessment & Administration, Volume 3, Issue 4.
rd
34 Copeland, Thomas E. & Weston, Fred J. (1988). Financial Theory and Corporate Policy (3 ed.) Addison-Wesley
Publishing Company. Page 534
35 Damodaran, Aswath, Dr. Equity Risk Premiums (ERP): Determinants, Estimation and Implications The 2011 Edition.
Retrieved from: http://people.stern.nyu.edu/adamodar/pdfiles/papers/ERP2011.pdf
,36 Damodaran, Aswath, Dr. (11 April 2015). The small cap premium: Where is the beef? Retrieved from:
http://aswathdamodaran.blogspot.com/2015/04/the-small-cap-premium-fact-fiction-and.html.
37 Fama, Eugene F. and French, Kenneth R. (2007). Migration. Financial Analysts Journal, Volume 63, Number 3. CFA
Institute.

Page | 14 Public Comment


Illiquidity
The department does not adjust capitalization rates for illiquidity. As the Appraisal of Real Estate (2013)
explains:
A discount rate reflects the relationship between income and the value that a market will attribute
to that income. The financial and economic concepts implicitly in a discount rate are complex and
have been the subject of significant analysis for more than a century. Although four key
components can be identified within a discount rate the safe rate plus considerations of
illiquidity, management, and various risks a discount rate that is constructed by adding
allowances for these components can be misleading and inaccurate (p. 458).38

The above referenced quote from the Appraisal of Real Estate is in Chapter 21, The Income Capitalization
Approach. The resource further discusses the Direct and Yield methods in Chapters 23 and 24,
respectively.

Growth
The importance of the growth rate is that it affects the yield model, explained in the Yield Capitalization
Rate section. Minnesota Rules, 8100 and 8106 imply a Zero Percent Growth Yield model. If the
assumption that income streams remain equal over time is incorrect, the model may not accurately
indicate the market value of the company.

For a company with a changing income streams, a Discounted Cash Flows model or Stable Growth Yield
model may better at estimating the value for the company under review. The Discounted Cash Flows
model uses explicit forecasts of income and expenses for each period. These inputs can be estimated if
they are not made available.

The Implied Growth Rate is the difference between the yield rate and the direct rate. The direct rate is the
relationship between an estimate of a single years net operating income and the value of the property,
while the yield rate converts income from future periods into present value.

The Western States Association of Tax Administrators Appraisal Handbook states, direct capitalization
is not affected by the appraisers view of the future income.39 In addition, Unit Valuation Insights states,
The direct capitalization rate is typically calculated as the yield capitalization rate minus an expected
long-term growth rate.40

ShortTermGrowthRate
The department reviewed short-term growth rates from several sources to derive an estimate of a short-
term growth rate for each market segment.

Business news service Reuters provides analysts estimates of market segment earnings per share growth.
The estimates for the next five years for the industry (as of January 17, 2017) are as follows:

Gas GasTransmission FluidTransportation ClassI Other


Electric
Distribution Pipeline Pipeline Railroads Railroads
9.88% 8.97% 7.49% 7.49% 8.96% 8.96%

38 Appraisal Institute (2013). The Appraisal of Real Estate, 14th Edition, Page 458
39 Ibid., Page III-9
40 Schweihs, Robert P. & Reilly, Robert F. (Spring 2014). Unit Valuation Insights, Issues Related to the Unit Valuation
Principle, Page 77
Page | 15 Public Comment
Value Line Investment Survey provides analysts estimates of change in earnings and dividends from
2013-2015 to 2019-2021. Gas Transmission Pipeline and Fluid Transportation Pipeline segments did not
have sufficient data provided by Value Line for earnings or dividends growth rates. The average growth
rates provided by Value Line Investment Survey are as follows:

Electric GasDistribution ClassIRailroads OtherRailroads


EarningsGrowthRate 5.38% 5.25% 8.78% 6.50%
DividendGrowthRate 5.09% 3.50% 10.17% N/A41

Yahoo! Finance provides growth estimates for the next five years for several publicly traded companies.
These estimates were used for Gas Transmission Pipeline market segment and Fluid Transportation
Pipeline market segment. The average growth estimates for the guideline companies are as follows:

GasTransmissionPipeline FluidTransportationPipeline
5YearGrowthEstimate 7.74% 8.97%

Based on the sources above, the indicated short-term growth rate for each market segment is as follows:

Electric Gas Gas Fluid ClassI Other


Distribution Transmission Transportation Railroads Railroads
Pipeline Pipeline

ShortTerm 5.38% 5.25% 7.74% 8.97% 8.78% 6.50%


GrowthRate

This evidence indicates that there is significant short-term growth in each market segment.

LongTermGrowthRate
The department reviewed long-term growth rates from several sources to derive an estimate of long-term
growth for the market as a whole.

Since no firm can grow forever at a rate higher than the growth rate of the economy in which it operates,
the constant growth rate cannot be greater than the overall growth rate of the economy.42 Therefore, the
risk-free rate can be viewed as the maximum constant growth rate for each market segment. The U.S.
Treasury 20-year Coupon Bond Yield on December 30, 2016, was 2.79%.43

The sources analyzed for this report indicate varying rates of growth in the U.S. economy over the long-
term:

41 Genesee & Wyoming is the only railroad company used for the Other Railroads market segment. Genesee & Wyoming does
not pay dividends. Therefore, there is no estimated growth rate for dividends for Genesee & Wyoming.
42 Damodaran, Aswath, Dr. (n.d.) The Stable Growth Rate, A. Damodaran,
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/valquestions/stablegrowthrate.htm
43 Board of Governors of the Federal Reserve System, H.15, Selected Interest Rates, Market Yield on U.S. Treasury Securities
20-year constant maturity quoted on investment bases, 2015 4th quarter daily average, December 30, 2016.
http://www.federalreserve.gov/datadownload/Choose.aspx?rel=H15

Page | 16 Public Comment


The World Bank forecasts that U.S. real Gross Domestic Product (GDP) will grow by 2.7% in
2017, 2.9% in 2018, and 2.9% in 2019.44
Trading Economics projects the U.S. GDP growth rate to trend around 2.60% in 202045.
The Economist Intelligence Unit forecasts that U.S. real GDP will grow by 1.80% from 2015 to
2050.46
A 2014 publication from the Organisation for Economic Co-operation and Development (OECD)
indicates that the average growth rate in potential GDP for the U.S. is 1.70% from 2031 to 2060.47
The Congressional Budget Office estimates that U.S real GDP will expand at an average annual
rate of 2.1% from the fourth quarter of 2016 to the fourth quarter of 2018, and at 1.9% from during
the second half of the 2017 2027 time period.48

After considering the above sources, the department applies the most reliance on the average growth rate
in potential U.S. GDP for 2015 to 2050, and secondary reliance on the U.S. Treasury 20-year Coupon
Bond Yield on December 30, 2016. The indicated long-term growth rate of the U.S. economy is 2.60%.

Inflation
Inflation makes future income less valuable than todays income. Inflation is the percentage change in the
value of the Wholesale Price Index (WPI) on a year-to-year basis. It effectively measures the change in
the prices of a basket of goods and services in a year.49

According to Arthur Keown, John Martin, and J. William Petty, investors require nominal (or quoted)
rate of interest that exceeds the inflation rate or else their realized real return will be negative.50
According to Damodaran, An inflation-indexed Treasury security does not offer a guaranteed nominal
return to buyers, but instead provides a guaranteed real return.51

According to Cornell, inflation is not considered explicitly when using the equity risk premium to
forecast long-run future stock returns because it is already included in the interest rates that go into the
calculation.52 Cornell continues, When investors invest, their goal is to increase future consumption.
Consequently, the success of an investment is measured not in nominal dollars but real dollars investors
are concerned with real returns, defined as the percent increase in purchasing power, not nominal
returns.53

44 World Bank Group Flagship Report, Global Economic Prospects Weak Investment in Uncertain Times, January 2017,
Page 4
45 Trading Economics, United States GDP Growth Rate Forecast, http://www.tradingeconomics.com/forecast/gdp-annual-
growth-rate, accessed on February 22, 2017
46 The Economist Intelligence Unit. http://country.eiu.com/article.aspx?articleid=794253063&Country=United
States&topic=Economy&subtopic=Long-term+outlook&subsubtopic=Summary, accessed on March 6, 2017
47 Congressional Budget Office. (February 2, 2017). The Budget and Economic Outlook: 2017 to 2027,
https://www.cbo.gov/sites/default/files/115th-congress-2017-2018/reports/52390-outlooktestimonyhouse.pdf, accessed on
March 14, 2017 OECD (2014), Growth Prospects and Fiscal Requirements Over the Long Term, OECD Economic Outlook,
Volume 2014/1, Page 224
48 Congressional Budget Office. (February 2, 2017). The Budget and Economic Outlook: 2017 to 2027,
https://www.cbo.gov/sites/default/files/115th-congress-2017-2018/reports/52390-outlooktestimonyhouse.pdf, accessed on
March 14, 2017
49 http://economictimes.indiatimes.com/definition/inflation
50 Keown, Arthur; Martin, John; and Petty, J. William, (2014). Foundations of Finance: The Logic and Practice of Financial
Management, 8th Ed., Page 35
th
51 Damodaran, Aswath, Dr. (2015). Applied Corporate Finance, 4 Ed., Page 90
52 Cornell, Bradford, (1999). The Equity Risk Premium, Page 29
53 Ibid. Page 31

Page | 17 Public Comment


The Budget and Economic Outlook: 20172027, published by the Congressional Budget Office (CBO),
estimates that the inflation rate rises to 1.9% in 2017 and to 2.0% in 2018, where it remains throughout
the rest of the coming decade.54

The U.S. Treasury issues inflation-indexed securities. Comparing the inflation-indexed securities to the
non-inflation indexed securities, one can estimate the inflation rate. Using the 10-year, 20-year, and 30-
year securities, the department estimated the inflation rate between 1.57% and 1.74% as shown below.55

10Year 20Year 30Year


EstimatedInflation 1.57% 1.57% 1.74%

The department used the expected inflation rate of 2.0% provided by the CBOs estimate in The Budget
and Economic Outlook: 2017 2027.

Given the indicated long-term growth rate of the U.S. economy of 2.60% and the expected inflation rate
of 2.0%, the department estimates the nominal growth rate at 4.60%.

MarkettoBookRatios
The department analyzes market-to-book ratios of publicly traded stock and debt securities by market
segment, as data is available. This analysis indicates how the market perceives the value of these assets
relative to the book value. A market-to-book ratio below one indicates that there may be obsolescence
affecting that market segment; a ratio over one would indicate that there is no obsolescence.

StateAssessedPropertySpringForum
The department held the 2017 State Assessed Property Spring Forum on March 8, 2017 and invited
company representatives from each market segment, academic professionals, employees at the Minnesota
Department of Commerce and Public Utilities Commission, appraisers, and assessors. The forum was an
opportunity for participants to provide input for the upcoming Capitalization Rate Study. We encouraged
everyone to participate. We asked participants to discuss current market conditions, industry trends and
developments, mergers and acquisitions, new projects, and other topics that could affect the Capitalization
Rate Study. Three company representatives discussed the current trends they see in their market segment.
We used the information they provided to see how well it lined up with the data we reviewed while
completing this study.

The company representatives noted that railroad market segment growth has been slowing. We also noted
that forecasts of growth from Value Line have declined for the railroad market segment compared to the
previous year.

The representative for the electric market segment noted that their expected beta is down from last year,
cost of equity is down from last year, and the cost of debt might decline. The department also noted that
the beta, cost of equity, and cost of debt decreased for the electric market segment from the previous year.

54 Congressional Budget Office. (February 2, 2017). The Budget and Economic Outlook: 2017 to 2027,
https://www.cbo.gov/sites/default/files/115th-congress-2017-2018/reports/52390-outlooktestimonyhouse.pdf, accessed on
March 14, 2017
55 Difference between inflation-indexed and non-inflation indexed securities for 10-year, 20-year, and 30-year daily rates,
averaged. Downloaded from www.federalreserve.gov
Page | 18 Public Comment
RevisionComments
The department posted the initial Capitalization Rate Study on April 20, 2017 for public comment. The
department received comments from interested parties and appreciated the responses and feedback for the
2017 Capitalization Rate Study. Your opinions and input were carefully considered. We appreciate
everyone that took the time to provide us with comments.

The department revised some of the content in this report after we received public comments. Overall, the
yield and direct capitalization rates were revised upward. Below are summaries of the comments the
department received and our response.

Several responses indicated that the commenter would like to see changes at least one year prior to
implementation. This may not be feasible in all situations. However, the department understands the
request and will do our best to allow those impacted sufficient time to review the methods we use in
valuation.

CostofDebt
AfterTaxCostofDebt
Most of the feedback the department received expressed a need for additional time to review the after-tax
cost of debt subject. Several of the comments also detailed their disagreement with the after-tax cost of
debt. For the January 2, 2017 assessments, the department will use the before-tax cost of debt. The
department will continue to review the applicability of the after-tax cost of debt for the valuation models
we use. We encourage companies to continue the discussion after they have had additional time to review.
Use of the before-tax cost of debt instead of the after-tax cost of debt results in a higher cost of debt
component of the yield and direct capitalization rates.

CostofDebtDataSources
Some comments indicated that the department should consider using industrial bond yields instead of
utility bond yields for the Gas Transmission Pipeline market segment from Mergent Bond Record. The
comments also indicated the department should consider using Bloomberg and Standard & Poors as data
sources for the bond yield averages. The department will review these other sources of data for future
studies.

In the initial study, the department used Public Utility Bond Averages for December 2016 for the electric,
gas distribution, gas transmission pipeline, and fluid transportation pipeline market segments. The
department uses Industrial Bond Yield Averages for December 2016 for the Class I and Other Railroad
market segments.

After considering the comments, the department used the industrial averages for gas transmission pipeline
and fluid transportation pipeline market segments. This changed the cost of debt from 4.79% to 4.85% for
fluid transportation pipeline market segment and 5.76% to 5.79% for gas transmission pipeline market
segment.

The department used the bond yield averages published in Mergent Bond Record, January 2017 Edition.

CostofEquity
Several of the comments the department received related to the selected cost of equity for different market
segments. In general, the comments indicated that the departments cost of equity is too low. The
department placed the most reliance on Dividend Growth Model, Earnings Growth in the initial study.
The comments generally agreed with this approach, but argued for more reliance on Dividend Growth
Models and less reliance on Capital Asset Pricing Models.
Page | 19 Public Comment
After considering the comments, the department reconciled a higher indicated rate of equity for each
market segment. For the Electric and Gas Distribution market segments, the department placed more
reliance on the Dividend Growth Model Earnings Growth. For the Gas Transmission Pipeline and Fluid
Transportation Pipeline market segments, the department reconciled a higher indicated equity rate for the
Dividend Growth Model Earnings Growth by placing equal reliance on the mean and median. For the
Class I Railroads and Other Railroads market segments, the department placed more reliance on the
Dividend Growth Model Earnings Growth and the Capital Asset Pricing Model Ex Post when
reconciling the indicated rate of equity. The department completed several cost of equity indicators and
selected the cost of equity within the range established by the different cost of equity indicators. The
department reconciled and placed more reliance on specific equity models based on the provided
comments.

DividendGrowthModels
Growth Estimate
Several companies commented that they do not believe the Value Line Investment Survey estimates for
growth are accurate because their analysts use a mix of historical and forecasts in their estimate of growth.

A Value Line education article by Kenneth J. DeFranco, Jr. states, All rates are computed utilizing the
average number for a base three-year period to an average number for a future period in order to eliminate
short-term fluctuations that may distort results.56 Value Lines website also provides an explanation of
their 3-to-5-year projections, stating, the 3-to-5-year projection is based on an analysts educated
estimates. You should consider it as a subjective, but unbiased, measure.57

The department will continue to use the growth estimates as provided in the first publication of this study.

Some comments also indicated that the department could complete their own growth estimate using Value
Line data. The department needs sufficient time to review and complete this calculation. In addition,
others who would be affected by adding this new calculation would not have time to review and offer
their opinion if it were added at this time.

It is also important to note that analysts estimates are estimates from experts in their fields and come
from widely used and respected sources

The department will continue to review the growth estimates by Value Line analysts as well as growth
rates completed by other analysts, such as Zacks, Yahoo! Finance, Reuters, and Standard & Poors. Value
Line, in general, fluctuates less over each year.

The department will continue to review this subject for future studies.

Retention or Plow Back Model


Comments also suggested the department complete a Retention Growth or Plowback model to
estimate the cost of equity. The model calculates a market growth factor based on a companys long-term
outlook for return on equity and retention ratio. The department does not have sufficient time to review
and implement a new model at this stage in the valuation process. Others affected by adding a new model
will not have time to review and offer their opinion. The department will look at completing this model

56DeFranco Jr., Kenneth J., The Annual Rates Box,


http://staging.valueline.com/Tools/Educational_Articles/Stocks_Detail.aspx?id=8920#.WQo7501OmUk, accessed on 5/2/2017
57 Value Line, Understanding the Value Line Research, http://www.valueline.com/about/help.aspx, accessed on 5/4/2017

Page | 20 Public Comment


for the next study and encourages anyone with information about this type of model to contact us with
your opinion.

CapitalAssetPricingModelExAnte
Several comments included disagreements with the departments ex ante equity risk premium used in the
Capital Asset Pricing Model. The department believes this forward-looking indicator of the cost of equity
is important to continue to calculate and consider in the reconciliation of the cost of equity.

One comment specifically suggested the department follow ex ante models completed by other states. At
least one of the other states mentioned uses a single-stage dividend growth model of the S&P 500 to
estimate the forward-looking equity risk premium. The department uses a multi-stage dividend growth
model to estimate the forward-looking equity risk premium. Cornell explains the multi-stage approach as
using the analysts forecasts for the first five years, applying a linear convergence to the analysts
forecasts to the long-run economic growth forecast for the next fifteen years, and using the long-run
economic growth rate after that.58 As provided by Damodaran, no firm can grow forever at a rate higher
than the growth rate of the economy in which it operates; the constant growth rate cannot be greater than
the overall growth rate of the economy.59 Therefore, the short-term growth estimates can be unrealistic
when applied to a perpetuity model.

NewCostofEquityModels
The department included two additional cost of equity models in the original publication of this years
study, the Empirical Capital Asset Pricing Model and the Multi-Stage Dividend Growth Model.

In general, the comments we received about these two new models were positive. The department will
continue to complete these models and review them as part of the study. Conversely, a few comments
expressed disagreement with the department making changes without first publishing the changes for a
full year before implementing the changes. The department did not place significant reliance on these
models to select the indicated cost of equity, rather used the new models to establish a reasonable range
for the cost of equity.

Illiquidity
Several comments suggested the department include adjustments for illiquidity. Some comments also
stated that the departments quote from the Appraisal of Real Estate was taken out of context. One
comment also suggested that the departments models are constructed from components that measure a
safe rate and various risks to one extent or another.

The department disagrees with illiquidity adjustments. The department included more information in the
Illiquidity section in response to comments on this subject. See the above Illiquidity section for the
departments position.

FlotationCosts
Several comments suggested the department include adjustments for flotation costs. The department
considered the comments and did not make any changes regarding this subject. See the above Flotation
Costs section for the departments position.

58Cornell, Bradford (1999). The Equity Risk Premium, p. 106-113


59Damodaran, Aswath, Dr. (n.d.) The Stable Growth Rate, A. Damodaran,
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/valquestions/stablegrowthrate.htm
Page | 21 Public Comment
ValueLineInvestmentSurveyReportDates
In the initial publication of this study, the department used Value Line Reports for the guideline
companies with specific publication dates. The Value Line published the Electric Utility (Central) reports
on December 16, 2016 and Electric Utility (West) on October 28, 2016. After further review, the
department will use Value Line published reports for the Electric Utility (West) guideline companies as of
January 27, 2017. The January 27, 2017 publication date is more indicative of information known or
knowable as of January 2, 2017 than the October 28, 2016 publication date. The three guideline
companies used by the department in Value Lines Electric Utility (West) are Black Hills Corp.,
Northwestern Corp., and Xcel Energy Inc. The data did not vary significantly in the reports from October
28, 2016 to January 27, 2017.

StudiesCompletedbyOthers
Several commenters provided studies they completed, studies completed by other states, and studies
completed for a specific industry as completed by external consultants. The department appreciates
receiving these studies. The department reviews these studies to understand what rates others are
calculating as well as the different models and inputs these rates are based on. It is important to note that
while these other studies are estimating the cost of capital; those completing the studies may use them for
other purposes, for different models, or apply the results to different income levels than the department.
See Appendix H for a comparison of studies.

DirectCapitalizationRates
The department also received comments about the direct capitalization rate. The comments provided
disagreement with the departments use of direct capitalization rates and how the rates are applied to
arrive at an indicator of market value. The Minnesota Tax Court has found the direct capitalization
method authoritative.

Questions?
If you have questions about the 2017 Capitalization Rate Study, please contact Holly Soderbeck at 651-
556-6119 or sa.property@state.mn.us.

Page | 22 Public Comment


Electric AppendixAElectric 2017 Capitalization Rate Study
January 2, 2017, Assessment

YieldRate

Capital
Rate Composite
Structure
LongTermDebt 36.00% 4.79% 1.72%
CommonEquity 64.00% 8.44% 5.40%
YieldRate 7.13%

ElectricUtilityYieldRate 7.13%

Page | A-1 Yield Rate


Electric 2017 Capitalization Rate Study
January 2, 2017, Assessment

CapitalStructure

Valueof
ValueofLong Valueof TotalMarket %Long %Preferred %Common
Company Preferred
TermDebt CommonEquity Value TermDebt Equity Equity
Equity
AlleteInc. 1,358,900,000 None 3,095,870,393 4,454,770,393 30.50% 0.00% 69.50%
AlliantEnergyCorp. 3,816,900,000 400,000,000 8,208,215,442 12,425,115,442 30.72% 3.22% 66.06%
AmerenCorp. 6,607,000,000 142,000,000 11,971,600,933 18,720,600,933 35.29% 0.76% 63.95%
AmericanElectricPowerCompanyInc. 17,320,000,000 None 29,242,084,868 46,562,084,868 37.20% 0.00% 62.80%
BlackHillsCorp. 3,211,800,000 None 3,280,814,003 6,492,614,003 49.47% 0.00% 50.53%
CenterPointEnergyInc. 7,736,000,000 None 10,241,627,948 17,977,627,948 43.03% 0.00% 56.97%
CMSEnergyCorp. 9,912,000,000 37,000,000 11,141,672,000 21,090,672,000 47.00% 0.18% 52.83%
DTEEnergyCo. 9,903,000,000 None 17,080,408,797 26,983,408,797 36.70% 0.00% 63.30%
EntergyCorp. 13,887,000,000 233,200,000 12,406,397,800 26,526,597,800 52.35% 0.88% 46.77%
MGEEnergyInc. 388,100,000 None 2,097,436,385 2,485,536,385 15.61% 0.00% 84.39%
NorthwesternCorp. 1,819,400,000 None 2,771,106,992 4,590,506,992 39.63% 0.00% 60.37%
OGEEnergyCorp. 2,505,200,000 None 6,398,482,806 8,903,682,806 28.14% 0.00% 71.86%
OtterTailCorp. 460,800,000 None 1,527,533,175 1,988,333,175 23.18% 0.00% 76.82%
VectrenCorp. 1,713,800,000 None 4,130,147,051 5,843,947,051 29.33% 0.00% 70.67%
WECEnergyGroup 9,088,100,000 30,400,000 17,491,510,711 26,610,010,711 34.15% 0.11% 65.73%
XcelEnergyInc. 13,403,000,000 None 20,927,655,154 34,330,655,154 39.04% 0.00% 60.96%

Mean 35.71% 0.32% 63.97%


Median 36.00% 0.00% 63.62%

IndicatedIndustryCapitalStructure 36.00% 64.00%

Weselectedthemediancapitalstructureastheindicatedcapitalstructure,roundingto36%debt,64%equity.

Notes:
DatadownloadedfromValueLine.

Page | A- 2 Capital Structure


Electric 2017 Capitalization Rate Study
January 2, 2017, Assessment

IndicatedRateofDebt
LongTerm
Company DebtRating
DebtRate
AlleteInc. A3 4.27
AlliantEnergyCorp. Baa1 4.79
AmerenCorp. Baa1 4.79
AmericanElectricPowerCompanyInc. Baa1 4.79
BlackHillsCorp. Baa2 4.79
CenterPointEnergyInc. Baa2 4.79
CMSEnergyCorp. Baa2 4.79
DTEEnergyCo. Baa1 4.79
EntergyCorp. Baa3 4.79
MGEEnergyInc. A1 4.27
NorthwesternCorp. A3 4.27
OGEEnergyCorp. A3 4.27
OtterTailCorp. A3 4.27
VectrenCorp. N/A N/A
WECEnergyGroup A3 4.27
XcelEnergyInc. A3 4.27

Mean 4.55
Median 4.79

IndicatedRateofDebt 4.79%

Weestimatedthecostofdebtat4.27%for7oftheguidelinecompaniesand4.79%for8oftheguidelinecompanies.
Therefore,themedianisalsothemode.Weplacedthemostrelianceonthemediantoarriveattheindicatedrateofdebt.

PublicUtilityBondYieldAveragesfromMergentBondRecord,January2017Edition
PublicUitlityBondAverages,December2016

Mergent S&P YieldAvg


Aaa AAA
Aa1 AA+
Aa2 AA
Aa3 AA 4.11
A1 A+
A2 A
A3 A 4.27
Baa1 BBB+
Baa2 BBB
Baa3 BBB 4.79

Notes:
CompanieswithBB(S&P)orBa(Mergent's)Bondratingsorlesswereexcludedfromthedata.
Notratedcompaniesalsoexcluded.

Page | A-3 Indicated Rate of Debt


Electric 2017 Capitalization Rate Study
January 2, 2017, Assessment

IndicatedRateofEquity
Model Rate
CAPMExPost 7.79%
CAPMSupplySide 7.09%
CAPMExAnte 6.77%
CAPMDamodaran 6.89%
CAPMDuff&Phelps 7.46%
EmpiricalCAPMExPost 8.27%
EmipricalCAPMSupplySide 7.51%
EmpiricalCAPMExAnte 7.16%
EmpiricalCAPMDamodaran 7.29%
EmpiricalCAPMDuff&Phelps 7.85%
DGMDividendGrowth 9.00%
DGMEarningsGrowth 9.30%
MultiStageDGM 8.84%
IndicatedRateofEquity 8.44%

Weestablishedarangeofacceptabilityforthecostofequitywithallavailablemodels.Weconsideredallofthedata
andplacedthemostrelianceontheDividendGrowthModel,EarningsGrowth.Thedepartmentplacedsecondary
relianceontheCapitalAssetPricingModelsusingDr.Damodaran'sandtheExPostequityriskpremiums.

Page | A- 4 Indicated Rate of Equity


Electric 2017 Capitalization Rate Study
January 2, 2017, Assessment

DirectRateandGrowth
Capital
Rate Composite
Structure
DebtComponent 36.00% 4.79% 1.72%
EquityComponent 64.00% 5.43% 3.48%
DirectRate 5.20%

ElectricUtilityDirectRate 5.20%

YieldRate 7.13%
DirectRate 5.20%
ImpliedIndustryGrowthRate 1.93%

Page | A-5 Direct Rate and Growth


Electric 2017 Capitalization Rate Study
January 2, 2017, Assessment

CapitalAssetPricingModel(CAPM)

CAPMModel
ExAnte,3Stage Dr.Damodaran
2 3
ExPost SupplySide DividendGrowth EquityRisk Duff&Phelps6
Model4 Premium5
Equityriskpremium 6.94% 5.97% 5.53% 5.69% 5.50%
xIndustryBeta 0.72 0.72 0.72 0.72 0.72
=IndustryRiskPremium 5.00% 4.30% 3.98% 4.10% 3.96%

+RiskFreeRate1 2.79% 2.79% 2.79% 2.79% 3.50%

=IndicatedEquityRate 7.79% 7.09% 6.77% 6.89% 7.46%


RoundedIndicatedEquityRate 7.79% 7.09% 6.77% 6.89% 7.46%

Notes:
1 USTreasury20yearCouponBondYield,December30,2016
2 Longhorizonexpectedequityriskpremium(historical),2017ValuationHandbookGuidetoCostofCapital
3 Longhorizonexpectedequityriskpremium(supplyside),2017ValuationHandbookGuidetoCostofCapital
4 3StageDividendGrowthModel,S&P500,SeeExhibit,ExAnteCalculation
5 ImpliedEquityRiskPremiumonJanuary1,2017asdeterminedbyDr.AswathDamodaran;http://pages.stern.nyu.edu/~adamodar/
6 Duff&Phelpsrecommendedequityriskpremium(conditional):TheDuff&PhelpsrecommendedERPwasdevelopedinrelationto(and
shouldbeusedinconjunctionwith)a3.5%normalizedriskfreerate.2017ValuationHandbookGuidetoCostofCapital

Page | A-6 Capital Asset Pricing Model


Electric 2017 Capitalization Rate Study
January 2, 2017, Assessment

EmpiricalCapitalAssetPricingModel(ECAPM)

ECAPMModel
ExAnte,3Stage Dr.Damodaran
2 3
ExPost SupplySide DividendGrowth EquityRisk Duff&Phelps6
4 5
Model Premium
Equityriskpremium 6.94% 5.97% 5.53% 5.69% 5.50%
xIndustryBeta 0.72 0.72 0.72 0.72 0.72
x75% 75% 75% 75% 75% 75%
=IndustryRiskPremium(weighted) 3.75% 3.22% 2.99% 3.07% 2.97%

Equityriskpremium 6.94% 5.97% 5.53% 5.69% 5.50%


x25% 25% 25% 25% 25% 25%
=EquityRiskPremium(weighted) 1.74% 1.49% 1.38% 1.42% 1.38%

+RiskFreeRate1 2.79% 2.79% 2.79% 2.79% 3.50%

=IndicatedEquityRate 8.27% 7.51% 7.16% 7.29% 7.85%


RoundedIndicatedEquityRate 8.27% 7.51% 7.16% 7.29% 7.85%

Notes:
1 USTreasury20yearCouponBondYield,December30,2016
2 Longhorizonexpectedequityriskpremium(historical),2017ValuationHandbookGuidetoCostofCapital
3 Longhorizonexpectedequityriskpremium(supplyside),2017ValuationHandbookGuidetoCostofCapital
4 3StageDividendGrowthModel,S&P500,SeeExhibit,ExAnteCalculation
5 ImpliedEquityRiskPremiumonJanuary1,2017asdeterminedbyDr.AswathDamodaran;http://pages.stern.nyu.edu/~adamodar/
6 Duff&Phelpsrecommendedequityriskpremium(conditional):TheDuff&PhelpsrecommendedERPwasdevelopedinrelationto(andshould
beusedinconjunctionwith)a3.5%normalizedriskfreerate.2017ValuationHandbookGuidetoCostofCapital

Page | A-7 ECAPM


Electric 2017 Capitalization Rate Study
January 2, 2017, Assessment

DividendGrowthModel

Projected CostofCapital CostofCapital


Current ProjEPS
Dividend Earnings Dividend
Company Dividend GrowthRate
GrowthRate5 Growth Growth
Yield(DY) 5Year(EG)
Year(DG) DY+EG DY+DG
AlleteInc. 3.40% 4.00% 3.50% 7.40% 6.90%
AlliantEnergyCorp. 3.30% 6.00% 4.50% 9.30% 7.80%
AmerenCorp. 3.60% 6.00% 4.00% 9.60% 7.60%
AmericanElectricPower
CompanyInc.
4.00% 5.00% 5.00% 9.00% 9.00%
BlackHillsCorp. 3.00% 7.50% 6.00% 10.50% 9.00%
CenterPointEnergyInc. 4.50% 2.00% 4.50% 6.50% 9.00%
CMSEnergyCorp. 3.30% 6.00% 6.50% 9.30% 9.80%
DTEEnergyCo. 3.50% 6.00% 6.50% 9.50% 10.00%
EntergyCorp. 5.10% 0.50% 2.50% 5.60% 7.60%
MGEEnergyInc. 2.00% 7.00% 4.00% 9.00% 6.00%
NorthwesternCorp. 3.60% 6.50% 5.50% 10.10% 9.10%
OGEEnergyCorp. 3.90% 3.00% 9.50% 6.90% 13.40%
OtterTailCorp. 3.30% 6.00% 1.50% 9.30% 4.80%
VectrenCorp. 3.40% 9.00% 5.00% 12.40% 8.40%
WECEnergyGroup 3.80% 6.00% 7.00% 9.80% 10.80%
XcelEnergyInc. 3.50% 5.50% 6.00% 9.00% 9.50%

Mean 3.58% 5.38% 5.09% 8.95% 8.67%


Median 3.50% 6.00% 5.00% 9.30% 9.00%

DGMDividendGrowth,IndicatedRate 9.00%
DGMEarningsGrowth,IndicatedRate 9.30%

WeplacedmorerelianceonthemediantoarriveattheindicatedratesforDGMEarningsGrowthandDGMDividendGrowth.

Notes:
DividendYieldandgrowthratesprovidedbyValueLine

Page | A-8 Dividend Growth Model


Electric 2017 Capitalization Rate Study
January 2, 2017 Assessment

MultiStageDividendGrowthModel
KE=(D1/P0)+0.67(G1)+0.33(g)
Where:
KECostofEquity G1GrowthEstimate,nextfiveyears
D1/P0DividendYield gStableGrowth

G1Growth
D1/P0 gStable
Company Estimate,next 0.67xG1 .33xg KECostofEquity
DividendYield Growth
fiveyears
CMSEnergyCorp. 3.30% 6.00% 4.60% 4.02% 1.52% 8.84%
DTEEnergyCo. 3.50% 6.00% 4.60% 4.02% 1.52% 9.04%
EntergyCorp. 5.10% 0.50% 4.60% 0.34% 1.52% 6.95%
MGEEnergyInc. 2.00% 7.00% 4.60% 4.69% 1.52% 8.21%
NorthwesternCorp. 3.60% 6.50% 4.60% 4.36% 1.52% 9.47%
OGEEnergyCorp. 3.90% 3.00% 4.60% 2.01% 1.52% 7.43%
OtterTailCorp. 3.30% 6.00% 4.60% 4.02% 1.52% 8.84%
VectrenCorp. 3.40% 9.00% 4.60% 6.03% 1.52% 10.95%
WECEnergyGroup 3.80% 6.00% 4.60% 4.02% 1.52% 9.34%
XcelEnergyInc. 3.50% 5.50% 4.60% 3.69% 1.52% 8.70%
Mean 8.78%
Median 8.84%
MultiStageDGM,IndicatedRate 8.84%

Weplacedthemostrelianceonthemediantoarriveattheindicatedrate.

Notes:
DividendYieldprovidedbyValueLine
GrowthEstimates,Next5YearsforEarningsprovidedValueLine

Page | A-9 Multi-Stage Dividend Growth Model


Electric 2017 Capitalization Rate Study
January 2, 2017, Assessment

EquityComponentoftheDirectRate

ValueLine
Company
P/ERatio
AlleteInc. 21.4
AlliantEnergyCorp. 22.1
AmerenCorp. 17.9
AmericanElectricPowerCompanyInc. 14.5
BlackHillsCorp. 19.0
CenterPointEnergyInc. 18.6
CMSEnergyCorp. 19.4
DTEEnergyCo. 18.2
EntergyCorp. 15.7
MGEEnergyInc. 26.2
NorthwesternCorp. 16.5
OGEEnergyCorp. 16.3
OtterTailCorp. 24.6
VectrenCorp. 19.3
WECEnergyGroup 18.2
XcelEnergyInc. 18.1

Mean 19.13
Median 18.40
SelectedPricetoEarnings(P/E)Ratio 18.40

IndicatedEquityComponentoftheDirectRate 5.43%

Weplacedthemostrelianceonthemedianpricetoearningsratio.

Notes:
ThePrice/EarningsRatiowasdownloadedfromValueLine.
*TrailingP/ERatio

Page | A-10 Direct Equity Component


Electric 2017 Capitalization Rate Study
January 2, 2017, Assessment

BetaAnalysis
Company Beta
AlleteInc. 0.75
AlliantEnergyCorp. 0.70
AmerenCorp. 0.65
AmericanElectricPowerCompanyInc. 0.65
BlackHillsCorp. 0.90
CenterPointEnergyInc. 0.85
CMSEnergyCorp. 0.65
DTEEnergyCo. 0.65
EntergyCorp. 0.65
MGEEnergyInc. 0.70
NorthwesternCorp. 0.70
OGEEnergyCorp. 0.90
OtterTailCorp. 0.85
VectrenCorp. 0.75
WECEnergyGroup 0.60
XcelEnergyInc. 0.60
ElectricBetaMean 0.72
ElectricBetaMedian 0.70
UnleveredandReleveredMean* 0.72
IndicatedBeta 0.72

Weconsideredthemean,median,andunlevered/releveredmean.Weplacedmorerelianceonthemean
whenselectingtheindicatedbeta.

Notes:
*SeetheUnleveringReleveringBetapageforthecalculation

Page | A-11 Beta Analysis


Electric 2017 Capitalization Rate Study
January 2, 2017, Assessment

Unlevering/ReleveringBetas
ValueLine CapitalStructureTabofCapRate CapitalStructureTabofCapRate ValueLine Formula
ActualEquityinCapital LeveredBeta Unlevered
UnleveringofBetas ActualIncomeTaxRate ActualDebtinCapitalStructure
Structure (Published) Beta
AlleteInc. 13.00% 30.50% 69.50% 0.75 0.54
AlliantEnergyCorp. 15.00% 30.72% 66.06% 0.70 0.50
AmerenCorp. 36.00% 35.29% 63.95% 0.65 0.48
AmericanElectricPowerCompanyInc. 36.00% 37.20% 62.80% 0.65 0.47
BlackHillsCorp. 34.00% 49.47% 50.53% 0.90 0.55
CenterPointEnergyInc. 37.00% 43.03% 56.97% 0.85 0.58
CMSEnergyCorp. 34.00% 47.00% 52.83% 0.65 0.41
DTEEnergyCo. 26.00% 36.70% 63.30% 0.65 0.45
EntergyCorp. 12.50% 52.35% 46.77% 0.65 0.33
MGEEnergyInc. 35.00% 15.61% 84.39% 0.70 0.62
NorthwesternCorp. Nil 39.63% 60.37% 0.70 N/A
OGEEnergyCorp. 29.00% 28.14% 71.86% 0.90 0.70
OtterTailCorp. 25.00% 23.18% 76.82% 0.85 0.69
VectrenCorp. 35.00% 29.33% 70.67% 0.75 0.59
WECEnergyGroup 38.00% 34.15% 65.73% 0.60 0.45
XcelEnergyInc. 35.00% 39.04% 60.96% 0.60 0.42
Average 0.72

Formula CapitalStructureTabofCapRate CapitalStructureTabofCapRate Formula


IndustryEquityinCapital
ReleveringofBetas CompositeIncomeTaxRate IndustryDebtinCapitalStructure LeveredBeta
Structure
AlleteInc. 29.37% 36.00% 64.00% 0.75
AlliantEnergyCorp. 30.54% 36.00% 64.00% 0.70
AmerenCorp. 31.73% 36.00% 64.00% 0.66
AmericanElectricPowerCompanyInc. 31.38% 36.00% 64.00% 0.65
BlackHillsCorp. 30.95% 36.00% 64.00% 0.76
CenterPointEnergyInc. 30.53% 36.00% 64.00% 0.81
CMSEnergyCorp. 29.95% 36.00% 64.00% 0.57
DTEEnergyCo. 29.74% 36.00% 64.00% 0.63
EntergyCorp. 30.23% 36.00% 64.00% 0.46
MGEEnergyInc. 31.91% 36.00% 64.00% 0.86
NorthwesternCorp. 31.50% 36.00% 64.00% N/A
OGEEnergyCorp. 31.37% 36.00% 64.00% 0.97
OtterTailCorp. 31.43% 36.00% 64.00% 0.96
VectrenCorp. 31.87% 36.00% 64.00% 0.82
WECEnergyGroup 31.61% 36.00% 64.00% 0.62
XcelEnergyInc. 31.07% 36.00% 64.00% 0.58
Average 0.72

Page | A-12 Unlevering Relevering Betas


Electric 2017 Capitalization Rate Study
January 2, 2017, Assessment

CalculationofMarkettoBookRatiosfortheElectricMarketSegment
December31,2016calendaryearinformationfortheJanuary2,2017Assessment

Amarkettobookratiooveronewouldbeanindicationofnoobsolescence.

MarketValueestimatesforCommonEquityarefromValueLine.MarketValueEstimatesforLongTermDebtarefromthecompany's10K.

BookValueamountsarefromthecompany's10K.

MarkettoBookRatioforEquity

MarketValueof BookValueof
Marketto
Company CommonEquity CommonEquity Source
BookRatio
fromValueLine from10K
AlleteInc. 3,095,870,393 1,893,000,000 1.64 201610K,page71
AlliantEnergyCorp. 8,208,215,442 3,862,000,000 2.13 201610K,page65
AmerenCorp. 11,971,600,933 7,103,000,000 1.69 201610K,page31

AmericanElectricPowerCompanyInc. 29,242,084,868 17,397,000,000 1.68 201610K,pageS5


BlackHillsCorp. 3,280,814,003 1,614,639,000 2.03 201610K,page104
CenterPointEnergyInc. 10,241,627,948 3,460,000,000 2.96 201610K,page74
CMSEnergyCorp. 11,141,672,000 4,290,000,000 2.60 201610K,page83
DTEEnergyCo. 17,080,408,797 9,499,000,000 1.80 201610K,page59
EntergyCorp. 12,406,397,800 8,081,809,000 3.00 201610K,page57
MGEEnergyInc. 2,097,436,385 724,088,000 2.90 201610K,page56
NorthwesternCorp. 2,771,106,992 1,676,227,000 1.65 201610K,pageF6
OGEEnergyCorp. 6,398,482,806 3,252,100,000 1.97 201610K,page48
OtterTailCorp. 1,527,533,175 670,104,000 2.28 201610K,page61
VectrenCorp. 4,130,147,051 1,768,100,000 2.34 201610K,page22
WECEnergyGroup 17,491,510,711 8,929,800,000 1.96 201610K,page72
XcelEnergyInc. 20,927,655,154 11,020,849,000 1.90 201610K,page166
Average 2.16

Page | A-13 Market to Book Ratios


Electric 2017 Capitalization Rate Study
January 2, 2017, Assessment

MarkettoBookRatioforDebt
MarketValueof BookValueLong
Marketto
Company LongTermDebt TermDebtfrom Source
BookRatio
from10K 10K
AlleteInc. 1,653,800,000 1,569,100,000 1.05 201610K,page103
AlliantEnergyCorp. 4,336,100,000 4,315,600,000 1.00 201610K,page115
AmerenCorp. 7,772,000,000 7,276,000,000 1.07 201610K,page112
AmericanElectricPowerCompanyInc. 22,211,900,000 20,391,200,000 1.09 201610K,page236
BlackHillsCorp. 3,351,305,000 3,216,932,000 1.04 201610K,page171
CenterPointEnergyInc. 8,443,000,000 8,846,000,000 0.95 201610K,page103
CMSEnergyCorp. 9,089,000,000 8,640,000,000 1.05 201610K,page83
DTEEnergyCo. 11,905,000,000 11,270,000,000 1.06 201610K,page108
EntergyCorp. 14,815,535,000 14,467,655,000 1.02 201610K,page129
MGEEnergyInc. 430,122,000 391,242,000 1.10 201610K,page79
NorthwesternCorp. 1,852,052,000 1,793,338,000 1.03 201610K,pageF24
OGEEnergyCorp. 2,803,900,000 2,530,800,000 1.11 201610K,page61
OtterTailCorp. 538,542,000 583,835,000 0.92 201610K,page110
VectrenCorp. 1,835,800,000 1,714,000,000 1.07 201610K,page103
WECEnergyGroup 9,818,200,000 9,285,800,000 1.06 201610K,page115
XcelEnergyInc. 15,513,209,000 14,450,247,000 1.07 201610K,page131
Average 1.04

ApplicationofCapitalStructureasdeterminedintheCapitalizationRateStudy
CapitalStructure MarkettoBook Composite
CommonEquity 64.00% 2.16 1.38
LongtermDebt 36.00% 1.04 0.38
OverallMarkettoBookRatio 1.76

Page | A-14 Market to Book Ratios


Electric 2017 Capitalization Rate Study
January 2, 2017, Assessment

DebtRatingAnalysis
Yieldto 52Week
Maturity Coupon 52Week Sales Current
Company Ticker CUSIP Issue Callable S&PIndustry Maturity High
Date % LowPrice Price Yield
% Price
CenterPointEnergyInc. CNP 15189TAL1 SrNtConv144a 1/15/2024 Yes MultiUtilities 2.88 N/A N/A 0 N/A N/A
CMSEnergyCorp. CMS 125896AT7 SrNtConv 7/15/2023 Yes MultiUtilities 3.38 N/A N/A 0 N/A N/A
CMSEnergyCorp. CMS 125896BA7 SrNt 7/17/2017 Yes MultiUtilities 6.55 N/A N/A N/A N/A N/A
AmerenUnElec N/A 02360FAA4 SrSecdNts 10/1/2019 Yes N/A 5.10 2.15 N/A 0 107.79 4.73
AmerenUnElec N/A 02360FAB2 SrSecdNt 8/1/2037 Yes N/A 5.30 3.99 N/A 0 118.23 4.48
VectrenUtilHldgsInc. N/A 92239MAG6 SrNt 12/1/2035 Yes N/A 6.10 5.00 N/A 0 113.32 5.38
VectrenUtilHldgsInc. N/A 92239MAH4 InsdNt 10/1/2036 Yes N/A 5.95 5.94 100 100.00 100.00 5.95
WisconsinElectricPower N/A 976656BP2 Debs 6/1/2028 No N/A 6.5 3.95 N/A 0 123.17 5.27
WisconsinElectricPower N/A 976656BL1 Deb 12/1/2095 No N/A 6.88 5.16 131.72 131.72 132.63 5.18
WisconsinEnergyCorp. N/A 976657AH9 2007SerAJrSubNt 5/15/2067 Yes N/A 6.25 7.28 87.62 87.62 86.15 7.25
WisconsinElectricPower N/A 976656BZ0 Deb 12/1/2036 Yes N/A 5.7 4.07 121.48 121.48 122.03 4.67
XcelEnergyInc. XEL 98389BAH3 SrNt 7/1/2036 Yes Electric 6.50 4.49 N/A 0 125.84 5.16

Mean 4.67 Mean 5.34

Median 4.49 Median 5.18

Companiesnotavailable:
AlleteInc.
AlliantEnergyCorp.
AmerenCorp.
AmericanElectricPowerCompanyInc.
BlackHillsCorp.
DTEEnergyCo.
EntergyCorp.
MGEEnergyInc.
NorthwesternCorp.
OGEEnergyCorp.
OtterTailCorp.
VectrenCorp.
WECEnergyGroup
XcelEnergyInc.

DatacompiledfromS&PCapitalIQMcGrawHillFinancialonJanuary9,2017

Page | A-15 Debt Rating Analysis


Gas Distribution Appendix B - Gas Distribution 2017 Capitalization Rate Study
January 2, 2017, Assessment

YieldRate
Capital
Rate Composite
Structure
LongTermDebt 26.00% 4.53% 1.18%
CommonEquity 74.00% 7.61% 5.63%
YieldRate 6.81%

GasDistributionYieldRate 6.81%

Page | B-1 Yield Rate


Gas Distribution 2017 Capitalization Rate Study
January 2, 2017, Assessment

CapitalStructure
Valueof
ValueofLong Valueof TotalMarket %Long %Preferred %Common
Company Preferred
TermDebt CommonEquity Value TermDebt Equity Equity
Equity
AtmosEnergyCorp. 2,205,600,000 None 7,564,277,977 9,769,877,977 22.58% N/A 77.42%
ChesapeakeUtilitiesCorp. 143,500,000 None 1,074,246,510 1,217,746,510 11.78% N/A 88.22%
DeltaNaturalGasCo.Inc. 50,400,000 None 183,237,000 233,637,000 21.57% N/A 78.43%
NewJerseyResourcesCorp. 967,800,000 None 2,886,034,380 3,853,834,380 25.11% N/A 74.89%
NiSourceInc. 6,096,200,000 None 7,064,729,895 13,160,929,895 46.32% N/A 53.68%
NorthwestNaturalGasCo. 530,200,000 None 1,596,971,960 2,127,171,960 24.93% N/A 75.07%
RGCResourcesInc. 32,800,000 None 119,441,700 152,241,700 21.54% N/A 78.46%
SouthJerseyIndustries 808,700,000 None 2,618,794,235 3,427,494,235 23.59% N/A 76.41%
SpireInc. 1,833,700,000 None 2,995,047,901 4,828,747,901 37.97% N/A 62.03%
WGLHoldingsInc. 1,194,300,000 28,200,000 3,399,049,089 4,621,549,089 25.84% 0.61% 73.55%

Mean 26.12% 0.61% 73.81%


Median 24.26% 0.61% 75.74%

IndicatedIndustryCapitalStructure 26.00% 74.00%

Weselectedthemeancapitalstructureastheindicatedcapitalstructure,roundingto26%debt,74%equity.

Notes:
DatadownloadedfromValueLine.

Page | B- 2 Capital Structure


Gas Distribution 2017 Capitalization Rate Study
January 2, 2017, Assessment

IndicatedRateofDebt
LongTerm
Company DebtRating
DebtRate
AtmosEnergyCorp. A2 4.27
ChesapeakeUtilitiesCorp. N/A N/A
DeltaNaturalGasCo.Inc. N/A N/A
NewJerseyResourcesCorp. N/A N/A
NiSourceInc. (P)Ba1 7.21 *
NorthwestNaturalGasCo. (P)A3 4.27
RGCResourcesInc. N/A N/A
SouthJerseyIndustries BBB+ 4.79
SpireInc. Baa2 4.79
WGLHoldingsInc. A3 4.27

Mean 4.93
Median 4.53

IndicatedRateofDebt 4.53%

Weplacedmostrelianceonthemedianwhenselectingtheindicatedrateofdebt.

PublicUtilityBondYieldAveragesfromMergentBondRecord,January2017Edition
PublicUitlityBondAverages,December2016

Mergent S&P YieldAvg


Aaa AAA
Aa1 AA+
Aa2 AA
Aa3 AA 4.11
A1 A+
A2 A
A3 A 4.27
Baa1 BBB+
Baa2 BBB
Baa3 BBB 4.79

Notes:
Notratedcompaniesorcompanieswho'sdebtratwasnotavailablewereexcluded.

*ThesecompaniesareratedbelowtheMergentBondRecordBondYieldAverages.Weanalyzedthe
MergentBondRecord,January2017issue,forU.S.CorporateBondsthatwereconsideredbelow
investmentgrade.WedeterminedtheaverageBayieldtomaturityis7.21%.

Page | B-3 Indicated Rate of Debt


Gas Distribution 2017 Capitalization Rate Study
January 2, 2017, Assessment

IndicatedRateofEquity
Model Rate
CAPMExPost 7.65%
CAPMSupplySide 6.97%
CAPMExAnte 6.66%
CAPMDamodaran 6.77%
CAPMDuff&Phelps 7.35%
EmpiricalCAPMExPost 8.17%
EmpiricalCAPMSupplySide 7.42%
EmpiricalCAPMExAnte 7.08%
EmpiricalCAPMDamodaran 7.20%
EmpiricalCAPMDuff&Phelps 7.76%
DGMDividendGrowth 6.50%
DGMEarningsGrowth 7.90%
MultiStageDGM 7.76%
IndicatedRateofEquity 7.61%

Weestablishedarangeofacceptabilityforthecostofequitywithallavailablemodels.We
consideredallofthedataandplacedthemostrelianceontheDividendGrowthModel,Earnings
Growth.ThedepartmentplacedsecondaryrelianceontheCapitalAssetPricingModelsusingDr.
Damodaran'sandtheExPostequityriskpremiums.

Page | B- 4 Indicated Rate of Equity


Gas Distribution 2017 Capitalization Rate Study
January 2, 2017, Assessment

DirectRateandGrowth
Capital
Rate Composite
Structure
DebtComponent 26.00% 4.53% 1.18%
EquityComponent 74.00% 4.76% 3.52%
DirectRate 4.70%

GasDistributionDirectRate 4.70%

YieldRate 6.81%
DirectRate 4.70%
ImpliedIndustryGrowthRate 2.11%

Page | B-5 Direct Rate and Growth


Gas Distribution 2017 Capitalization Rate Study
January 2, 2017, Assessment

CapitalAssetPricingModel(CAPM)

CAPMModel
ExAnte,3Stage Dr.Damodaran
2 3
ExPost SupplySide DividendGrowth EquityRisk Duff&Phelps6
Model4 Premium5
Equityriskpremium 6.94% 5.97% 5.53% 5.69% 5.50%
xIndustryBeta 0.70 0.70 0.70 0.70 0.70
=IndustryRiskPremium 4.86% 4.18% 3.87% 3.98% 3.85%

+RiskFreeRate1 2.79% 2.79% 2.79% 2.79% 3.50%

=IndicatedEquityRate 7.65% 6.97% 6.66% 6.77% 7.35%


RoundedIndicatedEquityRate 7.65% 6.97% 6.66% 6.77% 7.35%

Notes:
1 USTreasury20yearCouponBondYield,December30,2016
2 Longhorizonexpectedequityriskpremium(historical),2017ValuationHandbookGuidetoCostofCapital
3 Longhorizonexpectedequityriskpremium(supplyside),2017ValuationHandbookGuidetoCostofCapital
4 3StageDividendGrowthModel,S&P500,SeeExhibit,ExAnteCalculation
5 ImpliedEquityRiskPremiumonJanuary1,2017asdeterminedbyDr.AswathDamodaran;http://pages.stern.nyu.edu/~adamodar/
6 Duff&Phelpsrecommendedequityriskpremium(conditional):TheDuff&PhelpsrecommendedERPwasdevelopedinrelationto(and
shouldbeusedinconjunctionwith)a3.5%normalizedriskfreerate.2017ValuationHandbookGuidetoCostofCapital

Page | B-6 Capital Asset Pricing Model


Gas Distribution 2017 Capitalization Rate Study
January 2, 2017, Assessment

EmpiricalCapitalAssetPricingModel(ECAPM)

ECAPMModel
ExAnte,3Stage Dr.Damodaran
2 3
ExPost SupplySide DividendGrowth EquityRisk Duff&Phelps6
4 5
Model Premium
Equityriskpremium 6.94% 5.97% 5.53% 5.69% 5.50%
xIndustryBeta 0.70 0.70 0.70 0.70 0.70
x75% 75% 75% 75% 75% 75%
=IndustryRiskPremium(weighted) 3.64% 3.13% 2.90% 2.99% 2.89%

Equityriskpremium 6.94% 5.97% 5.53% 5.69% 5.50%


x25% 25% 25% 25% 25% 25%
=EquityRiskPremium(weighted) 1.74% 1.49% 1.38% 1.42% 1.38%

+RiskFreeRate1 2.79% 2.79% 2.79% 2.79% 3.50%

=IndicatedEquityRate 8.17% 7.42% 7.08% 7.20% 7.76%


RoundedIndicatedEquityRate 8.17% 7.42% 7.08% 7.20% 7.76%

Notes:
1 USTreasury20yearCouponBondYield,December30,2016
2 Longhorizonexpectedequityriskpremium(historical),2017ValuationHandbookGuidetoCostofCapital
3 Longhorizonexpectedequityriskpremium(supplyside),2017ValuationHandbookGuidetoCostofCapital
4 3StageDividendGrowthModel,S&P500,SeeExhibit,ExAnteCalculation
5 ImpliedEquityRiskPremiumonJanuary1,2017asdeterminedbyDr.AswathDamodaran;http://pages.stern.nyu.edu/~adamodar/
6 Duff&Phelpsrecommendedequityriskpremium(conditional):TheDuff&PhelpsrecommendedERPwasdevelopedinrelationto(andshould
beusedinconjunctionwith)a3.5%normalizedriskfreerate.2017ValuationHandbookGuidetoCostofCapital

Page | B-7 ECAPM


Gas Distribution 2017 Capitalization Rate Study
January 2, 2017, Assessment

DividendGrowthModel

CostofCapital CostofCapital
Current ProjEarnings ProjDividend
Earnings Dividend
Company Dividend GrowthRate GrowthRate
GrowthDY Growth
Yield(DY) 5Year(EG) 5Year(DG)
+EG DY+DG
AtmosEnergyCorp. 2.50% 6.50% 6.50% 9.00% 9.00%
ChesapeakeUtilitiesCorp. 1.90% 8.50% 6.00% 10.40% 7.90%
DeltaNaturalGasCo.Inc. 3.20% N/A N/A N/A N/A
NewJerseyResourcesCorp. 3.00% 3.00% 3.50% 6.00% 6.50%
NiSourceInc. 3.00% 1.50% 2.50% 4.50% 0.50%
NorthwestNaturalGasCo. 3.20% 7.00% 2.00% 10.20% 5.20%
RGCResourcesInc. 3.20% N/A N/A N/A N/A
SouthJerseyIndustries 3.30% 3.00% 6.50% 6.30% 9.80%
SpireInc. 3.20% 9.00% 3.50% 12.20% 6.70%
WGLHoldingsInc. 2.90% 3.50% 2.50% 6.40% 5.40%

Mean 2.88% 5.25% 3.50% 8.13% 6.38%


Median 3.00% 5.00% 3.50% 7.70% 6.60%

DGMDividendGrowth,IndicatedRate 6.50%

DGMEarningsGrowth,IndicatedRate 7.90%

WeplacedequalrelianceonthemeanandmediantoarriveattheindicatedratesforDGMEarningsGrowthandDGMDividend
Growth,roundingtothenearesttenth.

Notes:
DividendYieldprovidedbyValueLine
DeltaNaturalGasandRGCResources,Inc.donothaveanalystsestimatesand,therefore,thecompanieswerenotincludedinthemean,
median,ormodel.Theyarestillshown.
NiSourcewasnotincludedinthemean,median,ormodelbecausetheyareconsideredanoutlier.

Page | B-8 Dividend Growth Model


Gas Distribution 2017 Capitalization Rate Study
January 2, 2017 Assessment

MultiStageDividendGrowthModel
KE=(D1/P0)+0.67(G1)+0.33(g)
Where:
KECostofEquity G1GrowthEstimate,nextfiveyears
D1/P0DividendYield gStableGrowth

G1Growth
D1/P0 gStable
Company Estimate,next 0.67xG1 .33xg KECostofEquity
DividendYield Growth
fiveyears
AtmosEnergyCorp. 2.50% 6.50% 4.60% 4.36% 1.52% 8.37%
ChesapeakeUtilitiesCorp. 1.90% 8.50% 4.60% 5.70% 1.52% 9.11%
NewJerseyResourcesCorp. 3.00% 3.00% 4.60% 2.01% 1.52% 6.53%
NiSourceInc. 3.00% 1.50% 4.60% 1.01% 1.52% 5.52%
NorthwestNaturalGasCo. 3.20% 7.00% 4.60% 4.69% 1.52% 9.41%
SouthJerseyIndustries 3.30% 3.00% 4.60% 2.01% 1.52% 6.83%
SpireInc. 3.20% 9.00% 4.60% 6.03% 1.52% 10.75%
WGLHoldingsInc. 2.90% 3.50% 4.60% 2.35% 1.52% 6.76%
Mean 7.91%
Median 7.60%
MultiStageDGM,IndicatedRate 7.76%
Weplacedequalrelianceonthemeanandmediantoarriveattheindicatedrate.

Notes:
DividendYieldprovidedbyValueLine
GrowthEstimates,Next5YearsforEarningsprovidedValueLine

WeremovedthebelowcompaniesbecausetheydonothavegrowthestimatesavailabethroughValueLine
DeltaNaturalGasCo.Inc. 3.20% N/A 4.60% N/A 1.52% N/A
RGCResourcesInc. 3.20% N/A 4.60% N/A 1.52% N/A

Page | B-9 Multi-Stage Dividend Growth Model


Gas Distribution 2017 Capitalization Rate Study
January 2, 2017, Assessment

EquityComponentoftheDirectRate
ValueLine
Company
P/ERatio
AtmosEnergyCorp. 20.80
ChesapeakeUtilitiesCorp. 23.90
DeltaNaturalGasCo.Inc. 32.20 *
NewJerseyResourcesCorp. 19.70
NiSourceInc. 20.80
NorthwestNaturalGasCo. 26.30
RGCResourcesInc. 20.50 *
SouthJerseyIndustries 22.40
SpireInc. 18.80
WGLHoldingsInc. 19.80

Mean 22.52
Median 20.80
SelectedPricetoEarnings(P/E)Ratio 21.00

IndicatedEquityComponentoftheDirectRate 4.76%

Weplacedthemostrelianceonthemedianpricetoearningsratio.

Notes:
ThePrice/EarningsRatiowasdownloadedfromValueLine.
* TrailingP/ERatio

Page | B-10 Direct Equity Component


Gas Distribution 2017 Capitalization Rate Study
January 2, 2017, Assessment

BetaAnalysis

Company Beta
AtmosEnergyCorp. 0.70
ChesapeakeUtilitiesCorp. 0.65
DeltaNaturalGasCo.Inc. 0.65
NewJerseyResourcesCorp. 0.80
NiSourceInc. NMF
NorthwestNaturalGasCo. 0.65
RGCResourcesInc. 0.45
SouthJerseyIndustries 0.80
SpireInc. 0.70
WGLHoldingsInc. 0.75

ElectricBetaMean 0.68
ElectricBetaMedian 0.70
UnleveredandReleveredMean* 0.69
IndicatedBeta 0.70

Weconsideredthemean,median,andunlevered/releveredmean.Weplacedmorerelianceonthemedianwhen
selectingtheindicatedbetatoaccountforthewiderangeofbetas.

Notes:
* SeetheUnleveringReleveringBetapageforthecalculation

Page | B-11 Beta Analysis


Gas Distribution 2017 Capitalization Rate Study
January 2, 2017, Assessment

Unlevering/ReleveringBetas
ValueLine CapitalStructureTabofCapRate CapitalStructureTabofCapRate ValueLine Formula
UnleveringofBetas ActualIncomeTaxRate ActualDebtinCapitalStructure ActualEquityinCapitalStructure LeveredBeta(Published) UnleveredBeta
AtmosEnergyCorp. 36.40% 22.58% 77.42% 0.70 0.59
ChesapeakeUtilitiesCorp. 40.00% 11.78% 88.22% 0.65 0.60
DeltaNaturalGasCo.Inc. 37.90% 21.57% 78.43% 0.65 0.56
NewJerseyResourcesCorp. 32.00% 25.11% 74.89% 0.80 0.65
NiSourceInc. 33.50% 46.32% 53.68% NMF N/A
NorthwestNaturalGasCo. 35.00% 24.93% 75.07% 0.65 0.53
RGCResourcesInc. 38.40% 21.54% 78.46% 0.45 0.38
SouthJerseyIndustries 25.00% 23.59% 76.41% 0.80 0.65
SpireInc. 32.50% 37.97% 62.03% 0.70 0.50
WGLHoldingsInc. 39.00% 25.84% 73.55% 0.75 0.62
Average 0.68

Formula CapitalStructureTabofCapRate CapitalStructureTabofCapRate Formula


ReleveringofBetas CompositeIncomeTaxRate IndustryDebtinCapitalStructure IndustryEquityinCapitalStructure LeveredBeta
AtmosEnergyCorp. 34.97% 26.00% 74.00% 0.72
ChesapeakeUtilitiesCorp. 34.97% 26.00% 74.00% 0.74
DeltaNaturalGasCo.Inc. 34.97% 26.00% 74.00% 0.69
NewJerseyResourcesCorp. 34.97% 26.00% 74.00% 0.80
NiSourceInc. 34.97% 26.00% 74.00% N/A
NorthwestNaturalGasCo. 34.97% 26.00% 74.00% 0.65
RGCResourcesInc. 34.97% 26.00% 74.00% 0.47
SouthJerseyIndustries 34.97% 26.00% 74.00% 0.80
SpireInc. 34.97% 26.00% 74.00% 0.61
WGLHoldingsInc. 34.97% 26.00% 74.00% 0.76
Average 0.69

Page | B-12 Unlevering Relevering Betas


Gas Distribution 2017 Capitalization Rate Study
January 2, 2017, Assessment

DebtRatingAnalysis

Yieldto 52Week
Maturity S&P Coupon 52Week Sales Current
Company Ticker CUSIP Issue Callable Maturity High
Date Industry % LowPrice Price Yield
% Price
AtmosEnergyCorp. ATO 049560AA3 Deb 7/15/2028 Yes GasUtilities 6.75 3.89 118.73 118.73 122.21 5.52
AtmosEnergyCorp. ATO 049560AG0 SrNt 10/15/2034 Yes GasUtilities 5.95 4.25 114.86 114.86 120.90 4.92
AtmosEnergyCorp. ATO 049560AH8 SrNt 6/15/2017 Yes GasUtilities 6.35 1.42 102.29 102.29 101.38 6.26
Insd
DeltaNaturalGasCo.Inc. DGAS 247748AG1 Quarterly 4/1/2021 Yes GasUtilities 5.75 5.74 N/A 0 100.00 5.75
NtIqNts
GtdFxdRt
NiSourceFinance N/A 65473QAQ6 9/15/2017 Yes N/A 5.25 2.09 102.31 102.31 101.67 5.16
SrNt
GtdFxdRt
NiSourceFinance N/A 65473QAR4 9/15/2020 Yes N/A 5.45 2.64 109.08 109.08 109.41 4.98
SrNt

MTNSeries
SouthJerseyGas N/A 83851MAK3 7/15/2017 No N/A 4.66 3.66 N/A 0 100.35 4.64
B20033

MTNSeries
SouthJerseyGas N/A 83851MAM9 7/15/2033 No N/A 5.55 4.63 110.43 110.43 110.38 5.02
B20034

Mean 3.54 Mean 5.28

Median 3.78 Median 5.09


Companiesnotavailable:
ChesapeakeUtilitiesCorp.
NewJerseyResourcesCorp.
NorthwestNaturalGasCo.
RGCResourcesInc.
SouthJerseyIndustries
SpireInc.
WGLHoldingsInc.

DatacompiledfromS&PCapitalIQMcGrawHillFinancialonMarch6,2017

Page | B-13 Debt Rating Analysis


Gas Distribution 2017 Capitalization Rate Study
January 2, 2017, Assessment

CalculationofMarkettoBookRatiosfortheElectricMarketSegment
December31,2016calendaryearinformationfortheJanuary2,2017Assessment

Amarkettobookratiooveronewouldbeanindicationofnoobsolescence.

MarketValueestimatesarefromtheCapitalStructurepageoftheCapitalizationRateStudy.

BookValueamountsarefromthecompany'sbalancesheetaslistedinthe10KorAnnualReport

MarkettoBookRatioforEquity
MarketValueof
BookValueof MarkettoBook
Company CommonEquity Source
CommonEquity Ratio
fromValueLine
AtmosEnergyCorp. 7,564,277,977 3,463,059,000 2.18 201610K,page35 FiscalYearEnd9/30/2016
ChesapeakeUtilitiesCorp. 1,074,246,510 446,086,000 2.41 201610K,page24
DeltaNaturalGasCo.Inc. 183,237,000 77,726,969 2.36 201610K,page41 FiscalYearEnd6/30/2016
NewJerseyResourcesCorp. 2,886,034,380 1,166,591,000 2.47 201610K,page27 FiscalYearEnd9/30/2016
NiSourceInc. 7,064,729,895 4,071,200,000 1.74 201610K,page19
NorthwestNaturalGasCo. 1,596,971,960 850,497,000 1.88 201610K,page56
RGCResourcesInc. 119,441,700 23,941,445 4.99 201610K,page34 FiscalYearEnd6/30/2016
SouthJerseyIndustries 2,618,794,235 1,289,240,000 2.03 201610K,page57
SpireInc. 2,995,047,901 1,768,200,000 1.69 201610K,page60 FiscalYearEnd9/30/2016
WGLHoldingsInc. 3,399,049,089 574,496,000 5.92 201610K,page78 FiscalYearEnd9/30/2016
Average 2.77

Page | B-14 Market to Book Ratios


Gas Distribution 2017 Capitalization Rate Study
January 2, 2017, Assessment

MarkettoBookRatioforDebt
MarketValueof
BookValueLong MarkettoBook
Company LongTermDebt Source
TermDebt Ratio
from10K
AtmosEnergyCorp. 2,844,990,000 2,460,000,000 1.16 201610K,page95
ChesapeakeUtilitiesCorp. 161,500,000 145,900,000 1.11 201610K,page78
DeltaNaturalGasCo.Inc. 55,324,000 50,422,796 1.10 201610K,page41&49
NewJerseyResourcesCorp. 1,131,077,000 1,082,845,000 1.04 201610K,page98
NiSourceInc. 7,064,100,000 6,421,300,000 1.1 201610K,page89
NorthwestNaturalGasCo. 793,339,000 679,334,000 1.17 201610K,page71
RGCResourcesInc. 36,163,523 33,896,200 1.07 201610K,page60
SouthJerseyIndustries 1,080,800,000 1,039,914,000 1.04 201610K,page76
SpireInc. 2,083,700,000 2,257,100,000 0.92 201610K,page96
WGLHoldingsInc. 1,641,900,000 1,446,000,000 1.14 201610K,page66
Average 1.09

ApplicationofCapitalStructureasdeterminedintheCapitalizationRateStudy
CapitalStructure MarkettoBook Composite
CommonEquity 74.00% 2.77 2.05
LongtermDebt 26.00% 1.09 0.28
OverallMarkettoBookRatio 2.33

Page | B-15 Market to Book Ratios


Gas Transmission Pipeline Appendix C - 2017 Capitalization Rate Study
January 2, 2017, Assessment Gas Transmission Pipeline

YieldRate

CapitalStructure Rate Composite

LongTermDebt 39.00% 4.85% 1.89%


CommonEquity 61.00% 11.59% 7.07%
YieldRate 8.96%

GasTransmissionPipelineYieldRate 8.96%

Page |C -1 Yield Rate


Gas Transmission Pipeline 2017 Capitalization Rate Study
January 2, 2017, Assessment

CapitalStructure
Valueof %Long
ValueofLong Valueof TotalMarket %Preferred %Common
Company Preferred Term
TermDebt CommonEquity Value Equity Equity
Equity Debt
BoardwalkPipelinePartnersLP 3,626,800,000 N/A 4,322,625,425 7,949,425,425 45.62% N/A 54.38%
EnterpriseProductsPartnersLP 21,121,200,000 N/A 53,909,536,466 75,030,736,466 28.15% N/A 71.85%
KinderMorganInc. 36,700,000,000 N/A 49,178,984,956 85,878,984,956 42.73% N/A 57.27%
ONEOKPartnersLP 6,691,700,000 N/A 12,013,276,531 18,704,976,531 35.77% N/A 64.23%
TCPipeLinesLP 1,896,000,000 N/A 3,617,046,000 5,513,046,000 34.39% N/A 65.61%
WilliamsPartnersLP 18,918,000,000 N/A 22,263,446,418 41,181,446,418 45.94% N/A 54.06%

Mean 38.77% 61.23%


Median 39.25% 60.75%

IndicatedIndustryCapitalStructure 39.00% 61.00%

Weselectedthemediancapitalstructureastheindicatedcapitalstructureduetothelargerangeofvalues,roundingto39%debt,61%equity.

Notes:
DatadownloadedfromValueLine.

Page |C -2 Capital Structure


Gas Transmission Pipeline 2017 Capitalization Rate Study
January 2, 2017, Assessment

IndicatedRateofDebt
LongTerm
Company DebtRating
DebtRate
BoardwalkPipelinePartnersLP Baa3 4.85
EnterpriseProductsPartnersLP N/A N/A
KinderMorganInc. Baa3 4.85
ONEOKPartnersLP Baa2 4.85
TCPipeLinesLP Baa2 4.85
WilliamsPartnersLP Baa3 4.85

Mean 4.85
Median 4.85

IndicatedRateofDebt 4.85%

Weestimatedthattheguidelinecompanieshavethesamecostofdebt.

IndustrialBondYieldAveragesfromMergentBondRecord,January2017Edition
IndustrialBondAverages,December2016

Mergent S&P YieldAvg


Aaa AAA
Aa1 AA+
Aa2 AA
Aa3 AA 4.13
A1 A+
A2 A
A3 A 4.29
Baa1 BBB+
Baa2 BBB
Baa3 BBB 4.85

Notes:
CompanieswithBB(S&P)orBa(Mergent's)Bondratingsorlesswereexcludedfromthedata.
Notratedcompaniesalsoexcluded.

Page |C -3 Indicated Rate of Debt


Gas Transmission Pipeline 2017 Capitalization Rate Study
January 2, 2017, Assessment

IndicatedRateofEquity

Model Rate
CAPMExPost 10.42%
CAPMSupplySide 9.36%
CAPMExAnte 8.87%
CAPMDamodaran 9.05%
CAPMDuff&Phelps 9.55%
EmpiricalCAPMExPost 10.25%
EmpiricalCAPMSupplySide 9.21%
EmpiricalCAPMExAnte 8.73%
EmpiricalCAPMDamodaran 8.91%
EmpricalCAPMDuff&Phelps 9.41%
DividendGrowthModel 13.45%
MultiStageDGM 12.87%
IndicatedRateofEquity 11.59%

Weestablishedarangeofacceptabilityforthecostofequitywithallavailablemodels.Weconsideredallofthe
dataandplacedthemostrelianceontheDividendGrowthModel.Thedepartmentplacedsecondaryrelianceon
theCapitalAssetPricingModelsusingDr.Damodaran'sandtheExPostequityriskpremiums.

Page |C -4 Indicated Rate of Equity


Gas Transmission Pipeline 2017 Capitalization Rate Study
January 2, 2017, Assessment

DirectRateandGrowth

Capital
Rate Composite
Structure
DebtComponent 39.00% 4.85% 1.89%
EquityComponent 61.00% 8.55% 5.22%
DirectRate 7.11%

GasTransmissionDirectRate 7.11%

YieldRate 8.96%
DirectRate 7.11%
ImpliedIndustryGrowthRate 1.85%

Page |C -5 Direct Rate and Growth


Gas Transmission Pipeline 2017 Capitalization Rate Study
January 2, 2017, Assessment

CapitalAssetPricingModel(CAPM)

CAPMModel
ExAnte,3Stage Dr.Damodaran
2 3
ExPost SupplySide DividendGrowth EquityRisk Duff&Phelps6
4 5
Model Premium
Equityriskpremium 6.94% 5.97% 5.53% 5.69% 5.50%
xIndustryBeta 1.10 1.10 1.10 1.10 1.10
=IndustryRiskPremium 7.63% 6.57% 6.08% 6.26% 6.05%

+RiskFreeRate1 2.79% 2.79% 2.79% 2.79% 3.50%

=IndicatedEquityRate 10.42% 9.36% 8.87% 9.05% 9.55%


RoundedIndicatedEquityRate 10.42% 9.36% 8.87% 9.05% 9.55%

Notes:
1 USTreasury20yearCouponBondYield,December30,2016
2 Longhorizonexpectedequityriskpremium(historical),2016ValuationHandbookGuidetoCostofCapital
3 Longhorizonexpectedequityriskpremium(supplyside),2016ValuationHandbookGuidetoCostofCapital
4 3StageDividendGrowthModel,S&P500,SeeExhibit,ExAnteCalculation
5 ImpliedEquityRiskPremiumonJanuary1,2016asdeterminedbyDr.AswathDamodaran;http://pages.stern.nyu.edu/~adamodar/
6 Duff&Phelpsrecommendedequityriskpremium(conditional):TheDuff&PhelpsrecommendedERPwasdevelopedinrelationto(andshouldbeusedin
conjunctionwith)a4.0%normalizedriskfreerate.2016ValuationHandbookGuidetoCostofCapital

Page | C-6 Capital Asset Pricing Model


Gas Transmission Pipeline 2017 Capitalization Rate Study
January 2, 2017, Assessment

EmpiricalCapitalAssetPricingModel(ECAPM)

ECAPMModel
ExAnte,3Stage Dr.Damodaran
2 3
ExPost SupplySide DividendGrowth EquityRisk Duff&Phelps6
4 5
Model Premium
Equityriskpremium 6.94% 5.97% 5.53% 5.69% 5.50%
xIndustryBeta 1.10 1.10 1.10 1.10 1.10
x75% 75% 75% 75% 75% 75%
=IndustryRiskPremium(weighted) 5.73% 4.93% 4.56% 4.69% 4.54%

Equityriskpremium 6.94% 5.97% 5.53% 5.69% 5.50%


x25% 25% 25% 25% 25% 25%
=EquityRiskPremium(weighted) 1.74% 1.49% 1.38% 1.42% 1.38%

+RiskFreeRate1 2.79% 2.79% 2.79% 2.79% 3.50%

=IndicatedEquityRate 10.25% 9.21% 8.73% 8.91% 9.41%


RoundedIndicatedEquityRate 10.25% 9.21% 8.73% 8.91% 9.41%

Notes:
1 USTreasury20yearCouponBondYield,December30,2016
2 Longhorizonexpectedequityriskpremium(historical),2016ValuationHandbookGuidetoCostofCapital
3 Longhorizonexpectedequityriskpremium(supplyside),2016ValuationHandbookGuidetoCostofCapital
4 3StageDividendGrowthModel,S&P500,SeeExhibit,ExAnteCalculation
5 ImpliedEquityRiskPremiumonJanuary1,2016asdeterminedbyDr.AswathDamodaran;http://pages.stern.nyu.edu/~adamodar/
6 Duff&Phelpsrecommendedequityriskpremium(conditional):TheDuff&PhelpsrecommendedERPwasdevelopedinrelationto(andshould
beusedinconjunctionwith)a4.0%normalizedriskfreerate.2016ValuationHandbookGuidetoCostofCapital

Page | C-7 ECAPM


Gas Transmission Pipeline 2017 Capitalization Rate Study
January 2, 2017, Assessment

DividendGrowthModel

Current Growth
IndicatedCost
Company Dividend Estimate,
ofEquity
Yield(DY) Next5Years
BoardwalkPipelinePartnersLP 2.30% 15.30% 17.60%
EnterpriseProductsPartnersLP 6.30% 5.67% 11.97%
TCPipeLinesLP 6.90% 6.00% 12.90%
WilliamsPartnersLP 9.10% 4.00% 13.10%

Mean 6.15% 7.74% 13.89%


Median 6.60% 5.84% 13.00%

DividendGrowthModel,IndicatedRate 13.45%

Weplacedequalrelianceonthemeanandmedianwhenselectingtheindicatedrate.

Notes:
DividendYieldprovidedbyValueLine
GrowthEstimates,Next5YearsforEarningsprovidedYahoo!Finance
KinderMorganInc.andWilliamsPartnersLParenotincludedintheabovecalculation(eventhoughtheyareshown)because
analysts'estimateswerenotavailable.
ONEOKPartners,L.P.isnotincludedintheabovecalculationbecausetheyareconsideredanoutlier.

WeremovedONEOKPartnersLPandKinderMoganInc.becausetheyareoutliers:

KinderMorganInc. 2.30% 0.50% 1.80%


ONEOKPartnersLP 7.50% 29.74% 37.24%

Page | C-8 Dividend Growth Model


Gas Transmission Pipeline 2017 Capitalization Rate Study
January 2, 2017 Assessment

MultiStageDividendGrowthModel
KE=(D1/P0)+0.67(G1)+0.33(g)
Where:
KECostofEquity G1GrowthEstimate,nextfiveyears
D1/P0DividendYield gStableGrowth

G1Growth
D1/P0 gStable
Company Estimate,next 0.67xG1 .33xg KECostofEquity
DividendYield Growth
fiveyears
BoardwalkPipelinePartnersLP 2.30% 15.30% 4.60% 10.25% 1.52% 14.07%
EnterpriseProductsPartnersLP 6.30% 5.67% 4.60% 3.80% 1.52% 11.62%
TCPipeLinesLP 6.90% 6.00% 4.60% 4.02% 1.52% 12.44%
WilliamsPartnersLP 9.10% 4.00% 4.60% 2.68% 1.52% 13.30%
Mean 12.86%
Median 12.87%
MultiStageDGM,IndicatedRate 12.87%
Weplacedequalrelianceonthemeanandmediantoarriveattheindicatedrate.

Notes:
DividendYieldprovidedbyValueLine
GrowthEstimates,Next5YearsforEarningsprovidedYahoo!Finance

Weremovedthebelowtwocompaneisasoutliers.
KinderMorganInc. 2.30% 0.50% 4.60% 0.34% 1.52% 3.48%
ONEOKPartnersLP 7.50% 29.74% 4.60% 19.93% 1.52% 28.94%

Page | C-9 Multi-Stage Dividend Growth Model


Gas Transmission Pipeline 2017 Capitalization Rate Study
January 2, 2017, Assessment

EquityComponentoftheDirectRate
ValueLine
Company
P/ERatio
BoardwalkPipelinePartnersLP 15.30
EnterpriseProductsPartnersLP 19.10
ONEOKPartnersLP 17.50
TCPipeLinesLP 13.20 *
WilliamsPartnersLP 26.90

Mean 18.40
Median 17.50
SelectedPricetoEarnings(P/E)Ratio 18.00

SelectedMarginalTaxRate 35.00%

SelectedP/ERatiox(1SelectedMarginalTaxRate) 11.70

IndicatedEquityComponentoftheDirectRate 8.55%

Weplacedequalrelianceonthemeanandmedianpricetoearningsratio.

Notes:
KinderMorganInc.wasremovedfromthisanalysisasitisacoproration,notapartnershipastheotherguidlinecompanies.The
P/Eratioisaffectedbythetaxtreatmentofthecorporateorganization.

ThePricetoEarningsRatiowasdownloadedfromValueLine.
*TrailingP/ERatio

TheearningcomponentoftheaboveP/Eratioshavenotbeenadjustedforincometaxes.WehaveadjustedtheselectedP/Eratio
forincometaxesbymultiplyingtheselectedP/Eratioby1minustheselectedmarginaltaxrate.

Page | C-10 Direct Equity Component


Gas Transmission Pipeline 2017 Capitalization Rate Study
January 2, 2017, Assessment

BetaAnalysis
Company Beta
BoardwalkPipelinePartnersLP 0.85
EnterpriseProductsPartnersLP 1.15
KinderMorganInc. 1.25
ONEOKPartnersLP 1.05
TCPipeLinesLP 1.00
WilliamsPartnersLP 1.35

BetaMean 1.11
BetaMedian 1.10
UnleveredandReleveredMean* 1.11
IndicatedBeta 1.10

Weconsideredthemeanandmedian,placingmorerelianceonthemedianwhenselectingtheindicatedbeta.We
unleveredandreleveredthebetas(seetheUneleveringReleveringBetapage).However,theincometaxdataisnot
reliableforthismarketsegmentandwedidnotgiveweighttotheunleveredreleveredmean.

Notes:
* SeetheUnleveringReleveringBetapageforthecalculation

Page | C-11 Beta Analysis


Gas Transmission Pipeline 2017 Capitalization Rate Study
January 2, 2017, Assessment

Unlevering/ReleveringBetas
ValueLine CapitalStructureTabofCapRate CapitalStructureTabofCapRate ValueLine Formula
ActualIncomeTax ActualDebtinCapital ActualEquityinCapital LeveredBeta UnleveredBeta
UnleveringofBetas Rate Structure Structure (Published)
BoardwalkPipelinePartnersLP 0.50% 45.62% 54.38% 0.85 0.46
EnterpriseProductsPartnersLP 0.50% 28.15% 71.85% 1.15 0.83
KinderMorganInc. 16.00% 42.73% 57.27% 1.25 0.77
ONEOKPartnersLP 1.50% 35.77% 64.23% 1.05 0.68
TCPipeLinesLP 0.00% 34.39% 65.61% 1.00 0.66
WilliamsPartnersLP 1.00% 45.94% 54.06% 1.35 0.73
Average 1.11

Formula CapitalStructureTabofCapRate CapitalStructureTabofCapRate Formula


CompositeIncome DebtinCapitalStructure EquityinCapitalStructure LeveredBeta
ReleveringofBetas
TaxRate
BoardwalkPipelinePartnersLP 3.25% 39.00% 61.00% 0.74
EnterpriseProductsPartnersLP 3.25% 39.00% 61.00% 1.34
KinderMorganInc. 3.25% 39.00% 61.00% 1.25
ONEOKPartnersLP 3.25% 39.00% 61.00% 1.10
TCPipeLinesLP 3.25% 39.00% 61.00% 1.07
WilliamsPartnersLP 3.25% 39.00% 61.00% 1.18
Average 1.11

Page | C-12 Unlevering Relevering Betas


Gas Transmission Pipeline 2017 Capitalization Rate Study
January 2, 2017 Assessment

DebtRatingAnalysis
Yieldto
Maturity S&P Coupon 52Week 52Week Sales Current
Company Ticker CUSIP Issue Callable Maturity
Date Industry % LowPrice HighPrice Price Yield
%

EnterpriseProdsOper GtdFixed
N/A 293791AP4 10/15/2034 Yes N/A 6.65 4.79 N/A 0 121.89 5.45
LP RtSrNt

JrSubNt
EnterpriseProdsOper
N/A 293791AV1 Fixed/fltg 8/1/2066 Yes N/A 4.74 4.78 94.05 94.05 99.25 4.77
LP
Rate
KinderMorganEnergy
N/A 494550AJ5 Nt 3/15/2031 Yes N/A 7.4 5.4 N/A 0 119.47 6.19
Partners
KinderMorganEnergy
N/A 494550AL0 Nt 3/15/2032 Yes N/A 7.75 5.29 121.95 121.95 125.25 6.18
Partners
KinderMorganEnergy 494550AQ
N/A SrNt 8/15/2033 Yes N/A 7.3 5.51 N/A 0 119.09 6.12
Partners 9
KinderMorganEnergy 494550AW
N/A SrNt 1/15/2038 Yes N/A 6.95 5.52 N/A 0 117.57 5.91
Partners 6
KinderMorganEnergy
N/A 494550AV8 SrNt 2/1/2037 Yes N/A 6.5 5.59 N/A 0 110.73 5.86
Partners
ONEOKInc. OKE 682680AB9 Deb 10/1/2028 Yes N/A 6.88 5.85 109 109 108.50 6.33

ONEOKInc. OKE 682680AN3 FxdRtNt 6/15/2035 Yes N/A 6 5.53 N/A 0 105.25 5.7

SrInsd
ONEOKInc. OKE 682680AA1 Quarterly 9/30/2028 Yes N/A 6.5 6.69 98.61 98.61 98.47 6.6
Nt
SrInsd
ONEOKInc. OKE 682680AD5 Quarterly 2/1/2019 Yes N/A 6.4 6.39 N/A 0 100.00 6.4
Nt
68268NAC
ONEOKPartnersLP OKS GtdSrNt 10/1/2036 Yes N/A 6.65 5.14 113.06 113.06 118.42 5.61
7

Page | C-13 Debt Rating Analysis


Gas Transmission Pipeline 2017 Capitalization Rate Study
January 2, 2017 Assessment
Williams
CompaniesInc. WMB 969457BG4 Nt 9/1/2021 Yes N/A 7.88 4.1 114.25 114.25 115.31 6.82

Williams 969457AW FixedRt


WMB 7/15/2019 Yes N/A 7.62 3.83 108 108 108.50 7.02
CompaniesInc. 0 Nt
Williams
WMB 969457BD1 SrNt 6/15/2031 Yes N/A 7.75 5.83 114 114 118.38 6.54
CompaniesInc.
Williams
WMB 969457BB5 DebSerA 1/15/2031 Yes N/A 7.5 5.67 112.75 112.75 117.38 6.38
CompaniesInc.
Williams 969457BM
WMB Nt 3/15/2032 Yes N/A 8.75 5.88 120.75 120.75 128.38 6.81
CompaniesInc. 1
Williams
WMB 969457AH3 Deb 7/15/2020 No N/A 10.25 N/A N/A 0 N/A N/A
CompaniesInc.
Williams
WMB 969457AK6 Deb 11/15/2021 No N/A 9.38 N/A N/A 0 N/A N/A
CompaniesInc.

Mean 5.40 Mean 6.16

Median 5.52 Median 6.19

Companiesnotavailable:
BoardwalkPipelinePartnersLP
EnterpriseProductsPartnersLP
KinderMorganInc.
TCPipeLinesLP
WilliamsPartnersLP

Companiesnotusedasguidelinecompanies:
EnergyTransfer
ETP 29273RAF6 SrNt 10/15/2036 Yes N/A 6.62 5.51 108 108 113.15 5.85
PartnersLP
SpectraEnergyPartners
NotAvailable
LP
SunocoLogistics
NotAvailable
PartnersLP

DatacompiledfromS&PCapitalIQMcGrawHillFinancialonMarch6,2017

Page | C-14 Debt Rating Analysis


Gas Transmission Pipeline 2017 Capitalization Rate Study
January 2, 2017 Assessment

CalculationofMarkettoBookRatiosfortheGasTransmissionMarketSegment
December31,2016calendaryearinformationfortheJanuary2,2017Assessment
Amarkettobookratiooveronewouldbeanindicationofnoobsolescence.
MarketValueestimatesforCommonEquityarefromValueLine.MarketValueEstimatesforLongTermDebtarefromthecompany'sAnnualReportor10K.
BookValueamountsarefromthecompany'sbalancesheetaslistedinthe10KorAnnualReport

MarkettoBookRatioforEquity
MarketValueof BookValueof MarkettoBook
Company Source
CommonEquity CommonEquity Ratio
BoardwalkPipelinePartnersLP 4,322,625,425 4,530,900,000 0.95 201610K,page45
EnterpriseProductsPartnersLP 53,909,536,466 22,266,000,000 2.42 201610K,page62
KinderMorganInc. 49,178,984,956 34,802,000,000 1.41 201610K,page77
ONEOKPartnersLP 12,013,276,531 6,177,820,000 1.94 201610K,page76
TCPipeLinesLP 3,617,046,000 1,146,000,000 3.16 201610K,pageF7
WilliamsPartnersLP 22,263,446,418 21,453,000,000 1.04 201610K,page86
Average 1.82

MarkettoBookRatioforDebt

MarketValueof
BookValueLong MarkettoBook
Company LongTermDebt Source
TermDebt Ratio
from10K
BoardwalkPipelinePartnersLP 3,709,200,000 3,558,900,000 1.04 201610K,page59
EnterpriseProductsPartnersLP 23,697,700,000 23,697,700,000 1.00 201610K,page62,F65
KinderMorganInc. 37,354,000,000 36,205,000,000 1.03 201610K,page101
ONEOKPartnersLP 7,100,000,000 6,698,957,000 1.06 201610K,page90
TCPipeLinesLP 1,908,000,000 1,867,000,000 1.02 201610K,pageF28
WilliamsPartnersLP 18,907,000,000 18,470,000,000 1.02 201610K,page124
Average 1.03

Page | C-15 Market to Book Ratios


Gas Transmission Pipeline 2017 Capitalization Rate Study
January 2, 2017 Assessment

ApplicationofCapitalStructureasdeterminedintheCapitalizationRateStudy

CapitalStructure MarkettoBook Composite


CommonEquity 61.00% 1.82 1.11
LongtermDebt 39.00% 1.03 0.40
OverallMarkettoBookRatio 1.51

Page | C-16 Market to Book Ratios


Fluid Transportation Pipeline Appendix D - Fluid 2017 Capitalization Rate Study
January 2, 2017, Assessment Transportation Pipeline

YieldRate
Capital
Rate Composite
Structure
LongTermDebt 36.00% 5.79% 2.08%
CommonEquity 64.00% 12.49% 7.99%
YieldRate 10.08%

FluidTransportationPipelineYieldRate 10.08%

Page | D -1 Yield Rate


Fluid Transportation Pipeline 2017 Capitalization Rate Study
January 2, 2017, Assessment

CapitalStructure
Valueof
ValueofLong Valueof TotalMarket %Long %Preferred %Common
Company Preferred
TermDebt CommonEquity Value TermDebt Equity Equity
Equity
BuckeyePartnersLP 3,826,900,000 N/A 9,164,932,142 12,991,832,142 29.46% N/A 70.54%
HollyEnergyPartnersLP 1,070,600,000 N/A 1,940,511,090 3,011,111,090 35.55% N/A 64.45%
MagellanMidstreamPartnersLP 4,073,500,000 N/A 15,666,977,742 19,740,477,742 20.64% N/A 79.36%
NuStarEnergyLP 3,153,000,000 N/A 3,778,316,040 6,931,316,040 45.49% N/A 54.51%
PlainsAllAmericanPipeline 9,634,000,000 N/A 13,313,919,802 22,947,919,802 41.98% N/A 58.02%

Mean 34.62% 65.38%


Median 35.55% 64.45%

IndicatedIndustryCapitalStructure 36.00% 64.00%

Weselectedthemediancapitalstructureastheindicatedcapitalstructure,roundingto36%debt,64%equity.

Notes:
DatadownloadedfromValueLine

Page | D - 2 Capital Structure


Fluid Transportation Pipeline 2017 Capitalization Rate Study
January 2, 2017, Assessment

IndicatedRateofDebt

LongTerm
Company DebtRating
DebtRate
BuckeyePartnersLP Baa3 4.85
HollyEnergyPartnersLP Ba3 7.21 *
MagellanMidstreamPartnersLP Baa1 4.85
NuStarEnergyLP Ba1 7.21 *
PlainsAllAmericanPipeline Baa3 4.85

Mean 5.79
Median 4.85

IndicatedRateofDebt 5.79%

Weusedthemeanwhenselectingtheindicatedrate.

IndustrialBondYieldAveragesfromMergentBondRecord,January2017Edition
IndustrialBondAverages,December2016

Mergent S&P YieldAvg


Aaa AAA
Aa1 AA+
Aa2 AA
Aa3 AA 4.13
A1 A+
A2 A
A3 A 4.29
Baa1 BBB+
Baa2 BBB
Baa3 BBB 4.85

Notes:
Notratedcompaniesorcompanieswho'sdebtratingwasnotavailablewereexcluded.

* ThesecompaniesareratedbelowtheMergentBondRecordBondYieldAverages.WeanalyzedtheMergent
BondRecord,January2017issue,forU.S.CorporateBondsthatwereconsideredbelowinvestmentgrade.We
determinedtheaverageBayieldtomaturityis7.21%.

Page | D - 3 Indicated Rate of Debt


Fluid Transportation Pipeline 2017 Capitalization Rate Study
January 2, 2017, Assessment

IndicatedRateofEquity
Model Rate
CAPMExPost 10.08%
CAPMSupplySide 9.06%
CAPMExAnte 8.60%
CAPMDamodaran 8.76%
CAPMDuff&Phelps 9.28%
EmpiricalCAPMExPost 9.99%
EmipricalCAPMSupplySide 8.98%
EmpiricalCAPMExAnte 8.53%
EmpiricalCAPMDamodaran 8.69%
EmpiricalCAPMDuff&Phelps 9.21%
DividendGrowthModel 15.55%
MultiStageDGM 14.31%
IndicatedRateofEquity 12.49%

Weestablishedarangeofacceptabilityforthecostofequitywithallavailablemodels.Weconsideredall
ofthedataandplacedthemostrelianceontheDividendGrowthModel,EarningsGrowth.The
departmentplacedsecondaryrelianceontheCapitalAssetPricingModelsusingDr.Damodaran'sandthe
ExPostequityriskpremiums.

Page | D - 4 Indicated Rate of Equity


Fluid Transportation Pipeline 2017 Capitalization Rate Study
January 2, 2017, Assessment

DirectRateandGrowth
Capital
Rate Composite
Structure
DebtComponent 36.00% 5.79% 2.08%
EquityComponent 64.00% 8.01% 5.13%
DirectRate 7.21%

FluidTransportationPipelineDirectRate 7.21%

YieldCapRate 10.08%
DirectCapRate 7.21%
ImpliedIndustryGrowthRate 2.87%

Page | D - 5 Direct Rate and Growth


Fluid Transportation Pipeline 2017 Capitalization Rate Study
January 2, 2017, Assessment

CapitalAssetPricingModel(CAPM)

CAPMModel
ExAnte,3Stage Dr.Damodaran
2 3
ExPost SupplySide DividendGrowth EquityRisk Duff&Phelps6
Model4 Premium5
Equityriskpremium 6.94% 5.97% 5.53% 5.69% 5.50%
xIndustryBeta 1.05 1.05 1.05 1.05 1.05
=IndustryRiskPremium 7.29% 6.27% 5.81% 5.97% 5.78%

+RiskFreeRate1 2.79% 2.79% 2.79% 2.79% 3.50%

=IndicatedEquityRate 10.08% 9.06% 8.60% 8.76% 9.28%


RoundedIndicatedEquityRate 10.08% 9.06% 8.60% 8.76% 9.28%

Notes:
1 USTreasury20yearCouponBondYield,December30,2016
2 Longhorizonexpectedequityriskpremium(historical),2016ValuationHandbookGuidetoCostofCapital
3 Longhorizonexpectedequityriskpremium(supplyside),2016ValuationHandbookGuidetoCostofCapital
4 3StageDividendGrowthModel,S&P500,SeeExhibit,ExAnteCalculation
5 ImpliedEquityRiskPremiumonJanuary1,2016asdeterminedbyDr.AswathDamodaran;http://pages.stern.nyu.edu/~adamodar/
6 Duff&Phelpsrecommendedequityriskpremium(conditional):TheDuff&PhelpsrecommendedERPwasdevelopedinrelationto(and
shouldbeusedinconjunctionwith)a4.0%normalizedriskfreerate.2016ValuationHandbookGuidetoCostofCapital

Page | D - 6 Capital Asset Pricing Model


Fluid Transportation Pipeline 2017 Capitalization Rate Study
January 2, 2017, Assessment

EmpiricalCapitalAssetPricingModel(ECAPM)

ECAPMModel
ExAnte,3Stage Dr.Damodaran
2 3
ExPost SupplySide DividendGrowth EquityRisk Duff&Phelps6
4 5
Model Premium
Equityriskpremium 6.94% 5.97% 5.53% 5.69% 5.50%
xIndustryBeta 1.05 1.05 1.05 1.05 1.05
x75% 75% 75% 75% 75% 75%
=IndustryRiskPremium(weighted) 5.47% 4.70% 4.35% 4.48% 4.33%

Equityriskpremium 6.94% 5.97% 5.53% 5.69% 5.50%


x25% 25% 25% 25% 25% 25%
=EquityRiskPremium(weighted) 1.735% 1.49% 1.38% 1.42% 1.38%

+RiskFreeRate1 2.79% 2.79% 2.79% 2.79% 3.50%

=IndicatedEquityRate 9.99% 8.98% 8.53% 8.69% 9.21%


RoundedIndicatedEquityRate 9.99% 8.98% 8.53% 8.69% 9.21%

Notes:
1 USTreasury20yearCouponBondYield,December30,2016
2 Longhorizonexpectedequityriskpremium(historical),2016ValuationHandbookGuidetoCostofCapital
3 Longhorizonexpectedequityriskpremium(supplyside),2016ValuationHandbookGuidetoCostofCapital
4 3StageDividendGrowthModel,S&P500,SeeExhibit,ExAnteCalculation
5 ImpliedEquityRiskPremiumonJanuary1,2016asdeterminedbyDr.AswathDamodaran;http://pages.stern.nyu.edu/~adamodar/
6 Duff&Phelpsrecommendedequityriskpremium(conditional):TheDuff&PhelpsrecommendedERPwasdevelopedinrelationto(andshould
beusedinconjunctionwith)a4.0%normalizedriskfreerate.2016ValuationHandbookGuidetoCostofCapital

Page | D - 7 ECAPM
Fluid Transportation Pipeline 2017 Capitalization Rate Study
January 2, 2017, Assessment

DividendGrowthModel
CurrentDividend GrowthEstimate, IndicatedCostof
Company
Yield Next5Years Equity
BuckeyePartnersLP 7.70% 8.11% 15.81%
HollyEnergyPartnersLP 7.30% 7.70% 15.00%
MagellanMidstreamPartnersLP 5.10% 6.77% 11.87%
PlainsAllAmericanPipeline 6.80% 13.28% 20.08%

Mean 6.73% 8.97% 15.69%


Median 7.05% 7.91% 15.41%

DividendGrowthModel,IndicatedRate 15.55%

Weplacedequalrelianceonthemeanandmediantoarriveattheindicatedrate.

Notes:
DividendYieldprovidedbyValueLine
GrowthEstimates,Next5YearsforEarningsprovidedYahoo!Finance

WeremovedNuStarEnergyLPasanoutlier:

NuStarEnergyLP 9.10% 7.60% 1.50%

Page | D - 8 Dividend Growth Model


Fluid Transportation Pipeline 2017 Capitalization Rate Study
January 2, 2017 Assessment

MultiStageDividendGrowthModel
KE=[(D1/P0)+0.67(G1)+0.33(g)]
Where:
KECostofEquity G1GrowthEstimate,nextfiveyears
D1/P0DividendYield gStableGrowth

G1Growth
D1/P0 gStable
Company Estimate,next 0.67xG1 .33xg KECostofEquity
DividendYield Growth
fiveyears
BuckeyePartnersLP 7.70% 8.11% 4.60% 5.43% 1.52% 14.65%
HollyEnergyPartnersLP 7.30% 7.70% 4.60% 5.16% 1.52% 13.98%
MagellanMidstreamPartnersLP 5.10% 6.77% 4.60% 4.54% 1.52% 11.15%
PlainsAllAmericanPipeline 6.80% 13.28% 4.60% 8.90% 1.52% 17.22%
Mean 14.25%
Median 14.31%

MultiStageDGM,IndicatedRate 14.31%

Weplacedthemostrelianceonthemediantoarriveattheindicatedrate.

Notes:
DividendYieldprovidedbyValueLine
GrowthEstimates,Next5YearsforEarningsprovidedYahoo!Finance

WeremovedNuStarEnergyLPasanoutlier:

NuStarEnergyLP 9.10% 7.60% 4.60% 5.09% 1.52% 5.53%

Page |D -9 Multi-Stage Dividend Growth Model


Fluid Transportation Pipeline 2017 Capitalization Rate Study
January 2, 2017, Assessment

EquityComponentoftheDirectRate

ValueLineP/E
Company
Ratio
BuckeyePartnersLP 15.10
HollyEnergyPartnersLP 18.30 *
MagellanMidstreamPartnersLP 19.30
NuStarEnergyLP 22.00 *
PlainsAllAmericanPipeline 21.10

Mean 19.16
Median 19.30
SelectedPricetoEarnings(P/E)Ratio 19.20

SelectedMarginalTaxRate 35.00%

P/ERatiox(1SelectedMarginalTaxRate) 12.48

IndicatedEquityComponentoftheDirectRate 8.01%

Weplacedequalrelianceonthemedianandmeanswhenselectingthepricetoearningsratio.

Notes:
ThePrice/EarningsRatiowasdownloadedfromValueLine.
*TrailingP/ERatio
TheearningcomponentoftheaboveP/Eratioshavenotbeenadjustedforincometaxes.Wehaveadjustedthe
selectedP/EratioforincometaxesbymultiplyingtheselectedP/Eratioby1minustheselectedmarginaltaxrate.

Page | D - 10 Direct Equity Component


Fluid Transportation Pipeline 2017 Capitalization Rate Study
January 2, 2017, Assessment

BetaAnalysis

Company Beta
BuckeyePartnersLP 1.05
HollyEnergyPartnersLP 0.90
MagellanMidstreamPartnersLP 1.05
NuStarEnergyLP 1.05
PlainsAllAmericanPipeline 1.25

BetaMean 1.06
BetaMedian 1.05
UnleveredandReleveredMean* 1.08
IndicatedBeta 1.05

Weconsideredthemeanandmedian,placingmorerelianceonthemedianwhenselectingtheindicatedbetagiven
thewiderangeofbetas.Weunleveredandreleveredthebetas(seetheUnleveringReleveringBetapage).
However,theincometaxdataisnotreliableforthismarketsegmentandwedidnotgivesignificantreliancetothe
unleveredreleveredmean.

Notes:
* SeetheUnleveringReleveringBetapageforthecalculation

Page | D - 11 Beta Analysis


Fluid Transportation Pipeline 2017 Capitalization Rate Study
January 2, 2017, Assessment

Unlevering/ReleveringBetas

ValueLine CapitalStructureTabofCapRate CapitalStructureTabofCapRate ValueLine Formula


UnleveringofBetas ActualIncomeTaxRate ActualDebtinCapitalStructure ActualEquityinCapitalStructure LeveredBeta(Published) UnleveredBeta
BuckeyePartnersLP 0.20% 29.46% 70.54% 1.05 0.74
HollyEnergyPartnersLP 0.20% 35.55% 64.45% 0.90 0.58
MagellanMidstreamPartners 0.50% 20.64% 79.36% 1.05 0.83
NuStarEnergyLP 4.60% 45.49% 54.51% 1.05 0.58
PlainsAllAmericanPipeline 7.00% 41.98% 58.02% 1.25 0.75
Average 1.06

Formula CapitalStructureTabofCapRate CapitalStructureTabofCapRate Formula


ReleveringofBetas CompositeIncomeTaxRate DebtinCapitalStructure EquityinCapitalStructure LeveredBeta
BuckeyePartnersLP 2.50% 36.00% 64.00% 1.15
HollyEnergyPartnersLP 2.50% 36.00% 64.00% 0.90
MagellanMidstreamPartners 2.50% 36.00% 64.00% 1.29
NuStarEnergyLP 2.50% 36.00% 64.00% 0.90
PlainsAllAmericanPipeline 2.50% 36.00% 64.00% 1.16
Average 1.08

Page | D - 12 Unlevering Relevering Betas


Fluid Transportation Pipeline 2017 Capitalization Rate Study
January 2, 2017, Assessment

DebtRatingAnalysis
Maturity S&P Coupon Yieldto 52Week 52Week Sales Current
Company Ticker CUSIP Issue Callable
Date Industry % Maturity% LowPrice HighPrice Price Yield
Fixed
BuckeyePartnersLP BPL 118230AE1 7/1/2017 Yes N/A 5.12 2.7 N/A 0 100.78 5.08
RtNts
MagellanMidstreamPartnersLP MMP 559080AC0 SrNt 5/1/2037 Yes N/A 6.4 4.98 118.07 118.07 117.81 5.43
PlainsAllAmernPipelineLP N/A 72650RAM4 SrNt 5/15/2036 Yes N/A 6.7 5.79 109.13 109.13 110.35 6.07

Mean 4.49 Mean 5.53

Median 4.98 Median 5.43


Companiesnotavailable:
HollyEnergyPartnersLP HEP
NuStarEnergyLP NS
PlainsAllAmericanPipeline PAA

NotUsingDuetoMerger
SunocoLogisticsPartnersLP SXL Notavailable
NtFully
Exchang
EnbridgeEnergyPartnersLP EEP 29250RAD8 6/1/2033 Yes N/A 5.95 5.92 96.23 96.23 100.21 5.93
edFrom
Cusip
FixedRt
EnbridgeEnergyPartnersLP EEP 29250RAG1 SrGbl 12/15/2034 Yes N/A 6.3 N/A N/A N/A N/A N/A
Nts

DatacompiledfromS&PCapitalIQMcGrawHillFinancialonMarch6,2017

Page | D - 13 Debt Rating Analysis


Fluid Transportation Pipeline 2017 Capitalization Rate Study
January 2, 2017, Assessment

CalculationofMarkettoBookRatiosfortheFluidTransportationMarketSegment
December31,2016calendaryearinformationfortheJanuary2,2017Assessment
Amarkettobookratiooveronewouldbeanindicationofnoobsolescence.
MarketValueestimatesforCommonEquityarefromValueLine.MarketValueEstimatesforLongTermDebtarefromthecompany's10K.
BookValueamountsarefromthecompany's10K.

MarkettoBookRatioforEquity
MarketValueof BookValueof MarkettoBook
Company Source
CommonEquity CommonEquity Ratio
BuckeyePartnersLP 9,164,932,142 4,698,423,000 1.95 201610K,page63
HollyEnergyPartnersLP 1,940,511,090 512,110,000 3.79 201610K,page86
MagellanMidstreamPartnersLP 15,666,977,742 2,092,105,000 7.49 201610K,page44
NuStarEnergyLP 3,778,316,040 1,611,617,000 2.34 201610K,page62
PlainsAllAmericanPipeline 13,313,919,802 8,816,000,000 1.51 201610K,page72
Average 3.42

MarkettoBookRatioforDebt
LongtermDebt
BookValueLongTerm MarkettoBook
Company MarketValue Source
Debt Ratio
from10K
BuckeyePartnersLP 4,333,488,000 4,217,695,000 1.03 201610K,page65
HollyEnergyPartnersLP 723,750,000 690,912,000 1.05 201610K,page73
MagellanMidstreamPartnersLP 4,262,321,000 4,087,192,000 1.04 201610K,page114
NuStarEnergyLP 3,084,762,000 3,014,364,000 1.02 201610K,page85
PlainsAllAmericanPipeline 10,300,000,000 10,124,000,000 1.02 201610K,pageF27
Average 1.03

Page | D - 14 Market to Book Ratios


Fluid Transportation Pipeline 2017 Capitalization Rate Study
January 2, 2017, Assessment

ApplicationofCapitalStructureasdeterminedintheCapitalizationRateStudy
CapitalStructure MarkettoBook Composite
CommonEquity 64.00% 3.42 2.19
LongtermDebt 36.00% 1.03 0.37
OverallMarkettoBookRatio 2.56

Page | D - 15 Market to Book Ratios


Class I Railroads and Other Railroads AppendixEClassIRailroads 2017 Capitalization Rate Study
January 2, 2017, Assessment andOtherRailroads

YieldRate
ClassIRailroads

Capital
Rate Composite
Structure
LongTermDebt 21.00% 4.85% 1.02%
CommonEquity 79.00% 10.31% 8.14%
YieldRate 9.16%

ClassIRailroadsYieldRate 9.16%

OtherRailroads

Capital
Rate Composite
Structure
LongTermDebt 31.00% 7.21% 2.24%
CommonEquity 69.00% 10.93% 7.54%
YieldRate 9.78%

OtherRailroadsYieldRate 9.78%

Page | E-1 Yield Rate


Class I Railroads and Other Railroads 2017 Capitalization Rate Study
January 2, 2017, Assessment

CapitalStructure
Valueof %Long
ValueofLong Valueof TotalMarket %Preferred %Common
Company Preferred Term
TermDebt CommonEquity Value Equity Equity
Equity Debt
CanadianNationalRailwayCo. 7,517,000,000 None 49,296,079,000 56,813,079,000 13.23% N/A 86.77%
CanadianPacificRailwayLimited 6,366,000,000 None 21,190,092,000 27,556,092,000 23.10% N/A 76.90%
CSXCorp. 9,888,000,000 None 32,323,533,000 42,211,533,000 23.42% N/A 76.58%
Genesee&Wyoming 1,977,600,000 None 4,439,969,271 6,417,569,271 30.82% N/A 69.18%
KansasCitySouthern 2,275,700,000 6,100,000 9,163,584,075 11,445,384,075 19.88% 0.05% 80.06%
NorfolkSouthernCorp. 9,555,000,000 None 30,531,318,936 40,086,318,936 23.84% N/A 76.16%
UnionPacificCorp. 15,205,000,000 None 81,677,783,136 96,882,783,136 15.69% N/A 84.31%

MeanAll 21.43% 0.05% 78.57%


MedianAll 23.10% 0.05% 76.90%
MeanClassI* 19.86% 0.05% 80.13%
MedianClassI* 21.49% 0.05% 78.48%
MeanOtherRailroads^ 30.82% N/A 69.18%
MedianOtherRailroads^ 30.82% N/A 69.18%

IndicatedIndustryCapitalStructure,ClassIRailroads 21.00% 79.00%

IndicatedIndustryCapitalStructure,OtherRailroads 31.00% 69.00%

WeplacedmorerelianceonthemediancapitalstructurewhenselectingtheindicatedcapitalstructureforClassIRailroads,roundingto21%debt,79%equity.
WeselectedthemeancapitalstructureastheindicatedcapitalstructureforOtherRailroads,roundingto31%debt,69%equity.

Notes:
DatadownloadedfromValueLine.
* DoesnotincludeGenesee&Wyoming.
^Genesee&Wyomingonly.

Page | E-2 Capital Structure


Class I Railroads and Other Railroads 2017 Capitalization Rate Study
January 2, 2017, Assessment

IndicatedRateofDebt
LongTerm
Company DebtRating
DebtRate
CanadianNationalRailwayCo. A2 4.29
CanadianPacificRailwayLimited Baa1 4.85
CSXCorp. Baa1 4.85
Genesee&Wyoming Ba2 7.21 **
KansasCitySouthern (P)Baa3 4.85
NorfolkSouthernCorp. Baa1 4.85
UnionPacificCorp. A3 4.29

MeanClassI* 4.66
MedianClassI* 4.85

IndicatedRateofDebt,ClassIRailroads 4.85%

IndicatedRateofDebt,OtherRailroads^ 7.21%

WeselectedthemedianastheindicatedrateofdebtforClassIRailroads.
WeselectedGenesee&Wyoming'slongtermdebtrateastheindicatedrateofdebtforOtherRailroads.

IndustrialBondYieldAveragesfromMergentBondRecord,January2017Edition
IndustrialBondAverages,December2016

Mergent S&P YieldAvg


Aaa AAA 4.06
Aa1 AA+
Aa2 AA
Aa3 AA 4.13
A1 A+
A2 A
A3 A 4.29
Baa1 BBB+
Baa2 BBB
Baa3 BBB 4.85

Notes:
*DoesnotincludeGenesee&Wyoming.
^Genesee&WyomingOnly.
**Genesee&WyomingisratedbelowtheMergentBondRecordBondYieldAverages.WeanalyzedtheMergentBond
Record,January2017issue,forU.S.CorporateBondsthatwereconsideredbelowinvestmentgrade.Wedeterminedthe
averageBayieldtomaturityis7.21%.

Page | E-3 Indicated Rate of Debt


Class I Railroads and Other Railroads 2017 Capitalization Rate Study
January 2, 2017, Assessment

IndicatedRateofEquity
ClassIRailroads

Model Rate
CAPMExPost 10.63%
CAPMSupplySide 9.54%
CAPMExAnte 9.04%
CAPMDamodaran 9.22%
CAPMDuff&Phelps 9.72%
EmpiricalCAPMExPost 10.41%
EmpiricalCAPMSupplySide 9.34%
EmpiricalCAPMExAnte 8.86%
EmpiricalCAPMDamodaran 9.03%
EmpiricalCAPMDuff&Phelps 9.54%
DGMDividendGrowth 11.85%
DGMEarningsGrowth 10.30%
MulitStageDGM 9.01%
IndicatedRateofEquity 10.31%

OtherRailroads

Model Rate
CAPMExPost 12.51%
CAPMSupplySide 11.15%
CAPMExAnte 10.53%
CAPMDamodaran 10.76%
CAPMDuff&Phelps 11.20%
EmpiricalCAPMExPost 11.81%
EmpiricalCAPMSupplySide 10.55%
EmpiricalCAPMExAnte 9.98%
EmpiricalCAPMDamodaran 10.19%
EmpiricalCAPMDuff&Phelps 10.65%
DGMDividendGrowth 11.85%
DGMEarningsGrowth 10.30%
MulitStageDGM 9.01%
IndicatedRateofEquity 10.93%

Weestablishedarangeofacceptabilityforthecostofequitywithallavailablemodels.Weconsideredallofthedataandplaced
themostrelianceontheDividendGrowthModel,EarningsGrowth.ThedepartmentplacedsecondaryrelianceontheCapital
AssetPricingModelsusingDr.Damodaran'sandtheExPostequityriskpremiums.

Page | E-4 Indicated Rate of Equity


Class I Railroads and Other Railroads 2017 Capitalization Rate Study
January 2, 2017, Assessment

DirectRateandGrowth
ClassIRailroads
Capital
Rate Composite
Structure
DebtComponent 21.00% 4.85% 1.02%
EquityComponent 79.00% 5.52% 4.36%
DirectRate 5.38%

ClassIRailroadsDirectRate 5.38%

YieldRate 9.16%
DirectRate 5.38%
EstimatedIndustryGrowthRate 3.78%

OtherRailroads

Capital
Rate Composite
Structure
DebtComponent 31.00% 7.21% 2.24%
EquityComponent 69.00% 5.46% 3.77%
DirectRate 6.00%

OtherRailroadsDirectRate 6.00%

YieldRate 9.78%
DirectRate 6.00%
EstimatedIndustryGrowthRate 3.78%

Page | E-5 Direct Rate and Growth


Class I Railroads and Other Railroads 2017 Capitalization Rate Study
January 2, 2017, Assessment

CapitalAssetPricingModel(CAPM)
ClassIRailroads

CAPMModel
ExAnte,3Stage Dr.Damodaran
2 3
ExPost SupplySide DividendGrowth EquityRisk Duff&Phelps6
4 5
Model Premium
Equityriskpremium 6.94% 5.97% 5.53% 5.69% 5.50%
xIndustryBeta 1.13 1.13 1.13 1.13 1.13
=IndustryRiskPremium 7.84% 6.75% 6.25% 6.43% 6.22%
1
+RiskFreeRate 2.79% 2.79% 2.79% 2.79% 3.50%

=IndicatedEquityRate 10.63% 9.54% 9.04% 9.22% 9.72%


RoundedIndicatedEquityRate 10.63% 9.54% 9.04% 9.22% 9.72%

Notes:
1 USTreasury20yearCouponBondYield,December30,2016
2 Longhorizonexpectedequityriskpremium(historical),2017ValuationHandbookGuidetoCostofCapital
3 Longhorizonexpectedequityriskpremium(supplyside),2017ValuationHandbookGuidetoCostofCapital
4 3StageDividendGrowthModel,S&P500,SeeExhibit,ExAnteCalculation
5 ImpliedEquityRiskPremiumonJanuary1,2017asdeterminedbyDr.AswathDamodaran;http://pages.stern.nyu.edu/~adamodar/
6 Duff&Phelpsrecommendedequityriskpremium(conditional):TheDuff&PhelpsrecommendedERPwasdevelopedinrelationto(and
shouldbeusedinconjunctionwith)a3.5%normalizedriskfreerate.2017ValuationHandbookGuidetoCostofCapital

Page | E-6 CAPM - Class I Railroads


Class I Railroads and Other Railroads 2017 Capitalization Rate Study
January 2, 2017, Assessment

CapitalAssetPricingModel(CAPM)
OtherRailroads

CAPMModel
ExAnte,3Stage Dr.Damodaran
2 3
ExPost SupplySide DividendGrowth EquityRisk Duff&Phelps6
4 5
Model Premium
Equityriskpremium 6.94% 5.97% 5.53% 5.69% 5.50%
xIndustryBeta 1.40 1.40 1.40 1.40 1.40
=IndustryRiskPremium 9.72% 8.36% 7.74% 7.97% 7.70%
1
+RiskFreeRate 2.79% 2.79% 2.79% 2.79% 3.50%

=IndicatedEquityRate 12.51% 11.15% 10.53% 10.76% 11.20%


RoundedIndicatedEquityRate 12.51% 11.15% 10.53% 10.76% 11.20%

Notes:
1 USTreasury20yearCouponBondYield,December30,2016
2 Longhorizonexpectedequityriskpremium(historical),2017ValuationHandbookGuidetoCostofCapital
3 Longhorizonexpectedequityriskpremium(supplyside),2017ValuationHandbookGuidetoCostofCapital
4 3StageDividendGrowthModel,S&P500,SeeExhibit,ExAnteCalculation
5 ImpliedEquityRiskPremiumonJanuary1,2017asdeterminedbyDr.AswathDamodaran;http://pages.stern.nyu.edu/~adamodar/
6 Duff&Phelpsrecommendedequityriskpremium(conditional):TheDuff&PhelpsrecommendedERPwasdevelopedinrelationto(and
shouldbeusedinconjunctionwith)a3.5%normalizedriskfreerate.2017ValuationHandbookGuidetoCostofCapital

Page | E-7 CAPM - Other Railroads


Class I Railroads and Other Railroads 2017 Capitalization Rate Study
January 2, 2017, Assessment

EmpiricalCapitalAssetPricingModel(ECAPM)
ClassIRailroads

ECAPMModel
ExAnte,3Stage Dr.Damodaran
2 3
ExPost SupplySide DividendGrowth EquityRisk Duff&Phelps6
Model4 Premium5
Equityriskpremium 6.94% 5.97% 5.53% 5.69% 5.50%
xIndustryBeta 1.13 1.13 1.13 1.13 1.13
x75% 75% 75% 75% 75% 75%
=IndustryRiskPremium(weighted) 5.88% 5.06% 4.69% 4.82% 4.66%

Equityriskpremium 6.94% 5.97% 5.53% 5.69% 5.50%


x25% 25% 25% 25% 25% 25%
=EquityRiskPremium(weighted) 1.74% 1.49% 1.38% 1.42% 1.38%

+RiskFreeRate1 2.79% 2.79% 2.79% 2.79% 3.50%

=IndicatedEquityRate 10.41% 9.34% 8.86% 9.03% 9.54%


RoundedIndicatedEquityRate 10.41% 9.34% 8.86% 9.03% 9.54%

Notes:
1 USTreasury20yearCouponBondYield,December30,2016
2 Longhorizonexpectedequityriskpremium(historical),2017ValuationHandbookGuidetoCostofCapital
3 Longhorizonexpectedequityriskpremium(supplyside),2017ValuationHandbookGuidetoCostofCapital
4 3StageDividendGrowthModel,S&P500,SeeExhibit,ExAnteCalculation
5 ImpliedEquityRiskPremiumonJanuary1,2017asdeterminedbyDr.AswathDamodaran;http://pages.stern.nyu.edu/~adamodar/
6 Duff&Phelpsrecommendedequityriskpremium(conditional):TheDuff&PhelpsrecommendedERPwasdevelopedinrelationto(andshould
beusedinconjunctionwith)a3.5%normalizedriskfreerate.2017ValuationHandbookGuidetoCostofCapital

Page | E-8 ECAPM - Class I Railroads


Class I Railroads and Other Railroads 2017 Capitalization Rate Study
January 2, 2017, Assessment

EmpiricalCapitalAssetPricingModel(ECAPM)
OtherRailroads

ECAPMModel
ExAnte,3Stage Dr.Damodaran
2 3
ExPost SupplySide DividendGrowth EquityRisk Duff&Phelps6
Model4 Premium5
Equityriskpremium 6.94% 5.97% 5.53% 5.69% 5.50%
xIndustryBeta 1.40 1.40 1.40 1.40 1.40
x75% 75% 75% 75% 75% 75%
=IndustryRiskPremium(weighted) 7.29% 6.27% 5.81% 5.97% 5.78%

Equityriskpremium 6.94% 5.97% 5.53% 5.69% 5.50%


x25% 25% 25% 25% 25% 25%
=EquityRiskPremium(weighted) 1.74% 1.49% 1.38% 1.42% 1.38%

+RiskFreeRate1 2.79% 2.79% 2.79% 2.79% 3.50%

=IndicatedEquityRate 11.81% 10.55% 9.98% 10.19% 10.65%


RoundedIndicatedEquityRate 11.81% 10.55% 9.98% 10.19% 10.65%

Notes:
1 USTreasury20yearCouponBondYield,December30,2016
2 Longhorizonexpectedequityriskpremium(historical),2017ValuationHandbookGuidetoCostofCapital
3 Longhorizonexpectedequityriskpremium(supplyside),2017ValuationHandbookGuidetoCostofCapital
4 3StageDividendGrowthModel,S&P500,SeeExhibit,ExAnteCalculation
5 ImpliedEquityRiskPremiumonJanuary1,2017asdeterminedbyDr.AswathDamodaran;http://pages.stern.nyu.edu/~adamodar/
6 Duff&Phelpsrecommendedequityriskpremium(conditional):TheDuff&PhelpsrecommendedERPwasdevelopedinrelationto(andshould
beusedinconjunctionwith)a3.5%normalizedriskfreerate.2017ValuationHandbookGuidetoCostofCapital

Page | E-9 ECAPM - Other Railroads


Class I Railroads and Other Railroads 2017 Capitalization Rate Study
January 2, 2017, Assessment

Dividend Growth Model

Proj Costof
CostofCapital
Current ProjEPS Dividend Capital
Dividend
Company Dividend GrowthRate Growth Earnings
GrowthDY
Yield(DY) 5Year(EG) Rate5Year Growth
+DG
(DG) DY+EG
CanadianNationalRailwayCo. 1.70% 9.50% 13.50% 11.20% 15.20%
CanadianPacificRailwayLimited 1.00% 12.50% 14.00% 13.50% 15.00%
CSXCorp. 2.10% 8.00% 9.50% 10.10% 11.60%
Genesee&Wyoming Nil 6.50% Nil
KansasCitySouthern 1.50% 9.00% 10.50% 10.50% 12.00%
NorfolkSouthernCorp. 2.30% 6.50% 4.00% 8.80% 6.30%
UnionPacificCorp. 2.20% 7.00% 9.50% 9.20% 11.70%

Mean 1.80% 8.75% 10.17% 10.55% 11.97%


Median 1.90% 8.50% 10.00% 10.30% 11.85%

DGMDividendGrowth,IndicatedRate 11.85%
DGMEarningsGrowth,IndicatedRate 10.30%

Weplacedmostrelainceonthemedianwhenselectingtheindicatedrategiventhewiderangeinvalues.

Notes:
DividendYieldprovidedbyValueLine.
Genesee&Wyomingisshownintheabovecalculation,butisnotincludedinthemean,medianormodel
becausetheydonotpaydividends.

Page | E-10 Dividend Growth Model


Class I Railroads and Other Railroads 2017 Capitalization Rate Study
January 2, 2017 Assessment

MultiStageDividendGrowthModel
KE=(D1/P0)+0.67(G1)+0.33(g)
Where:
KECostofEquity G1GrowthEstimate,nextfiveyears
D1/P0DividendYield gStableGrowth

G1Growth
D1/P0 gStable KECostof
Company Estimate,next 0.67xG1 .33xg
DividendYield Growth Equity
fiveyears
CanadianNationalRailwayCo. 1.70% 9.50% 4.60% 6.37% 1.52% 9.58%
CanadianPacificRailwayLimited 1.00% 12.50% 4.60% 8.38% 1.52% 10.89%
CSXCorp. 2.10% 8.00% 4.60% 5.36% 1.52% 8.98%
KansasCitySouthern 1.50% 9.00% 4.60% 6.03% 1.52% 9.05%
NorfolkSouthernCorp. 2.30% 6.50% 4.60% 4.36% 1.52% 8.17%
UnionPacificCorp. 2.20% 7.00% 4.60% 4.69% 1.52% 8.41%
Mean 9.18%
Median 9.01%
MultiStageDGM,IndicatedRate 9.01%

Weplacedthemostrelianceonthemediantoarriveattheindicatedrate.

Notes:
DividendYieldprovidedbyValueLine.
GrowthEstimates,Next5YearsforEarningsprovidedValueLine.

WeremovedGenesee&Wyomingbecausetheydonotpaydividends.

Genesee&Wyoming Nil 6.50% 4.60% 4.36% 1.52% N/A

Page | E-11 Multi-Stage Dividend Growth Model


Class I Railroads and Other Railroads 2017 Capitalization Rate Study
January 2, 2017, Assessment

EquityComponentoftheDirectRate,ClassIRailroads

ValueLine
Company
P/ERatio
CanadianNationalRailwayCo. 18.50
CanadianPacificRailwayLimited 16.80
CSXCorp. 18.30
KansasCitySouthern 17.90
NorfolkSouthernCorp. 17.70
UnionPacificCorp. 19.50

Mean 18.12
Median 18.10
SelectedPricetoEarnings(P/E)Ratio 18.10

IndicatedEquityComponentoftheDirectRate 5.52%

EquityComponentoftheDirectRate,OtherRailroads

ValueLine
Company
P/ERatio
CanadianNationalRailwayCo. 18.50
CanadianPacificRailwayLimited 16.80
CSXCorp. 18.30
Genesee&Wyoming 21.30
KansasCitySouthern 17.90
NorfolkSouthernCorp. 17.70
UnionPacificCorp. 19.50

Mean 18.57
Median 18.30
SelectedPricetoEarnings(P/E)Ratio 18.30

IndicatedEquityComponentoftheDirectRate 5.46%

WeplacedthemostrelianceonthemedianpricetoearningsratioforboththeClassIandOtherRailroads.

Notes:
ThePrice/EarningsRatiowasdownloadedfromValueLine.
*TrailingP/ERatio

Page | E-12 Direct Equity Component


Class I Railroads and Other Railroads 2017 Capitalization Rate Study
January 2, 2017, Assessment

BetaAnalysis
Company Beta
CanadianNationalRailwayCo. 1.00
CanadianPacificRailwayLimited 1.20
CSXCorp. 1.20
Genesee&Wyoming 1.40
KansasCitySouthern 1.15
NorfolkSouthernCorp. 1.10
UnionPacificCorp. 1.05

ClassIRailroads*
BetaMean 1.12
BetaMedian 1.13
UnleveredandReleveredMean^ 1.13
IndicatedBeta 1.13

OtherRailroads^^
BetaMean 1.40
BetaMedian 1.40
IndicatedBeta 1.40

WeplacedequalrelianceonthemeanandmedianwhenselectingtheindicatedbetaforbothClassIandOtherRailroads.

Notes:
* DoesnotincludeGenesee&Wyoming.

^SeetheUnleveringReleveringBetapageforthecalculation.
WedidnotunleverandreleverthebetaforOtherRailroadsasitisonlyGenesee&Wyoming.
^^Genesee&Wyomingonly

Page | E-13 Beta Analysis


Class I Railroads and Other Railroads 2017 Capitalization Rate Study
January 2, 2017, Assessment

Unlevering/ReleveringBetas
GuidelineCompaniesforClassIRailroads
ValueLine CapitalStructureTabofCapRate CapitalStructureTabofCapRate ValueLine Formula
ActualIncome ActualDebtinCapital ActualEquityinCapital LeveredBeta Unlevered
UnleveringofBetas
TaxRate Structure Structure (Published) Beta
CanadianNationalRailwayCo. 26.50% 13.23% 86.77% 1.00 0.90
CanadianPacificRailwayLimited 26.00% 23.10% 76.90% 1.20 0.98
CSXCorp. 37.00% 23.42% 76.58% 1.20 1.01
KansasCitySouthern 33.00% 19.88% 80.06% 1.15 0.99
NorfolkSouthernCorp. 38.00% 23.84% 76.16% 1.10 0.92
UnionPacificCorp. 37.50% 15.69% 84.31% 1.05 0.94
AverageBeta 1.12

Formula CapitalStructureTabofCapRate CapitalStructureTabofCapRate Formula


Composite
ReleveringofBetas DebtinCapitalStructure EquityinCapitalStructure LeveredBeta
IncomeTaxRate
CanadianNationalRailwayCo. 33.00% 21.00% 79.00% 1.06
CanadianPacificRailwayLimited 33.00% 21.00% 79.00% 1.15
CSXCorp. 33.00% 21.00% 79.00% 1.19
KansasCitySouthern 33.00% 21.00% 79.00% 1.17
NorfolkSouthernCorp. 33.00% 21.00% 79.00% 1.08
UnionPacificCorp. 33.00% 21.00% 79.00% 1.11
AverageBeta 1.13

Page | E-14 Unlevering Relevering Beta


Class I Railroads and Other Railroads 2017 Capitalization Rate Study
January 2, 2017, Assessment

DebtRatingAnalysis

Yieldto
Maturity S&P Coupon 52Week 52Week Sales Current
Company Ticker CUSIP Issue Callable Maturity
Date Industry % LowPrice HighPrice Price Yield
%
CanadianNationalRailwayCo. CNI 136375BD3 Nt 7/15/2028 Yes Railroads 6.9 3.34 132.85 132.85 133.39 5.17
PuttableReset
CanadianNationalRailwayCo. CNI 136375BE1 7/15/2018 No Railroads 6.71 N/A 134.35 134.35 134.99 4.97
SecsPurs
CanadianNationalRailwayCo. CNI 136375BA9 Nt 5/15/2023 Yes Railroads 6.8 1.69 107.53 107.53 106.99 6.35
CanadianNationalRailwayCo. CNI 136375AY8 Deb 7/15/2036 No Railroads 7.62 3.48 N/A 0 122.97 6.2
CSXCorp. CSX 126408GH0 Nt 10/1/2036 Yes Railroads 6 4.28 119.02 119.02 122.63 4.89
CSXCorp. CSX 126408GK3 FixedRtNt 5/1/2037 Yes Railroads 6.15 4.36 122.4 122.4 123.79 4.96
CSXCorp. CSX 126408GJ6 FixedRtNt 5/1/2017 Yes Railroads 5.6
CSXCorp. CSX 126408AQ6 Deb 9/15/2022 No Railroads 8.1 3.24 121.87 121.87 124.44 6.5
CSXCorp. CSX 126408AM5 Deb 5/15/2022 No Railroads 8.62 3.24 125.18 125.18 125.58 6.86
KansasCitySouthern KSU 485170AF1 FxdRtDeb 12/15/2025 Yes Railroads 7 N/A N/A N/A N/A N/A
NorfolkSouthernCorp. NSC 655844AV0 FixedRtSrNt 3/15/2105 Yes Railroads 6 5.06 115.17 115.17 118.31 5.07
NorfolkSouthernCorp. NSC 655844AK4 Nt 5/15/2097 Yes Railroads 7.9 5.43 143.02 143.02 144.79 5.45
NorfolkSouthernCorp. NSC 655844AX6 Nt 5/17/2029 Yes Railroads 5.64 3.92 114.42 114.42 116.52 4.84
NorfolkSouthernCorp. NSC 655844AW8 Nt 5/17/2025 Yes Railroads 5.59 3.48 114.06 114.06 114.95 4.86
NorfolkSouthernCorp. NSC 655844AF5 FixedRtNt 5/1/2037 Yes Railroads 7.05 4.45 135.04 135.04 134.37 5.24
NorfolkSouthernCorp. NSC 655844AQ1 FixedRtSrNt 2/15/2031 Yes Railroads 7.25 3.88 133.79 133.79 136.04 5.32
NorfolkSouthernCorp. NSC 655844AJ7 FixedRtNt 5/15/2027 Yes Railroads 7.8 3.7 133.52 133.52 134.57 5.79
NorfolkSouthernCorp. NSC 655844AE8 Nt 5/15/2017 Yes Railroads 7.7 1.33 102.3 102.3 101.35 7.59
NorfolkSouthernCorp. NSC 655844AA6 FixedRtNt 3/1/2021 No Railroads 9 3.51 0 120.34 7.47
UnionPacificCorp. UNP 907818CX4 FxdRtDeb 5/1/2037 Yes Railroads 6.15 4.23 123.25 123.25 125.76 4.89
UnionPacificCorp. UNP 907818CF3 Deb 2/1/2029 Yes Railroads 6.62 3.38 129.9 129.9 131.60 5.03
UnionPacificCorp. UNP 907818CW6 FxdRtNt 5/1/2017 Yes Railroads 5.65 1.48 101.53 101.53 100.72 5.6
UnionPacificCorp. UNP 907818CU0 SrNt 5/1/2034 Yes Railroads 6.25 4.03 125.76 125.76 127.31 4.9
UnionPacificCorp. UNP 907818BY3 Deb 2/1/2028 No Railroads 7.12 3.66 129.02 129.02 130.94 5.44

Mean 3.70 Mean 5.61


Median 3.79 Median 5.28
Companiesnotavailable:
Genesse&Wyoming
CanadianPacificRailwayLimited

DatacompiledfromS&PCapitalIQMcGrawHillFinancialonMarch1,2017

Page | E-15 Debt Rating Analysis


Class I Railroads and Other Railroads 2017 Capitalization Rate Study
January 2, 2017 Assessment

CalculationofMarkettoBookRatiosforRailroadMarketSegment
December31,2016calendaryearinformationfortheJanuary2,2017Assessment Amarkettobookratiooveronewouldbeanindicationofnoobsolescence.
MarketValueestimatesforCommonEquityarefromValueLine.MarketValueEstimatesforLongTermDebtarefromthecompany'sAnnualReportor10K.
BookValueamountsarefromthecompany'sbalancesheetaslistedinthe10KorAnnualReport

MarkettoBookRatioforEquity
MarketValueof
BookValueof MarkettoBook
Company CommonEquity Source
CommonEquity Ratio
fromValueLine
CanadianNationalRailwayCo. 49,296,079,000 11,053,576,800 ^ 4.46 2016FullYearFinancialsReport,page55
CanadianPacificRailwayLimited 21,190,092,000 3,445,444,800 ^ 6.15 2016AnnualReport,page98
CSXCorp. 32,323,533,000 11,694,000,000 2.76 201610K,page23
Genesee&Wyoming 4,439,969,271 3,187,121,000 1.39 201610K,pageF3
KansasCitySouthern 9,163,584,075 4,089,900,000 2.24 201610K,page52
NorfolkSouthernCorp. 30,531,318,936 12,409,000,000 2.46 201610K,pageK39
UnionPacificCorp. 81,677,783,136 19,932,000,000 4.10 201610K,page49
ClassIAverage* 3.90
OtherRailroadsAverage** 1.39

MarkettoBookRatioforDebt
MarketValueof
BookValueLong MarkettoBook
Company LongTermDebt Source
TermDebt Ratio
from10K
CanadianNationalRailwayCo. 9,000,163,200 ^ 8,145,877,600 ^ 1.10 2016FullYearFinancialsReport,page55
CanadianPacificRailwayLimited 7,433,848,800 ^ 6,467,843,200 ^ 1.15 2016AnnualReport,page117
CSXCorp. 12,096,000,000 11,293,000,000 1.07 201610K,page104
Genesee&Wyoming 2,303,531,000 2,359,453,000 0.98 201610K,pageF42
KansasCitySouthern 2,303,800,000 2,296,900,000 1.00 201610K,page44
NorfolkSouthernCorp. 11,626,000,000 10,112,000,000 1.15 201610K,pageK39
UnionPacificCorp. 15,900,000,000 15,000,000,000 1.06 201610K,page72
ClassIAverage* 1.08
OtherRailroadsAverage** 0.98

Page | E-16 Market to Book Ratios


Class I Railroads and Other Railroads 2017 Capitalization Rate Study
January 2, 2017 Assessment

ClassIRailroads
ApplicationofCapitalStructureasdeterminedintheCapitalizationRateStudy

CapitalStructure MarkettoBook Composite


CommonEquity 79.00% 3.90 3.08
LongtermDebt 21.00% 1.08 0.23
OverallMarkettoBookRatio 3.31

OtherRailroads
ApplicationofCapitalStructureasdeterminedintheCapitalizationRateStudy

CapitalStructure MarkettoBook Composite


CommonEquity 69.00% 1.39 0.96
LongtermDebt 31.00% 0.98 0.30
OverallMarkettoBookRatio 1.26

Notes:
CanadianDollarsconvertedtoU.S.Dollarsusing12/2016exchangerateof0.7448fromtheBankofCanada

Page | E-17 Market to Book Ratios


Ex Ante Calculation Appendix F - Ex Ante Calculation 2017 Capitalization Rate Study
January 2, 2017, Assessment
3 Stage Dividend Growth Model, Implied Equity Risk Premium

Implied Market Rate Range = 7.37% to 8.32%

Mean 7.84%
Median 7.84%

Market Rate Used 8.32%

(Less) Risk-Free Rate 2.79%

Equals Equity Risk Premium 5.53%

Assumptions:
Stages Years Growth Model 1 Model 2
1st Stage 1-5 years Constant @: 12.09% * 12.09% *

Linear
2nd Stage 6-15 years Linear from: 11.40% to 4.54% OR 11.40% to 3.17% from
Real Growth** Inflation^ 1st
3rd Stage 15 years -perpetuity GDP Growth: Real and Inflation 1.60% 2.80% + 1.57% to 1.74% Stage
to 3rd
Stage
GDP Growth^^: Real + Inflation 4.54% TO 3.17%

Model 1 Model 2
Impled Market Return 8.32% 7.37%

Model 1 Model 2
Year Starting Industry S & P 500 Starting Industry S & P 500
2016 Start Price $ (2,184.88) Start Price $ (2,184.88)
2017 Expected Dividends $ 49.09 Expected Dividends $ 49.09
2018 12.090% $ 55.02 1st Stage 12.090% $ 55.02
1st Stage
2019 12.090% $ 61.68 Growth 12.090% $ 61.68
Growth Rates
2020 12.090% $ 69.13 Rates 12.090% $ 69.13
2021 12.090% $ 77.49 12.090% $ 77.49
2022 11.40% $ 86.33 11.40% $ 86.33
2023 10.717% $ 95.58 10.580% $ 95.46
2024 10.031% $ 105.17 9.757% $ 104.78
2025 9.345% $ 115.00 8.934% $ 114.14
2nd Stage
2026 2nd Stage 8.658% $ 124.95 8.110% $ 123.40
Growth
2027 Growth Rates 7.972% $ 134.91 7.287% $ 132.39
Rates
2028 7.285% $ 144.74 6.463% $ 140.94
2029 6.599% $ 154.30 5.640% $ 148.89
2030 5.913% $ 163.42 4.817% $ 156.06
2031 5.226% $ 171.96 3.993% $ 162.30
2032 4.540% $ 179.77 3.170% $ 167.44
2033 4.540% $ 187.93 3.170% $ 172.75
2034 4.540% $ 196.46 3.170% $ 178.23
2035 4.540% $ 205.38 3.170% $ 183.88
2036 4.540% $ 214.70 3.170% $ 189.70
2037 4.540% $ 224.45 3.170% $ 195.72
2038 4.540% $ 234.64 3.170% $ 201.92
2039 4.540% $ 245.29 3.170% $ 208.32
2040 4.540% $ 256.43 3.170% $ 214.93
2041 4.540% $ 268.07 3.170% $ 221.74
2042 4.540% $ 280.24 3.170% $ 228.77
2043 4.540% $ 292.97 3.170% $ 236.02
2044 4.540% $ 306.27 3.170% $ 243.50
2045 4.540% $ 320.17 3.170% $ 251.22
2046 4.540% $ 334.71 3.170% $ 259.19
2047 4.540% $ 349.90 3.170% $ 267.40
2048 4.540% $ 365.79 3.170% $ 275.88
2049 4.540% $ 382.39 3.170% $ 284.62
2050 4.540% $ 399.76 3.170% $ 293.65
2051 4.540% $ 417.90 3.170% $ 302.96
2052 4.540% $ 436.88 3.170% $ 312.56
2053 4.540% $ 456.71 3.170% $ 322.47
2054 4.540% $ 477.45 3.170% $ 332.69
2055 4.540% $ 499.12 3.170% $ 343.24
2056 4.540% $ 521.78 3.170% $ 354.12
2057 4.540% $ 545.47 3.170% $ 365.34
2058 4.540% $ 570.24 3.170% $ 376.92
2059 4.540% $ 596.12 3.170% $ 388.87
2060 4.540% $ 623.19 3.170% $ 401.20
2061 4.540% $ 651.48 3.170% $ 413.92
2062 4.540% $ 681.06 3.170% $ 427.04
2063 4.540% $ 711.98 3.170% $ 440.57
2064 4.540% $ 744.30 3.170% $ 454.54
2065 4.540% $ 778.09 3.170% $ 468.95
2066 4.540% $ 813.42 3.170% $ 483.82
2067 4.540% $ 850.35 3.170% $ 499.15

Page |F -1 Ex Ante Calculation


Ex Ante Calculation 2017 Capitalization Rate Study
January 2, 2017, Assessment

2068 4.540% $ 888.95 3.170% $ 514.98


2069 4.540% $ 929.31 3.170% $ 531.30
2070 4.540% $ 971.50 3.170% $ 548.14
2071 4.540% $ 1,015.61 3.170% $ 565.52
2072 4.540% $ 1,061.72 3.170% $ 583.45
2073 4.540% $ 1,109.92 3.170% $ 601.94
2074 4.540% $ 1,160.31 3.170% $ 621.02
2075 4.540% $ 1,212.99 3.170% $ 640.71
2076 4.540% $ 1,268.06 3.170% $ 661.02
2077 4.540% $ 1,325.63 3.170% $ 681.97
2078 4.540% $ 1,385.81 3.170% $ 703.59
2079 4.540% $ 1,448.73 3.170% $ 725.90
2080 4.540% $ 1,514.50 3.170% $ 748.91
3rd Stage
2081 3rd Stage 4.540% $ 1,583.26 3.170% $ 772.65
Growth
2082 Growth Rates 4.540% $ 1,655.14 3.170% $ 797.14
Rates
2083 4.540% $ 1,730.28 3.170% $ 822.41
2084 4.540% $ 1,808.84 3.170% $ 848.48
2085 4.540% $ 1,890.96 3.170% $ 875.38
2086 4.540% $ 1,976.81 3.170% $ 903.13
2087 4.540% $ 2,066.55 3.170% $ 931.75
2088 4.540% $ 2,160.38 3.170% $ 961.29
2089 4.540% $ 2,258.46 3.170% $ 991.76
2090 4.540% $ 2,360.99 3.170% $ 1,023.20
2091 4.540% $ 2,468.18 3.170% $ 1,055.64
2092 4.540% $ 2,580.23 3.170% $ 1,089.10
2093 4.540% $ 2,697.38 3.170% $ 1,123.63
2094 4.540% $ 2,819.84 3.170% $ 1,159.25
2095 4.540% $ 2,947.86 3.170% $ 1,195.99
2096 4.540% $ 3,081.69 3.170% $ 1,233.91
2097 4.540% $ 3,221.60 3.170% $ 1,273.02
2098 4.540% $ 3,367.86 3.170% $ 1,313.38
2099 4.540% $ 3,520.76 3.170% $ 1,355.01
2100 4.540% $ 3,680.60 3.170% $ 1,397.96
2101 4.540% $ 3,847.70 3.170% $ 1,442.28
2102 4.540% $ 4,022.39 3.170% $ 1,488.00
2103 4.540% $ 4,205.01 3.170% $ 1,535.17
2104 4.540% $ 4,395.91 3.170% $ 1,583.84
2105 4.540% $ 4,595.49 3.170% $ 1,634.04
2106 4.540% $ 4,804.12 3.170% $ 1,685.84
2107 4.540% $ 5,022.23 3.170% $ 1,739.28
2108 4.540% $ 5,250.24 3.170% $ 1,794.42
2109 4.540% $ 5,488.60 3.170% $ 1,851.30
2110 4.540% $ 5,737.78 3.170% $ 1,909.99
2111 4.540% $ 5,998.28 3.170% $ 1,970.53
2112 4.540% $ 6,270.60 3.170% $ 2,033.00
2113 4.540% $ 6,555.29 3.170% $ 2,097.45
2114 4.540% $ 6,852.90 3.170% $ 2,163.94
2115 4.540% $ 7,164.02 3.170% $ 2,232.53
2116 4.540% $ 7,489.26 3.170% $ 2,303.30
2117 4.540% $ 7,829.28 3.170% $ 2,376.32
2118 4.540% $ 8,184.73 3.170% $ 2,451.65
2119 4.540% $ 8,556.31 3.170% $ 2,529.36
2120 4.540% $ 8,944.77 3.170% $ 2,609.55
2121 4.540% $ 9,350.86 3.170% $ 2,692.27
2122 4.540% $ 9,775.39 3.170% $ 2,777.61
2123 4.540% $ 10,219.19 3.170% $ 2,865.66
2124 4.540% $ 10,683.14 3.170% $ 2,956.50
2125 4.540% $ 11,168.16 3.170% $ 3,050.23
2126 4.540% $ 11,675.19 3.170% $ 3,146.92
2127 4.540% $ 12,205.25 3.170% $ 3,246.68
2128 4.540% $ 12,759.37 3.170% $ 3,349.60
2129 4.540% $ 13,338.64 3.170% $ 3,455.78
2130 4.540% $ 13,944.21 3.170% $ 3,565.33
2131 4.540% $ 14,577.28 3.170% $ 3,678.35
2132 Reversion`` $ 32.49 Reversion`` $ 20.55
Implied Market Return 8.32% Implied Market Return 7.37%

*S&P 500 Earnings and Estimate Report dated 1/26/2017, http://us.spindices.com/indices/equity/sp-500


**First Quarter 2017 Survey of Professional Forecasters - Philadelphia Federal Reserve Release Date 2/10/2017
^Inflation Range = Federal Reserve, Treasuries Inflation - Indexed
^^GDP Growth = Real growth + Inflation
Start Price is the S&P 500 Index -2016 4th quarter hi-low average downloaded from Yahoo! Finane
Expected Dividends from Political Calculations article, The Future for S&P 500 Dividends in 2017, Published 12/22/2016

``Reversion Calculation: ####### ##########


A. Last period's expected dividends, growth applied 15,239.09 3,794.95
B. Implied Market Risk Premum Less Long-Term Growth 3.78% 4.20%
C. A / B 403,488.93 90,392.10
D.C/((1+ImpliedMarketRiskPremium)^LastPeriod+1) 32.49 20.55

Page |F -2 Ex Ante Calculation


Guideline Companies 2017 Capitalization Rate Study

AppendixGGuidelineCompanies

GuidelineCompanyAddendumContents
TableofContents
Market Segment: Electric ....................................................................................................................................... 1
Companies Included in the Electric Market Segment ......................................................................................... 1
Companies Not Included in the Electric Market Segment ................................................................................ 10
Market Segment: Gas Distribution ....................................................................................................................... 29
Companies Included in the Gas Distribution Market Segment ......................................................................... 29
Companies Not Included in the Gas Distribution Market Segments ................................................................ 35
Market Segment: Gas Transmission Pipeline and Fluid Transportation Pipeline ................................................ 39
Companies Included in the Gas Transmission Pipeline Market Segment ........................................................ 39
Companies Included in the Fluid Transportation Pipeline Market Segment .................................................... 42
Companies Not Included in the Gas Transmission Pipeline or Fluid Transportation Market Segments.......... 46
Market Segment: Railroad, Class I and Other Railroads ...................................................................................... 87
Companies Included in the Railroad Market Segment...................................................................................... 87
Companies Not Included in the Railroad Market Segment............................................................................... 90

Note: The information below is verbatim from Value Line and the companys website.

MarketSegment:Electric
CompaniesIncludedintheElectricMarketSegment
ALLETE, Inc.
Company Summary from Value Line:
ALLETE, Inc. is the parent of Minnesota Power, which supplies electricity to 146,000 customers in northeastern
MN, & Superior Water, Light & Power in northwestern WI. Electric rev. breakdown: taconite
mining/processing, 26%; paper/wood products, 9%; other industrial, 8%; residential, 12%; commercial, 13%;
wholesale, 16% other, 16%. ALLETE Clean Energy owns renewable energy projects. Acqd U.S. Water
Services 2/15. Has real estate operation in FL. Generating sources: coal & lignite, 51%; wind, 11%; other, 3%;
purchased, 35%. Fuel costs: 22% of revs. 15 deprec. rate: 3.3%. Has 1,600 employees.
Additional Company Information from Website:
ALLETE's Minnesota Power electric utility serves 144,000 residents, 16 municipalities and some of the nation's
largest industrial customers. Other businesses include BNI Energy, delivers energy solutions in North Dakota;
ALLETE Clean Energy, a developer and operator of energy projects throughout the US with limited
environmental impact; Superior Water, Light & Power, serves electric, water and gas to residents in Superior,
Wisconsin; ALLETE Renewable Resources, which operates and maintains wind generation facilities in North
Page | G 1 Electric
Guideline Companies 2017 Capitalization Rate Study

Dakota; and U.S. Water Services, an integrated industrial water management company serving customers in
USA and Canada.1
Why was the company included?
This company is similar (and is one of) to the Electric Companies that the State Assessed Section is responsible
for valuing. The company engages in providing energy in the upper Midwest.
Alliant Energy Corp.
Company Summary from Value Line:
Alliant Energy Corp., formerly named Interstate Energy, is a holding company formed through the merger of
WPL Holdings, IES Industries, and Interstate Power. Supplies electricity, gas, and other services in Wisconsin,
Iowa, and Minnesota. Elect. revs. by state: WI, 44%; IA, 55%; MN, 1%. Elect. rev.: residential, 39%;
commercial, 24%; industrial, 30%; wholesale, 6%; other, 1%. Fuel sources, 2015: coal, 46%; gas, 19%; other,
35%. Fuel costs: 49% of revs. 2015 depreciation rate: 5.7%. Estimated plant age: 13 years. Has 4,070
employees.
Additional Company Information from Website:
We serve approximately 950,000 electric customers and 410,000 natural gas customers. We have approximately
4,000 employees. We are traded on the New York Stock Exchange under the ticker LNT.2
Why was the company included?
This company is similar (and is one of) to the Electric Companies that the State Assessed Section is responsible
for valuing. The company engages in providing energy in the upper Midwest.
Ameren Corporation
Company Summary from Value Line:
Ameren Corporation is a holding company formed through the merger of Union Electric and CIPSCO. Acqd
CILCORP 1/03; Illinois Power 10/04. Has 1.2 mill. electric and 127,000 gas customers in Missouri; 1.2 mill.
electric and 813,000 gas customers in Illinois. Discontinued nonregulated power-generation operation in 13.
Electric rev. breakdown: residential, 45%; commercial, 33%; industrial, 12%; other, 10%. Generating sources:
coal, 67%; nuclear, 23%; hydro, 4%; purchased & other, 6%. Fuel costs: 30% of revs. 15 reported deprec. rates:
3%-4%. Has 8,500 employees.
Additional Company Information from Website:
Ameren Corporation is a Fortune 500 company that trades on the New York Stock Exchange under the symbol
AEE. It is the parent company of Ameren Illinois, based in Collinsville, Ill., and Ameren Missouri in St. Louis.
Ameren Transmission Company, also based in St. Louis, designs and builds regional transmission projects.
Ameren was created by the combination of three Illinois utilities (CIPSCO Incorporated, CILCO Inc. and Illinois
Power Company) and Union Electric Company of St. Louis. The name comes from combining the words
American and Energy. Employing more than 8,500 personnel, Ameren powers the quality of life for 2.4 million
electric customers and more than 900,000 natural gas customers across a 64,000-square-mile area.

Ameren Missouri ranks as the largest electric power provider in Missouri, and Ameren Illinois ranks
as Illinois' third largest natural gas distribution operation in total number of customers. Ameren companies
generate a net capacity of nearly 10,200 megawatts of electricity and own more than 7,500 circuit miles of
transmission lines. Ameren's rates are some of the lowest in the nation.3

1 http://www.allete.com/OurBusinesses, Accessed 12/19/16


2 http://www.alliantenergy.com/AboutAlliantEnergy/CompanyInformation/index.htm, Accessed 12/19/16
3 https://www.ameren.com/about/facts, accessed 12/19/2016

Page | G - 2 Electric
Guideline Companies 2017 Capitalization Rate Study

Why was the company included?


This company is similar to the Electric Companies that the State Assessed Section is responsible for valuing.
The company engages in providing energy in the Midwest.
American Electric Power Company, Inc.
Company Summary from Value Line:
American Electric Power Company, Inc. (AEP), through 10 operating utilities, serves 5.4 mill. customers in
Arkansas, Kentucky, Indiana, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia, & West
Virginia. Electric rev. breakdown: residential, 40%; commercial, 23%; industrial, 19%; wholesale, 15%; other,
3%. Sold 50% stake in Yorkshire Holdings (British utility) 01; SEEBOARD (British utility) 02; Houston
Pipeline 05; commercial barge operation in 15. Generating sources not available. Fuel costs: 37% of revs. 15
reported deprec. rates (utility): 0.4%- 11.8%. Has 17,400 employees.
Additional Company Information from Website:
At AEP, we dedicate ourselves to providing reliable service and shareholder value, with continued focus on
safety. AEP is one of the largest electric utilities in the U.S., serving nearly 5.4 million customers in 11 states.
We own: A more than 40,000-mile electricity transmission network the largest in the nation; more 765-kilovolt
extra-high voltage transmission lines than all other U.S. transmission systems combined; and approximately
31,000 megawatts of generating capacity. Our major businesses include: Regulated Utility Operations - seven
regional electric utilities serving customers across 11 states; Transmission - the nation's strongest transmission
network, with a national vision for the nation's power grid; Power Generation - one of the nation's largest, most
efficient, and most innovative generation fleets; and AEP Energy Partners - providing electric supply to
customers in deregulated electricity markets.4

Why was the company included?


This company is similar to the Electric Companies that the State Assessed Section is responsible for valuing.
The company engages in providing energy in the Midwest.
Black Hills Corporation
Company Summary from Value Line:
Black Hills Corporation is a holding company for utilities that serve 207,000 electric customers in CO, SD, WY
and MT, and 1 million gas customers in NE, IA, KS, CO, WY, and AR. Mines coal & has a gas & oil E&P
business. Acqd Mallon Resources 3/03; Cheyenne Light 1/05; utility ops. from Aquila 7/08; SourceGas 2/16.
Discont. telecom in 05; oil marketing in 06; gas marketing in 11. Electric revenue breakdown: resl, 31%;
comml, 38%; indl, 16%; other, 15%. Generating sources: coal, 33%; other, 4%; purch., 63%. Fuel costs: 35%
of revs. 15 deprec. rate: 3.3%. Has 3,100 employees.
Additional Company Information from Website:
We are a growth-oriented, vertically integrated energy company with a mission of improving life with energy
and a vision to be the energy partner of choice. Based in Rapid City, South Dakota, the company serves 1.2
million natural gas and electric utility customers in eight states. The company's non-regulated businesses
generate wholesale electricity and produce natural gas, oil and coal.5

Why was the company included?


This company is similar to the Electric Companies that the State Assessed Section is responsible for valuing.
The company engages in providing energy in the Midwest.

4 https://www.aep.com/about/, accessed 12/19/2016


5 https://www.blackhillscorp.com/about, accessed on 12/19/2016

Page | G - 3 Electric
Guideline Companies 2017 Capitalization Rate Study

CenterPoint Energy, Inc.


Company Summary from Value Line:
CenterPoint Energy, Inc. is a holding company for Houston Electric, which serves 2.4 million customers in
Houston and environs, and gas utilities with 3.3 million customers in Texas, Minnesota, Arkansas, Louisiana,
and Oklahoma. Owns 55.4% of Enable Midstream Partners. Discontinued Texas Genco Holdings in 04. Electric
revenue breakdown: residential, 52%; commercial, 31%; industrial, 15%; other, 2%. Does not own generating
assets. Gas costs: 42% of revenues. 15 depreciation rate: 6.0%. Has 7,500 employees.
Additional Company Information from Website:
CenterPoint Energy, Inc., headquartered in Houston, Texas, is a domestic energy delivery company that includes
electric transmission & distribution, natural gas distribution and energy services operations. With more than
7,400 employees, CenterPoint Energy and its predecessor companies have been in business for more than 140
years.6 We sell and deliver natural gas to 3.2 million homes and businesses in Arkansas, Louisiana, Minnesota,
Mississippi, Oklahoma and Texas, including the high-growth areas of Houston and Minneapolis. We maintain
the wires, poles and electric infrastructure serving our 5,000-square-mile electric service territory in the Houston
metropolitan area. While our employees ensure the reliable delivery of power from power plants to homes and
businesses, we neither generate power nor sell it to customers. Our natural gas marketing business, CenterPoint
Energy Services (CES), sells non rate-regulated natural gas and related services to approximately 100,000
commercial, industrial and wholesale customers in 26 states. For over 80 years, HSP has provided heating and
cooling solutions for Minnesota homeowners. We proudly offer expert repair, along with service and
maintenance plans, and professional sales for both gas and electric equipment.7

Why was the company included?


This company is similar to the Electric Companies that the State Assessed Section is responsible for valuing.
The company serves an electric service territory in the Houston metropolitan area.
CMS Energy Corporation
Company Summary from Value Line:
CMS Energy Corporation is a holding company for Consumers Energy, which supplies electricity and gas to
lower Michigan (excluding Detroit). Has 1.8 million electric, 1.7 million gas customers. Has 1,034 megawatts of
nonregulated generating capacity. Sold Palisades nuclear plant in 07. Electric revenue breakdown: residential,
43%; commercial, 34%; industrial, 16%; other, 7%. Generating sources: coal, 44%; gas, 10%; other, 3%;
purchased, 43%. Fuel costs: 47% of revenues. 15 reported deprec. rates: 3.5% electric, 2.8% gas, 8.7% other.
Has 7,400 employees.
Additional Company Information from Website:
CMS Energy Corporations business strategy is focused primarily on its principal subsidiary, Consumers Energy
Company, Michigans largest electric and natural gas utility, serving 6.7 million of the states 10 million
residents. With our subsidiary, CMS Enterprises Company, we are also engaged in independent power
generation in several states. Our business also includes EnerBank USA, which specializes in providing
unsecured home improvement payment option programs for homeowners through nationwide dealer networks.8

Why was the company included?


This company is similar to the Electric Companies that the State Assessed Section is responsible for valuing.
The company serves an electric service territory in the Midwest.

6 http://www.centerpointenergy.com/en-us/corporate, accessed on 12/19/2016


7 http://www.centerpointenergy.com/en-us/corporate/about-us/company-overview,accessedon12/19/2016
8 http://www.cmsenergy.com/about-cms-energy/default.aspx, accessed 12/19/2016

Page | G - 4 Electric
Guideline Companies 2017 Capitalization Rate Study

DTE Energy Company


Company Summary from Value Line:
DTE Energy Company is a holding company for DTE Electric (formerly Detroit Edison), which supplies
electricity in Detroit and a 7,600-square-mile area in southeastern Michigan, and DTE Gas (formerly Michigan
Consolidated Gas). Customers: 2.1 mill. electric, 1.3 mill. gas. Has various nonutility operations. Electric
revenue breakdown: residential, 45%; commercial, 35%; industrial, 13%; other, 7%. Generating sources: coal,
67%; nuclear, 17%; gas, 1%; purchased, 15%. Fuel costs: 54% of revenues. 15 reported deprec. rates: 3.5%
electric, 2.6% gas. Has 10,000 employees.
Additional Company Information from Website:
DTE Energy (NYSE: DTE) is a Detroit-based diversified energy company involved in the development and
management of energy-related businesses and services nationwide. Its operating units include an electric utility
serving 2.2 million customers in Southeastern Michigan and a natural gas utility serving 1.2 million customers in
Michigan. The DTE Energy portfolio includes non-utility energy businesses focused on power and industrial
projects, natural gas pipelines, gathering and storage, and energy marketing and trading. As one of Michigan's
leading corporate citizens, DTE Energy is a force for growth and prosperity in the 450 Michigan communities it
serves in a variety of ways, including philanthropy, volunteerism and economic progress. Information about
DTE Energy is available on the DTE Energy home page, Twitter account and Facebook page. DTE Energy has
more than 10,000 employees in utility and non-utility subsidiaries involved in a wide range of energy-related
businesses. The company's growing non-utility businesses are built around the strengths, skills and assets of DTE
Energy's electric and gas utilities.9

Why was the company included?


This company is similar to the Electric Companies that the State Assessed Section is responsible for valuing.
The company serves an electric service territory in the Midwest.
Entergy Corporation
Company Summary from Value Line:
Entergy Corporation supplies electricity to 2.9 million customers through subsidiaries in Arkansas, Louisiana,
Mississippi, Texas, and New Orleans (regulated separately from Louisiana). Distributes gas to 200,000
customers in Louisiana. Has a nonutility subsidiary that owns six nuclear units (one no longer operating).
Electric revenue breakdown: residential, 38%; commercial, 27%; industrial, 26%; other, 9%. Generating sources:
gas, 35%; nuclear, 31%; coal, 7%; purchased, 27%. Fuel costs: 33% of revenues. 15 reported depreciation rate:
2.9%. Has 13,600 employees.
Additional Company Information from Website:
Entergy Corporation is an integrated energy company engaged primarily in electric power production and retail
distribution operations. Entergy owns and operates power plants with approximately 30,000 megawatts of
electric generating capacity, including nearly 10,000 megawatts of nuclear power. Entergy delivers electricity to
2.8 million utility customers in Arkansas, Louisiana, Mississippi and Texas. Entergy has annual revenues of
approximately $11.5 billion and more than 13,000 employees. Entergy Corporation is an integrated energy
company engaged primarily in electric power production and retail.10

9 https://www.newlook.dteenergy.com/wps/wcm/connect/dte-web/home/about-dte/common/about-dte/about-dte, accessed
12/21/2016
10 http://entergy.com/about_entergy/, accessed 12/21/2016

Page | G - 5 Electric
Guideline Companies 2017 Capitalization Rate Study

Why was the company included?


This company is similar to the Electric Companies that the State Assessed Section is responsible for valuing.
The company serves an electric service territory in Arkansas, Louisiana, Mississippi, and Texas.
MGE Energy, Inc.
Company Summary from Value Line:
MGE Energy Inc. is a holding company for Madison Gas and Electric, which provides electric service to
approximately 146,000 customers in a 316-square-mile area of Dane County and gas service to 152,000
customers in 1,682 square miles in seven counties in Wisconsin. Electric revenue breakdown, 15: residential,
33%; commercial, 53%; industrial, 5%; public authorities and other, 9%. Generating sources, 15: coal, 48%;
purchased power, 40%; natural gas and other, 12%. Fuel costs: 24% of revenues. 15 reported depreciation rate:
3.6%. Has 708 employees.
Additional Company Information from Website:
MGE Energy, a public utility holding company, is headquartered in the state capital Madison, Wis. MGE Energy
trades on NASDAQ with the stock ticker MGEE. MGE Energy is dedicated to long-term value for its
shareholders. We have increased our dividend for more than 40 consecutive years and have paid dividends for
more than 100 years. MGE Energy is the parent company of the following: Madison Gas and Electric Company
(MGE) provides natural gas and electric service in south-central and western Wisconsin. MGE Transco
Investment, LLC owns interest in the American Transmission Company. MGE Power owns assets in the West
Campus Cogeneration Facility in Madison, Wis. and the Elm Road Generating Station in Oak Creek, Wis.
MAGAEL, LLC holds title to properties acquired for future utility plant expansion. Central Wisconsin
Development Corporation promotes business grown in MGE's service area. MGE Services, LLC provides
construction and other services. Its subsidiary NGV Fueling Services, LLC, installs, owns and maintains
equipment used to fuel natural gas-powered vehicles.11

Why was the company included?


This company is similar to the Electric Companies that the State Assessed Section is responsible for valuing.
The company serves an electric service territory in Wisconsin.
NorthWestern Corporation
Company Summary from Value Line:
NorthWestern Corporation (doing business as NorthWestern Energy) supplies electricity & gas in the Upper
Midwest and Northwest, serving 416,000 electric customers in Montana and South Dakota and 277,000 gas
customers in Montana (83% of gross margin), South Dakota (15%), and Nebraska (2%). Electric revenue
breakdown: residential, 40%; commercial, 51%; industrial, 5%; other, 4%. Generating sources are not provided
by company. Fuel costs: 40% of revenues. 14 reported depreciation rate: 2.9%. Has 1,600 employees.
Additional Company Information from Website:
For more than 100 years, NorthWestern Energy has delivered the energy and exceptional service that our
customers and communities count on safely, efficiently and responsibly. We own and operate natural gas
production, transmission and distribution systems serving 279,200 customers. We own and operate a diverse
generation fleet of wind, water, natural gas and coal-fired resources* and the high-voltage transmission system
and distribution system that reliably delivers responsibly-produced electricity to more than 421,800 customers
daily. Our regulated electricity utility business in Montana includes generation, transmission and
distribution. Our service territory covers approximately 107,600 square miles or about 73% of Montanas land
area. Our South Dakota electric utility business operates as a vertically integrated generation transmission and
distribution utility. We have the exclusive right to serve an area in South Dakota comprised of 25 counties. Our

11 https://www.mgeenergy.com/about-us/about.htm, accessed 12/21/2016

Page | G - 6 Electric
Guideline Companies 2017 Capitalization Rate Study

regulated natural gas utility business in Montana includes production, storage transmission and
distribution. Since 2010, we have acquired gas production and gathering system assets as part of an overall
strategy to provide rate stability and customer value through the addition of regulated assets that are not subject
to market forces. We provide natural gas to 60 South Dakota communities and also transport natural gas for eight
gas-marketing firms and three large end-user accounts. In Nebraska we provide natural gas service to four
communities and transport natural gas for three gas-marketing firms and one end-user account.12
Why was the company included?
This company is located in the Electric Utility (West) Value Line Industry and operates in Montana, Wyoming,
South Dakota, and Nebraska with generating facilities in North Dakota and Iowa. We are limiting the guideline
companies for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are
located in or directly next to Minnesota. 15% of their gross margin is derived from South Dakota.
OGE Energy Corporation
Company Summary from Value Line:
OGE Energy Corp. is a holding company for Oklahoma Gas and Electric Company (OG&E), which supplies
electricity to 830,000 customers in Oklahoma (84% of electric revenues) and western Arkansas (8%); wholesale
is (8%). Owns 26.3% of Enable Midstream Partners. Electric revenue breakdown: residential, 41%; commercial,
24%; industrial, 16%; other, 19%. Generating sources: coal, 34%; gas, 30%; wind, 5%; purchased, 31%. Fuel
costs: 39% of revenues. 15 reported depreciation rate (utility): 2.9%. Has 2,600 employees.
Additional Company Information from Website:
OGE Energy Corp. (NYSE: OGE), is headquartered in Oklahoma City and is the parent company of Oklahoma
Gas and Electric Company (OG&E), a regulated electric utility serving more than 800,000 customers in
Oklahoma and western Arkansas. In addition, OGE holds 26.3 percent limited partner interest and 50 percent
general partner interest in Enable Midstream Partners, LP. OG&E serves more than 800,000 retail customers in
Oklahoma and western Arkansas, and a number of wholesale customers throughout the region. OG&E, with
about 6,800 megawatts of capacity, generates electricity from natural gas, western coal, and wind. OG&E's
electric transmission and distribution systems span 30,000 square miles.13

Why was the company included?


This company is similar to the Electric Companies that the State Assessed Section is responsible for valuing.
The company serves an electric service territory in Oklahoma and Arkansas.
Otter Tail Corporation
Company Summary from Value Line:
Otter Tail Corporation is the parent of Otter Tail Power Company, which supplies electricity to over 130,000
customers in Minnesota (50% of retail elec. revs.), North Dakota (41%), and South Dakota (9%). Electric rev.
breakdown, 15: residential, 32%; commercial & farms, 35%; industrial, 30%; other, 3%. Fuel costs: 15.5% of
revenues. Also has operations in manufacturing and plastics. 2015 depr. rate: 2.9%. Has 2,005 employees. Off.
and dir. own 1.6% of common stock; Cascade Investment, LLC, 9.1%; The Vanguard Group, 7.1%; BlackRock,
Inc., 5.4% (3/16 Proxy).
Additional Company Information from Website:
With offices in Fargo, North Dakota and Fergus Falls, Minnesota, Otter Tail Corporation is a growing company
with approximately $800 million in revenues and approximately 1,900 employees across several industries. Our
diversified operations include an electric utility and manufacturing businesses. Otter Tail Corporation delivers

12 http://www.northwesternenergy.com/our-company/about-us, accessed 12/22/2016


13 http://phx.corporate-ir.net/phoenix.zhtml?c=106374&p=irol-irhome, accessed 12/22/2016

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Guideline Companies 2017 Capitalization Rate Study

value by building strong electric utility and manufacturing platforms. For our shareholders we deliver above
average returns through operational excellence and growing our businesses. For our customers we commit to
quality and value in everything we do. For our employees we provide an environment of opportunity with
accountability where people are valued and empowered to do their best work.14

Why was the company included?


This company is similar to (and is one of) the Electric Companies that the State Assessed Section is responsible
for valuing. The company serves an electric service territory in the Midwest.
Vectren Corporation
Company Summary from Value Line:
Vectren is a holding company formed through the merger of Indiana Energy and SIGCORP. Supplies electricity
and gas to an area nearly two-thirds of the state of Indiana. Owns gas distribution assets in Ohio. Has a customer
base exceeding 1.1 million. 2014 Electricity revenues: residential, 37%; commercial, 27%; industrial, 35%;
other, 1%. 2014 Gas revenues: residential, 67%; commercial, 28%; other, 5%. Nonutility operations include
Infrastructure Services and Energy Services. Estd plant age: electric, 8 years. 14 depreciation rate: 4.8%. Has
5,500 employees.
Additional Company Information from Website:
Vectren Corporation is an energy holding company headquartered in Evansville, Ind. Vectren's wholly owned
subsidiary, Vectren Utility Holdings, Inc., serves as the intermediate holding company for three operating
utilities: Vectren Energy Delivery of Indiana - North (Vectren North), Vectren Energy Delivery of Indiana -
South (Vectren South) and Vectren Energy Delivery of Ohio (VEDO). Vectren North provides energy delivery
services to 570,000 natural gas customers located in central and southern Indiana. Vectren South provides energy
delivery services to 142,000 electric customers and 111,000 gas customers located in southwestern Indiana.
Vectren South also owns and operates electric generation to serve its electric customers and optimizes those
assets in the wholesale power market. VEDO provides energy delivery services to approximately 314,000
natural gas customers located in west central Ohio. Vectren's electric customers are served by a mixed portfolio
of 1,000 megawatts (MW) of coal-fired generation and up to 273 MW of gas-fired generation. Also, purchases
from the Ohio Valley Electric Corporation (OVEC) of up to 32 MW and additional load from the Midcontinent
Independent System Operator (MISO) power pool occasionally supplement Vectren load requirements.
Furthermore, interruptible load and demand side management initiatives can yield more than 60 MW of energy
savings to meet peak demand if needed. Vectren's Nonutility Group is involved in Infrastructure Services and
Energy Services. Infrastructure Services provides underground construction, repair, and replacement services
(Miller Pipeline and Minnesota Limited.) Energy Services provides energy performance contracting services and
renewable energy project development (Energy Systems Group).15

Why was the company included?


This company is similar to the Electric Companies that the State Assessed Section is responsible for valuing.
The company serves an electric service territory in Indiana and Ohio.
WEC Energy Group
Company Summary from Value Line:
WEC Energy Group, Inc. (formerly Wisconsin Energy) is a holding company for utilities that provide electric,
gas & steam service in WI & gas service in IL, MN, & MI. Customers: 1.6 mill. elec., 2.8 mill. gas. Acqd
Integrys Energy 6/15. Sold Point Beach nuclear plant in 07. Elec. rev. breakdown: residential, 35%; small

14 http://www.ottertail.com/about.cfm, accessed 12/22/2016


15 https://www.vectren.com/Corporate/About_Vectren.jsp, accessed 12/22/2016

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Guideline Companies 2017 Capitalization Rate Study

commercial & industrial, 31%; large commercial & industrial, 21%; other, 13%. Generating sources: coal, 52%;
gas, 16%; renewables, 3%; purchased, 29%. Fuel costs: 38% of revs. 15 reported deprec. rates (utility): 1.2%-
3.0%. Has 8,400 employees.
Additional Company Information from Website:
We are one of the nations largest electric and natural gas delivery companies, with deep operational expertise,
scale and financial resources to meet the regions future energy needs. We focus on reliable service, customer
satisfaction and shareholder value. Were privileged to provide vital services to nearly 4.4 million customers in
Wisconsin, Illinois, Michigan and Minnesota. Our scale and geographic proximity allow for operating
efficiencies across our 70,000 miles of electric distribution lines, 44,000 miles of natural gas distribution and
transmission lines, and 8,800 megawatts of reliable power plant capacity. Were committed to delivering world-
class reliability and the very best customer care anywhere. Our customers are at the heart of our business, and
we work every day to help grow and support the communities we serve. As a Fortune 500 company, we value
and develop our employees who are making a difference in a mission that matters.16

MILWAUKEE, June 29, 2015 /PRNewswire/ -- Wisconsin Energy Corporation announced today it has
completed the acquisition of Integrys Energy forming the WEC Energy Group (NYSE: WEC). 17

Why was the company included?


This company is similar to the Electric Companies that the State Assessed Section is responsible for valuing.
The company serves an electric service territory in the Midwest. This company completed an acquisition of
Integrys (operations in Minnesota) in June 2015.
Xcel Energy
Company Summary from Value Line:
Xcel Energy Inc. is the parent of Northern States Power, which supplies electricity to Minnesota, Wisconsin,
North Dakota, South Dakota & Michigan & gas to Minnesota, Wisconsin, North Dakota & Michigan; Public
Service of Colorado, which supplies electricity & gas to Colorado; & Southwestern Public Service, which
supplies electricity to Texas & New Mexico. Customers: 3.5 mill. electric, 1.9 mill. gas. Elec. rev. breakdown:
residential, 31%; sm. comml & indl, 36%; lg. comml & indl, 18%; other, 15%. Generating sources not
available. Fuel costs: 43% of revs. 15 reported depr. rate: 2.8%. Has 11,700 employees.
Additional Company Information from Website:
Xcel Energy provides the energy that powers millions of homes and businesses across eight Western and
Midwestern states, including Colorado, Michigan, Minnesota, New Mexico, North Dakota, South Dakota, Texas
and Wisconsin. Our workforce of more than 12,000 is rising to the challenge of a changing industryone that
requires us to be even more customer focused, forward thinking and productive. Together, we remain committed
to meeting our customers fundamental need for safe, reliable, affordable energy, but those needs are evolving.
We recognize that our customers and the communities we serve want more control over how their energy is
produced and how they use it. In anticipation of this expectation, Xcel Energy continues to offer innovative
solutions that give customers more options, help them manage their energy use and support their values. We are
a recognized industry leader in delivering renewable energy and reducing carbon and other emissions, efforts
that have put us on a path to a more sustainable energy future. Our business requires that we achieve the right
mix in all we docultivating the right talent, offering customers the right options, collaborating with
communities, investing for the future and protecting the environment. Headquartered in Minneapolis, Minn.,

16https://www.wecenergygroup.com/about/aboutus.htm, accessed 12/22/2016


17http://www.prnewswire.com/news-releases/wisconsin-energy-completes-acquisition-of-integrys-to-form-wec-energy-
group-300106090.html, accessed 12/22/2016

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Guideline Companies 2017 Capitalization Rate Study

Xcel Energy Inc.s operations include the activity of four wholly owned utility subsidiaries that serve electric
and natural gas customers in our eight states. These utility subsidiaries, referred to as operating companies, are
Northern States Power Company-Minnesota, Northern States Power Company-Wisconsin, Public Service
Company of Colorado and Southwestern Public Service Company. 18

Why was the company included?


This company is similar to (and is one of) the Electric Companies that the State Assessed Section is responsible
for valuing. The company serves an electric service territory in the Midwest and West.

CompaniesNotIncludedintheElectricMarketSegment
AES Corporation
Company Summary from Value Line:
AES Corp. has four LOB: contract generation, competitive supply, large utilities, and growth distribution. Contr.
gener. consists of multiple gener. facilities engaging in long-term contracts. The competitive supply unit consists
of gener. facil. that sell electricity in the spot market. The util. line is comprised of regulated electric comp. The
growth distrb. unit incl. utilities located in emerging economies. Lat. Amer. ops., 50% of 2015 revenues; North
Amer., 21%; MCAC, 17%; EMEA, 9%; Asia, 3%. Employs about 21,800. T. Rowe Price owns 16.0% of shs.;
BlackRock, 9.9%; Vanguard, 9.2%; Boston Partners, 6.3%, State St., 5.1% (3/16 proxy).

Additional Company Information from Website:


The AES Corporation (NYSE: AES) is a Fortune 200 global power company. We provide affordable, sustainable
energy to 17 countries through our diverse portfolio of distribution businesses as well as thermal and renewable
generation facilities. Our workforce of 21,000 people is committed to operational excellence and meeting the
worlds changing power needs. Our 2015 revenues were $15 billion and we own and manage $37 billion in total
assets.

We are dedicated to improving the lives of our customers by leveraging our energy solutions that encompass a
broad range of technologies and fuel types, including coal, diesel, gas, oil, pet coke and renewables. Our people
share a passion to help meet the worlds current and increasing energy needs, while providing communities and
countries the opportunity for economic growth due to the availability of reliable, affordable electric power.19
Why was the company not included?
This company is located in the Power Company Value Line Industry. We are limiting the guideline companies
for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are located in or
directly next to Minnesota.

18 https://www.xcelenergy.com/company/corporate_responsibility_report/who_we_are, accessed 12/22/2016


19 http://www.aes.com/about-us/about-us-overview/default.aspx, accessed 12/19/2016

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Guideline Companies 2017 Capitalization Rate Study

Avangrid, Inc.
Company Summary from Value Line:
AVANGRID, Inc., formerly Iberdrola USA, Inc., is a diversified energy and utility company with more than $30
billion in assets and operations in 25 states. It operates regulated utilities and electricity generation through two
primary lines of business: Avangrid Networks and Avangrid Renewables. The former group includes eight
electric and natural gas utilities, serving customers in New York and New England. The latter operates 6.3
gigawatts of electricity capacity, primarily through wind power, in the U.S. Fuel costs: 22% of 15 rev. Has 2.2
million elect., 1 million gas customers. Has 6,810 employees.

Additional Company Information from Website:


AVANGRID, Inc. (NYSE: AGR) is a diversified energy and utility company with more than $30 billion in
assets and operations in 25 states. The company operates regulated utilities and electricity generation through
two primary lines of business. Avangrid Networks includes eight electric and natural gas utilities, serving 3.1
million customers in New York and New England. Avangrid Renewables operates 6.3 gigawatts of electricity
capacity, primarily through wind power, in states across the United States. AVANGRID employs 7,000 people.
The company was formed by a merger between Iberdrola USA and UIL Holdings Corporation in 2015.
IBERDROLA S.A. (Madrid: IBE), a worldwide leader in the energy industry, owns 81.5% of AVANGRID.20

AVANGRID, Inc. (NYSE: AGR) is a U.S. based diversified energy and utility company with $30 billion in
assets and operations in 25 states, created through the merger of Iberdrola USA and UIL Holdings Corp. in
December 2015.21

Why was the company not included?


This company is located in the Electric Utility (East) Value Line Industry. We are limiting the guideline
companies for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are
located in or directly next to Minnesota. This company was recently created through the merger of Iberdrola
USA and UIL Holdings Corp.

Avista Corporation
Company Summary from Value Line:
Avista Corporation (formerly The Washington Water Power Company) supplies electricity & gas in eastern
Washington & northern Idaho. Supplies electricity to part of Alaska & gas to part of Oregon. Customers:
392,000 electric, 335,000 gas. Acqd Alaska Electric Light and Power 7/14. Sold Ecova energy-management
sub. 6/14. Electric rev. breakdown: residential, 34%; commercial, 31%; industrial, 11%; wholesale, 13%; other,
11%. Generating sources: gas & coal, 32%; hydro, 28%; purchased, 40%. Fuel costs: 44% of revs. 15 reported
deprec. rate (Avista): 3.1%. Has 1,900 employees.
Additional Company Information from Website:
We are an energy company involved in the production, transmission and distribution of energy as well as other
energy-related businesses. Avista Utilities is our operating division that provides electric service to more than
600,000 electric and natural gas customers. Our service territory covers 30,000 square miles in eastern
Washington, northern Idaho and parts of southern and eastern Oregon, with a population of 1.5 million. Alaska
Energy and Resources Company, an Avista subsidiary, provides retail electric service in the city and borough of
Juneau through its subsidiary Alaska Electric Light and Power Company. Our stock is traded under the ticker

20 https://www.avangrid.com/AboutAvanGrid/default.html, accessed on 12/19/2016


21 http://www.avangrid.com/NewsRoom/NewsReleases/default.html, accessed 12/22/2016

Page | G - 11 Electric
Guideline Companies 2017 Capitalization Rate Study

symbol "AVA." Avistas legacy of innovation is rooted in the renewable energy weve generated since our
founding in 1889.22
Why was the company not included?
This company is located in the Electric Utility (West) Value Line Industry. We are limiting the guideline
companies for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are
located in or directly next to Minnesota.

Cleco Corporation
Company Summary from Value Line:
Not Available
Additional Company Information from Website:
Cleco is a regulated utility company headquartered in Pineville, Louisiana. In business since 1935, the company
has approximately 1,200 employees serving approximately 287,000 customers in Louisiana through its retail
business and supplies wholesale power in Louisiana and Mississippi. We offer reasonable rates, reliable service
and a customer-focused workforce. Cleco owns nine generating units with a total nameplate capacity of 3,310
megawatts, 11,931 miles of distribution lines and 1,305 miles of transmission lines. We use multiple generating
sources and multiple fuels to serve our customers. In addition to power generated by Cleco units, we have access
to purchased power when it's needed and when it's more cost effective than our generation.23

The sale of Pineville-based Cleco Corp. to an investor group is complete, the company announced April 13,
2016 article.24

Why was the company not included?


This company was acquired by a private firm and is no longer publically traded.
Consolidated Edison, Inc.
Company Summary from Value Line:
Consolidated Edison, Inc. is a holding company for Consolidated Edison Company of New York, Inc.
(CECONY), which sells electricity, gas, and steam in most of New York City and Westchester County. Also
owns Orange and Rockland Utilities (O&R, acquired 7/99), which operates in New York, New Jersey, and
Pennsylvania. Has 3.6 million electric, 1.2 million gas customers. Pursues competitive energy opportunities
through three wholly owned subsidiaries. Purchases most of its power. Fuel costs: 35% of revenues. 14 reported
depreciation rates: 2.9%-3.1%. Has 14,600 employees.
Additional Company Information from Website:
Con Edison's principal business segments are Consolidated Edison Company of New York's regulated electric,
gas, and steam utility activities, Orange & Rockland Utilities' (O&R) regulated electric and gas utility activities,
and Con Edison's competitive energy businesses. Con Edison of New York provides electric service to
approximately 3.3 million customers and gas service to approximately 1.1 million customers in New York City
and Westchester County. The company also provides steam service in parts of Manhattan. Orange & Rockland
provides electric service to 301,000 customers in southeastern New York and adjacent areas of northern New
Jersey and eastern Pennsylvania and gas service to 130,000 customers in southeastern New York and adjacent
areas of eastern Pennsylvania. Con Edison's competitive energy businesses participate in segments of the

22 http://www.avistacorp.com/about/Pages/aboutus.aspx, accessed 12/19/2016


23 https://www.cleco.com/about-us, accessed 12/19/2016
24 http://www.thetowntalk.com/story/news/2016/04/13/cleco-sale-complete/82995678/, accessed 12/19/2016

Page | G - 12 Electric
Guideline Companies 2017 Capitalization Rate Study

electricity industry that are less comprehensively regulated than our regulated businesses. These segments
include the operation of electric generation facilities, trading of electricity and fuel, sales of electricity to
wholesale and retail customers, and sales of certain energy-related goods and services. Con Edison Transmission
offers customers diverse, low-cost energy supplies by investing in electric and gas transmission projects. Con
Edison Solutions is a retail energy supply and services company that sells electricity directly to delivery-service
customers of utilities primarily in the Northeast and Mid-Atlantic regions. Con Edison Development participates
in infrastructure projects, developing and operating a grid of connected renewable energy infrastructure
throughout the continental United States. Con Edison Energy is a wholesale energy supply company that
procures electric energy, fuel, and capacity for Con Edison Solutions.
We operate one of the worlds largest energy delivery systems. Founded in 1823 as the New York Gas Light
company, our electric, gas, and steam service now provides energy for the 10 million people who live in New
York City and Westchester County. Were constantly looking toward the future and exploring ways to innovate
and take advantage of developing technology. But, more than anything, were listening to you and working hard
to give you cleaner, more efficient energy choices, and more control over when and how you use your power.
Con Edison of New York serves 3.3 million customers averaging a population of approximately nine million
people throughout a 604-square-mile service territory. Con Edison operates one of the most complex electric
power systems in the world. It is also the world's most reliable. Con Edison distributes natural gas to 1.1 million
customers in Manhattan, the Bronx, Queens, and Westchester County, making it one of the largest gas
distribution companies in the United States. Con Edison operates the largest district-energy steam system in the
United States. The steam system provides service to approximately 1,700 customers in Manhattan, from the
Battery to 96th Street on the West Side and 89th Street on the East Side.25
Why was the company not included?
This company is located in the Electric Utility (East) Value Line Industry. We are limiting the guideline
companies for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are
located in or directly next to Minnesota.
Dominion Resources, Inc.
Company Summary from Value Line:
Dominion Resources, Inc. is a holding company for Virginia Power & North Carolina Power, which serve 2.6
mill. customers in Virginia & northeastern North Carolina. Serves 2.3 mill. gas customers in Ohio, West
Virginia, & Utah. Nonutility ops. incl. independent power production. Owns 70.9% of Dominion Midstream
Partners. Acqd Questar 9/16. Elec. rev. breakdown: residential, 46%; commercial, 32%; industrial, 7%; other,
15%. Generating sources: nuclear, 30%; coal, 26%; gas, 23%; other, 6%; purch. 15%. Fuel costs: 31% of revs.
15 reported depr. rates: 2.3%-3.7%. Has 14,700 employees.
Additional Company Information from Website:
Dominion is one of the nation's largest producers and transporters of energy, with a portfolio of approximately
26,000 megawatts of generation, 14,400 miles of natural gas transmission, gathering and storage pipeline, and
6,500 miles of electric transmission lines. Dominion operates one of the nation's largest natural gas storage
systems with 1 trillion cubic feet of storage capacity and serves more than 6 million utility and retail energy
customers. Our company is built on a proud legacy of public service, innovation and community involvement. In
addition to our core energy production, transportation and storage businesses, we invest in communities where
we live and work and by practicing responsible environmental stewardship wherever we operate.26

25 https://www.conedison.com/en/about-us/our-businesses, accessed 12/19/2016


26https://www.dom.com/corporate/about-us/company-profile, accessed 12/19/2016

Page | G - 13 Electric
Guideline Companies 2017 Capitalization Rate Study

Why was the company not included?


This company is located in the Electric Utility (East) Value Line Industry. We are limiting the guideline
companies for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are
located in or directly next to Minnesota.
Duke Energy Corporation
Company Summary from Value Line:
Duke Energy Corporation is a holding company for utilities with 7.4 mill. elec. customers in NC, FL, IN, SC,
Oh, & KY, and 1.5 mill. gas customers in OH, KY, NC, SC, and TN. Owns independent power plants & has
25% stake in National Methanol in Saudi Arabia. Acqd Progress Energy 7/12; Piedmont Natural Gas 10/16;
discontinued most intl ops. in 16. Elec. rev. breakdown: residential, 43%; commercial, 29%; industrial, 15%;
other, 13%. Generating sources: coal, 29%; nuclear, 27%; gas, 23%; other, 1%; purchased, 20%. Fuel costs: 33%
of revs. 15 reported deprec. rates: 2.6%-3.0%. Has 29,200 empls.
Additional Company Information from Website:
We are one of the largest electric power holding companies in the United States, supplying and delivering
electricity to approximately 7.4 million U.S. customers. We have approximately 52,700 megawatts of electric
generating capacity in the Carolinas, the Midwest and Florida and natural gas distribution services serving
more than 1.5 million customers in Ohio, Kentucky, Tennessee and the Carolinas. Our commercial and
international businesses own and operate diverse power generation assets in North America and Latin America,
including a portfolio of renewable energy assets.27 Duke Energy Corporation is an energy company
headquartered in Charlotte, N.C. Its Regulated Utilities business unit serves 7.4 million retail electric customers
in six states in the Southeast and Midwest regions of the United States, representing a population of
approximately 24 million people. Duke Energy is a Fortune 125 company traded on the New York Stock
Exchange under the symbol DUK.28
Duke Energy completed its acquisition of Piedmont Natural Gas, closing the transaction on October 3, 2016.29
Why was the company not included?
This company is located in the Electric Utility (East) Value Line Industry. We are limiting the guideline
companies for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are
located in or directly next to Minnesota. Also, the company was recently involved in an acquisition.
Edison International (formerly SCECorp)
Company Summary from Value Line:
Edison International (formerly SCECorp) is a holding company for Southern California Edison Company (SCE),
which supplies electricity to 4.9 mill. customers in a 50,000-sq.-mi. area in central, coastal, & southern CA (excl.
Los Angeles & San Diego). Edison Energy is an energy svcs. co. Disc. Edison Mission Energy (independent
power producer) in 12. Elec. rev. breakdown: residential, 37%; commercial, 44%; industrial, 6%; other, 13%.
Generating sources: gas, 7%; nuclear, 7%; hydro, 1%; purchased, 85%. Fuel costs: 37% of revs. 15 reported
depr. rate: 3.9%. Has 13,700 empls.
Additional Company Information from Website:
Our subsidiary SCE is one of the largest electric utilities in the United States and a longtime leader in renewable
energy and energy efficiency. With headquarters in Rosemead, Calif., SCE serves approximately 15 million
people in a 50,000 square-mile area of central, coastal and Southern California. SCE has provided electric

27 https://www.duke-energy.com/our-company/about-us, accessed 12/21/2016


28 http://www.duke-energy.com/pdfs/de-factsheet.pdf, accessed 12/21/2016
29 https://news.duke-energy.com/releases/duke-energy-completes-acquisition-of-piedmont-natural-gas, accessed
12/21/2016

Page | G - 14 Electric
Guideline Companies 2017 Capitalization Rate Study

service in the region for more than 125 years. SCE maintains grid assets valued at more than $20 billion,
including 1.4 million power poles, 700,000 transformers and 103,000 miles of distribution and transmission
lines. In the past 5 years, SCEs energy efficiency programs have helped customers save enough energy to power
1.2 million homes for a year. SCE delivered more than 18 billion kilowatt-hours of renewable power to
customers in 2015. Thats nearly 24% of all the electricity we delivered that year.30
Why was the company not included?
This company is located in the Electric Utility (West) Value Line Industry. We are limiting the guideline
companies for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are
located in or directly next to Minnesota.
El Paso Electric Company
Company Summary from Value Line:
El Paso Electric Company (EPE) provides electric service to 405,000 customers in an area of approximately
10,000 square miles in the Rio Grande valley in western Texas (68% of revenues) and southern New Mexico
(19% of revenues), including El Paso, Texas and Las Cruces, New Mexico. Wholesale is 13% of revenues.
Electric revenue breakdown by customer class not available. Generating sources: nuclear, 47%; gas, 34%; coal,
6%; purchased, 13%. Fuel costs: 28% of revenues. 15 reported depreciation rate: 2.6%. Has about 1,000
employees.
Additional Company Information from Website:
El Paso Electric is a regional electric utility providing generation, transmission and distribution service to
approximately 400,000 retail and wholesale customers in a 10,000 square mile area of the Rio Grande valley in
west Texas and southern New Mexico. Its service territory extends from Hatch, New Mexico to Van Horn,
Texas and includes two connections to Juarez, Mexico and the Comisin Federal de Electricidad (CFE),
Mexicos national utility. EPEs principal industrial and large customers include steel production, copper and oil
refining, and United States military installations including the United States Army at Fort Bliss in Texas and the
White Sands Missile Range and Holloman Air Force Base in New Mexico. EPE has a net dependable generating
capability of 1,990 MW. Its facilities include a 15.8 percent interest in the Palo Verde Nuclear Generating
Station in Wintersburg, Arizona, the Rio Grande Power Station in Sunland Park, New Mexico, the Newman
Power Station, Copper Power Station and Montana Power Staton in El Paso.31

Why was the company not included?


This company is located in the Electric Utility (West) Value Line Industry. We are limiting the guideline
companies for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are
located in or directly next to Minnesota.
Empire District Electric Company
Company Summary from Value Line:
The Empire District Electric Company supplies electricity to 170,000 customers in a 10,000 sq. mi. area in
southwestern Missouri (89% of retail elec. revs.), Kansas (5%), Oklahoma (3%), & Arkansas (3%). Acquired
Missouri Gas (44,000 customers) 6/06. Supplies water service (4,000 customers) and has a small fiberoptics
operation. Elec. rev. breakdown: residential, 42%; commercial, 31%; industrial, 16%; other, 11%. Generating
sources: coal, 50%; gas, 27%; hydro, 1%; purch., 22%. Fuel costs: 31% of revenues. 15 reported depr. rate:
3.2%. Has about 750 employees.

30 https://www.edison.com/home/about-us/our-companies.html, accessed 12/21/2016


31 https://www.epelectric.com/about-el-paso-electric, accessed 12/21/2016

Page | G - 15 Electric
Guideline Companies 2017 Capitalization Rate Study

Additional Company Information from Website:


Empire District is an investor-owned, regulated utility providing electric, natural gas (through its wholly owned
subsidiary The Empire District Gas Company), and water service, to approximately 218,000 customers in
Missouri, Kansas, Oklahoma, and Arkansas. A subsidiary of the company provides fiber optic services.32

Why was the company not included?


This company is similar to the Electric Companies that the State Assessed Section is responsible for valuing.
The company serves an electric service territory in Missouri, Kansas, Oklahoma, and Arkansas.
This company is current undergoing an acquisition. The Empire District Electric Company and Algonquin Power
& Utilities Corp. announced June 16, 2016 that Empires shareholders voted to approve the previous announced
Agreement and Plan of Merger, dated February 9, 2016.33
Eversource Energy
Company Summary from Value Line:
Eversource Energy (formerly Northeast Utilities) is the parent of utilities that have 3.1 million electric, 504,000
gas customers. Supplies power to most of Connecticut and gas to part of Connecticut; supplies power to three
fourths of New Hampshires population; supplies power to western Massachusetts and parts of eastern
Massachusetts & gas to central & eastern Massachusetts. Acquired NSTAR 4/12. Electric revenue breakdown:
residential, 52%; commercial, 36%; industrial, 5%; other, 7%. Fuel costs: 39% of revenues. 15 reported deprec.
rate: 2.9%. Has 8,200 employees.
Additional Company Information from Website:
Eversource is New Englands largest energy delivery company, safely and reliably delivering energy to more
than 3.6 million electric and natural gas customers in Connecticut, Massachusetts and New Hampshire.
The company operates more than 4,270 circuit miles of transmission lines, 72,000 pole miles of distribution
lines, 578 substations, 449,737 distribution transformers and 6,459 miles of natural gas distribution pipelines
across our service territory.
Our customers:
Connecticut: 1.2 million electric in 149 communities, 222,000 natural gas in 71 communities.
Massachusetts: 1.4 million electric in 140 communities, 283,000 natural gas in 51 communities.
New Hampshire: 510,000 electric in 211 communities.34

Why was the company not included?


This company is located in the Electric Utility (East) Value Line Industry. We are limiting the guideline
companies for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are
located in or directly next to Minnesota.
Exelon Corporation
Company Summary from Value Line:
Exelon Corporation is a holding company for Commonwealth Edison, PECO Energy, Baltimore Gas and
Electric, Pepco, Delmarva Power, & Atlantic City Electric. Has 8.6 mill. elec., 1.3 mill. gas customers. Has
nonregulated generating & energy marketing ops. Acqd Constellation Energy 3/12; Pepco Holdings 3/16. Elec.
rev. breakdown: resl, 63%; small comml & indl, 23%; large comml & indl, 13%; other, 1%. Generating

32 https://www.empiredistrict.com/About, accessed 12/21/2016


33 http://www.prnewswire.com/news-releases/empire-shareholders-approve-merger-with-algonquin-power--utilities-corp-
583296711.html, accessed 12/21/2016
34 https://www.eversource.com/Content/general/about/about-eversource/customer-profile, accessed 12/21/2016

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sources: nuclear, 68%; other, 8%; purch., 24%. Fuel costs: 44% of revs. 15 depr. rates: 2.8%-3.5% elec., 2.2%
gas. Has 34,000 empls.
Additional Company Information from Website:
We are a FORTUNE 100 company that works in every stage of the energy business: power generation,
competitive energy sales, transmission and delivery. As the nation's leading competitive energy provider, Exelon
does business in 48 states, D.C., and Canada and had 2015 revenues of $34.5 billion. We employ approximately
34,000 people nationwide.35
Exelon Corporation (NYSE: EXC) and Pepco Holdings, Inc. (NYSE: POM) announced on March 23 that the
two companies had completed their merger transaction. The announcement followed the approval of the merger
by the Public Service Commission of the District of Columbia (DC PSC). The merger brought together Exelons
three electric and gas utilities BGE, ComEd and PECO and Pepco Holdings three electric and gas utilities
Atlantic City Electric, Delmarva Power and Pepco to create the leading mid-Atlantic electric and gas
utility company.36
Why was the company not included?
This company is located in the Electric Utility (East) Value Line Industry. We are limiting the guideline
companies for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are
located in or directly next to Minnesota. Also, this company recently underwent an acquisition.
FirstEnergy Corporation
Company Summary from Value Line:
FirstEnergy Corp. is a holding company for Ohio Edison, Pennsylvania Power, Cleveland Electric, Toledo
Edison, Metropolitan Edison, Penelec, Jersey Central Power & Light, West Penn Power, Potomac Edison, &
Mon Power. Provides electric service to over 6 million customers in OH, PA, NJ, WV, MD, & NY. Acqd
Allegheny Energy 2/11. Electric revenue breakdown by customer class not available. Generating sources: coal,
44%; nuclear, 26%; purchased, 30%. Fuel costs: 43% of revenues. 13 reported deprec. rate: 2.6%. Has 15,800
employees.
Additional Company Information from Website:
We are a forward-thinking electric utility powered by a diverse team of employees committed to making
customers lives brighter, the environment better and our communities stronger. FirstEnergy (NYSE: FE) is
dedicated to safety, reliability and operational excellence. Headquartered in Akron, Ohio, FirstEnergy includes
one of the nation's largest investor-owned electric systems, more than 24,000 miles of transmission lines that
connect the Midwest and Mid-Atlantic regions, and a diverse generating fleet with a total capacity of nearly
17,000 megawatts. Our company has invested $10 billion in environmental efforts since 1970, and we have a
continuing commitment to cleaner energy resources, smarter technology and a more sustainable planet.37
Why was the company not included?
This company is located in the Electric Utility (East) Value Line Industry. We are limiting the guideline
companies for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are
located in or directly next to Minnesota.

35 http://www.exeloncorp.com/company/about-exelon, accessed 12/21/2016


36 http://www.pepcoholdings.com/about-us/exelon-acquisition/, accessed 12/22/2016
37 https://www.firstenergycorp.com/about.html, accessed 12/21/2016

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Fortis, Inc.
Company Summary from Value Line:
Fortis Inc. owns a diverse collection of businesses. Its main focus is electricity and gas utility operations (both
regulated and non-regulated) in the United States, Canada, and the Caribbean. It serves more than three million
electricity and gas customers. Owns UNS Energy (Arizona), Central Hudson (New York), FortisBC Energy
(British Columbia), FortisAlberta (Central Alberta), and Eastern Canada (Newfoundland). Fortis also operates 23
hotels, comprised of 4,400 rooms, in eight Canadian provinces.
Additional Company Information from Website:
Fortis Inc. has its origin in the formation of St. Johns Electric Light Company in 1885 in the province now
known as Newfoundland and Labrador. That company eventually became Newfoundland Light & Power Co.
Limited which became the first wholly owned subsidiary of Fortis Inc. Fortis was created as a holding company
in 1987 with the mission to expand and diversify. Today, Fortis is a leader in the North American utility industry
with assets of approximately $47 billion and 2015 revenue of $6.7 billion. Our 8,000 employees serve utility
customers in five Canadian provinces, nine U.S. states and three Caribbean countries.38
Why was the company not included?
This company is similar to the Electric Companies that the State Assessed Section is responsible for valuing.
This company is in the Electric Utility (Central) Value Line Industry. Fortis completed an acquisition of ITC
Holdings Corp in October 2016.39 Fortis Inc. began trading on the New York Stock Exchange on October 14,
2016. The company also trades on the Toronto Stock Exchange.40 Due to the recent acquisition we will not use
this company. We will review this company for use as a guideline company in the future.
Great Plains Energy
Company Summary from Value Line:
Great Plains Energy Incorporated is a holding company for Kansas City Power & Light and two other
subsidiaries, which supply electricity to 853,000 customers in western Missouri (71% of revenues) and eastern
Kansas (29%). Acquired Aquila 7/08. Sold Strategic Energy (energy-marketing subsidiary) in 08. Electric
revenue breakdown: residential, 40%; commercial, 39%; industrial, 9%; other, 12%. Generating sources: coal,
63%; nuclear, 13%; wind, 1%; gas & oil, 1%; purchased, 22%. Fuel costs: 24% of revenues. 15 reported deprec.
rate (utility): 3.0%. Has 2,900 employees.
Additional Company Information from Website:
Great Plains Energy Incorporated (NYSE: GXP) is the holding company of Kansas City Power & Light
Company and KCP&L Greater Missouri Operations Company (GMO). The utilities operate under the brand
name KCP&L. Our vertically integrated electric utilities serve just over 851,200 customers in 47 counties in
Missouri and Kansas with a combined diverse generation platform of more than 6,400 MW of capacity.41

Why was the company not included?


This company is similar to the Electric Companies that the State Assessed Section is responsible for valuing.
The company serves an electric service territory in the Midwest. Great Plains Energy and Westar Energy, Inc.
announced that their respective shareholders approved all proposals necessary for Great Plains Energys

38 https://www.fortisinc.com/about-us, accessed 12/21/2016


39 http://business.financialpost.com/news/energy/fortis-completes-acquisition-of-itc-eyes-renewable-power-shift-for-
growth?__lsa=24fb-ebab, accessed 12/21/2016
40 https://www.fortisinc.com/news-and-media/news-releases/news-release?id=2102625, accessed 12/21/2016
41 http://www.greatplainsenergy.com/overview.html, accessed 12/21/2016

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acquisition of Westar Energy on September 26, 2016.42 After the acquisition, we will review the company again
to see if we should include the company as a guideline company.
Hawaiian Electric Industries, Inc.
Company Summary from Value Line:
Hawaiian Electric Industries, Inc. is the parent company of Hawaiian Electric Company, Inc. (HECO) &
American Savings Bank (ASB). HECO & its subs., Maui Electric Co. (MECO) & Hawaii Electric Light Co.
(HELCO), supply electricity to 458,000 customers on Oahu, Maui, Molokai, Lanai, & Hawaii. Operating
companies systems are not interconnected. Disc. intl power sub. in 01. Elec. rev. breakdown: resl, 31%;
comml, 34%; large light & power, 34%; other, 1%. Generating sources: oil, 54%; purchased, 46%. Fuel costs:
48% of revs. 15 reported depr. rate (util.): 3.2%. Has 3,900 empls.
Additional Company Information from Website:
At Hawaiian Electric Industries (HEI), through our subsidiaries, Hawaiian Electric Company and American
Savings Bank, we strive to be trusted and valued leaders in improving the economic well-being of the state,
promoting the environmental sustainability of our islands, and benefiting the communities we serve. At the
Hawaiian Electric Companies, we're committed to achieving a 100 percent renewable energy future for Hawaii.
As we continue to add diverse types of local renewable energy, Hawaii will reduce its dependence on imported
oil. Our vision is to empower our customers and communities with affordable, reliable, clean energy, and
provide innovative energy leadership for Hawaii. At American Savings Bank, we are the bank where everybody
is somebody a place where teammates work together to make banking easy while providing the best customer
experience. For more than 90 years we have championed the dreams of generations of island residents and
businesses. Our strength comes from helping customers succeed and supporting the communities they live in.
HEI works proactively to improve the future of Hawaii and its communities. These efforts are integrated into our
core business strategies. By helping our state achieve economic prosperity and a clean environment, and by
addressing our communities' needs, we build a sustainable future for our companies and for Hawaii.43

Why was the company not included?


This company is located in the Electric Utility (West) Value Line Industry. We are limiting the guideline
companies for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are
located in or directly next to Minnesota.
IDACORP, Inc.
Company Summary from Value Line:
IDACORP, Inc. is a holding company for Idaho Power Company, a regulated electric utility that serves 530,000
customers throughout a 24,000-square-mile area in southern Idaho and eastern Oregon (population: 1 million).
Most of the companys revenues are derived from the Idaho portion of its service area. Revenue breakdown:
residential, 40%; commercial, 24%; industrial, 14%; irrigation, 13%; other, 9%. Generating sources: hydro,
36%; coal, 28%; gas, 13%; purchased, 23%. Fuel costs: 34% of revenues. 15 reported depreciation rate: 2.7%.
Has 2,000 employees.
Additional Company Information from Website:
Boise, Idaho-based IDACORP is a holding company comprised of Idaho Power Company, a regulated electric
utility; IDACORP Financial, a holder of affordable housing projects and other real estate investments; and Ida-
West Energy, an operator of small hydroelectric generation projects that satisfy the requirements of the Public
Utility Regulatory Policies Act of 1978. IDACORP was formed Oct. 1, 1998, following approval by Idaho

42 http://www.businesswire.com/news/home/20160926006171/en/Great-Plains-Energy-Westar-Energy-Shareholders-
Approve, accessed 12/21/2016
43 http://www.hei.com/CustomPage/Index?keyGenPage=1073751872, accessed 12/21/2016

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Power shareholders, the Federal Energy Regulatory Commission and the public utility commissions of Idaho,
Oregon, Nevada and Wyoming (states where IDACORP has conducted business or has holdings). Under the
holding company structure, Idaho Power Company is the primary subsidiary. This regulated utility, created in
1916, is dedicated to providing quality electric service to more than 530,000 general business customers in a
24,000-square-mile service area in southern Idaho and eastern Oregon. The backbone of the companys
generation portfolio is a series of 17 hydroelectric plants it owns and operates on the Snake River and its
tributaries. Idaho Power also owns three natural gas-fired power plants and a partial interest in three coal-fired
generating stations. IDACORP's common stock is traded on the New York Stock Exchange under the trading
symbol "IDA".44

Why was the company included?


This company is part of Value Lines Electric Utility (West) industry, but it is similar to the Electric Companies
that the State Assessed Section is responsible for valuing. We are limiting the guideline companies for electric to
the Electric Utility (Central) Value Line Industry as well as those companies that are located in or directly next
to Minnesota.
ITC Holdings Corporation
Company Summary from Value Line:
Not Available
Additional Company Information from Website:
ITC Holdings Corp. invests in the electricity transmission grid to improve reliability, expand access to markets,
lower the costs of delivered energy and allow new generating resources to interconnect to its transmission
systems. The largest independent electricity transmission company in the country, ITC operates in Michigans
Lower Peninsula and portions of Iowa, Minnesota, Illinois, Missouri, Kansas and Oklahoma. ITC also focuses
on new areas where significant transmission system improvements are needed through ITC Grid Development
and its subsidiaries.45

Why was the company not included?


This company was similar to (and is one of) the Electric Companies that the State Assessed Section is
responsible for valuing. The company serves an electric service territory in the Midwest and South. Fortis
completed an acquisition of ITC Holdings Corp in October 2016.46
MDU Resources Group, Inc.
Company Summary from Value Line:
MDU Resources Group, Inc. is a diversified natural resource company. Segments: construction materials and
contracting (45% of 15 revs; 57% of 15 op. inc.), construction services (22%, 17%), natural gas distribution
(19%, 20%); electric (7%, 13%) and pipeline and energy services (4%, 11%). Utilities sell gas & electricity in
northwest and upper Midwest U.S. Construction materials has 1.1 billion tons of construction aggregate reserves.
Purchased certain leasehold positions in Wyoming 2/14. Has 8,689 employees.
Additional Company Information from Website:
A strong infrastructure is the heart of the American economy. It is the natural gas and electricity that power
business, industry and our daily lives. It is the pipes and wires that connect our homes, factories, offices and

44 http://www.idacorpinc.com/about-us/at-a-glance, accessed 12/21/2016


45 http://www.itc-holdings.com/itc/about-us, accessed 12/21/2016
46 http://business.financialpost.com/news/energy/fortis-completes-acquisition-of-itc-eyes-renewable-power-shift-for-
growth?__lsa=24fb-ebab, accessed 12/21/2016

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stores to bring them to life. It is the transportation network of roads, highways and airports that keeps our
economy moving. Infrastructure is our business. We provide value-added natural resource products and related
services that are essential to energy and transportation infrastructure. Our company was founded in 1924 as a
small electric utility serving a handful of farm communities on the border of Montana and North Dakota. We
realized early the value of delivering a variety of services, and we grew our company by developing a core line
of businesses. Today, we are a multibillion-dollar corporation with most of our businesses headquartered in
Bismarck, North Dakota, but operations and customers across the country. MDU Resources is the largest
publicly traded company headquartered in North Dakota, and we do business in 48 states. Since 1948, our stock
has been traded on the New York Stock Exchange. It trades under the symbol MDU.47

Why was the company not included?


This company is located in the Natural Gas Diversified Company Value Line Industry. We are limiting the
guideline companies for electric to the Electric Utility (Central) Value Line Industry as well as those companies
that are located in or directly next to Minnesota that are very similar to the companies in Minnesota. MDU
Resources Group, Inc.s majority operating segment is construction materials and contracting. This company is
reviewed as a potential guideline company because it has an operating subsidiary located in Minnesota.
NextEra Energy, Inc.
Company Summary from Value Line:
NextEra Energy, Inc. (formerly FPL Group, Inc.) is a holding company for Florida Power & Light Company
(FPL), which provides electricity to 4.8 million customers in a 27,650-sq.-mi. area in eastern & southern Florida.
NextEra Energy Resources is a nonregulated power generator with nuclear, gas, & wind ownership. Has a 79.9%
stake in NextEra Energy Partners. Rev. breakdown: residential, 54%; commercial, 36%; industrial & other, 10%.
Generating sources: gas, 69%; nuclear, 22%; coal, 4%; purchased, 5%. Fuel costs: 30% of revs. 15 reported
depr. rate (utility): 3.3%. Has 13,800 employees.
Additional Company Information from Website:
NextEra Energy, Inc.is a leading clean energy company. 2015 revenues of approximately $17.5 billion.
Approximately 45,000 megawatts of generating capacity, which includes megawatts associated with
noncontrolling interests related to NextEra Energy Partners, LP (NYSE: NEP), as of April 2016. 14,300
employees in 27 states and Canada as of year-end 2015. We have two principal subsidiaries. Florida Power &
Light Company (FPL), the largest rate-regulated electric utility in Florida, serves more than 4.8 million customer
accounts in the state and has the third-largest number of customers in the United States. NextEra Energy
Resources, LLC, together with its affiliated entities, is the worlds largest generator of renewable energy from
the wind and sun. NextEra Energy is one of the largest operators of commercial nuclear power units in the
United States. We have eight nuclear units at five plant sites located in Florida, New Hampshire, Iowa and
Wisconsin. These facilities have the capacity to generate more than 6,400 megawatts of emissions-free
electricity, enough to supply the needs of nearly 5 million households.48
JUNO BEACH, Fla., July 29, 2016 NextEra Energy, Inc. (NYSE: NEE) today announced a definitive
agreement under which a newly formed subsidiary of NextEra Energy will acquire 100 percent of the equity of
reorganized Energy Future Holdings Corp. (EFH) and certain of its direct and indirect subsidiaries, including
EFHs approximately 80 percent indirect interest in Oncor Electric Delivery Company (Oncor), which implies
a total enterprise value of approximately $18.4 billion.49

47 http://www.mdu.com/our-business, accessed 12/21/2016


48 http://www.nexteraenergy.com/company/factsheet.shtml, accessed 12/22/2016
49 http://www.nexteraenergy.com/news/contents/2016/072916b.shtml, accessed 1/9/2017

Page | G - 21 Electric
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Why was the company not included?


This company is located in the Electric Utility (East) Value Line Industry. We are limiting the guideline
companies for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are
located in or directly next to Minnesota. This company has nuclear plants in Wisconsin. However, this company
reached a definitive agreement on July 29, 2016 to purchase Oncor Electric Delivery Company. Will consider
this company in future studies.
Ormat Technologies, Inc.
Company Summary from Value Line:
Ormat Technologies, Inc., together with its subsidiaries, provides geothermal and recovered energy power and
products through two operating segments. Its electricity division (63% of 2015 revenues) develops, constructs,
owns, and operates geothermal power plants, selling electricity. Under the product segment (37% of revenues),
the company designs and manufactures power units for geothermal plants and power units for recovered
generation. Has 1,060 employees. Southern Cal Pwr., Sierra Pacific Pwr., and Nevada Pwr., accounted for 19.2%
of 15 revs. Officers/ directors own 23.0% of outs. stock. Inc.: DE.
Additional Company Information from Website:
Headquartered in Reno, Nevada, Ormat is a leading geothermal company and the only vertically integrated
company solely engaged in geothermal and recovered energy generation (REG), with the objective of becoming
a leading global provider of renewable energy. The Company has over five decades of experience in the
development of state-of-the-art, environmentally sound power solutions. The company designs, develops, builds,
owns and operates geothermal and recovered energy-based power plants. The in-depth knowledge gained from
these operations gives the Company the competitive edge by enabling efficient maintenance and timely response
to operational issues. In addition to owning and operating geothermal power plants in the United States and other
countries, the Company designs, manufactures and sells power generating equipment as well as complete power
plants on a turnkey basis.50
Why was the company not included?
This company is located in the Power Company Value Line Industry. We are limiting the guideline companies
for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are located in or
directly next to Minnesota.
PG&E Corporation (Pacific Gas and Electric Company, Inc.)
Company Summary from Value Line:
PG&E Corporation is a holding company for Pacific Gas and Electric Company and nonutility subsidiaries.
Supplies electricity and gas to most of northern and central California. Has 5.3 million electric and 4.4 million
gas customers. Electric revenue breakdown: residential, 38%; commercial, 40%; industrial, 12%; agricultural,
9%; other, 1%. Generating sources: nuclear, 23%; gas, 9%; hydro, 5%; purchased, 63%. Fuel costs: 34% of
revenues. 15 reported depreciation rate (utility): 3.8%. Has 23,000 employees.
Additional Company Information from Website:
PG&E Corporation is an energy-based holding company headquartered in San Francisco. It is the parent
company of Pacific Gas and Electric Company. PG&E Corporation subsidiaries provide customers with
public utility services, and services relating to the generation of energy, transmission of electricity and
natural gas, generation of electricity, and the distribution of energy.51

50 http://investor.ormat.com/CorporateProfile.aspx?iid=4087066, accessed 12/22/2106


51 http://www.pgecorp.com/aboutus/, accessed 12/22/2016

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Why was the company not included?


This company is located in the Electric Utility (West) Value Line Industry. We are limiting the guideline
companies for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are
located in or directly next to Minnesota.
Pepco Holdings, Inc.
Company Summary from Value Line:
Not Available
Additional Company Information from Website:
Exelon Corporation (NYSE: EXC), now including the Pepco Holdings utilities, is the nations leading
competitive energy provider, with 2015 revenues of approximately $34.5 billion. Headquartered in Chicago,
Exelon does business in 48 states, the District of Columbia and Canada. Exelon is one of the largest competitive
U.S. power generators, with more than 32,700 megawatts of owned capacity comprising one of the nations
cleanest and lowest-cost power generation fleets. The companys Constellation business unit provides energy
products and services to approximately 2 million residential, public sector and business customers, including
more than two-thirds of the Fortune 100. Exelons six utilities deliver electricity and natural gas to
approximately 10 million customers in Delaware, the District of Columbia, Illinois, Maryland, New Jersey and
Pennsylvania through its Atlantic City Electric, BGE, ComEd, Delmarva Power, PECO and Pepco
subsidiaries. 52

Exelon Corporation (NYSE: EXC) and Pepco Holdings, Inc. (NYSE: POM) announced on March 23 that the
two companies had completed their merger transaction. The announcement followed the approval of the merger
by the Public Service Commission of the District of Columbia (DC PSC). The merger brought together Exelons
three electric and gas utilities BGE, ComEd and PECO and Pepco Holdings three electric and gas utilities
Atlantic City Electric, Delmarva Power and Pepco to create the leading mid-Atlantic electric and gas
utility company.53
Why was the company not included?
This company was acquired by Exelon Corporation and is no longer publically traded.
Pinnacle West Capital Corporation
Company Summary from Value Line:
Pinnacle West Capital Corporation is a holding company for Arizona Public Service Company (APS), which
supplies electricity to 1.1 million customers in most of Arizona, except about half of the Phoenix metro area, the
Tucson metro area, and Mohave County in northwestern Arizona. Discontinued SunCor real estate subsidiary in
10. Electric revenue breakdown: residential, 49%; commercial, 39%; industrial, 5%; other, 7%. Generating
sources: coal, 31%; nuclear, 27%; gas & other, 20%; purchased, 22%. Fuel costs: 32% of revenues. 15 reported
deprec. rate: 2.7%. Has 6,400 employees.
Additional Company Information from Website:
Pinnacle West Capital Corporation (NYSE: PNW) is an investor owned electric utility holding company based in
Phoenix, Arizona with consolidated assets of about $15 billion. For over 125 years, Pinnacle West and our
affiliates have provided energy and energy-related products to people and businesses throughout Arizona -- our
history and Arizonas history are bound together. Pinnacle West derives essentially all of our revenues and
earnings from our wholly-owned subsidiary, Arizona Public Service (APS). APS is a vertically-integrated
electric utility that provides either retail or wholesale electric service to most of the State of Arizona, 1.2 million

52 http://www.pepcoholdings.com/about-us/, accessed12/22/2016
53 http://www.pepcoholdings.com/about-us/exelon-acquisition/, accessed 12/22/2016

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customers in total. APS is also the operator and co-owner of the Palo Verde Nuclear Generating Station a
primary source of electricity for the Southwest. Pinnacle Wests other principal subsidiary is Bright Canyon
Energy.54
Why was the company not included?
This company is located in the Electric Utility (West) Value Line Industry. We are limiting the guideline
companies for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are
located in or directly next to Minnesota.
PNM Resources, Inc.
Company Summary from Value Line:
PNM Resources is a holding company with two regulated electric utilities. Its Public Service of New Mexico
unit (PNM) provides power generation, transmission, and distribution services across north central New Mexico,
including the cities of Albuquerque and Santa Fe. Texas-New Mexico Power Company (TNMP) transmits and
distributes power throughout New Mexico. Electric rev. breakdown 15: residential, 30%; commercial, 32%;
industrial, 19%; other, 19%. Fuels: coal, 57%; nuclear, 30%; gas/oil, 12%; solar, 1%. Fuel costs: 49% of
revenues. 15 depreciation rate: 3.3%. Has 1,881 employees.
Additional Company Information from Website:
PNM Resources Inc. is an energy holding company based in Albuquerque, New Mexico. It serves electricity to
more than 761,000 homes and businesses in New Mexico and Texas through its regulated utilities, PNM and
TNMP. In 2015 consolidated operating revenues totaled $1.4 billion. The companys generation capacity of
more than 2,787 megawatts reflects a balanced mix of coal, natural gas, nuclear, wind, solar and geothermal
generation. PNM Resources common stock trades on the NYSE under the ticker PNM.55

Why was the company not included?


This company is located in the Electric Utility (West) Value Line Industry. We are limiting the guideline
companies for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are
located in or directly next to Minnesota.
Portland General Electric Company
Company Summary from Value Line:
Portland General Electric Company (PGE) provides electricity to 860,000 customers in 52 cities in a 4,000-
square-mile area of Oregon, including Portland and Salem. The company is in the process of decommissioning
the Trojan nuclear plant, which it closed in 1993. Electric revenue breakdown: residential, 47%; commercial,
35%; industrial, 12%; other, 6%. Generating sources: gas, 23%; coal, 19%; wind, 8%; hydro, 7%; purchased,
43%. Fuel costs: 35% of revenues. 15 reported depreciation rate: 3.6%. Has 2,600 employees.
Additional Company Information from Website:
For more than 125 years, weve been powering the pioneering spirit of our region keeping energy safe,
reliable and responsibly generated. We are deeply committed to the success of the communities we serve and
strive to bring innovative solutions to our customers and a bright energy future for Oregon. 56

54 http://www.pinnaclewest.com/about-us/default.aspx, accessed 12/22/2016


55 http://www.pnmresources.com/about-us/our-businesses.aspx, accessed 12/22/2016
56 https://www.portlandgeneral.com/our-company/pge-at-a-glance/quick-facts, 12/22/2016

Page | G - 24 Electric
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Why was the company not included?


This company is located in the Electric Utility (West) Value Line Industry. We are limiting the guideline
companies for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are
located in or directly next to Minnesota.
PPL Corporation
Company Summary from Value Line:
PPL Corporation (formerly PP&L Resources, Inc.) is a holding company for PPL Electric Utilities (formerly
Pennsylvania Power & Light Company), which distributes electricity to 1.4 million customers in eastern &
central PA. Acqd Kentucky Utilities and Louisville Gas and Electric (1.2 million customers) 11/10. Has electric
distribution sub. in U.K. (7.8 million customers). Sold gas distribution subsidiary in 08. Spun off power
generating subsidiary in 15. The company no longer breaks out data on electric operating statistics. Fuel costs:
22% of revs. 15 reported deprec. rate: 2.6%. Has 12,800 employees.
Additional Company Information from Website:
As one of the largest investor-owned companies in the U.S. utility sector, PPL Corporation delivers on its
promises to customers, investors, employees and the communities we serve. Our utilities Western Power
Distribution, Louisville Gas and Electric and Kentucky Utilities, and PPL Electric Utilities provide an
outstanding service experience for our customers, consistently ranking among the best in the U.S. and the U.K.
Our stable earnings, secure dividend, solid management and high-quality assets represent an excellent low-risk
opportunity for those looking to invest in the utility sector. For employees, the PPL family of companies offers
the potential to grow in a wide range of exciting career opportunities. We are committed to providing essential
energy services in extraordinary ways and we deliver. And we are a positive force in the cities and towns where
we do business, providing support for programs that create jobs, donating millions to charitable organizations
that improve the quality of life, and encouraging the generosity of employees who volunteer freely to help
others. $7.7 billion in annual revenue. 10.5 million utility customers in the U.S. and U.K. 13,000 employees
About 8,000 megawatts of regulated generation capacity in the U.S.57

Why was the company not included?


This company is located in the Electric Utility (East) Value Line Industry. We are limiting the guideline
companies for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are
located in or directly next to Minnesota.
Public Service Enterprise Group, Inc.
Company Summary from Value Line:
Public Service Enterprise Group Incorporated is a holding company for Public Service Electric and Gas
Company (PSE&G), which serves 2.2 million electric and 1.8 million gas customers in New Jersey, and PSEG
Power LLC, a nonregulated power generator with nuclear, gas, and coal-fired plants in the Northeast. PSEG
Energy Holdings is involved in renewable energy. The company no longer breaks out data on electric and gas
operating statistics. Fuel costs: 31% of revenues. 15 reported depreciation rate (utility): 2.5%. Has 12,700
employees.
Additional Company Information from Website:
PSEG is a diversified energy company. Established in 1903, the company has long had a key role in fueling New
Jersey's economy and supporting the state's quality of life. Public Service Electric and Gas (PSE&G) is New
Jersey's largest provider of electric and gas service serving 2.2 million electric customers and 1.8 million gas
customers or nearly three out of every four people in the state. PSEG also owns and operates a diverse fleet of
power plants with approximately 12,000 megawatts of generating capacity located primarily in the Mid-Atlantic

57 https://www.pplweb.com/who-we-are/about-us/, accessed 12/22/2016

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and Northeast regions and has solar energy facilities throughout the United States. Another member of the PSEG
family of companies, PSEG Long Island, operates the electric transmission and distribution system of the Long
Island Power Authority, with 1.1 million customers. PSEG has approximately 13,000 employees, who are
carrying forward a proud tradition of dedicated service over more than 100 years.58
Why was the company not included?
This company is located in the Electric Utility (East) Value Line Industry. We are limiting the guideline
companies for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are
located in or directly next to Minnesota.
SCANA Corporation
Company Summary from Value Line:
SCANA Corporation is a holding company for South Carolina Electric & Gas Company, which supplies
electricity to 707,000 customers in central, southern, and southwestern South Carolina. Supplies gas service to
1.3 million customers in North Carolina, South Carolina, and Georgia. Electric revenue breakdown: residential,
44%; commercial, 33%; industrial, 18%; other, 5%. Generating sources: coal, 48%; oil & gas, 28%; nuclear,
19%; hydro, 3%; purchased, 2%. Fuel costs: 46% of revenues. 15 reported depreciation rate: 2.6%. Has 5,800
employees.
Additional Company Information from Website:
Headquartered in Cayce, South Carolina, SCANA is an energy-based holding company that has brought power
and fuel to homes in the Carolinas and Georgia for 160 years. SCANA is principally engaged, through
subsidiaries, in regulated electric and natural gas utility operations and other non-regulated energy-related
businesses in South Carolina, North Carolina and Georgia. In 1846, local business leaders met to form the
Charleston Gas Light Company. Two years later, the company lit the streets of Charleston with gas streetlights.
SCANA Corporation, a diversified holding company, was formed on December 31, 1984. Over half a million
electric customers in 25 counties throughout South Carolina. More than 1.2 million customers in South Carolina,
North Carolina and Georgia. Nearly 6,000 full and part-time employees.59

Why was the company not included?


This company is located in the Electric Utility (East) Value Line Industry. We are limiting the guideline
companies for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are
located in or directly next to Minnesota.
Sempra Energy
Company Summary from Value Line:
Sempra Energy is a holding co. for San Diego Gas & Electric Company, which sells electricity & gas mainly in
San Diego County, & Southern California Gas Company, which distributes gas to most of Southern California.
Customers: 1.4 mill. electric, 6.6 mill. gas. Elec. rev. breakdown: residential, 41%; commercial, 42%; industrial,
10%; other, 7%. Purchases most of its power; the rest is gas. Has subs. in gas pipeline & storage, power
generation, & liquefied natural gas. Sold commodities business in 10. Power costs: 37% of revs. 15 reported
deprec. rates: 2.7%-5.7%. Has 17,400 employees.
Additional Company Information from Website:
Sempra Energy is a Fortune 500 energy services holding company, based in San Diego, Calif., that combines
deep industry expertise with rigorous risk management to deliver superior shareholder returns.

58 https://www.pseg.com/family/index.jsp, accessed 12/22/2016


59 https://www.scana.com/about, accessed 12/22/2016

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Sempra Energy was created in 1998 by a merger of parent companies of two long-established, and highly
respected, investor-owned utilities -- Los Angeles-based Pacific Enterprises, the parent company of Southern
California Gas Co., and Enova Corporation, the parent company of San Diego Gas & Electric -- with rich
histories dating back more than a century. Sempra Energy capitalizes on new opportunities in competitive energy
markets. The companys ongoing focus is to enhance shareholder value and meet customer needs by sustaining
the financial strength, operational flexibility and skilled workforce needed to succeed in rapidly changing market
conditions. In 2015, Sempra Energy produced revenues of approximately $10 billion. Over the past 10 years,
Sempra Energy has delivered a total shareholder return of 181 percent, compared with total returns of 104
percent for the S&P 500 Utilities Index and 102 percent for the S&P 500 Index. During the past five years,
Sempra Energys total shareholder return was 110 percent. For multi-year periods, Sempra Energy is among the
top performers in its industry. Sempra Energys California utilities, San Diego Gas & Electric and SoCalGas,
serve more than 20 million consumers. And its other businesses Sempra U.S. Gas & Power and Sempra
International develop and operate critical energy infrastructure and provide gas and electricity services in
North America and South America.60

Why was the company not included?


This company is located in the Electric Utility (West) Value Line Industry. We are limiting the guideline
companies for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are
located in or directly next to Minnesota.
Southern Company
Company Summary from Value Line:
The Southern Company, through its subs., supplies electricity to 4.6 million customers in GA, AL, FL, and MS.
Also has a competitive generation business. Acqd AGL Resources (renamed Southern Company Gas, 4.5 mill.
customers in GA, FL, NJ, IL, VA, & TN) 7/16. Electric rev. breakdown: residential, 38%; commercial, 32%;
industrial, 19%; other, 11%. Retail revs. by state: GA, 50%; AL, 34%; FL, 9%; MS, 7%. Generating sources: gas
& oil, 44%; coal, 32%; nuclear, 15%; hydro, 3%; purchased, 6%. Fuel costs: 31% of revs. 15 reported depr. rate
(utility): 3.0%. Has 32,000 employees.
Additional Company Information from Website:
With more than 9 million customers, 44,000 megawatts of generating capacity and 1,500 billion cubic feet of
combined natural gas consumption and throughput, Atlanta-based Southern Company (NYSE: SO) is America's
premier energy company serving the Southeast through its subsidiaries. A leading U.S. producer of clean, safe,
reliable and affordable energy, Southern Company owns electric utilities in four states, natural gas distribution
utilities in seven states, a competitive generation company serving wholesale customers across America and a
nationally recognized provider of customized energy solutions, as well as fiber optics and wireless
communications. Southern Company brands are known for energy innovation, excellent customer service, high
reliability and retail electric prices that are below the national average. Through an industry-leading commitment
to innovation, Southern Company and its subsidiaries are inventing America's energy future by developing the
full portfolio of energy resources, including carbon-free nuclear, 21st century coal, natural gas, renewables and
energy efficiency, and creating new products and services for the benefit of customers. Southern Company has
been named by the U.S. Department of Defense and G.I. Jobs magazine as a top military employer, recognized
among the Top 50 Companies for Diversity by DiversityInc, listed by Black Enterprise magazine as one of the
40 Best Companies for Diversity and designated a Top Employer for Hispanics by Hispanic Network. The
company has earned a National Award of Nuclear Science and History from the National Atomic Museum

60 http://www.sempra.com/, accessed 12/22/2016

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Guideline Companies 2017 Capitalization Rate Study

Foundation for its leadership and commitment to nuclear development and is continually ranked among the top
utilities in Fortune's annual World's Most Admired Electric and Gas Utility rankings.61

Southern Company (NYSE: SO) and AGL Resources announced July 1, 2016 the completion of a merger
creating one of America's leading energy providers.AGL Resources has become a wholly owned subsidiary of
Southern Company, which now has 11 electric and natural gas utilities with operations across the U.S.62

Why was the company not included?


This company is located in the Electric Utility (East) Value Line Industry. We are limiting the guideline
companies for electric to the Electric Utility (Central) Value Line Industry as well as those companies that are
located in or directly next to Minnesota. The company also recently underwent an acquisition.
TECO Energy, Inc.
Company Summary from Value Line:
Not Available
Additional Company Information from Website:
Emera Inc. (TSX: EMA) today announced that it has completed the acquisition of all outstanding shares of
TECO Energy Inc. for approximately US$6.5 billion.63

Why was the company not included?


Teco Energy, Inc. was acquired by Emera, Inc.
UIL Holdings Corp
Company Summary from Value Line:
Not Available
Additional Company Information from Website:
AVANGRID, Inc. (NYSE: AGR) is a U.S. based diversified energy and utility company with $30 billion in
assets and operations in 25 states, created through the merger of Iberdrola USA and UIL Holdings Corp. in
December 2015.64

Why was the company not included?


This company is now part of AVANGRID, Inc.
Westar Energy
Company Summary from Value Line:
Westar Energy, Inc., formerly Western Resources, is the parent of Kansas Gas & Electric Company. Westar
supplies electricity to 700,000 customers in Kansas. Electric revenue sources: residential and rural, 41%;
commercial, 38%; industrial, 21%. Sold investment in ONEOK in 2003 and 85% ownership in Protection One in
2004. 2014 depreciation rate: 3.9%. Estimated plant age: 16 years. Fuels: coal, 48%; nuclear, 8%; gas, 44%. Has
2,411 employees. BlackRock Inc. owns 7.2% of common; The Vanguard Group owns 6.3%; Stowers Institute
owns 5.7% (4/15 proxy).

61 http://southerncompany.com/about-us/our-business/home.cshtml, accessed 12/22/2016


62 http://www.southerncompany.com/news/2016-07-01-complete-merger.cshtml?hp=lnau_box3, accessed 12/22/2016
63 http://www.tecoenergy.com/news/article/index.cfm?article=872, accessed12/22/2016
64 http://www.avangrid.com/NewsRoom/NewsReleases/default.html, accessed 12/22/2016

Page | G - 28 Electric
Guideline Companies 2017 Capitalization Rate Study

Additional Company Information from Website:


Westar Energy is the largest electric energy provider in Kansas. We provide generation, transmission and
distribution to approximately 687,000 customers in much of east and east-central Kansas. Westar Energy is
dedicated to operating the best electric utility in the Midwest and providing quality service at below average
prices. The company is headquartered in Topeka, and employs about 2,400 people in Kansas. Our energy
centers in eleven Kansas communities generate more than 7,000 megawatts of electricity, and we operate and
coordinate 34,000 miles of transmission and distribution lines.65
KANSAS CITY, Mo. & TOPEKA, Kan.--(BUSINESS WIRE)--Great Plains Energy Incorporated (NYSE:
GXP), the parent company of KCP&L, and Westar Energy, Inc. (NYSE: WR) today September 26, 2016 that
their respective shareholders approved all proposals necessary for Great Plains Energys acquisition of Westar
Energy at each companys respective shareholder meeting. 66
Why was the company not included?
This company is similar to the Electric Companies that the State Assessed Section is responsible for valuing.
The company serves an electric service territory in Kansas. However, Great Plains Energy and Westar Energy,
Inc. announced that their respective shareholders approved all proposals necessary for Great Plains Energys
acquisition of Westar Energy on September 26, 2016.

MarketSegment:GasDistribution
CompaniesIncludedintheGasDistributionMarketSegment
Atmos Energy Corporation
Company Summary from Value Line:
Atmos Energy Corporation is engaged primarily in the distribution and sale of natural gas to roughly three
million customers through six regulated natural gas utility operations: Louisiana Division, West Texas Division,
Mid-Tex Division, Mississippi Division, Colorado-Kansas Division, and Kentucky/Mid-States Division. Gas
sales breakdown for fiscal 2015: 66%, residential; 29%, commercial; 3%, industrial; and 2% other. The company
has around 4,760 employees. Officers and directors own approximately 1.5% of common stock (12/15 Proxy).
Additional Company Information from Website:
Atmos Energy Corporation, headquartered in Dallas, is the country's largest natural-gas-only distributor, serving
about 3 million natural gas distribution customers in more than 1,400 communities in eight states from the Blue
Ridge Mountains in the East to the Rocky Mountains in the West. Atmos Energy also provides natural gas
marketing and procurement services to industrial, commercial and municipal customers primarily in the Midwest
and Southeast and manages company-owned natural gas pipeline and storage assets, including one of the largest
intrastate natural gas pipeline systems in Texas.67
Why was the company included?
This company is similar to the Gas Distribution Companies that the State Assessed Section is responsible for
valuing.

65 http://investors.westarenergy.com/phoenix.zhtml?c=89455&p=irol-irhome, accessed 12/22/2016


66 http://www.businesswire.com/news/home/20160926006171/en/Great-Plains-Energy-Westar-Energy-Shareholders-
Approve, accessed 12/21/2016
67 https://www.atmosenergy.com/company/about-atmos-energy, accessed 12/22/2016

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Chesapeake Utilities Corporation


Company Summary from Value Line:
Chesapeake Utilities Corporation consists of two units: Regulated Energy and Unregulated Energy. The
Regulated Energy segment (65% of 2015 revenues) distributes natural gas in Delaware, Maryland, and Florida;
distributes electricity in Florida; and transmits natural gas on the Delmarva Peninsula and in Florida. The
Unregulated Energy operation (35% of 2015 revenues) wholesales and distributes propane; markets natural gas;
and provides other unregulated energy services, including midstream services in Ohio. Officers and directors
own 5.4% of common stock; T. Rowe Price, 8.3; BlackRock, 5.8% (3/16 Proxy).
Additional Company Information from Website:
Chesapeake Utilities Corporation is a diversified energy company that provides superior service to its customers
and communities. For more than 100 years, the Company has successfully delivered safe, secure, reliable and
efficient solutions that are environmentally and economically smart. Chesapeake positions itself for long-term
growth that creates superior value.68
Why was the company included?
This company is similar to the Gas Distribution Companies that the State Assessed Section is responsible for
valuing.
Delta Natural Gas Company
Company Summary from Value Line:
Delta Natural Gas Company, Inc. distributes natural gas to approximately 36,000 retail customers on its
distribution system in central and southeastern Kentucky. The Regulated segment sells natural gas to its retail
customers, primarily in 23 rural counties. This segment also transports gas to industrial customers on its system
that purchase gas in the open market, as well as transports gas on behalf of local producers not on its distribution
system. The Non-Regulated segment purchases natural gas on the open market and from Kentucky producers,
and resells this gas to industrial customers on its distribution system and to others not on its system. This
segment also produces natural gas that is sold to Delgasco for resale. Delta owns approximately 2,600 miles of
natural gas gathering, transmission, distribution, storage, and service lines; and holds leases for the storage of
natural gas under 8,000 acres. Has 148 employees.
Additional Company Information from Website:
Corporate Profile:
Started 1949; growth through expansion and acquisitions
Regulated by Kentucky Public Service Commission
Distributes, transports and gathers natural gas
June 30, 2016 annual throughput of 20.1 bcf. (2.6 bcf sales; 17.5 bcf transportation)
Quarterly gas cost recovery filings recover gas cost in rates
Primarily weather-sensitive residential /commercial sales
Rates adjust December-April billing months for weather variances from normal (30 year average)69

Why was the company included?


This company is similar to the Gas Distribution Companies that the State Assessed Section is responsible for
valuing.

68 http://www.chpk.com/our-company/our-committment/, accessed 12/22/2016


69 https://www.deltagas.com/, accessed 12/22/2016

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Gas Natural, Inc.


Company Summary from Value Line:
On October 10, 2016, First Reserve, a leading global private equity and infrastructure investment firm, agreed to
acquire all of the outstanding shares of Gas Natural, Inc. common stock for $13.10 per share, for a total value of
about $196 million. Due to this news, the companys ranks were suspended. Gas Natural, Inc., a holding
company, distributes and sells natural gas to residential, commercial, and industrial customers. Annually it
distributes roughly 21 Bcf of natural gas through regulated utilities operating in Maine, Montana, North
Carolina, and Ohio. Its natural gas utility subsidiaries include Bangor Gas (Maine), Brainard (Ohio), Cut Bank
Gas (Montana), EWM (Montana), Frontier Gas (North Carolina), NEO (Ohio), and Orwell (Ohio). As of
September 30, 2016, it served about 68,600 customers. In October 2016, Gas Natural closed a $92 million debt
refinancing following receipt of regulatory approvals to reorganize its utilities within a wholly-owned subsidiary.
Has 182 employees.
Additional Company Information from Website:
Gas Natural Inc. (NYSE MKT: EGAS), a holding company, distributes and sells natural gas to end-use
residential, commercial and industrial customers. It distributes approximately 26 billion cubic feet of natural gas
to approximately 68,000 customers through regulated utilities operating in Montana, Ohio, Pennsylvania, Maine,
North Carolina and Kentucky. The Companys other operations include natural gas production and natural gas
marketing. The Company's Montana public utility was originally incorporated in 1909. Gas Naturals strategy
for growth is to expand throughput, particularly in the Maine and North Carolina markets, while looking for
acquisitions that are either adjacent to its existing utilities or in under saturated markets. The companys common
stock currently trades on the NYSE MKT under the ticker symbol EGAS. 70

Why was the company not included?


This company is similar to the Gas Distribution Companies that the State Assessed Section is responsible for
valuing.
Spire, Inc., formerly The Laclede Group
Company Summary from Value Line:
Spire Inc., formerly known as the Laclede Group, Inc., is a holding company for natural gas utilities, which
distributes natural gas across Missouri, including the cities of St. Louis and Kansas City. Has roughly 1.6 million
customers. Acquired Missouri Gas 9/13, Alabama Gas Co 9/14. Utility therms sold and transported in fiscal
2016: 2.6 bill. Revenue mix for regulated operations: residential, 67%; commercial and industrial, 23%;
transportation, 2%; other, 8%. Has around 3,078 employees. Officers and directors own 3.2% of common shares
(1/16 proxy).
Additional Company Information from Website:
Spires natural gas utilities and other related businesses work together to enrich the lives of the 1.56 million
customers we serve across Missouri and Alabama. Our gas marketing business maintains the balance between
our natural gas supplies and our customers needs, ensuring the highest reliability at the lowest costs. And weve
tapped into the growing market of cleaner-burning natural gas vehicles that can conveniently support business
fleets of all kinds.71

April 28, 2016, shareholders approved renaming The Laclede Group (NYSE: LG) to Spire. Starting April 29, the
companys common stock shares will trade under the ticker symbol SR on the New York Stock Exchange.72

70 http://www.egas.net/about-us/who-we-are/, accessed 12/22/2016


71 http://www.spireenergy.com/our-company, accessed 12/22/2016
72 http://www.lacledegas.com/about/news/article/143/, accessed 12/22/2016

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Guideline Companies 2017 Capitalization Rate Study

Why was the company included?


This company is similar to the Gas Distribution Companies that the State Assessed Section is responsible for
valuing.
New Jersey Resources Corporation
Company Summary from Value Line:
New Jersey Resources Corp. is a holding company providing retail/wholesale energy svcs. to customers in New
Jersey, and in states from the Gulf Coast to New England, and Canada. New Jersey Natural Gas had about
512,300 customers at 9/30/15 in Monmouth and Ocean counties, and other N.J. counties. Fiscal 2015 volume:
341 bill. cu. ft. (14% interruptible, 21% residential and commercial and electric utility, 65% incentive programs).
N.J. Natural Energy subsidiary provides unregulated retail/wholesale natural gas and related energy svcs. 2015
dep. rate: 2.5%. Has 991 empls. Off./dir. own about 1.4% of common (12/15 Proxy).
Additional Company Information from Website:
NEW JERSEY RESOURCES (NYSE: NJR) is a Fortune 1000 company that, through its subsidiaries, provides
safe and reliable natural gas and clean energy services, including transportation, distribution, asset management
and home services. NJR is comprised of five primary businesses: NEW JERSEY NATURAL GAS, NJRs
principal subsidiary, operates and maintains over 7,300 miles of natural gas transportation and distribution
infrastructure to serve over half a million customers in New Jerseys Monmouth, Ocean and parts of Morris,
Middlesex and Burlington counties. NJR ENERGY SERVICES manages a diversified portfolio of natural gas
transportation and storage assets and provides physical natural gas services and customized energy solutions to
its customers across North America. NJR CLEAN ENERGY VENTURES invests in, owns and operates solar
and onshore wind projects with a total capacity of nearly 240 MW, providing residential and commercial
customers with low-carbon solutions. NJR MIDSTREAM serves customers from local distributors and
producers to electric generators and wholesale marketers through its 50 percent equity ownership in the
Steckman Ridge natural gas storage facility and its stake in Dominion Midstream Partners, L.P., as well as its 20
percent equity interest in the PennEast Pipeline Project. NJR HOME SERVICES provides service contracts as
well as heating, central air conditioning, water heaters, standby generators, solar and other indoor and outdoor
comfort products to residential homes throughout New Jersey. NJR and its more than 1,000 employees are
committed to helping customers save energy and money by promoting conservation and encouraging efficiency
through Conserve to Preserve and initiatives such as The SAVEGREEN Project and The Sunlight
Advantage.73
Why was the company included?
This company is similar to the Gas Distribution Companies that the State Assessed Section is responsible for
valuing.
NiSource, Inc.
Company Summary from Value Line:
NiSource Inc. is a holding company for Northern Indiana Public Service Company (NIPSCO), which supplies
electricity and gas to the northern third of Indiana. Customers: 461,000 electric in Indiana, 3.4 million gas in
Indiana, Ohio, Pennsylvania, Kentucky, Virginia, Maryland, Massachusetts through its Columbia subsidiaries.
Revenue breakdown, 2015: electrical, 34%; gas, 66%; other, less than 1%. Generating sources, 2015: coal,
77.3%; purchased & other, 22.7%. 2015 reported depreciation rates: 3.0% electric, 1.8% gas. Has 7,596
employees.

73 http://files.shareholder.com/downloads/NJR/1656564592x0x921029/97855792-93C0-4575-9FB7-
58999EBDDA53/NJR_AR_2016_FINAL_W_10K.PDF, accessed 12/22/2016

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Additional Company Information from Website:


NiSource (NYSE: NI) helps energize the lives of its nearly 4 million natural gas and electric customers across
seven states. Our local utilities Columbia Gas and NIPSCO ensure that customers receive safe, reliable and
affordable natural gas and electric service each and every day. Our business plan is focused on proactively
investing in our energy infrastructure approximately $1.4 billion a year to ensure we meet and improve upon
our customer commitments for the next 100 years. We employ more than 7,000 of our neighbors who are
actively engaged in the communities were privileged to serve, making them great places to live and call home.
NiSource is headquartered in Merrillville, Indiana about 35 miles from Chicago and we maintain a
significant corporate presence in Columbus, Ohio.74
Why was the company included?
This company is similar to the Gas Distribution Companies that the State Assessed Section is responsible for
valuing.
Northwest Natural Gas Company
Company Summary from Value Line:
Northwest Natural Gas Co. distributes natural gas to 90 communities, 704,000 customers, in Oregon (89% of
customers) and in southwest Washington state. Principal cities served: Portland and Eugene, OR; Vancouver,
WA. Service area population: 2.5 mill. (77% in OR). Company buys gas supply from Canadian and U.S.
producers; has transportation rights on Northwest Pipeline system. Owns local underground storage. Rev.
breakdown: residential, 35%; commercial, 22%; industrial, gas transportation, and other, 43%. Employs 1,092.
BlackRock Inc. owns 10.0% of shares; officers and directors, 2.1% (4/16 proxy).
Additional Company Information from Website:
NW Natural (NYSE:NWN) is a 157-year-old natural gas local distribution and storage company headquartered
in Portland, Oregon, and provides natural gas service to more than 718,000 residential, commercial, and
industrial customers through 14,000 miles of mains and service lines in western Oregon and southwestern
Washington. It is the largest independent natural gas utility in the Pacific Northwest with $2.9 billion in total
assets. NW Natural and its subsidiaries currently own and operate underground gas storage facilities with
designed storage capacity of approximately 31 Bcf in Oregon and California. 75
Why was the company included?
This company is similar to the Gas Distribution Companies that the State Assessed Section is responsible for
valuing.
RGC Resources, Inc.
Company Summary from Value Line:
RGC Resources, Inc. is an energy services company primarily engaged in the regulated sale and distribution of
natural gas to approximately 60,000 residential, commercial, and industrial customers in Roanoke, Virginia and
the surrounding localities through its Roanoke Gas Company and RGC Midstream LLC subsidiaries. The
principal service of Roanoke Gas is the distribution and sale of natural gas to residential, commercial and
industrial customers. Roanoke Gas regulated natural gas distribution business accounted for approximately 98%
of Resources total revenues for fiscal years ending September 30, 2015, 2014, and 2013. The company operates
approximately 1,125 miles of transmission and distribution pipeline; and a liquefied natural gas storage facility
located in Botetourt County that has the capacity to store up to 220,000 DTH of natural gas. In November 2016,
Roanoke completed its 25-year pipeline renewal program in Roanoke. Has 125 employees.

74 https://www.nisource.com/about-us, accessed 12/22/2016


75 http://www.snl.com/irweblinkx/corporateprofile.aspx?iid=4057132, accessed 12/27/2016

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Additional Company Information from Website:


RGC Resources, Inc. ("Resources" or the "Company") was incorporated in the state of Virginia on July 31, 1998,
for the primary purpose of becoming the holding company for Roanoke Gas Company (Roanoke Gas) and its
subsidiaries. Effective July 1, 1999, Roanoke Gas and its subsidiaries were reorganized into the holding
company structure. Resources is currently composed of the following subsidiaries: Roanoke Gas, Diversified
Energy Company and RGC Midstream, LLC. Roanoke Gas was organized as a public service corporation under
the laws of the Commonwealth of Virginia in 1912. The principal service of Roanoke Gas is the distribution and
sale of natural gas to residential, commercial and industrial customers within its service territory in Roanoke,
Virginia and the surrounding localities. Roanoke Gas also provides certain non-regulated services which account
for most of the non-gas utility revenue of Resources. In July 2015, the Company formed RGC Midstream, LLC,
a limited liability company established for the purpose of becoming a 1% investor in Mountain Valley Pipeline,
LLC. Mountain Valley Pipeline, LLC was created for the purpose of constructing a natural gas pipeline in West
Virginia and Virginia. Additional information regarding this investment is provided under Note 3 of the
Company's annual consolidated financial statements and under the Equity Investment in Mountain Valley
Pipeline section of Item 7. In March 2016, Resources dissolved its subsidiary, RGC Ventures of Virginia, Inc.
("Ventures"). Ventures contained the operations of Application Resources, Inc., which provided information
technology consulting services, and The Utility Consultants, which provided utility and regulatory consulting
services to other utilities. Both of these operations were insignificant when compared to the overall activities of
Resources and represented less than 0.2% of total revenues and less than 6% of other non-utility revenues.
Diversified Energy Company currently has no active operations. 76
Why was the company included?
This company is similar to the Gas Distribution Companies that the State Assessed Section is responsible for
valuing.
South Jersey Industries, Inc.
Company Summary from Value Line:
South Jersey Industries, Inc. is a holding company. Its subsidiary, South Jersey Gas Co., distributes natural gas to
373,100 customers in New Jerseys southern counties. Gas revenue mix 15: residential, 45%; commercial, 22%;
cogeneration and electric generation, 12%; industrial, 21%. Non-utility operations include: South Jersey Energy,
South Jersey Resources Group, South Jersey Exploration, Marina Energy, South Jersey Energy Service Plus, and
SJI Midstream. Has about 720 employees. Off./dir. Own less than 1% of common shares; BlackRock, Inc.,
10.5%; The Vanguard Group, Inc., 7.7% (3/16 proxy).
Additional Company Information from Website:
South Jersey Industries (NYSE: SJI), an energy services holding company based in Folsom, NJ, operates its
business through two primary subsidiaries. South Jersey Gas, one of the fastest growing natural gas utilities in
the nation, strongly advocates the efficient use of energy while safely and reliably delivering natural gas in
southern New Jersey. South Jersey Energy Solutions, the parent of SJIs non-regulated businesses, provides
innovative, environmentally-friendly energy solutions that help customers control energy costs. South Jersey
Energy acquires and markets natural gas and electricity for retail customers throughout New Jersey and also
offers businesses energy-related services to reduce their energy costs. Marina Energy develops and operates on-
site energy projects including thermal facilities, serving hot and chilled water for casinos, cogeneration plants,
solar system installations and landfill gas to electricity facilities. South Jersey Resources Group provides
wholesale commodity marketing and risk management services in the mid-Atlantic region and also oversees the

76 http://www.rgcresources.com/financials/Annual%20Report%202016.pdf, accessed 12/27/2016

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Guideline Companies 2017 Capitalization Rate Study

companys activities in the Marcellus Shale. South Jersey Energy Service Plus services heating, air conditioning
and water heating equipment in addition to performing energy audits.77

Why was the company included?


This company is similar to the Gas Distribution Companies that the State Assessed Section is responsible for
valuing.
WGL Holdings, Inc.
Company Summary from Value Line:
WGL Holdings, Inc. is the parent of Washington Gas Light, a natural gas distributor in Washington, D.C. and
adjacent areas of VA and MD to residentl and comml users (1,129,865 meters). Hampshire Gas, a federally
regulated sub., operates an underground gas-storage facility in WV. Non-regulated subs.: Wash. Gas Energy
Svcs. sells and delivers natural gas and provides energy-related products in the D.C. metro area; Wash. Gas
Energy Sys. designs/installs comml heating, ventilating, and air cond. systems. BlackRock, Inc. owns 8.7% of
common stock; Off./dir. less than 1% (1/16 proxy).
Additional Company Information from Website:
WGL Holdings, Inc. is a public utility holding company serving the Washington, D.C. metropolitan region.
Washington Gas, our leading subsidiary, has provided safe, reliable natural gas service to customers in the D.C.
area for over 160 years and, today, serves more than one million customers in the District of Columbia,
Maryland and Virginia. Our unregulated subsidiaries provide energy-related services to residential and
commercial customers, including government organizations. Whether we are distributing clean natural gas
safely to a customers home, providing electric power through renewable wind energy, or installing energy-
efficient systems for the federal government, our vision is consistent and clear throughout our business: to be the
preferred source of clean and efficient energy solutions.78
Why was the company included?
This company is similar to the Gas Distribution Companies that the State Assessed Section is responsible for
valuing.

CompaniesNotIncludedintheGasDistributionMarketSegments
Adams Resources and Energy, Inc.
Company Summary from Value Line:
Adams Resources & Energy, Inc. engages in marketing crude oil, natural gas, and petroleum products. It
purchases crude oil and arranges sales and deliveries to refiners and other customers in Texas and Louisiana with
additional operations in Michigan and New Mexico; purchases, distributes, and markets natural gas; offers value
added services by providing access to common carrier pipelines and handling daily volume balancing
requirements, as well as risk management services. The company also markets branded and unbranded refined
petroleum products, such as motor fuels and lubricants. In addition, it transports liquid chemicals on a for-hire
basis in the continental United States and Canada, as well as engages in the exploration and development of
domestic oil and natural gas properties, primarily in Texas and the south central region of the United States.
Adams Resources holds interests in 513 producing wells of which 26 are company operated. Has 809 employees.

77 https://www.sjindustries.com/about-sji/company-overview, accessed 12/27/2016


78 http://wglholdings.com/company.cfm, accessed 12/27/2016

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Additional Company Information from Website:


The operations of Adams Resources & Energy, Inc. were originally founded by K. S. "Bud" Adams Jr. in 1947
as a private concern. The Company completed its initial public offering in 1974. The Company and its
subsidiaries presently have over 700 employees. The Company's GulfMark Energy, Inc. subsidiary purchases
crude oil and arranges sales and deliveries to refiners and other customers. Crude oil is acquired from
independent producers primarily in Texas, Louisiana, and Michigan. GulfMark purchases approximately 65,000
barrels per day at the wellhead. In connection with its purchases of crude oil, the Company operates 75 tractor-
trailer units and maintains over 50 pipeline inventory locations or injection points. GulfMark also has the ability
to barge oil from nine oil storage facilities along the intercoastal waterway of Texas and Louisiana and maintains
200,000 barrels of storage capacity at certain dock facilities in order to access waterborne markets for its
products. The company's Service Transport subsidiary transports liquid chemicals on a "for hire" basis
throughout the continental United States and Canada. With a fleet of 300+ of the most advanced tractors
available plus more than 450 trailer units, constant satellite communication capabilities and a comprehensive,
integrated package of operations management software, Service Transport Company has emerged as a leading
service provider to the bulk chemical industry. The Company's Adams Resources Exploration Corporation
subsidiary is actively engaged in the exploration and development of domestic oil and gas properties primarily
along the Gulf Coast of Texas and Louisiana.79
Why was the company not included?
The companys main business segments market crude oil, natural gas, and petroleum products.
AGL Resources, Inc.
Company Summary from Value Line:
Not Available.
Additional Company Information from Website:
Southern Company (NYSE: SO) and AGL Resources announced July 1, 2016 the completion of a merger
creating one of America's leading energy providers.AGL Resources has become a wholly owned subsidiary of
Southern Company, which now has 11 electric and natural gas utilities with operations across the U.S.80

Why was the company not included?


This company is no longer publically traded due to merger.
AmeriGas Partners, L.P.
Company Summary from Value Line:
AmeriGas Partners, LP, through its subsidiary, AmeriGas Propane, LP, is a retail and wholesale distributor of
propane gas. It serves about two million residential, commercial, industrial, agricultural, and motor fuel
customers in 50 states through 2,000 propane distribution locations. The company also sells, installs, and
services propane appliances, including heating systems. It markets propane primarily under the AmeriGas
and Americas Propane Co. names. The propane is used for home heating, water heating, and cooking
purposes; to fire furnaces, as a cutting gas, and in other process applications; as a supplemental fuel and motor
fuel; and for tobacco curing, chicken brooding, and crop drying applications. UGI Corp., through subsidiaries, is
the sole general partner and owns 26% of AmeriGas Partners, while the public owns the remaining 74%.
AmeriGas Partners, L.P. was founded in 1994 and is based in King of Prussia, Pennsylvania. Has about 8000
employees.

79 http://www.adamsresources.com/index.php/ARE_Basic/corporate-profile.html, accessed 12/22/2016


80 http://www.southerncompany.com/news/2016-07-01-complete-merger.cshtml?hp=lnau_box3, accessed 12/22/2016

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Additional Company Information from Website:


AmeriGas Partners, L.P. is a publicly traded master limited partnership (NYSE: APU). We are the nation's
largest retail propane marketer, serving approximately 2 million customers in all 50 states from approximately
2,100 distribution locations. We conduct our business principally through our subsidiary AmeriGas Propane,
L.P. UGI Corporation, through subsidiaries, is the sole General Partner and owns 26% of the Partnership. For
more information regarding UGI Corporation, please visit www.ugicorp.com81
Why was the company not included?
This company operates as a retail and wholesale distributor of propane gas.
Niska Gas Storage Partners, LLC.
Company Summary from Value Line:
Not available.
Additional Company Information from Website:
Niska Gas Storage Partners was acquired on July 19, 2016 by Brookfield Infrastructure Group and is a private
entity. We are the largest independent owner and operator of natural gas storage in North America, with
strategically located assets in key natural gas producing and consuming regions. Niska owns and operates three
facilities, including the AECO Hub (comprised of the Countess and Suffield facilities) 154 Bcf in Alberta,
Canada; Wild Goose 75 Bcf in Northern California; and Salt Plains 13 Bcf in Oklahoma. Niska also
contracts 3 Bcf of gas storage capacity on the Natural Gas Pipeline Company of America pipeline system. In
total, Niska owns, operates and contracts approximately 245 Bcf of working gas storage capacity.82
Why was the company not included?
This company was acquired by Brookfield Infrastructure Group and is a private entity.
Piedmont Natural Gas Company
Company Summary from Value Line:
Not Available.
Additional Company Information from Website:
Piedmont Natural Gas is a pure-play LDC operating in the southeastern United States. Effective Oct. 3, 2016, Piedmont
Natural Gas was acquired by Duke Energy (NYSE: DUK).83

Why was the company not included?


This company was acquired by Duke Energy on October 3, 2016.84
Southwest Gas Holdings, Inc.
Company Summary from Value Line:
Southwest Gas Corporation is a regulated gas distributor serving approximately 2.0 million customers in sections
of Arizona, Nevada, and California. Comprised of two business segments: natural gas operations and
construction services. 2015 margin mix: residential and small commercial, 85%; large commercial and
industrial, 4%; transportation, 11%. Total throughput: 2.1 billion therms. Has 5,876 employees. Officers &

81 http://investors.amerigas.com/investor-relations/ir-home/default.aspx, accessed 12/22/2016


82 https://www.niskapartners.com/, accessed 12/22/2016
83 https://news.duke-energy.com/releases/duke-energy-completes-acquisition-of-piedmont-natural-gas, accessed
12/21/2016
84 https://news.duke-energy.com/releases/duke-energy-completes-acquisition-of-piedmont-natural-gas, accessed on
12/21/2016

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directors own 1.3% of common stock; BlackRock Inc., 9.6%; The Vanguard Group, Inc., 7.4%; GAMCO
Investors, Inc., 6.4% (3/16 Proxy).
Additional Company Information from Website:
Southwest Gas Corporation (Southwest Gas or Company), headquartered in Las Vegas, NV, provides
natural gas service to over 1.9 million customers in Arizona, Nevada, and California. Centuri Construction
Group, Inc. (Centuri), a subsidiary, is a full-service underground piping contractor that primarily provides
utility companies with trenching and installation, replacement, and maintenance services for energy distribution
systems, and develops industrial construction solutions. Centuri operates in 20 major markets in the United
States (primarily under the NPL Construction Co. [NPL] name) and in two major markets in Canada (under
the Link-Line Contractors Ltd. and W.S. Nicholls Construction Inc. names).85

Southwest Gas Holdings, Inc. (NYSE: SWX) ("SWG Holdings") and Southwest Gas Corporation ("Southwest")
today [January 3, 2017] announced that, effective January 1, 2017, they completed the previously announced
reorganization of Southwest into a holding company structure. SWG Holdings is now the parent holding
company of Southwest, Centuri Construction Group, and their respective subsidiaries.86

Why was the company not included?


This company is similar to the Gas Distribution Companies that the State Assessed Section is responsible for
valuing. This company recently reorganized. This company will be considered for future studies.
Star Gas Partners, L.P.
Company Summary from Value Line:
Star Gas Partners, LP is a full-service provider specializing in the sale of home heating products and services to
approximately 446,000 full-service residential and commercial customers to heat their homes and buildings. It
also services and sells heating and air conditioning equipment to home heating oil and propane customers and, to
a lesser extent, provides these offerings to customers outside of its home heating oil and propane customer base.
In certain marketing areas, Star provides home security and plumbing services, primarily to its home heating oil
and propane customer base. The company also sells diesel fuel, gasoline, and home heating oil to approximately
74,000 customers on a delivery-only basis. Star is the nations largest retail distributor of home heating oil, based
upon sales volume, operating throughout the northeast and mid- Atlantic. Kestrel Heat, LLC is the general
partner of the company. Has 3101 employees.
Additional Company Information from Website:
Star Gas Partners is a full service energy provider specializing in the sale of home heating products and services
to residential and commercial customers. The Partnership also services and sells heating and air conditioning
equipment and, in certain areas, provides home security and plumbing services. In addition, Star sells diesel fuel,
gasoline and home heating oil on a delivery-only basis. Star is the nation's largest retail distributor of home
heating oil, based upon sales volume, operating throughout the Northeast and Mid-Atlantic. Star Gas is a
publicly traded master limited partnership. Common units, representing limited partner interests in the
Partnership, are listed and trade on the New York Stock Exchange, Inc. ("NYSE") under the symbol "SGU." As
a master limited partnership our unitholders are required to report for federal income tax purposes their allocable
share of our income, gains, losses, deductions and credits, regardless of whether we make cash distributions. We

85 http://investors.southwestgas.com/phoenix.zhtml?c=117697&p=irol-reportsannual, 2015 Annual Report, Page 2,


accessed 12/27/2016
86 http://www.prnewswire.com/news-releases/southwest-gas-completes-holding-company-reorganization-300384317.html,
accessed 1/12/2017

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expect that an investor will be allocated taxable income (mostly dividend income) regardless of whether a cash
distribution has been paid.87

Why was the company not included?


This companys business segments include sale of home heating products and services to residential and
commercial customers.
UGI Corporation
Company Summary from Value Line:
UGI Corp. operates six business segments: AmeriGas Propane (accounted for 21.7% of net income in 2015),
UGI International (18.8%), Gas Utility (41.2%), Midstream & Marketing (38.8%), and Corp. & Other -21%.
UGI Utilities distributes natural gas and electricity to over 617,000 customers mainly in Pennsylvania; 27%-
owned AmeriGas Partners is the largest U.S. propane marketer, serving about 1.3 million users in 50 states.
Acquired remaining 80% interest in Antargaz (3/04); Energy Transfer Partners (1/12). Wellington Management
Co. holds 9.6% of stock; officers/dir., about 3% (12/15 proxy). Has 8,500 empls.
Additional Company Information from Website:
UGI Corporation is a holding company that, through subsidiaries, distributes, stores, transports and markets
energy products and related services. We are a domestic and international retail distributor of propane and butane
(which are liquefied petroleum gases (LPG)); a provider of natural gas and electric service through regulated
local distribution utilities; a generator of electricity; a regional marketer of energy commodities; an owner and
manager of midstream assets; and a regional provider of heating, ventilation, air conditioning, refrigeration and
electrical contracting services.88
Why was the company not included?
This companys non-gas utility segments accounted for almost 59% of net income in 2015. Their gas utility
segment only accounted for 41 % of their net income.

MarketSegment:GasTransmissionPipelineand
FluidTransportationPipeline
CompaniesIncludedintheGasTransmissionPipelineMarketSegment
Boardwalk Pipeline Partners, L.P.
Company Summary from Value Line:
Boardwalk Pipeline Partners, L.P. engages in the transportation, gathering, and storage of natural gas in the
United States. Customers include local gas distributors, interstate and intrastate pipelines, direct industrial users,
electric power generators, marketers, and producers. Owns and operates 14,525 miles of natural gas and NGL
pipelines. Storage capacity of 205 Bcf (natural gas) and 24 MMbls (NGLS). Of 2015 revenues, 79% derived
from firm contacts, 12% from volumes actually transported and 9% from interruptible services. Boardwalk GP,
L.P. is the general partner. Loews Corp. owns 51.6% of equity. Has 1,260 emplys.
Additional Company Information from Website:
Boardwalk Pipeline Partners, LP (NYSE: BWP) is a midstream master limited partnership that provides
transportation, storage, gathering and processing of natural gas and liquids for our customers. Through our
subsidiaries, we own and operate approximately 14,090 miles of interconnected natural gas pipelines, directly

87 http://www.star-gas.com/, accessed 12/27/2016


88 http://www.ugicorp.com/about-us/default.aspx, accessed 12/27/2016

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serving customers in thirteen states and indirectly serving customers throughout the northeastern and
southeastern United States through numerous interconnections with unaffiliated pipelines. We also own and
operate more than 435 miles of natural gas liquids (NGLs) pipelines in Louisiana and Texas. In 2015, our
pipeline systems transported approximately 2.4 trillion cubic feet (Tcf) of natural gas and approximately 46.6
MMBbls of NGLs. Average daily throughput on our natural gas pipeline system during 2015 was approximately
6.7 Bcf. Our natural gas storage facilities are comprised of 14 underground storage fields located in four states
with an aggregate working gas capacity of approximately 205 Bcf, and our NGLs storage facilities consist of
nine salt-dome caverns located in Louisiana with an aggregate storage capacity of 24 MMBbls. We also own
three salt-dome caverns and a brine pond for use in providing brine supply services and to support the NGLs
storage operations.89
Why was the company included?
This company is similar to the Gas Transmission Pipeline Companies that the State Assessed Section is
responsible for valuing. The company engages in the transportation, gathering, and storage of natural gas.
Enterprise Products Partners
Company Summary from Value Line:
Enterprise Products Partners, LP, is a leading integrated provider of natural gas and natural gas liquids (NGLs)
processing, fractionation, transportation, and storage services in the U.S. and Canada. Acquired GulfTerra
Energy 9/04; TEPPCO, L.P. 10/09; M2 Midsteam, 5/10; Enterprise GP, 11/10; Oiltanking Partner, 2/15. Assets
include 49,000 miles of pipelines, 250 MMBbls of storage capacity for liquids and 14 Bcf for natural gas. Four
segments: NGL Pipeline (48% of 2015 revenues); Crude Oil Pipelines, (26%); Petrochemical & Refined
Products, (15%); Natural Gas Pipelines, (11%); Employs 6,900.
Additional Company Information from Website:
Enterprise Products Partners L.P. is one of the largest publicly traded partnerships and a leading North American
provider of midstream energy services to producers and consumers of natural gas, NGLs, crude oil, refined
products and petrochemicals. Our services include: natural gas gathering, treating, processing, transportation and
storage; NGL transportation, fractionation, storage and import and export terminals; crude oil gathering,
transportation, storage and terminals; petrochemical and refined products transportation, storage and terminals;
and a marine transportation business that operates primarily on the United States inland and Intracoastal
Waterway systems.90
Why was the company included?
This company is similar to the Gas Transmission Pipeline Companies that the State Assessed Section is
responsible for valuing. The company engages in the transportation, gathering, and storage of natural gas.
Kinder Morgan, Inc.
Company Summary from Value Line:
Kinder Morgan, Inc. owns the general partner and limited partner interests in both Kinder Morgan Energy
Partners, L.P. (KMP) and El Paso Pipeline Partners, L.P. (EPB). With more than 80,000 miles of pipelines and
180 terminals, it is the largest domestic transporter of petroleum products, natural gas, and carbon dioxide.
Kinder also owns the only pipeline that serves the West Coast of Canada. The company employs more than
11,535 individuals. Chairman & CEO: Richard D. Kinder. CFO: Kimberly Dang. Officers/directors own 14.0%
of the common stock; The Vanguard Group, 5.2% (4/16 proxy).

89 http://www.bwpmlp.com/AboutUsBWP.aspx, accessed 12/27/2016


90 http://www.enterpriseproducts.com/about-us, accessed 12/28/2016

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Guideline Companies 2017 Capitalization Rate Study

Additional Company Information from Website:


Kinder Morgan is the largest energy infrastructure company in America. We own an interest in or operate
approximately 84,000 miles of pipelines and approximately 180 terminals. Our pipelines transport natural gas,
gasoline, crude oil, carbon dioxide (CO2) and more. Our terminals store and handle petroleum products,
chemicals and other products. The revolutionary shale plays across the United States are creating a tremendous
need for more energy infrastructure, which bodes well for us. We invest billions of dollars each year to grow the
company by building new and expanding existing assets to help ensure that a variety of energy products get
delivered into the marketplace. In most of our businesses we operate like a giant toll road and receive a fee for
our services, generally avoiding commodity price risk. Our customers include major oil companies, energy
producers and shippers, local distribution companies and businesses across many industries.91
Why was the company included?
This company is similar to the Gas Transmission Pipeline Companies that the State Assessed Section is
responsible for valuing. The company engages in the transportation natural gas as well as operates terminals and
storage facilities.
ONEOK Partners, L.P.
Company Summary from Value Line:
ONEOK Partners, L.P. gathers, processes, stores, and transports natural gas (NG). Its NG G&P segment focuses
on NG from crude oil and NG wells in the Mid-Continent region. The NG Pipelines unit owns & operates
regulated transmission pipelines, storage facilities, and gathering systems for non-processed gas. Also provides
interstate NG transp. and storage. The NG Liquids unit gathers, fractionates, and treats natural gas liquids
(NGLs), and stores NGL products. Its general partner is a wholly owned subsidiary of ONEOK, Inc., a
diversified energy company. Has no direct empls. Off./dir. own less than 1% of units out. (15 10k).
Additional Company Information from Website:
ONEOK Partners, L.P. (NYSE: OKS) is one of the largest publicly traded master limited partnerships and owns
one of the nations premier natural gas liquids (NGL) systems, connecting NGL supply in the Mid-Continent,
Permian and Rocky Mountain regions with key market centers and is a leader in the gathering, processing,
storage and transportation of natural gas in the U.S. Our general partner, ONEOK Partners GP, L.L.C., is a
subsidiary of ONEOK, Inc. (NYSE: OKE), a diversified energy company, which owns 41.2 percent of the
partnership as of August 21, 2015. ONEOK Partners operations are conducted through the following three
business segments: Natural Gas Gathering and Processing, Natural Gas Pipelines, Natural Gas Liquids. 92
Why was the company included?
This company is similar to the Gas Transmission Pipeline Companies that the State Assessed Section is
responsible for valuing. The company engages in the transportation, gathering, and storage of natural gas.
TC PipeLines, L.P.
Company Summary from Value Line:
TC PipeLines, LP, a wholly-owned subsidiary of TransCanada Corp., acquires, owns, and participates in the
management of energy infrastructure assets in North America. The company owns interests in six natural gas
interstate pipeline systems, through which it transports approximately 9.1 billion cubic feet of natural gas per day
from producing regions and import facilities to market hubs and consuming markets, primarily in the western
and midwestern United States. It serves large utilities, local distribution companies, and natural gas marketers
and producing companies. Also, the company invests in longterm critical energy infrastructure that provides
reliable delivery of energy to customers in the United States; develops or acquires assets that provide stable cash

91 http://www.kindermorgan.com/, accessed 12/28/2016


92 http://www.oneokpartners.com/en/About, accessed 12/28/2016

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distributions and opportunities for new capital additions; and maximize the utilization of pipeline systems, with a
commitment to safe and reliable operations.
Additional Company Information from Website:
TC PipeLines, LP is a United States limited partnership with a long history of stable and growing cash
distributions which has delivered value to its investors while maintaining a solid cash distribution coverage ratio.
Through its disciplined investment philosophy, TC PipeLines now has investments in seven critical FERC
regulated, low-risk energy infrastructure pipelines, capable of moving 9.1 billion cubic feet per day of natural
gas. Revenues from these assets are derived almost entirely from fee-based charges. With access to new gas
supplies through support from its sponsor, TransCanada Corporation, who also operates our assets on our behalf,
TC PipeLines assets are primarily connected to one of the largest supply basins in North America that is
positioned to recover and grow over the next decade. With a strong and conservative balance sheet, a low general
partner cash take and an ample amount of available liquidity, we are well positioned for growth.93
Why was the company included?
Yes, this company is similar to the Gas Transmission Pipeline Companies that the State Assessed Section is
responsible for valuing. The company owns and actively participates in the management of natural gas pipelines
and related assets.
Williams Partners, L.P.
Company Summary from Value Line:
Williams Partners L.P. is a master limited partnership providing oil, natural gas, and natural gas liquids
processing, fractionation, transportation, and storage services. Acquired by Access Midland Partners on 1/1/15 in
a stock swap. Access Partners continued to operate under the name of Williams Partners L.P. As of 1/16, has five
operating segments: Central; Northeast Gathering & Processing; Atlantic-Gulf; West; NGL and Petrochemicals
Services. Williams Partners GP, LLC is the companys general partner. Employs 6,578. The Williams
Companies (WMB) owns WPZs general partner and 73% of common units.
Additional Company Information from Website:
Demand for natural gas is tremendous and continues to grow because gas is cleaner, less expensive and more
efficient than other fuels capable of meeting around-the-clock energy demand. Williams (NYSE: WMB) and
Williams Partners (NYSE: WPZ) own and operate premier energy infrastructure across the United States,
including the largest volume and fastest growing interstate pipeline system in the U.S., connecting the best
supplies of natural gas and natural gas products to the best markets.94
Why was the company included?
Energy Transfer Equity announced merger on 9/28/2015 with the Williams Companies.95 The Williams
Companies owns Williams Partners, L.P. general partner and 73% of common units. This companys parent,
Energy Transfer Equity, announced a merger on 9/28/2015 with the Williams Companies.96 Mergers can make
analysts opinions of the company unreliable if they are considering the proposed merger.

93 http://www.tcpipelineslp.com/, accessed 12/28/2016


94 http://investor.williams.com/, accessed 1/3/2017
95 Press Release Energy Transfer to Combine with Williams, 9/28/815, Business Wire.
http://ir.energytransfer.com/phoenix.zhtml?c=106094&p=irol-newsArticle_print&ID=2090796
96 Press Release Energy Transfer to Combine with Williams, 9/28/815, Business Wire.
http://ir.energytransfer.com/phoenix.zhtml?c=106094&p=irol-newsArticle_print&ID=2090796

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CompaniesIncludedintheFluidTransportationPipelineMarketSegment
Buckeye Partners, L.P.
Company Summary from Value Line:
Buckeye Partners, L.P., is a master limited partnership engaged in common carriage transportation of refined
petroleum products, including gasoline (50% of 15 volume), jet fuel (25%), distillates (23%), and other (2%).
Its subsidiaries own and operate 6,000 miles of pipeline mostly in the Northeast and upper Midwest. The L.P.
also owns 117 liquid petro. product terminals. Marine terminal Buckeye Bahamas Hub (formerly BORCO), is
one of the worlds largest. Acquired 80% Buckeye Texas Partners, 9/14; storage assets from Hess Corp., 12/13.
Off./Dir. own 0.4% of outstanding units; Tortoise Cap., 9.6%; ALPS Adv., 6.5% (4/16 proxy).
Additional Company Information from Website:
Buckeye Partners, L.P. (NYSE: BPL) is a publicly traded master limited partnership and owns and operates a
diversified network of integrated assets providing midstream logistic solutions, primarily consisting of the
transportation, storage, and marketing of liquid petroleum products. Buckeye is one of the largest independent
liquid petroleum products pipeline operators in the United States in terms of volumes delivered, with
approximately 6,000 miles of pipeline. Buckeye also uses its service expertise to operate and/or maintain third-
party pipelines and perform certain engineering and construction services for its customers. Additionally,
Buckeye is one of the largest independent terminalling and storage operators in the United States in terms
of capacity available for service.97

Why was the company not included?


This company is similar to the Fluid Transportation Pipeline Companies that the State Assessed Section is
responsible for valuing. The company engages in the common transportation of refined petroleum products.
Holly Energy Partners, L.P.
Company Summary from Value Line:
Holly Energy Partners, L.P. provides petroleum product and crude oil transportation, terminalling, storage and
throughput services to the petroleum industry, including HollyFrontier Corporation subsidiaries. The Partnership
owns and operates petroleum product and crude gathering pipelines, tankage and terminals in Texas, New
Mexico, Arizona, Washington, Idaho, Oklahoma, Utah, Wyoming and Kansas as well as refinery processing
units in Kansas. In addition, the Partnership owns a 75% interest in UNEV Pipeline, LLC, the owner of a Holly
Energy operated refined products pipeline running from Woods Cross, Utah to Nevada, and related product
terminals; a 50% interest in Osage Pipe Line Company, LLC, which owns a 135-mile crude oil pipeline from
Cushing, Oklahoma to Kansas; a 50% interest in Frontier Pipeline Company, which owns a 289-mile crude oil
pipeline from Wyoming to Utah; and a 25% interest in SLC Pipeline LLC, which owns a 95-mile intrastate
pipeline system serving refineries in Utah.
Holly Energy Partners, LP provides petroleum product and crude oil transportation, tankage, and terminal
services to the petroleum industry, including Holly Frontier Corp., which currently owns a 39% interest
(including a 2% general partner interest), in the partnership. It owns and operates petroleum product and crude
pipelines, tankage, terminals and loading facilities in Arizona, Idaho, Kansas, New Mexico, Oklahoma, Texas,
Utah, Washington, and Wyoming. In addition, it owns a 75% interest in UNEV Pipeline, LLC, the owner of
Holly Energy, which operates refined products pipeline running from Salt Lake City, Utah to Las Vegas,
Nevada, and related product terminals; a 50% interest in Frontier Pipeline Co.; a 296-mile crude oil pipeline
running from Casper, Wyoming to Frontier Station, Utah; and a 25% interest in SLC Pipeline LLC, a 95-mile

97 http://www.buckeye.com/AboutUs/tabid/54/Default.aspx, accessed 12/27/2016

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intrastate pipeline system. In September 2015, Holly Energy acquired 50% interest in Frontier Pipeline Co. from
an affiliate of Enbridge, Inc.
Additional Company Information from Website:
Holly Energy Partners, L.P. ("HEP") is a Delaware limited partnership formed in early 2004 by HollyFrontier
and is headquartered in Dallas, Texas. HEP provides petroleum product and crude oil transportation,
terminalling, storage and throughput services to the petroleum industry, including HollyFrontier Corporation
subsidiaries. The Partnership, through its subsidiaries and joint ventures, owns and/or operates petroleum
product and crude gathering pipelines, tankage and terminals in Texas, New Mexico, Arizona, Washington,
Idaho, Oklahoma, Utah, Nevada, Wyoming and Kansas as well as refinery processing units in Kansas and
Utah.98
Why was the company not included?
This company is similar to the Fluid Transportation Pipeline Companies that the State Assessed Section is
responsible for valuing. The company engages in the common transportation of refined petroleum products.
Magellan Midstream Partners, L.P.
Company Summary from Value Line:
Magellan Midstream Partners, L.P., engages in the transportation, storage, and distribution of hydrocarbons and
related products, largely in the U.S. Gulf coast and upper midwest regions. Segments: Refined products (73% of
15 Revs., 61% of operating income) has 9,500 miles of pipeline and 52 terminals; Crude oil (19%, 32%) has
1,700 miles of pipeline and storage capacity of 22 million barrels; Marine storage (8%, 7%) has storage capacity
of 26 million barrels. Acquired Longhorn Pipeline, 7/09; storage and pipeline from BP, 9/10. Employs 1,640.
Offs./dirs. own 0.3% of outstanding shares; Tortoise Cap. 7.0% (2/16 proxy).
Additional Company Information from Website:
Magellan Midstream Partners, L.P. is a publicly traded oil pipeline, storage and transportation company based in
Tulsa, Okla. Formerly a part of Williams Companies, Magellan began trading as Williams Energy Partners in
February 2001. In September 2003, we changed our name to Magellan Midstream Partners and began trading
under the stock ticker MMP. In 2004, Magellan purchased significant assets from Shell, including more than 3,000
miles of refined product pipelines as well as terminals and storage capacity. In 2007, another acquisition expanded
Magellans footprint again with increased capabilities in Texas. In 2009, we bought the Longhorn Pipeline running
from Houston to El Paso. The reversal of this line has played a key part in Magellans growth the last few years.
In 2010, Magellan purchased another 100 miles of pipeline and 7.8 million barrels of storage from BP. In 2013,
Magellan acquired approximately 800 miles of refined petroleum products pipeline, four terminals and 1.7 million
barrels of storage from Plains All American Pipeline. This purchase added assets in Colorado, New Mexico, South
Dakota and Wyoming. Today, Magellan has 9,700-mile refined products pipeline system with 53 connected
terminals as well as 27 independent terminals not connected to our pipeline system and our 1,100-mile ammonia
pipeline system. In addition, we own approximately 2,100 miles of crude oil pipelines and storage facilities with
an aggregate storage capacity of about 23 million barrels, of which 15 million are used for leased storage. We also
operate five marine terminals located along coastal waterways with an aggregate storage capacity of approximately
26 million barrels.99
Why was the company not included?
This company is similar to, and is one of, the Fluid Transportation Pipeline Companies that the State Assessed
Section is responsible for valuing. The company engages in the common transportation of refined petroleum
products.

98 http://www.hollyenergy.com/about-us/corporate-structure/default.aspx, accessed 12/28/2016


99 https://www.magellanlp.com/AboutUs/Default.aspx, accessed 12/28/2016

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NuStar Energy, L.P.


Company Summary from Value Line:
NuStar Energy, LP, through its subsidiaries, engages in the transportation, terminalling, and storage of crude oil
and refined products. The company operates through three segments: Storage, Pipeline, and Fuels Marketing.
The Storage segment provides storage and handling services on a fee basis for petroleum products, specialty
chemicals and other liquids, including crude oil and other feedstocks. Its Pipeline segment owns common carrier
refined product pipelines in Colorado, Iowa, Kansas, Minnesota, Nebraska, New Mexico, North Dakota,
Oklahoma, South Dakota, and Texas covering approximately 5,500 miles, consisting of the Central West
System, the East Pipeline, and the North Pipeline. Within its Fuels Marketing operations, the company purchases
crude oil and refined petroleum products for resale. NuStar currently has 8,700 miles of pipeline and 79 terminal
and storage facilities that store and distribute crude oil, refined products, and specialty liquids. Has 1644
employees.
Additional Company Information from Website:
Since it went public in 2001, NuStar Energy L.P. has grown from 160 employees to about 1,600 today; from
$387 million in assets to $5.1 billion; and from $100 million in revenues to $2.1 billion. As a result of its growth,
NuStar currently has approximately 8,700 miles of pipeline and 79 terminal and storage facilities that store and
distribute crude oil, refined products and specialty liquids. The partnerships combined system has
approximately 94 million barrels of storage capacity at its facilities around the world, and NuStar has operations
in the United States, Canada, Mexico, the Netherlands, including St. Eustatius in the Caribbean, and the United
Kingdom.100

SAN ANTONIO--(BUSINESS WIRE)--Oct. 21, 2016-- NuStar Energy L.P. (NYSE: NS) today announced that
it has signed an agreement to purchase crude oil and refined product storage assets in the Port of Corpus Christi
from Martin Midstream Partners L.P. (Nasdaq: MMLP) for a net $93 million. The acquisition, which is expected
to close by the end of the fourth quarter of 2016, is expected to be immediately accretive to NuStars earnings
based on the terminals current, actual volumes. It also reflects an approximate seven times multiple based on the
forecasted four-year average earnings before interest, taxes, depreciation and amortization (EBITDA)
attributable to the assets of $13.5 million annually. When combined with NuStars existing terminal operations
in Corpus Christi, the acquisition will give NuStar over 3.6 million barrels of total storage in the Port of Corpus
Christi, including 3.1 million barrels of crude oil storage and 577,000 barrels of refined product storage. The
terminal NuStar is acquiring includes 1.15 million barrels of total storage, which is comprised of 900,000 barrels
of crude oil storage and 250,000 barrels of refined product storage. The terminal has direct connectivity to Eagle
Ford crude oil production and receives crude oil and condensate via its connection to the Harvest Pipeline and
through its six-bay truck rack. The terminal has access to two of the ports deep-water crude oil docks, including
exclusive use of the ports new crude oil dock, and a barge dock. The terminal is located on 25 acres, and has
room for further expansion. NuStar also expects to achieve significant operational synergies between its existing
North Beach Terminal and the Martin terminal, which are located adjacent to each other in the Port of Corpus
Christi.101
Why was the company included?
This company is aligned with, and is one of, the fluid transportation companies that the State Assessed Section is
responsible for valuing.

100 http://nustarenergy.com/en-us/Company/Pages/CompanyMain.aspx, accessed 12/28/2016


101 http://investor.nustarenergy.com/phoenix.zhtml?c=123440&p=irol-newsArticle_Print&ID=2213695, accessed 1/3/2017

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Plains All American Pipeline, L.P.


Company Summary from Value Line:
Plains All American Pipeline, L.P., is a publicly traded master limited partnership which operates through
various subsidiaries. It engages in the transportation, storage, terminaling, and marketing of crude oil, refined
products, and liquefied petroleum gas. The company owns or leases approximately 18,144 miles of active
pipelines and gathering systems. Storage capacity 25 million barrels of natural gas liquids (NGL) storage
facilities; approximately 80 million barrels of crude oil and refined products; 97 Bcf natural gas. Has a 50%
ownership in PAA/Vulcan Gas Storage LLC. Has 5,400 employees.
Additional Company Information from Website:
Plains All American Pipeline is one of the largest and most admired midstream energy companies in North
America. Plains All American Pipeline (Plains) is a publicly-traded master limited partnership that owns and
operates midstream energy infrastructure and provides logistics services for crude oil, natural gas liquids (NGL),
natural gas, and refined products. We own an extensive network of pipeline transportation, terminalling, storage
and gathering assets in key crude oil and NGL producing basins and transportation corridors, and at major
market hubs in the United States and Canada. On average, PAA handles over 4.6 million barrels per day of crude
oil and NGL in its Transportation segment. The company is headquartered in Houston, Texas.102

Why was the company not included?


This company is similar to the Fluid Transportation Pipeline Companies that the State Assessed Section is
responsible for valuing. The company engages in the common transportation of refined petroleum products.

CompaniesNotIncludedintheGasTransmissionPipelineor
FluidTransportationMarketSegments
American Midstream Partners, L.P.
Company Summary from Value Line:
American Midstream Partners, LP is engaged in the business of gathering, treating, processing, and transporting
natural gas; gathering, transporting, storing, treating, and fractionating NGLs; gathering, storing, and
transporting crude oil and condensates; and storing specialty chemical products, all through ownership and
operation of 13 gathering systems, five processing facilities, three fractionation facilities, three interstate
pipelines, five intrastate pipelines, three marine terminal sites and one crude oil pipeline. In October 2016,
American Midstream and JP Energy Partners LP executed a merger agreement to create a combined midstream
platform. American Midstream will acquire 100% of JP Energy in a unit-for-unit merger. In conjunction with the
transaction, ArcLight Capital Partners, LLC, the sponsor of both American Midstream and JP Energy, will
combine the general partners of the two companies.
American Midstream Partners, LP was formed as a limited partnership for the purpose of operating, developing,
and acquiring a diversified portfolio of midstream energy assets. It provides natural gas gathering, treating,
processing, fractionating, marketing, and transportation services primarily in the Gulf Coast and Southeast
regions of the US through its ownership and operation of 12 gathering systems, five processing facilities, three
fractionation facilities, four marine terminal sites, three interstate pipelines, five intrastate pipelines, and one oil
pipeline. It operates more than 3,000 miles of pipelines that gather and transport over one Bcf/d of natural gas. In
October 2015, American Midstream acquired a minority interest in Delta House from an affiliate of ArcLight
Capital Partners, LLC, which controls the general partner of the partnership, for total consideration of $162
million. It acquired 25% of ArcLights 51.7% controlling interest in Delta House.

102 https://www.plainsallamerican.com/about-us, accessed 12/28/2016

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Additional Company Information from Website:


We are a growth-oriented Delaware limited partnership that was formed in August 2009 to own, operate,
develop, and acquire a diversified portfolio of midstream energy assets. We are engaged in the business of
gathering, treating, processing, and transporting natural gas and oil, fractionating NGLs and storing specialty
chemical products through our ownership and operation of twelve gathering systems, five processing facilities,
three fractionation facilities, three interstate pipelines, five intrastate pipelines, one oil pipeline and four marine
terminal sites. We own a 50% undivided, non-operating interest in a natural gas processing plant located in
southern Louisiana, a 67% non-operating interest in an offshore oil pipeline, and a 46% non-operated interest in
Mesquite, an off-spec condensate fractionation project in the Permian. We are also an owner, developer, and
operator of petroleum, agricultural, and chemical-liquid terminal storage facilities through our ownership of four
marine terminal sites. Our assets, which are strategically located in Alabama, Georgia, Louisiana, Maryland,
Mississippi, North Dakota, Tennessee, and Texas, provide critical infrastructure that links producers of natural
gas, NGLs, condensate and specialty chemicals to numerous intermediate and end-use markets. We currently
operate more than 3,000 miles of pipelines that gather and transport over 1 Bcf/d of natural gas and operate
approximately 1.7 million barrels of above-ground storage capacity.103
Why was the company not included?
This company is mainly located in the Gulf Coast. The Gulf Coast is a different market than the market of the
companies for which the State Assessed Section is responsible for valuing. Also, this company engages in
gathering, treating, processing, fractionating, storing specialty chemical products, etc. Also, American
Midstream and JP Energy Partners executed a merger agreement to create a combined midstream platform.
Antero Midstream Partners, L.P.
Company Summary from Value Line:
Antero Midstream Partners, LP (the partnership) is a growth-oriented limited partnership formed by Antero
Resources Corporation (Antero) to own, operate, and develop midstream energy assets to service Anteros
increasing production. The partnerships assets consist of gathering pipelines, compressor stations, and water
handling and treatment assets, through which it provides midstream services to Antero under long-term, fixed-
fee contracts. Its assets are located in the southwestern core of the Marcellus Shale in northwest West Virginia
and the core of the Utica Shale in southern Ohio. In September 2016, Antero Midstream priced its private
placement to eligible purchasers of $650 million in aggregate principal amount of 5.375% senior unsecured
notes due 2024 at par. The estimates net proceeds of approximately $640 million is intended to use to repay a
portion of the outstanding borrowings under its credit facility.
Additional Company Information from Website:
Headquartered in Denver, Colorado, Antero Midstream Partners LP (NYSE:AM) is a growth-oriented limited
partnership formed by Antero Resources Corporation (NYSE:AR) to own, operate and develop midstream
energy assets to service Antero Resources rapidly increasing production. Our assets consist of gathering
pipelines and compressor stations, through which we provide midstream services to Antero Resources under
long-term, fixed-fee contracts. Our assets are located in the rapidly developing liquids-rich southwestern core of
the Marcellus Shale in northwest West Virginia and liquids-rich core of the Utica Shale in southern Ohio.104
Why was the company not included?
This company is mainly provides gathering services and water for hydro fracturing. These business segments
are not similar to the main business segments of the companies the State Assessed Section is responsible for
valuing.

103 http://www.americanmidstream.com/about-us/default.aspx, accessed 12/27/2016


104 http://www.anteromidstream.com/, accessed 12/27/2016

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ARC Logistics Partners


Company Summary from Value Line:
Arc Logistics Partners, LP is a fee-based, growth-oriented limited partnership formed by Lightfoot Capital
Partners, LP and its general partner, Lightfoot Capital Partners GP, LLC, to own, operate, develop, and acquire a
diversified portfolio of complementary energy logistics assets. It is principally engaged in the terminalling,
storage, throughput, and transloading of crude oil and petroleum products. As of September 30, 2016, the
partnerships assets consisted of: 21 terminals in 12 states in the East Coast, Gulf Coast, Midwest, Rocky
Mountains, and West Coast regions of the US with approximately 7.8 million barrels of crude oil and petroleum
product storage capacity; four rail transloading facilities with about 126,000 bpd of throughput capacity; and the
LNG Interest in connection with the LNG Facility, which has 320,000 cubic meter of LNG storage, 1.5 bcf/d
natural gas sendout capacity, and interconnects to major natural gas pipeline networks. Has 111 employees.
Additional Company Information from Website:
Arc Logistics Partners LP (NYSE: ARCX) logistics assets are strategically located along the East Coast, West
Coast, Gulf Coast, and Midwest regions of the United States to receive and supply a diverse group of third-party
customers, including major oil and gas companies, independent refiners, crude oil and petroleum product
marketers, distributors and various industrial manufacturers. The location of our assets, combined with our
connectivity to major U.S. energy infrastructure, allows us to meet the evolving needs of our customers. We
provide customers with storage alternatives to handle a wide array of products including gasoline, distillates,
aviation gas, asphalt, fuel oil, crude oil, ethanol, bio-diesel, methanol and crude tall oil. Many of our
facilities manage multiple products and offer additional capacity to support the changing needs of our
customers. Our customer-focused business model, combined with a diverse asset base, provides us with the
opportunity to attract new customers and expand services to our existing customers.105
Why was the company not included?
This companys operations focus mainly on storage and a wide variety of products. These business segments are
not similar to the main business segments of the companies the State Assessed Section is responsible for valuing.
Archroc, Inc.
Company Summary from Value Line:
Archrock, Inc. is a pure play natural gas contract operations services business and the leading provider of natural
gas compression services to customers in the oil and natural gas industry throughout the US and a leading
supplier of aftermarket services to customers that own compression equipment in the US. The company operates
in two business segments. As of December 31, 2015, its contract operations business was largely comprised of
its significant equity investment in Archrock Partners, L.P. and its subsidiaries, in addition to the companys
owned fleet of natural gas compression equipment that it uses to provide operations services to its customers.
Archrocks aftermarket services business provides a full range of services to support the compression needs of
customers. The company sells parts and components and provide operations, maintenance, overhaul and
reconfiguration services to customers who own compression equipment. Has about 2200 employees.
Additional Company Information from Website:
HOUSTON, Nov. 21, 2016 (GLOBE NEWSWIRE) -- Archrock, Inc. (AROC) and Archrock Partners, L.P.
(APLP) today announced that Archrock Partners has completed its previously announced acquisition of
compression assets from Archrock, Inc. The acquired assets include customer contracts serving 63 customers
together with approximately 260 compressor units used to provide compression services under those contracts.
These compressor units represent approximately 147,000 horsepower of compression and approximately 4
percent (by available horsepower) of the combined contract operations business of Archrock, Inc. and Archrock

105 http://arcxlp.com/company/, accessed 12/27/2016

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Partners. Archrock Partners financed the acquisition entirely with the issuance of 5,482,581 common units and
111,040 general partner units to affiliates of Archrock, Inc. Archrock, Inc. (AROC) is a pure-play U.S. natural
gas contract compression services business and a leading supplier of aftermarket services to customers that own
compression equipment in the United States. Archrock, Inc. holds interests in Archrock Partners, L.P. (APLP), a
master limited partnership and the leading provider of natural gas compression services to customers in the oil
and natural gas industry throughout the United States. Archrock, Inc. is headquartered in Houston, Texas,
operating in the major oil and gas producing regions in the United States, with approximately 1,700 employees.
Archrock Partners, L.P., a master limited partnership, is the leading provider of natural gas contract compression
services to customers throughout the United States. Archrock, Inc. owns an equity interest in Archrock Partners,
including all of the general partner interest.106
On November 4, 2015, Exterran Holdings, Inc. separated its international contract operations, international
aftermarket services and global fabrication businesses into a standalone, publicly traded company (Exterran
Corporation), resulting in two independent companies. The remaining company, now known as Archrock, Inc.,
is a pure-play U.S. compression services business, and it owns and operates the former Exterran U.S. contract
operations and U.S. aftermarket services businesses, including equity interest in Archrock Partners. Visit
www.exterran.com to reach the Exterran Corporation (NYSE:EXTN) website.107
Why was the company not included?
This company provides compression services. This business segment is not similar to the main business
segments of the companies the State Assessed Section is responsible for valuing.
Archrock Partners, L.P.
Company Summary from Value Line:
Archrock Partners, LP, a Delaware limited partnership formed in June 2006, is the leading provider of natural
gas contract compression services. Its contract operations services primarily include designing, sourcing,
owning, installing, operating, servicing, repairing, and maintaining equipment to provide natural gas
compression services to customers. Archrock, Inc. owns an equity interest in Archrock Partners, including all of
the general partner interest. In October 2016, Archrock Partners agreed to acquire assets from Archrock, Inc.
including customer contracts serving 63 customers together with about 270 compressor units used to provide
compression services under those contracts, for consideration of approximately $85 million. The consideration to
be paid to Archrock, Inc.s affiliates will consist entirely of newly issued Archrock Partners common units and
general partner units.
Additional Company Information from Website:
Archrock Partners, L.P. (NASDAQ:APLP), a master limited partnership, is the leading provider of natural gas
contract compression services to clients throughout the United States. An equity interest in the company is
owned by Archrock, Inc. (AROC), a pure-play U.S. natural gas contract compression services leader.108
Exterran Partners, L.P. (Nasdaq: EXLP), renamed Archrock Partners, L.P.109
On November 4, 2015, Exterran Holdings, Inc. separated its international contract operations, international
aftermarket services and global fabrication businesses into a standalone, publicly traded company (Exterran
Corporation), resulting in two independent companies. The remaining company, now known as Archrock, Inc.,
is a pure-play U.S. compression services business, and it owns and operates the former Exterran U.S. contract

106 http://www.archrock.com/aroc/news/article/2224916, accessed 1/3/2017


107 http://www.archrock.com/aplp, accessed 1/3/2017
108 http://www.archrock.com/aplp/news, accessed 12/27/2016
109 http://www.bizjournals.com/houston/morning_call/2015/07/houston-energy-company-sets-date-for-spinoff-name.html,
accessed 12/27/2016

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operations and U.S. aftermarket services businesses, including equity interest in Archrock Partners. Visit
www.exterran.com to reach the Exterran Corporation (NYSE:EXTN) website.110
Why was the company not included?
This company provides compression services. This business segment is not similar to the main business
segments of the companies the State Assessed Section is responsible for valuing.
Azure Midstream Partners, L.P.
Company Summary from Value Line:
Azure Midstream Partners, LP is a limited partnership formed to develop, own, operate, and acquire midstream
energy assets. It currently provides natural gas gathering, transportation, treating and processing services, NGL
transportation services, and crude oil transloading services. The partnerships assets include: one natural gas
processing facility located in Panola County, Texas with an approximate design capacity of 125 MMcf/d; an idle
natural gas processing facility located in Tyler County, Texas with an approximate design capacity of 80
MMcf/d; high- and low-pressure gathering lines that currently serve approximately 100,000 dedicated acres and
have access to seven major downstream markets, Panola County processing plants, and three third-party
processing plants; and two NGL transportation pipelines with an approximate design capacity of 20,000 Bbls/d
that connect its Panola County and Tyler County processing facilities to third party NGL pipelines. Has 111
employees.
Additional Company Information from Website:
Azure Midstream Partners, LP, headquartered in Dallas, Texas, is a fee-based, growth-oriented limited
partnership formed to develop, operate, and acquire midstream energy assets. The Partnership provides natural
gas gathering, transportation, and processing services; as well as NGL transportation and crude oil logistics
services. The Partnership's assets include 963 miles of gathering lines in the Shelby Trough sub-play of the
Haynesville Shale and the horizontal Cotton Valley play located in east Texas and north Louisiana that are
capable of gathering 1.9 Bcf/d. The Partnership also has three natural gas processing facilities with 210 MMcf/d
of cumulative processing capacity located in the Panola, San Augustine and Tyler Counties of Texas, two NGL
transportation pipelines that connect its Panola County and Tyler County processing facilities to third party NGL
pipelines capable of transporting 20,000 barrels per day, and three crude oil transloading facilities containing six
crude oil transloaders with a combined capacity of 31,200 Bbls/d.111
Why was the company not included?
This company provides gathering and processing services. These business segments are not similar to the main
business segments of the companies the State Assessed Section is responsible for valuing.
Blueknight Energy Partners, L.P.
Company Summary from Value Line:
Blueknight Energy Partners, LP (BKEP) owns and operates a diversified portfolio of complementary
midstream energy assets consisting of roughly 7.4 million barrels of crude oil storage in Oklahoma and Texas,
985 miles of crude oil pipeline primarily in Oklahoma and Texas, 240 crude oil transportation and oilfield
services vehicles deployed in Kansas, Colorado, New Mexico, Oklahoma, and Texas, and 8.2 million barrels of
combined asphalt product and residual fuel oil storage located at 45 terminals. In October 2016, BKEP
announced that Ergon Asphalt & Emulsions, Inc. acquired the entity that owns the general partner of BKEP.
Ergon also contributed nine asphalt terminals it owned plus $22.1 million of cash to BKEP for an aggregate of
18,312,968 series A preferred units; and acquired 847,457 common units for about $5.0 million. In addition,

110 http://www.archrock.com/aplp, accessed 1/3/2017


111 http://www.azuremidstreampartners.com/pages/about-us, accessed 12/27/2016

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BKEP repurchased 13,335,390 of its series A preferred units owned by Blueknight Energy Holding, Inc. and
CB-Blueknight, LLC for $95.3 million. Has 480 employees.

Additional Company Information from Website:


Blueknight Energy Partners, L.P. is a publicly traded master limited partnership formed in July 2007. BKEP
owns and operates a diversified portfolio of complementary midstream energy assets. The depth of our
experience in the midstream energy business is second to none. Our strategically located assets allow us to be a
leading provider of mid-stream services in the energy industry. We provide services to our customers by
focusing on three operational areas: Crude Oil Terminalling and Storage; Crude Oil Gathering and
Transportation Services; Asphalt Terminalling, Storage and Processing Services. Our general partner,
Blueknight Energy Partners GP., L.L.C., is owned by affiliates of Ergon, Inc., based in Jackson,
Mississippi. Ergon, Inc. is a privately held company formed in 1954 with over 2,500 employees globally. Ergon
and its subsidiaries are engaged in a wide range of operations. Ergon is an exceptional company with a solid
track record and a like-minded disciplined approach to management. We know the importance of optimizing
commercial opportunities for our customers, starting with the consistent delivery of safe and reliable solutions.
Our customers include independent oil and gas producers, petroleum product wholesalers and distributors,
refiners and energy traders.112

Why was the company not included?


This company focuses on three operational areas, crude oil terminalling and storage; crude oil gathering and
transportation; and asphalt terminalling, storage and processing services. Also, in October 2016, BKEP
announced that Ergon Asphalt & Emulsions, Inc. acquired the entity that owns the general partner of BKEP.
Cheniere Energy, Inc.
Company Summary from Value Line:
Cheniere Energy, Inc. engages in the liquefied natural gas (LNG) business and related natural gas pipelines in the Gulf
Coast of the U.S. It operates the Sabine Pass LNG terminal in western Louisiana on the Sabine Pass Channel, and is
developing Corpus Christi LNG near Corpus Christi, Texas; and Creole Trail LNG at the Calcasieu Channel in Louisiana.
It operates the Creole Trail Pipeline, consisting of 94 miles of pipeline connecting the Sabine Pass LNG terminal to various
existing interstate natural gas pipelines in southwest Louisiana. Has 642 employees.

Additional Company Information from Website:


Cheniere Energy, Inc. (NYSE MKT: LNG) (Cheniere), is a Houston-based energy company primarily engaged
in LNG-related businesses. We own and operate the Sabine Pass LNG receiving terminal and Creole Trail
Pipeline located in Louisiana, through our general partner ownership interest in and management agreements
with Cheniere Energy Partners, L.P. (NYSE MKT: CQP) (Cheniere Partners) and our partial ownership interest
in Cheniere Energy Partners LP Holdings, LLC (NYSE MKT: CQH). Cheniere Partners is developing,
constructing and operating a liquefaction project at the Sabine Pass LNG terminal (the "SPL Project") adjacent to
the existing regasification facilities for up to six trains, with expected aggregate nominal production capacity of
approximately 27.0 mtpa of LNG. Train 1 commenced operations in May 2016 and Train 2 commenced
operations in September 2016. Train 3 is in commissioning and Trains 4-5 are currently under construction. All
regulatory approvals have been received to construct and operate Train 6, and FID is expected to be reached
upon obtaining an EPC contract, commercial contracts and financing sufficient to support construction. Cheniere
is developing and constructing additional liquefaction facilities near Corpus Christi, Texas (the "Corpus Christi
LNG terminal"). The Corpus Christi LNG terminal is being designed for up to five trains, with expected
aggregate nominal production capacity of approximately 22.5 mtpa of LNG, three LNG storage tanks with
capacity of approximately 13.5 Bcfe and two marine berths. Construction began on the first two trains in May

112 http://www.bkep.com/about, accessed 12/27/2016

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2016. All regulatory approvals have been received to construct and operate Train 3, and FID is expected to be
reached upon obtaining commercial contracts and financing sufficient enough to support construction. Cheniere
has also filed the NEPA pre-filing to commence the regulatory process on Train 4 and 5. Cheniere is also
engaged in LNG marketing and trading operations. Through its subsidiary, Cheniere Marketing, it is offering
LNG on an FOB or DAT basis to customers interested in purchasing LNG in the short and mid-term markets.
Cheniere Marketing LLC and its subsidiaries (Cheniere Marketing) has access to all excess nominal production
capacity not sold under long-term sale and purchase agreements to third parties. Cheniere continues to evaluate
the energy markets for additional development and/or marketing opportunities that would leverage the existing
platform and strategically fit within the Cheniere organization.113

Why was the company not included?


This company is mainly located in the Gulf Coast. The Gulf Coast is a different market than the market of the
companies for which the State Assessed Section is responsible for valuing.
Cheniere Energy Partners, L.P.
Company Summary from Value Line:
Cheniere Energy Partners, LP (Cheniere Partners) is a limited partnership formed by Cheniere Energy, Inc. to
own and operate the Sabine Pass liquefied natural gas (LNG) terminal on the Sabine Pass deep-water shipping
channel less than four miles from the Gulf Coast. The Sabine Pass LNG terminal has regasification facilities
owned by its wholly owned subsidiary, Sabine Pass LNG, LP, that include existing infrastructure of five LNG
storage tanks with capacity of 16.9 Bcfe, two marine berths that can accommodate vessels of up to 266,000 cubic
meters, and vaporizers with regasification capacity of roughly 4.0 Bcf/d. Cheniere develops and constructs
natural gas liquefaction facilities at the Sabine Pass LNG terminal adjacent to the existing regasification facilities
through Sabine Pass Liquefaction. The company is developing and constructing natural gas liquefaction facilities
at the Sabine Pass LNG terminal adjacent to the existing regasification facilities through its wholly owned
subsidiary, SPL.
Additional Company Information from Website:
Cheniere Energy, Inc. (NYSE MKT: LNG) (Cheniere), is a Houston-based energy company primarily engaged
in LNG-related businesses. We own and operate the Sabine Pass LNG receiving terminal and Creole Trail
Pipeline located in Louisiana, through our general partner ownership interest in and management agreements
with Cheniere Energy Partners, L.P. (NYSE MKT: CQP) (Cheniere Partners) and our partial ownership interest
in Cheniere Energy Partners LP Holdings, LLC (NYSE MKT: CQH). Cheniere Partners is developing,
constructing and operating a liquefaction project at the Sabine Pass LNG terminal (the "SPL Project") adjacent to
the existing regasification facilities for up to six trains, with expected aggregate nominal production capacity of
approximately 27.0 mtpa of LNG. Train 1 commenced operations in May 2016 and Train 2 commenced
operations in September 2016. Train 3 is in commissioning and Trains 4-5 are currently under construction. All
regulatory approvals have been received to construct and operate Train 6, and FID is expected to be reached
upon obtaining an EPC contract, commercial contracts and financing sufficient to support construction. Cheniere
is developing and constructing additional liquefaction facilities near Corpus Christi, Texas (the "Corpus Christi
LNG terminal"). The Corpus Christi LNG terminal is being designed for up to five trains, with expected
aggregate nominal production capacity of approximately 22.5 mtpa of LNG, three LNG storage tanks with
capacity of approximately 13.5 Bcfe and two marine berths. Construction began on the first two trains in May
2016. All regulatory approvals have been received to construct and operate Train 3, and FID is expected to be
reached upon obtaining commercial contracts and financing sufficient enough to support construction. Cheniere
has also filed the NEPA pre-filing to commence the regulatory process on Train 4 and 5. Cheniere is also

113 http://cheniere.com/about-us/cheniere-energy/, accessed 12/27/2016

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engaged in LNG marketing and trading operations. Through its subsidiary, Cheniere Marketing, it is offering
LNG on an FOB or DAT basis to customers interested in purchasing LNG in the short and mid-term markets.
Cheniere Marketing LLC and its subsidiaries (Cheniere Marketing) has access to all excess nominal production
capacity not sold under long-term sale and purchase agreements to third parties. Cheniere continues to evaluate
the energy markets for additional development and/or marketing opportunities that would leverage the existing
platform and strategically fit within the Cheniere organization.114

Why was the company not included?


This company is mainly located in the Gulf Coast. The Gulf Coast is a different market than the market of the
companies for which the State Assessed Section is responsible for valuing.
Clean Energy Fuels Corp
Company Summary from Value Line:
Clean Energy Fuels Corp. provides natural gas as an alternative fuel for vehicle fleets in the United States and
Canada. It designs, builds, finances, and operates fueling stations and supplies compressed natural gas and
liquefied natural gas. It serves about 650 fleet customers operating over 30,600 natural gas vehicles in various
markets, including public transit, refuse hauling, airports, taxis, and trucking. It owns, operates, and supplies
about 224 natural gas fueling stations. The company also constructs fueling stations and sells or leases the
stations to customers. Has about 710 employees.
Additional Company Information from Website:
Clean Energy is changing the way the world fuels its vehicles. Energy independence is an undisputed goal for
our nation, and we at Clean Energy know just how realistic and attainable that goal is with natural gas fuel.
Moving forward in our thinking as well as in our vehicles means a safer, healthier planet for all of us. This
change is already happening. Natural gas is abundant and domestically available and is already used as a cleaner
source of energy around the world.115

Why was the company not included?


This company provides natural gas an alternative fuel for vehicle fleets. This business segment is not similar to
the main business segments of the companies the State Assessed Section is responsible for valuing.
Columbia Pipeline Partners, L.P.
Company Summary from Value Line:
On November 1, 2016, Columbia Pipeline Partners LP (partnership) entered into a definitive agreement and plan
of merger with Columbia Pipeline Group, Inc. (Columbia) pursuant to which Columbia will acquire, for cash, all
of the outstanding common units of the partnership, at $17.00 per common unit for an aggregate transaction
value of approximately $915 million. Due to this news, the companys ranks were suspended. Columbia Pipeline
Partners, LP is engaged in regulated interstate gas transportation and storage services for local distribution
companies, marketers, producers, and industrial and commercial customers located in northeastern, mid-Atlantic,
midwestern, and southern states and the District of Columbia along with unregulated businesses such as
midstream services, including gathering, treating, conditioning, processing, compression and liquids handling,
and development of mineral rights positions.
Additional Company Information from Website:
Columbia Pipeline Partners LP is a Delaware master limited partnership with interests in three regulated U.S.
natural gas pipelines which serve markets extending from New York to the Gulf of Mexico, as well as storage
and related midstream assets. The Partnerships general partner became an indirect, wholly-owned subsidiary of

114 http://cheniere.com/about-us/cheniere-energy/, accessed 12/27/2016


115 https://www.cleanenergyfuels.com/about-us/#, accessed 12/27/2016

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TransCanada Corporation (NYSE:TRP) on July 1, 2016, and as a result, the Partnership is effectively managed
by TransCanada.116

Why was the company not included?


This company has mostly natural gas interstate pipelines from New York to the Gulf and also underground
storage. The location of the markets is not similar enough to the markets of the companies for which the State
Assessed Section is responsible for valuing. Also, Partnerships general partner became an indirect, wholly-
owned subsidiary of TransCanada Corporation (NYSE:TRP) on July 1, 2016, and as a result, the Partnership is
effectively managed by TransCanada.
Cone Midstream Partners, L.P.
Company Summary from Value Line:
CONE Midstream Partners is a master limited partnership formed by CONSOL Energy, Inc. and Noble Energy,
Inc. (sponsors) to own, operate, develop, and acquire natural gas gathering and other midstream energy assets to
service sponsors production in the Marcellus Shale in Pennsylvania and West Virginia. Its assets include natural
gas gathering pipelines, compression and dehydration facilities, and condensate gathering, collection, separation
and stabilization facilities. Its Anchor Systems include its midstream systems that generate the substantial
majority of current cash flows; and the Growth Systems comprise of high-growth, developing gathering systems
that will require substantial expansion capital expenditures over the next several years. In October 2016,
CONSOL Energy and Noble Energy agreed to separate their Marcellus Shale 50-50 joint venture. In November
2016, CONE agreed to acquire an additional 25% ownership interest in CONE Midstream DevCo I LP for about
$248 million.
Additional Company Information from Website:
CONE Midstream Partners (NYSE:CNNX) is a fee-based, growth-oriented master limited partnership that owns,
operates, develops and acquires natural gas gathering and other midstream energy assets to service the rapidly
growing production in the Marcellus Shale in Pennsylvania and West Virginia. Our assets include natural gas
gathering pipelines and compression and dehydration facilities, as well as condensate gathering, collection,
separation and stabilization facilities. We generate all of our revenues under long-term, fixed-fee gathering
agreements that are intended to mitigate our direct commodity price exposure and enhance the stability of our
cash flows. Our gathering agreements also include substantial acreage dedications currently totaling
approximately 496,000 net acres in the Marcellus Shale. CONE Midstream was formed by CONSOL Energy
Inc. (NYSE: CNX) and Noble Energy, Inc. (NYSE: NBL), whom we refer to as our Sponsors. Each of our
Sponsors is a large, independent oil and natural gas exploration and production company with a substantial
resource base and a history of growing production in its areas of operation. Through an upstream joint venture
formed in September 2011, our Sponsors established a joint development plan for one of the largest aggregate
acreage positions in the Marcellus Shale, which is widely viewed as a premier North American shale play due to
its significant hydrocarbon resources in place, consistent and predictable geology, high well recoveries relative to
drilling and completion costs and proximity to high-demand metropolitan markets in the northeastern United
States. We believe that our strategically located assets, our relationship with our Sponsors and our Sponsors
intention to use us as their primary midstream services company in the Marcellus Shale position us to become a
leading midstream energy company.117

116 http://www.columbiapipelinepartners.com/about-us, accessed 12/27/2016


117 http://www.conemidstream.com/CustomPage/Index?KeyGenPage=328650, accessed 12/28/2016

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Why was the company not included?


This company is mainly involved in natural gas gathering services. This business segments are not similar to the
main business segments of the companies the State Assessed Section is responsible for valuing.
Crestwood Equity Partners, L.P.
Company Summary from Value Line:
Crestwood Equity Partners, LP (CEQP) develops, acquires, owns or controls, and operates primarily fee-based assets and
operations within the energy midstream sector. It offers infrastructure solutions across the value chain to service premier
liquids-rich natural gas and crude oil shale plays across the US. CEQP owns and operates a diversified portfolio of crude
oil and natural gas gathering, processing, storage and transportation assets, and connects essential energy supply with
energy demand across North America. CEQP is a holding company and all of its consolidated operating assets are owned
through its subsidiary, Crestwood Midstream. In October 2016, CEQP and Williams Partners LP, as 50/50 joint venture
partners in the Bucking Horse natural gas processing plant and Jackalope Gas Gathering System, signed an agreement with
Chesapeake Energy Corp. to restructure natural gas gathering and processing services in Wyomings Powder River Basin.
Has about 1300 employees.

Additional Company Information from Website:


Crestwood Equity Partners LP (NYSE: CEQP) is a publicly traded master limited partnership that owns and operates
midstream assets located primarily in the Marcellus Shale, Bakken Shale, Delaware Permian Basin, PRB Niobrara Shale,
Barnett Shale, Fayetteville Shale and Haynesville Shale. Our operations and financial results are divided into three
segments that include Gathering & Processing, Storage & Transportation and Marketing, Supply & Logistics. Across our
three segments Crestwood is engaged in the gathering, processing, treating, compression, storage and transportation of
natural gas; storage, transportation, terminalling and marketing of NGLs; gathering, storage, transportation, terminalling
and marketing of crude oil.118

Why was the company not included?


This company is involved in three business segments: gathering and processing; storage and transportation; and
marketing, supply, and logistics. The companys transportation services are small lines in key areas. The
business segments are not closely related to the companies the State Assessed Section is responsible for valuing.
CrossAmerica Partners, L.P.
Company Summary from Value Line:
CrossAmerica Partners, LP is a wholesale distributor of motor fuels and owner and lessee of real estate used in
the retail distribution of motor fuels. Its general partner, CrossAmerica GP LLC, is a wholly owned subsidiary of
CST Brands, Inc., one of the largest independent retailers of motor fuels and convenience merchandise in North
America. Formed in 2012, CrossAmerica Partners is a distributor of branded and unbranded petroleum for motor
vehicles in the US and distributes fuel to more than 1,190 locations and owns or leases more than 800 sites. With
a geographic footprint covering 29 states, it has relationships with several major oil brands, including
ExxonMobil, BP, Shell, Chevron, Sunoco, Valero, Gulf, Citgo, and Phillips 66. In September 2016,
CrossAmerica closed on the previously announced purchase of certain assets of State Oil Company in the
Chicago, IL market for total consideration of $43.1 million. Has 1052 employees.
Additional Company Information from Website:
Formed in 2012, CrossAmerica Partners is a publicly traded master limited partnership that is engaged in the
wholesale distribution of motor fuels, consisting of gasoline and diesel fuel, and owns and leases real estate used
in the retail distribution of motor fuels. Our units are traded on the New York Stock Exchange under the symbol
"CAPL." With a focus on metropolitan and urban markets, CrossAmerica Partners distributes fuel to more than
1,190 locations and owns or leases more than 800 sites. Our geographic footprint covers 29 states: Arizona,

118 http://www.crestwoodlp.com/about-us/default.aspx, accessed 12/28/2016

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Arkansas, Colorado, Delaware, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland,
Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, New York, North Carolina,
Ohio, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Virginia, West Virginia and Wisconsin.
CrossAmerica Partners is headquartered in Allentown, Pennsylvania. Its downtown location plays an integral
part in the revitalization of the Lehigh Valley region's largest city.119

Why was the company not included?


This company is a wholesale distributor of motor fuels. Also, owner and lessee of real estate used in the retail
distribution of motor fuels. These business segments are not similar to the main business segments of the
companies the State Assessed Section is responsible for valuing.
DCP Midstream Partners, L.P.
Company Summary from Value Line:
DCP Midstream Partners, L.P. owns, operates, acquires, and develops a portfolio of midstream energy assets.
The Natural Gas Services segment (85% of 15 revenues) operates about 11,500 pipeline miles and 15 billion
cubic feet of storage capacity. The NGL (Natural Gas Liquids) Logistics Segment (4%) operates about 1,500
miles of pipelines and seven million barrels of storage capacity. The Wholesale Propane Logistics segment
(11%) owns/leases propane terminals, with total capacity of 975 thousand barrels. Off./dir. own less than 1% of
units; DCP Midstream, LLC, 21.1%; four institutions, 30.3% (3/16 proxy).
Additional Company Information from Website:
We are a must-run sector that gathers, compresses, treats, processes, transports, stores, and sells natural gas, as
well as produces, fractionates, transports, stores and sells natural gas liquids and condensate, and transports,
stores and sells propane in wholesale markets. The Partnerships operations are organized into three business
segments: Natural Gas Services, NGL Logistics, and Wholesale Propane Logistics.120

Why was the company not included?


This company is involved in many business functions, organized into three business segments, natural gas
services, natural gas liquids logistics, and wholesale propane logistics. These business segments are not similar
to the main business segments of the companies the State Assessed Section is responsible for valuing.
Delek Logistics Partners, L.P.
Company Summary from Value Line:
Delek Logistics Partners, LP owns and operates logistics and marketing assets for crude oil, and intermediate
and refined products in the United States. The company consists of assets, including pipelines and trucks and
ancillary assets that provide crude oil gathering and crude oil, intermediate and finished products transportation,
and storage services primarily in support of the Tyler and El Dorado refineries, as well as offers crude oil and
other products transportation services to third parties. It operates approximately 400 miles of crude oil
transportation pipelines; 124 miles of refined product pipelines; and approximately 600 miles of crude oil
gathering and trunk lines with an aggregate of approximately 6.9 million barrels of active shell capacity. The
company provides marketing, transporting, storing, and terminalling refined products and services to
independent third parties. Delek Logistics Partners, LP was founded in 2012 and is headquartered in Brentwood.
Additional Company Information from Website:
Delek Logistics Partners LP (NYSE: DKL), headquartered in Brentwood, Tennessee, is a growth-oriented
publicly traded master limited partnership (MLP) formed by Delek US Holdings in 2012 to own, operate,
acquire, and construct crude oil and refined products logistics and marketing assets. A substantial majority of our

119 http://www.crossamericapartners.com/about-us/about-lehigh-gas-partners/page.aspx?id=1002, accessed 12/28/2016


120 http://www.dcppartners.com/our-business-segments

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existing assets are integral to the success of Deleks refining and marketing operations. We gather, transport and
store crude oil and market, distribute, transport and store refined products in select regions of the southeastern
United States and west Texas for Delek and third parties, primarily in support of Deleks refineries in Tyler,
Texas and El Dorado, Arkansas.121

Why was the company not included?


This company is mainly located in the Gulf Coast. The Gulf Coast is a different market than the market of the
companies for which the State Assessed Section is responsible for valuing.
Dominion Midstream Partners, L.P.
Company Summary from Value Line:
Dominion Midstream Partners, LP is a growth-oriented Delaware limited partnership formed by Dominion
Resources, Inc. in March 2014, to own, operate, develop, and acquire natural gas import, storage, regasification,
transportation, and related assets. Its ongoing principal sources of liquidity may include distributions received
from Cove Point, from its preferred equity interest, borrowings under credit facility with Dominion Resources,
and issuances of debt and equity securities. The initial asset owned by Dominion Midstream is a preferred equity
interest in the Cove Point LNG facility. Cove Points operations currently consist of LNG import and storage
services at the Cove Point LNG Facility and the transportation of domestic natural gas and regasified LNG to
Mid-Atlantic markets via the Cove Point Pipeline. In October 2016, Dominion Midstream agreed to acquire
Questar Pipeline, LLC, from Dominion for consideration of approximately $1.725 billion.
Additional Company Information from Website:
Cove Points operations currently consist of LNG import and storage serves at the Cove Pont LNG Facility and
the transportation of domestic natural gas and regasified LNG to Mid-Atlantic markets via the Cove Point
Pipeline. The Cove Point LNG Facility includes an offshore pier, LNG storage tanks, regasification facilities and
associated equipment required to (1) receive imported LNG from tankers, (2) store LNG in storage tanks, (3)
regasify LNG and (4) deliver regasified LNG to the Cove Point Pipeline. Cove Point is in the process of
constructing the Liquefaction Project, which will consist of one LNG train with a design nameplate outlet
capacity of 5.25 Mtpa. Under normal operating conditions and after accounting for maintenance downtime and
other losses, the firm contracted capacity for LNG loading onto ships, will be approximately 4.6 Mtpa (0.66
Bcfe/d). Headquartered in Columbia, S.C., Dominion Carolina Gas Transmission (DCGT) is an interstate natural
gas transportation company delivering natural gas to wholesale and direct industrial customers throughout South
Carolina. The current DCGT system consists of ~1,500 miles of FERC-regulated interstate transmission
pipelines with approximately 770 Mmcf/day. Headquartered in Columbia, S.C., Dominion Carolina Gas
Transmission (DCGT) is an interstate natural gas transportation company delivering natural gas to wholesale and
direct industrial customers throughout South Carolina. The current DCGT system consists of ~1,500 miles of
FERC-regulated interstate transmission pipelines with approximately 770 Mmcf/day. Questar Pipeline transports
and stores natural gas. Questar's pipelines interconnect with major regional pipelines, and its system is
strategically located to serve major gas-producing basins in the Rockies.122

Why was the company not included?


This companys main business segments include importing natural gas and storage. These business segments are
not similar to the main business segments of the companies the State Assessed Section is responsible for valuing.

121 http://www.deleklogistics.com/phoenix.zhtml?c=251361&p=irol-IRHome, accessed 12/28/2016


122 http://www.dommidstream.com/aboutus/index.php

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Emerge Energy Service, L.P.


Company Summary from Value Line:
Emerge Energy Services, LP is a Delaware limited partnership formed by management and affiliates of Insight
Equity to own, operate, acquire, and develop a diversified portfolio of energy service assets. It is engaged in the
business of mining, producing, and distributing silica sand that is a key input for the hydraulic fracturing of oil
and gas wells. The Sand business conducts mining and processing operations from facilities in Wisconsin and
Texas. In addition, this business segment sells its product for use in building products and foundry operations.
The Fuel business operates transmix processing facilities in the Dallas-Fort Worth area and in Birmingham, AL.
The Fuel business also offered third-party bulk motor fuel storage and terminal services, biodiesel refining, sale
and distribution of wholesale motor fuels, reclamation services (which consists primarily of cleaning bulk
storage tanks used by other petroleum terminal and others) and blending of renewable fuels. Has 998 employees.
Additional Company Information from Website:
Emerge Energy Services is a growth-oriented diversified energy services company. Our operations are
strategically located to provide us with direct access to all major resource plays in North America, and also to the
major fuel markets of Dallas/Fort Worth and Birmingham, AL. Emerge Energy Services sand subsidiary
produces silica sand that is a key input for the hydraulic fracturing of oil and gas wells. While the Company is
able to produce sand suited for the stimulation of both oil and gas wells, the Company has developed a strong
reputation in the industry for producing sand that meets the strict requirements for use in oil wells. Our sand
facilities are located in New Auburn, WI, Barron County, WI and Kosse, TX, with headquarters in Fort Worth,
TX.123

Why was the company not included?


This companys main business segments are mining, producing, and distributing silica sand for hydraulic
fracturing. These business segments are not similar to the main business segments of the companies the State
Assessed Section is responsible for valuing.
Enable Midstream Partners, L.P.
Company Summary from Value Line:
Enable Midstream Partners, LP owns natural gas and crude oil infrastructure assets. It has two segments:
Gathering & Processing and Transportation & Storage. Enables assets include 12,400 miles of gathering
pipelines, 14 major processing plants with 2.5 billion cubic feet per day of capacity, 7,900 miles of interstate
pipelines, 2,200 miles of intrastate pipelines, and eight storage facilities. 2015 depr. rate: 2.8%. Has 1,640
employees. CenterPoint Energy owns 55.4% of shares out.; OGE Energy, 26.3%; ArcLight Capl. Partners,
11.3%; off. and dir., less than 1% (2015 10-K).
Enable Midstream Partners, LP owns, operates and develops strategically located natural gas and crude oil
infrastructure assets. The partnerships assets and operations are organized into two reportable segments:
Gathering and Processing, which primarily provides natural gas gathering, processing and fractionation services
and crude oil gathering for its producer customers, and Transportation and Storage, which provides interstate and
intrastate natural gas pipeline transportation and storage service primarily to natural gas producers, utilities and
industrial customers. The natural gas gathering and processing assets are located in five states and serve natural
gas production in the Anadarko, Arkoma and Ark-La-Tex basins. This segment also includes a crude oil
gathering business in the Bakken Shale formation, principally located in the Williston basin. Effective January 1,
2016, Rodney J. Sailor will become president, CEO, and member of the board of directors. Has 3 employees.

123 http://emergelp.com/emerge/about-us/, accessed 12/28/2016

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Additional Company Information from Website:


Enable Midstream Partners, LP is a publicly traded Master Limited Partnership (MLP) where approximately
1,900 employees focus on providing customers timely, reliable and affordable solutions. We were formed as a
joint venture by affiliates of CenterPoint Energy, Inc., OGE Energy Corp and ArcLight Capital Partners, LLC in
May 2013. Our general partner is equally controlled by CenterPoint Energy and OGE.124 Enable Midstream
Partners assets include approximately 12,400 miles of gathering lines, 14 major processing plants with
approximately 2.5 billion cubic feet per day with construction on one new plant underway, approximately 7,900
miles of interstate pipelines with 8.4 billion cubic feet per day of transport capacity, approximately 2,300 miles
of interstate pipelines, and approximately 85.0 billion cubic feet of natural gas storage.125

Why was the company not included?


This company began trading on April 11, 2014. We would consider this company in the future. As of January 2,
2017, the company has less than three full years of financials. However, this company performs a lot of
gathering and processing functions.
Enbridge Energy, Inc.
Company Summary from Value Line:
Enbridge Inc., a Canadian company, is a leader in energy transportation and distribution in North America and
internationally. As a transporter of energy, it operates the worlds longest crude oil and liquids pipeline system.
The company also has international operations and a growing involvement in the natural gas transmission and
midstream businesses. As a distributor of energy, it owns and operates Canadas largest natural gas distribution
company, and provides services in Ontario, Quebec, New Brunswick, and New York State. Owns 38.9% of
Noverco. Employs about 8,600.
Additional Company Information from Website:
Enbridge Inc., headquartered in Calgary, Alberta, manages and has a 91.9 per cent overall interest in Enbridge
Income Fund and a 21.1 per cent overall ownership in Enbridge Energy Partners, L.P., which is headquartered in
Houston. We have a workforce of approximately 10,000 people, primarily in Canada and the United States.
Enbridge manages several investment options that trade on the New York and/or Toronto stock exchanges,
including Enbridge Inc. (ENB), Enbridge Energy Partners, L.P. (EEP), Enbridge Energy Management, L.L.C.
(EEQ), and Enbridge Income Fund (ENF).126
Enbridge has a unique advantage through its family of public entities that make up the Enbridge Group of
Companies: Enbridge Income Fund Holdings (ENF), Enbridge Energy Partners (EEP), Enbridge Energy
Management (EEQ) and Midcoast Energy Partners (MEP). These companies offer a variety of attractive
investment options and enhance the value of our existing assets. In addition, our sponsored vehicle strategy is
expected to further enhance the value of our capital program by providing access to diversified sources of low-
cost funding.127
Why was the company included?
This company was not included because we would use Enbridge Energy Partners, L.P.

124 http://www.enablemidstream.com/html/pages/p001-homepage.html, accessed 12/28/2016


125 http://www.enablemidstream.com/html/pages/p002-about.html, accessed 12/28/2016
126 http://www.enbridge.com/About-Us/Our-Company.aspx, accessed 1/3/2017
127 http://www.enbridge.com/investment-center/enbridge-companies, accessed 1/3/2017

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Enbridge Energy Partners, L.P.


Company Summary from Value Line:
Enbridge Energy Partners, LP owns and operates crude oil and liquid petroleum transportation and storage
assets, natural gas gathering, treating, processing, transmission and marketing assets in the US. The companys
activities include interstate pipeline transportation and storage of crude oil, liquid petroleum, natural gas and
NGLs. EEP has no direct employees. The majority of EEP is owned by its parent holding companies Enbridge
Inc., Enbridge Energy and Enbridge Energy Management. The remaining 44.5% is publicly traded. The parent
company, Enbridge Inc., recently announced a definitive merger agreement with Spectra Energy (SE). Under the
deal, Spectra shareholders would receive 0.984 shares of the combined entity, or about $40.33 based on ENBs
price prior to the announcement.
Additional Company Information from Website:
Enbridge Energy Partners, L.P., (EEP), an Enbridge company, is a leader in the safe and reliable delivery of
energy in North America. We transport, generate and distribute energy, operating the worlds longest, most
sophisticated crude oil and liquids transportation system.128
Spectra Energy Corp and Enbridge Inc. will combine to create North Americas largest energy infrastructure
company. This transaction creates the largest energy infrastructure company in North America with an enterprise
value of approximately C$165 billion (US$127 billion), a C$74 billion (US$57 billion) inventory of current and
potential growth projects and anticipated annual dividend growth of 10-12 percent through 2024. The combined
company will be exceedingly well positioned to invest in critical infrastructure to meet the needs of our
customers and create value for our shareholders.129
Why was the company included?
This company is similar to, and is one of, the Fluid Transportation Pipeline Companies that the State Assessed
Section is responsible for valuing. The company engages in the common transportation of refined petroleum
products. However, the Spectra Energy Partners, L.P.s general partner, Spectra Energy Corp, announced a
merger with Enbridge, Inc., the parent of Enbridge Energy Partners, L.P., which could affect the financial
information for the current year for all companies involved.
Energy Transfer Partners, L.P.
Company Summary from Value Line:
Energy Transfer Partners, L.P., the third-largest master limited partnership in the U.S., gathers, processes, stores,
and transports natural gas, natural gas liquids, and oil; and wholesales and retails gasoline; owns about 47,000
miles of pipelines. 2015 operating profits: intrastate transportation and storage, 7%; interstate gas trans., 42%;
midstream and NGL, -5%; investment in Sunoco Logistics, 5%; retail and other, 51%. Sold propane ops, 1/12;
acquired Sunoco, 10/12. About 25,682 employees. ETP insiders control Energy Transfer Equity, L.P., which
owns .5% of the common units (15 10-K).
Additional Company Information from Website:
Energy Transfer Partners, L.P. (NYSE:ETP) is a master limited partnership that owns and operates one of the
largest and most diversified portfolios of energy assets in the United States. ETP's subsidiaries include
Panhandle Eastern Pipe Line Company, LP (the successor of Southern Union Company) and Lone Star NGL
LLC, which owns and operates natural gas liquids storage, fractionation and transportation assets. In total, ETP
currently owns and operates approximately 62,500 miles of natural gas and natural gas liquids pipelines. ETP

128 https://www.enbridgepartners.com/, accessed 12/28/2016


129 http://www.spectraenergy.com/Transaction/, accessed 12/28/2016

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also owns the general partner, 100% of the incentive distribution rights, and 67.1 million common units of
Sunoco Logistics Partners L.P. (NYSE:SXL), which operates a geographically diverse portfolio of
complementary crude oil, refined products, and natural gas liquids pipeline, terminalling acquisition and
marketing assets which are used to facilitate the purchase and sale of crude oil, natural gas liquids, and refined
products. ETP's general partner is owned by Energy Transfer Equity, L.P. (NYSE:ETE).130
Nov. 21, 2016-- Sunoco Logistics Partners L.P. (NYSE: SXL) and Energy Transfer Partners, L.P. (NYSE: ETP)
today announced that they have entered into a merger agreement providing for the acquisition of ETP by SXL in
a unit-for-unit transaction. The transaction was approved by the boards of directors and conflicts committees of
both partnerships and is expected to close in the first quarter of 2017, subject to receipt of ETP unitholder
approval and other customary closing conditions.131
Why was the company included?
This company is similar to the Gas Transmission Pipeline Companies that the State Assessed Section is
responsible for valuing. The company engages in the transportation, gathering, and storage of natural gas.
However, this company is currently entered in an agreement for its acquisition by Sunoco Logistics Partners,
L.P.
Energy Transfer Equity, L.P.
Company Summary from Value Line:
Energy Transfer Equity, LP is a master limited partnership that owns the general partner and 100% of the
incentive distribution rights (IDRs) of Energy Transfer Partners, LP (ETP), and Sunoco, LP, (SUN). The
company also owns approximately 2.6 ETP million common units and approximately 81.0 million ETP class H
units, which track 90% of the underlying economics of the general partner interest and IDRs of Sunoco Logistics
Partners, LP. On a consolidated basis, the ETE family owns and operates approximately 71,000 miles of natural
gas pipeline. Has about 30,000 employees.
Additional Company Information from Website:
Energy Transfer Equity, L.P. (NYSE:ETE) is a master limited partnership that owns the general partner and
100% of the incentive distribution rights (IDRs) of Energy Transfer Partners, L.P. (NYSE:ETP) and Sunoco LP
(NYSE:SUN). ETE also owns approximately 2.6 million ETP common units and approximately 81.0 million
ETP Class H Units, which track 90% of the underlying economics of the general partner interest and IDRs of
Sunoco Logistics Partners L.P. (NYSE:SXL). On a consolidated basis, the ETE family owns and operates
approximately 71,000 miles of natural gas, natural gas liquids, refined products, and crude oil pipelines.132
Nov. 21, 2016-- Sunoco Logistics Partners L.P. (NYSE: SXL) and Energy Transfer Partners, L.P. (NYSE: ETP)
today announced that they have entered into a merger agreement providing for the acquisition of ETP by SXL in
a unit-for-unit transaction. The transaction was approved by the boards of directors and conflicts committees of
both partnerships and is expected to close in the first quarter of 2017, subject to receipt of ETP unitholder
approval and other customary closing conditions.133

130 http://ir.energytransfer.com/phoenix.zhtml?c=106094&p=irol-IRHome, accessed 12/28/2016


131 http://ir.energytransfer.com/phoenix.zhtml?c=106094&p=irol-newsArticle&ID=2224891, accessed 12/28/2016
132 http://ir.energytransfer.com/phoenix.zhtml?c=106094&p=irol-IRHome, accessed 12/28/2016
133 http://ir.energytransfer.com/phoenix.zhtml?c=106094&p=irol-newsArticle&ID=2224891, accessed 12/28/2016

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Why was the company included?


This company owns the general partner and 100% of the incentive distribution rights of Energy Transfer
Partners, L.P. and Sunoco, L.P. Energy Transfer Partners, L.P. is currently entered in an agreement for its
acquisition by Sunoco Logistics Partners, L.P.
EnLink Midstream Partners, L.P.
Company Summary from Value Line:
EnLink Midstream Partners L.P., formerly Crosstex Energy, L.P., is a master limited partnership (MLP) that
provides midstream energy services, including gathering, transmission, processing, fractionation, and marketing,
to producers of natural gas, natural gas liquids (NGLs), crude oil, and condensate. Has five segments: Texas
(23% of 15 revenues, 49% of gross operating margin); Louisiana (41%, 22%); Oklahoma (4%, 14%); Crude &
Condensate (34%, 14%); and Corporate (-2%, 1%). Has 1,432 employees. Devon Energy Corp. owns 48% of
total units; Enfield Holdings, L.P, 13%; Off./dir., less than 1% (15 10-K).
Additional Company Information from Website:
Our expansive gathering, processing, fractionation, transportation, and logistics assets are located in the most
prolific oil and gas regions in North America, including the Gulf Coast, Permian, STACK, SCOOP, C-NOW,
Cana-Woodford, Arkoma-Woodford, North Texas, Haynesville, Utica, Marcellus, and Eagle Ford.
With approximately 10,000 miles of gathering and transportation pipelines, 19 processing plants with 3.9 billion
cubic feet of net processing capacity, and seven fractionators with 284,000 barrels per day of net fractionation
capacity, as well as barge and rail terminals, product storage facilities, product storage facilities, purchase and
marketing capabilities, brine disposal wells, an extensive crude oil trucking fleet, and equity investments in
certain private midstream companies, we are able to aggressively pursue system expansions and develop new
projects to better serve our customers.134
Why was the company not included?
Most of this companys operations are located in Texas and Oklahoma. This is a different market than the market
of the companies for which the State Assessed Section is responsible for valuing.
EQT MidStream Partners, L.P.
Company Summary from Value Line:
EQT Midstream Partners, LP is a growth-oriented limited partnership formed by EQT Corp. to own, operate,
acquire, and develop midstream assets in the Appalachian Basin of Pennsylvania, West Virginia and Ohio. The
partnership provides substantially all of its natural gas transmission, storage, and gathering services under
contracts with long-term, firm reservation and/or usage fees. EQT Corp. accounted for approximately 73% of
Partnership revenues for the year ended December 31, 2015. EQT Midstream Svcs., LLC serves as the general
partner of the company.
Additional Company Information from Website:
EQT Midstream Partners, LP is a growth-oriented limited partnership formed by EQT Corporation to own,
operate, acquire and develop midstream assets in the Appalachian Basin. The Partnership provides substantially
all of its natural gas transmission, storage and gathering services under contracts with long-term, firm reservation
and/or usage fees. This contract structure enhances the stability of the Partnerships cash flows and limits its
direct exposure to commodity price risk. The Partnerships operations are primarily focused in southwestern
Pennsylvania, northern West Virginia, and southeastern Ohio, a strategic location in the core of the rapidly
developing natural gas Marcellus and Utica shale plays. This same region is also the core operating area of EQT,
the Partnerships largest customer that accounted for approximately 73% of the Partnerships revenues generated
for the year ended December 31, 2015. The Partnership provides midstream services to EQT and multiple third

134 http://www.enlink.com/operations/, accessed 1/3/2017

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parties across 24 counties in Pennsylvania, West Virginia, and Ohio through its two primary assets: the
transmission and storage system, which serves as a header system transmission pipeline, and the gathering
system, which delivers natural gas from wells and other receipt points to transmission pipelines. The Partnership
believes that its strategically located assets, combined with its working relationship with EQT, position it as a
leading Appalachian Basin midstream energy company.135
Why was the company not included?
This companys operations are located in the Appalachian Basin, which is a different market than the market of
the companies for with the State Assessed Section is responsible for valuing.
Ferrellgas Partners, L.P.
Company Summary from Value Line:
Ferrellgas Partners, LP is engaged in the retail distribution of propane and related equipment sales; and
midstream operations, which is comprised of the following crude oil logistics segment and water solutions
segment. It is the sole limited partner of Ferrellgas, LP with an approximate 99% limited partner interest.
Ferrellgas Partners serve residential, industrial/commercial, portable tank exchange, agricultural, wholesale and
other customers in all 50 states, the District of Columbia, and Puerto Rico. In the residential and
industrial/commercial markets, propane is primarily used for space heating, water heating, cooking and other
propane fueled appliances. In the portable tank exchange market, propane is used primarily for outdoor cooking
using gas grills. In the agricultural market, propane is primarily used for crop drying, space heating, irrigation
and weed control.
Additional Company Information from Website:
Reliable, flexible, capable thats what you get when you do business with Ferrellgas. Throughout our history,
weve prided ourselves on being not only propane industry leaders, but good neighbors to the approximately 1
million customers we serve nationwide. For nearly 80 years, Americans have depended on Ferrellgas, their
hometown propane provider. Our nationwide supply network means you have propane when and where you
need it. No matter how you use propane, or where you use it, Ferrellgas has you covered.136
Why was the company not included?
This companys main business segment is propane, which is a different business segment of the companies for
with the State Assessed Section is responsible for valuing.
Genesis Energy, L.P.
Company Summary from Value Line:
Genesis Energy, LP is focused on the midstream segment of the oil and gas industry in the Gulf Coast region of
the US, primarily Alabama, Arkansas, Florida, Louisiana, Mississippi, Texas, Wyoming, and in the Gulf of
Mexico. It has diverse portfolio of assets, including pipelines, offshore hub and junction platforms, storage tanks
and terminals, and rail loading and unloading facilities. Genesis operates through five divisions: onshore pipeline
transportation of crude oil and carbon dioxide (CO 2); offshore pipeline transportation and processing of crude
oil and natural gas; refinery services involving processing of high sulfur gas streams for refineries to remove the
sulfur, and selling the related by-product, sodium hydrosulfide (NaHS); marine transportation to provide
waterborne transportation of petroleum products and crude oil; and supply and logistics services, which include
terminaling, blending, storing, marketing, and transporting crude oil and petroleum products. Has about 1400
employees.

135 https://www.eqtmidstreampartners.com/about-us/home, accessed 1/3/2017


136 https://www.ferrellgas.com/our-company/, accessed 1/3/2017

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Additional Company Information from Website:


Genesis Energy, L.P., is a growth-oriented master limited partnership headquartered in Houston,
Texas. Through our five divisions: onshore pipeline transportation, offshore pipeline transportation, refinery
services, marine transportation and supply and logistics, we provide an integrated suite of services to refineries,
oil producers, and industrial and commercial enterprises. Our operations are primarily located in Texas,
Louisiana, Arkansas, Mississippi, Alabama, Florida, Wyoming and the Gulf of Mexico. Our business activities
are primarily focused on providing services around and within refinery complexes. Upstream of refineries, we
provide gathering and transportation of crude oil. Within refineries, we provide services to assist in their sulfur
balancing requirements. Downstream of refineries, we provide transportation services as well as market outlets
for the finished refined products. We have a diverse portfolio of customers, operations and assets, including
pipelines, refinery-related plants, storage tanks and terminals, railcars, rail loading and unloading facilities,
barges and trucks. We also have interests in pipelines offshore in the Gulf of Mexico. That business includes
over 2,500 miles of offshore crude oil and natural gas pipelines and six offshore hub platforms that serve some
of the most active drilling and development regions in the United States, including deepwater production fields
in the Gulf of Mexico offshore of Texas, Louisiana, Mississippi, and Alabama.137
Why was the company not included?
This company is mainly located in the Gulf Coast. The Gulf Coast is a different market than the market of the
companies for which the State Assessed Section is responsible for valuing.
Global Partners, L.P.
Company Summary from Value Line:
Global Partners, LP is engaged in the purchasing, selling, and logistics of transporting petroleum and related
products, including domestic and Canadian crude oil, gasoline and gasoline blendstocks (such as ethanol and
naphtha), distillates (such as home heating oil, diesel, and kerosene), residual oil, renewable fuels, natural gas
and propane. It also receives revenue from convenience store sales and gasoline station rental income. Global
owns, controls, or has access to one of the largest terminal networks of refined petroleum products and
renewable fuels in the northeast. It owns transload and storage terminals in North Dakota and Oregon that extend
its origin-to-destination capabilities from the mid-continent region of the US and Canada to the east and west
coasts. As of September 30, 2016, the partnership had a portfolio of 1,472 owned, leased and/or supplied
gasoline stations, including 257 directly operated convenience stores, in the Northeast, Maryland and Virginia.
Has 1890 employees.
Additional Company Information from Website:
A publicly traded master limited partnership, Global is a midstream logistics and marketing company that owns,
controls or has access to one of the largest terminal networks of petroleum products and renewable fuels in the
Northeast. Global also is one of the largest distributors of gasoline, distillates, residual oil and renewable fuels to
wholesalers, retailers and commercial customers in New England and New York. The Partnership is engaged in
the transportation of crude oil and other products by rail from the mid-continental U.S. and Canada to the East
and West Coasts for distribution to refiners and others. With approximately 1,500 locations, primarily in the
Northeast, Global also is one of the largest independent owners, suppliers and operators of gasoline stations and
convenience stores.138
Why was the company not included?
This company is one of the largest distributors of gasoline, distillates, residual oil and renewable fuels to
wholesalers, retailers, and commercial customers in New England and New York. This type of business segment

137 http://genesisenergy.com/about/, accessed 1/3/2017


138 http://www.globalp.com/, accessed 1/3/2017

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is different than the business segments of the companies for which the State Assessed Section is responsible for
valuing.
JP Energy Partners, L.P.
Company Summary from Value Line:
JP Energy Partners, LP is a publicly traded, growth-oriented limited partnership that formed in May 2010 by
members of management and further capitalized by ArcLight Capital Partners, LLC to own, operate, develop,
and acquire a diversified portfolio of midstream energy assets. The companys operations currently consist of
crude oil pipelines and storage; refined products terminals and storage; and NGL distribution and sales, which
together provide midstream infrastructure solutions for the growing supply of crude oil, refined products and
NGLs in the United States. Its operations currently consist of three business segments: (i) crude oil pipelines and
storage, (ii) refined products terminals and storage and (iii) NGL distribution and sales. The company conducts
business through fee-based and margin-based arrangements.
Additional Company Information from Website:
JP Energy (NYSE: JPEP) is a master limited partnership focused on the gathering, storage and movement of
crude oil, refined products and natural gas liquids from production in key basins to consumer end markets. We
provide infrastructure solutions to producers, marketers and refiners of hydrocarbons and consumers in diverse
markets, helping navigate changing product flows and customer needs. Through our network of midstream
assets, we provide a means of connecting suppliers to customers through a full range of midstream services,
including supply and logistics, terminalling and storage.139
Why was the company not included?
This company operates one of the largest portable propane cylinder exchange businesses in the US. This
business segment is not similar to the business segments of the companies in which the State Assessed Section is
responsible for valuing. Also, American Midstream and JP Energy Partners executed a merger agreement to
create a combined midstream platform
Martin Midstream Partners, L.P.
Company Summary from Value Line:
Martin Midstream Partners, LP provides terminaling and storage services for petroleum products and by
products. Its four primary business lines include: natural gas services, including liquids transportation and
distribution services and natural gas storage; terminalling and storage services for petroleum products and by-
products including the refining of naphthenic crude oil, blending and packaging of finished lubricants; sulfur and
sulfur-based products processing, manufacturing, marketing and distribution; and marine transportation services
for petroleum products and by-products. The petroleum products and by-products the company collects,
transports, stores and markets are produced mainly by oil and gas companies. In October 2016, the company
entered into a definitive agreement with NuStar Logistics, L.P. to sell certain of its terminalling assets located in
Corpus Christi, Texas for gross consideration of $107 million plus the reimbursement of certain capital
expenditures and prepaid items.
Additional Company Information from Website:
Martin Midstream Partners L.P. is a publicly traded limited partnership with a diverse set of operations focused
primarily in the United States Gulf Coast region. Our four primary business lines include: Terminalling, storage
and packaging services for petroleum products and by-products including refining, blending and packaging of
finished lubricants; Natural gas liquids transportation and distribution services and natural gas storage; Sulfur
and sulfur-based products gathering, processing, manufacturing, marketing and distribution including fertilizer
manufacturing and distribution; Marine transportation services for petroleum products and by-products. The

139 http://www.jpenergypartners.com/, accessed 1/3/2017

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petroleum products and by-products we collect, transport, store and distribute are produced primarily by the
independent oil and gas companies who often turn to third parties, such as us, for the transportation and
disposition of these products. In addition to these major and independent oil and gas companies, our primary
customers include independent refiners, large chemical companies, fertilizer manufacturers and other wholesale
purchasers of these products. We operate primarily in the Gulf Coast region of the U.S., which is a major hub for
petroleum refining, natural gas gathering and processing and support services for the exploration and production
industry. Our diversified asset base enables us to offer our customers an integrated distribution network
consisting of transportation terminalling, distribution and midstream logistical services.140

SAN ANTONIO--(BUSINESS WIRE)--Oct. 21, 2016-- NuStar Energy L.P. (NYSE: NS) today announced that
it has signed an agreement to purchase crude oil and refined product storage assets in the Port of Corpus Christi
from Martin Midstream Partners L.P. (Nasdaq: MMLP) for a net $93 million. The acquisition, which is expected
to close by the end of the fourth quarter of 2016, is expected to be immediately accretive to NuStars earnings
based on the terminals current, actual volumes. It also reflects an approximate seven times multiple based on the
forecasted four-year average earnings before interest, taxes, depreciation and amortization (EBITDA)
attributable to the assets of $13.5 million annually. When combined with NuStars existing terminal operations
in Corpus Christi, the acquisition will give NuStar over 3.6 million barrels of total storage in the Port of Corpus
Christi, including 3.1 million barrels of crude oil storage and 577,000 barrels of refined product storage. The
terminal NuStar is acquiring includes 1.15 million barrels of total storage, which is comprised of 900,000 barrels
of crude oil storage and 250,000 barrels of refined product storage. The terminal has direct connectivity to Eagle
Ford crude oil production and receives crude oil and condensate via its connection to the Harvest Pipeline and
through its six-bay truck rack. The terminal has access to two of the ports deep-water crude oil docks, including
exclusive use of the ports new crude oil dock, and a barge dock. The terminal is located on 25 acres, and has
room for further expansion. NuStar also expects to achieve significant operational synergies between its existing
North Beach Terminal and the Martin terminal, which are located adjacent to each other in the Port of Corpus
Christi.141
Why was the company not included?
This company is mainly located in the Gulf Coast. The Gulf Coast is a different market than the market of the
companies for which the State Assessed Section is responsible for valuing.
Midcoast Energy Partners, L.P.
Company Summary from Value Line:
Midcoast Energy Partners, LP is a limited partnership formed by Enbridge Partners to serve as Enbridge
Partners primary vehicle for owning and growing its natural gas and natural gas liquids (NGLs) midstream
business in the United States. The companys assets consist of a 51.6% controlling interest in Midcoast
Operating, LP, a Texas limited partnership that owns a network of natural gas and NGL gathering and
transportation systems, natural gas processing and treating facilities, and NGL fractionation facilities primarily
located in Texas and Oklahoma. Midcoast Operating also owns and operates natural gas, condensate, and NGL
logistics and marketing assets that primarily support its gathering, processing, and transportation business. This
also includes approximately 11,100 miles of natural gas gathering and transportation lines, and approximately
233 miles of NGL gathering and transportation lines.
Midcoast Energy Partners, LP is a limited partnership formed by Enbridge Partners to serve as Enbridge
Partners primary vehicle for owning and growing its natural gas and natural gas liquids (NGLs) midstream

140 http://www.martinmidstream.com/about-us, accessed 1/3/2017


141 http://investor.nustarenergy.com/phoenix.zhtml?c=123440&p=irol-newsArticle_Print&ID=2213695, accessed 1/3/2017

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business in the United States. The companys assets consist of a 51.6% controlling interest in Midcoast
Operating, LP, a Texas limited partnership that owns a network of natural gas and NGL gathering and
transportation systems, natural gas processing and treating facilities, and NGL fractionation facilities primarily
located in Texas and Oklahoma. Midcoast Operating also owns and operates natural gas, condensate, and NGL
logistics and marketing assets that primarily support its gathering, processing, and transportation business. This
also includes approximately 11,100 miles of natural gas gathering and transportation lines, and approximately
233 miles of NGL gathering and transportation lines.
Additional Company Information from Website:
Midcoast Energy Partners, L.P., (MEP) is a full-service natural gas and natural gas liquid (NGL) midstream
business. We're a growth-oriented limited partnership, formed by Enbridge Energy Partners, L.P. (EEP) to serve
as EEP's primary vehicle for owning and growing its natural gas and NGL midstream business in the United
States. MEP and EEP are part of the Enbridge Inc. family of companies. We remain focused on executing our
strategic objectives to grow the business by increasing our scale, expanding our scope, extending our reach and
enhancing our capabilities to deliver sustainable value to our unitholders over the long term. Our assets consist
of a 51.6 percent controlling interest in Midcoast Operating, a Texas limited partnership that owns a network of
natural gas and NGL gathering and transportation systems, natural gas processing and treating facilities and
NGL fractionation facilities primarily located in Texas and Oklahoma, which we refer to as the gathering,
processing and transportation business. Midcoast Operating also owns and operates natural gas, condensate and
NGL logistics and marketing assets, referred to as the Logistics and Marketing business, that supports its
Gathering, Processing and Transportation business. Through our ownership of Midcoast Operatings general
partner, we control, manage and operate these systems. EEP has retained a 48.4 percent non-controlling interest
in Midcoast Operating. The Gathering, Processing and Transportation business primarily consists of gathering
unprocessed and untreated natural gas from wellhead locations and other receipt points on our systems,
processing the natural gas to remove NGLs and impurities at our processing and treating facilities, and
transporting the processed natural gas and NGLs to intrastate and interstate pipelines for transportation to various
customers and market outlets. The Logistics and Marketing business markets natural gas, NGLs and condensate
received from the gathering, processing and transportation business to wholesale customers. Midcoast Energy
Partners, L.P. is headquartered in Houston, Texas.142

Why was the company not included?


This company is mainly located in Texas and Oklahoma. The market in Texas and Oklahoma is a different
market than the market of the companies for which the State Assessed Section is responsible for valuing.
MPLX, L.P.
Company Summary from Value Line:
MPLX, LP is a diversified, growth-oriented master limited partnership (MLP) formed in 2012 by Marathon
Petroleum Corporation to own, operate, develop and acquire midstream energy infrastructure assets. It is
engaged in the gathering, processing, storage marketing, and transportation of natural gas, crude oil, and other
refined petroleum products. MPLXs assets consist of a network of common carrier crude oil and products
pipelines located in the Midwest and Gulf Coast regions of the US. Has no direct employees. Officers/directors
own less than 1.0% of common units (12/15 10-k).
Additional Company Information from Website:
MPLX LP (MPLX) is a diversified, growth-oriented master limited partnership formed in 2012 by Marathon
Petroleum Corporation (MPC) to own, operate, develop and acquire midstream energy infrastructure assets. In
2015, MPLX merged with MarkWest, whereby MarkWest became a wholly owned subsidiary of

142 http://www.midcoastpartners.com/About-Us/Company-Overview.aspx, accessed 1/3/2017

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MPLX. MPLX is engaged in the gathering, processing and transportation of natural gas; the gathering,
transportation, fractionation, storage and marketing of natural gas liquids (NGLs); and the gathering,
transportation and storage of crude oil and refined petroleum products. MPLX provides services in the
midstream sector across the hydrocarbon value chain through its Logistics and Storage and Gathering and
Processing segments.143

Why was the company not included?


This company has some common carrier pipelines that transport crude oil and refined products in the midwest. However,
the company also has extensive natural gas gathering systems in six states. This company also engages in the marketing of
natural gas liquids.

NuStar GP Holdings, LLC


Company Summary from Value Line:
NuStar GP Holdings, LLC is a publicly traded limited liability company that owns the two percent
general partner interest, an approximate 13% limited partner interest and the incentive distribution rights in
NuStar Energy L.P., one of the largest independent liquids terminal and pipeline operators in the nation. Its only
cash generating assets are its ownership interests in NuStar Energy L.P. It has no independent operations. NuStar
Energy is engaged in the transportation of petroleum products and anhydrous ammonia, the terminalling and
storage of petroleum products and the marketing of petroleum products. NuStar Energy has terminal and storage
facilities in the United States, Canada, Mexico, the Netherlands, including St. Eustatius in the Caribbean, and the
United Kingdom. The company was formed in 2000. Has 1251 employees.
Additional Company Information from Website:
NuStar GP Holdings, LLC owns general partner and limited partner interests in NuStar Energy L.P. that engages
in the transportation of petroleum products and anhydrous ammonia, the terminalling and storage of petroleum
products and the marketing of petroleum products. It holds a 2% general partner interest, 13.0% limited partner
interest, and 100% of the incentive distribution rights in NuStar Energy L.P. The company, through NuStar
Energy L.P., has interests in 79 terminal and storage facilities with approximately 93 million barrels of storage
capacity; and approximately 8,700 miles of crude oil and refined product pipelines. The company has operations
in the United States; Canada; Mexico; the Netherlands, including St. Eustatius in the Caribbean; and the United
Kingdom. NuStar GP Holdings, LLC was founded in 2000 and is based in San Antonio, Texas.144
Why was the company not included?
This company was not included because we used NuStar Energy L.P.
ONEOK, Inc.
Company Summary from Value Line:
ONEOK, Inc. is the sole general partner of, and owns a 41.2% total interest in, ONEOK Partners. ONEOK
Partners is a publicly traded master limited partnership that gathers, processes, fractionates, transports, stores,
markets, and distributes natural gas and natural gas liquids. Sold gathering and processing, natural gas liquids,
and pipelines and storage assets to ONEOK Partners, 4/06. Completed separation of natural gas distribution
business, 2/14. Has 2,364 employees. The Vanguard Group, Inc. owns 8.9% of common stock; BlackRock, Inc.,
8.7%; officers and directors, less than 1.0% (4/16 Proxy).
Additional Company Information from Website:
ONEOK, Inc. (pronounced ONE-OAK) (NYSE: OKE) is the general partner and, as of March 31, 2016, owns
41.2 percent of ONEOK Partners, L.P. (NYSE: OKS), one of the largest publicly traded master limited

143 http://www.mplx.com/About_MPLX/, accessed 1/3/2017


144 http://www.nustargpholdings.com/phoenix.zhtml?c=197894&p=irol-default, accessed 1/3/2017

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partnerships, which owns one of the nation's premier natural gas liquids (NGL) systems, connecting NGL supply
in the Mid-Continent, Permian and Rocky Mountain regions with key market centers and is a leader in the
gathering, processing, storage and transportation of natural gas in the U.S. ONEOK is a FORTUNE 500
company and is included in Standard & Poor's (S&P) 500 Stock Index.145
Why was the company not included?
This company was not included because we used ONEOK Partners, L.P.
PBF Logistics, L.P.
Company Summary from Value Line:
PBF Logistics, LP is a fee-based, growth oriented master limited partnership formed by PBF Energy,
Inc. to own or lease, operate, develop and acquire crude oil and refined petroleum products terminals, pipelines,
storage facilities, and similar logistics assets. The company operates in two segments: Transportation and
Terminaling, and Storage. The transportation and terminaling segment consists of the DCR Rail Terminal, which
serves PBF Holdings Delaware City and Paulsboro refineries; the DCR West Rack, which serves PBF
Holdings Delaware City refinery; the Toledo Truck Terminal, which serves PBF Holdings Toledo refinery,
comprised of LACT units; a propane truck loading facility, located within the Toledo Storage Facility, the
Delaware City Products Pipeline, and the Delaware City Truck Rack, which consists of a truck loading rack
utilized to distribute gasoline. The storage segment consists of the Toledo Storage Facility
Additional Company Information from Website:
PBFX is a fee-based, growth-oriented, Delaware master limited partnership formed in February 2013 by
subsidiaries of PBF Energy Inc. and its indirect subsidiary, PBF Logistics GP LLC (PBF GP), our general
partner, to own or lease, operate, develop and acquire crude oil and refined petroleum products terminals,
pipelines, storage facilities and similar logistics assets. PBF GP is our general partner and is wholly-owned by
PBF Energy Company LLC (PBF LLC). PBF Energy Inc. is the sole managing member of PBF LLC and as of
December 31, 2015 owned 95.1% of the total economic interest in PBF LLC. We refer you to Organizational
Structure below for an illustration of our relationship with PBF Energy Inc.146
Why was the company not included?
This companys market segments are terminaling and storage. A main business segment of the companies the
State Assessed Section is responsible for valuing is fluid transportation pipeline services or gas transmission
pipeline services.
Pembina Pipeline Corporation
Company Summary from Value Line:
Pembina Pipeline Corp. gathers, processes, and transports oil and natural gas in Western Canada. It owns and
operates an integrated system of pipelines, gas gathering and processing facilities, and an oil and NGL
infrastructure and logistics line. 2015 net revenues (operating income): Conventional Pipelines: 42% (36%); Oil
Sands & Heavy Oil: 14% (13%); Midstream: 30% (38%); Gas Services: 14% (13%). Daily 2015 liquids
throughput: 1.72 mill. barrels; Oil Sands & Heavy Oil, 51%; Conventional Pipelines, 36%; Midstream NGLs,
7%; Gas Services, 6%. Acqd Provident Energy, 4/12. Has 1,111 employees.
Additional Company Information from Website:
We are Calgary-based, and own and operate pipelines that transport conventional and synthetic crude oil and
natural gas liquids produced in western Canada; oil sands and heavy oil pipelines; gas gathering and processing

145http://www.oneok.com/, accessed 1/3/2017


146http://otp.investis.com/clients/us/pbf_logistics1/SEC/sec-
show.aspx?FilingId=11198826&Cik=0001582568&Type=PDF&hasPdf=1, accessed 1/3/2017

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facilities; and, an oil and natural gas liquids infrastructure and logistics business. With facilities strategically
located in western Canada and in natural gas liquids markets in eastern Canada and the U.S., Pembina also offers
a full spectrum of midstream and marketing services that span across our operations. Our integrated assets and
commercial operations enable us to offer services needed by the energy sector along the hydrocarbon value
chain.147
Why was the company not included?
This company is not traded on an American Stock Exchange.
Phillips 66 Partners, L.P.
Company Summary from Value Line:
Phillips 66 Partners, LP owns, operates, develops, and acquires primarily fee-based crude oil, refined petroleum
product, and natural gas liquids pipelines and terminals, and other transportation and midstream assets. Its assets
include the Clifton Ridge crude oil pipeline, terminal, and storage system in Louisiana; the Sweeny to Pasadena
refined petroleum product pipeline, terminal, and storage system in Texas; two refinery-grade propylene storage
spheres in Medford, Oklahoma; a refined petroleum product pipeline system (Gold Line) that runs from the
Phillips 66 jointly owned and operated refinery in Borger, Texas, to Cahokia, Illinois; and the Hartford
Connector refined petroleum product pipeline, terminal, and storage system in Illinois. In October 2016, Phillips
66 Partners, LP reached an agreement with Phillips 66 (PSX) to acquire 30 crude, refined products and natural
gas liquids (NGL) logistics assets for total consideration of $1.3 billion. Has 1313 employees.
Additional Company Information from Website:
Phillips 66 Partners (NYSE: PSXP) began trading on the New York Stock Exchange on July 23, 2013.
Headquartered in Houston, Texas, Phillips 66 Partners is a growth-oriented master limited partnership formed by
Phillips 66 to own, operate, develop and acquire primarily fee-based crude oil, refined petroleum product and
natural gas liquids (NGL) pipelines and terminals and other transportation and midstream assets.148
Why was the company not included?
This company began trading publicly on July 23, 2013. We would consider this company for the 2018 or 2019
Capitalization Rate Studies.
Plains GP Holdings, L.P.
Company Summary from Value Line:
Plains GP Holdings, LP was formed to own an interest in the general partner and incentive distribution rights of
Plains All American Pipeline, LP, which owns and operates midstream energy infrastructure and provides
logistics services for crude oil, natural gas liquids (NGL), natural gas, and refined products in the US and
Canada. The company is involved in transporting crude oil and NGL on pipelines, gathering systems, trucks, and
barges. It provides storage, terminalling, and throughput services for crude oil, refined products, NGL, and
natural gas; NGL fractionation and isomerization services; and natural gas and condensate processing services. It
is involved in merchant-related activities, such as purchase of crude oil, cargos, and NGL; storage of inventory
and NGL; and resell or exchange, and transport of crude oil and NGL. At September 2016, it owned 13 million
barrels of crude oil and NGL line fill; 990 trucks and 1,100 trailers; and 10,100 crude oil and NGL railcars. Has
about 5400 employees.
Additional Company Information from Website:
Plains GP Holdings owns an interest in PAA's [Plains All American Pipeline, L.P.] general partner, which owns
the 2% general partner interest and incentive distribution rights of PAA. PAGP makes quarterly distributions of

147 http://www.pembina.com/, accessed 1/3/2017


148 http://www.phillips66partners.com/EN/about/Pages/index.aspx, accessed 1/3/2017

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its available cash to Shareholders of record. PAGP completed its initial public offering in October 2013 and its
shares are traded on the New York Stock Exchange under the symbol PAGP. Investors in PAGP receive a
1099, versus a K-1.149
Why was the company not included?
This company was not included because we used Plains All American Pipeline, L.P.
Rose Rock Midstream, L.P.
Company Summary from Value Line:
Not available.
Additional Company Information from Website:
Rose Rock Midstream specializes in crude oil gathering, transportation, storage and marketing in some of the
best resource plays in North America. We serve areas that are experiencing strong production growth and
drilling activity through our exposure to the: Bakken Shale in North Dakota and Montana; Denver-Julesburg
(DJ) Basin and the Niobrara Shale in the Rocky Mountain region; Eagle Ford Formation, Granite Wash and
Mississippian oil trend in the Mid-Continent region; and Utica Basin in Ohio. We own and operate a network of
more than 1,900 miles of crude oil pipelines and 10.1 million barrels of crude storage. The majority of our assets
are strategically located in or connected to the Cushing, Oklahoma crude oil marketing hub, the designated point
of delivery specified in all NYMEX crude oil futures contracts and one of the largest crude oil marketing hubs in
the United States. Our midstream services are further extended with our Field Services trucking division. Our
fleet of more than 250 trucks follow the drilling, acting as mobile extensions of our operations. Together, our
assets offer the connectivity and flexibility needed to support the growing demand for midstream services
throughout the U.S.150
9/30/2016 TULSA, Okla., Sept. 30, 2016 (GLOBE NEWSWIRE) -- SemGroup Corporation (NYSE:SEMG)
today announced that it has completed the acquisition of all of the outstanding common units of Rose Rock
Midstream, L.P. (NYSE:RRMS) not already owned by the company.151
Why was the company not included?
Rose Rock Midstream, L.P. was acquired by SemGroup Corporation on 9/30/2016.
SemGroup Corporation
Company Summary from Value Line:
Not available.
Additional Company Information from Website:
SemGroup Corporation is a growth-oriented midstream company that specializes in moving energy. We own,
operate, develop and acquire a diversified portfolio of midstream energy assets in the United States, Canada,
Mexico and the United Kingdom. Our assets are strategically located in growing oil and gas producing areas and
interconnected with key markets and logistics centers. Through our subsidiaries, our expanding footprint reaches
across multiple shale and natural resource plays including: the Bakken Shale, DJ/Niobrara, Eagle Ford,
Mississippi Lime Play, Montney/Duvernay and Utica Basin. Our key operations include: Transporting, storing,

149 https://www.plainsallamerican.com/investor-relations, accessed 1/4/2017


150 http://www.semgroupcorp.com/Operations/RoseRock.aspx, accessed 1/4/2017
151 http://ir.semgroupcorp.com/press-releases/press-release-details/2016/SemGroup-Corporation-Announces-Closing-of-
Acquisition-of-Rose-Rock-Midstream-LP/default.aspx, accessed 1/4/2017

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terminaling and trucking crude oil; Gathering, compressing, treating, processing and selling natural gas; Storing
and terminaling refined petroleum products; Supplying and applying liquid asphalt cement in Mexico.152
9/30/2016 TULSA, Okla., Sept. 30, 2016 (GLOBE NEWSWIRE) -- SemGroup Corporation (NYSE:SEMG)
today announced that it has completed the acquisition of all of the outstanding common units of Rose Rock
Midstream, L.P. (NYSE:RRMS) not already owned by the company.153
Why was the company not included?
This companys assets are not closely related to the assets of companys that the State Assessed Property Section
is responsible for valuing. Only a portion of this companys assets include fluid transportation pipeline services.
Shell Midstream Partners, L.P.
Company Summary from Value Line:
Shell Midstream Partners, LP is a growth oriented master limited partnership formed by Shell Pipeline Co. LP to
own, operate, develop and acquire pipelines and other midstream assets. As of September 2016, it owned
interests in three crude oil pipeline systems and two refined products systems. The crude oil pipeline systems,
which are held by Zydeco Pipeline Co. LLC, Mars Oil Pipeline Co., and Poseidon Oil Pipeline Co., LLC, are
located along the Texas and Louisiana Gulf Coast and in the Gulf of Mexico. These systems link major onshore
and offshore production areas with key refining markets. The refined products pipeline systems, which are held
by Bengal Pipeline Co. and Colonial Pipeline Co., connect Gulf Coast and southeastern US refineries to major
demand centers from Alabama to New York. In September 2016, the company agreed to acquire from Shell an
additional 20% equity interest in Mars Oil Pipeline Company and a 49% equity interest in Odyssey Pipeline,
LLC for $350 million.
Additional Company Information from Website:
We are a fee-based, growth-oriented master limited partnership recently formed by Shell to own, operate,
develop and acquire pipelines and other midstream assets. Our initial assets consist of interests in entities that
own crude oil and refined products pipelines serving as key infrastructure to transport growing onshore and
offshore crude oil production to Gulf Coast refining markets and to deliver refined products from those markets
to major demand centers.154
Why was the company not included?
This company is mainly services the Gulf Coast (including offshore assets), the Gulf Coast to New York City,
and the Gulf Coast to the Midwest. The Explorer pipeline system from the Gulf Coast to the Midwest transports
gasoline, diesel, fuel oil, and jet fuel from the US Gulf Coast to Hammon, IL. The Explorer pipeline system is
the companys only asset that is similar to the companies the State Assessed Property Section is responsible for
valuing. The Explorer pipeline system is not a large enough portion of the companys overall business segments.
Also, this company was formed on March 19, 2014.
Southcross Energy Partners, L.P.
Company Summary from Value Line:
Southcross Energy Partners, LP provides natural gas gathering, processing, treating, compression, and
transportation services in the United States. The company operations provide a full range of complementary
services extending from wellhead to market, including gathering natural gas at the wellhead, treating natural gas
to meet downstream pipeline and customer quality standards, processing natural gas to separate NGLs (natural
gas liquids) from the natural gas, fractionating the resulting NGLs into the various components and selling or

152 http://www.semgroupcorp.com/About.aspx, accessed 1/4/2017


153 http://ir.semgroupcorp.com/press-releases/press-release-details/2016/SemGroup-Corporation-Announces-Closing-of-
Acquisition-of-Rose-Rock-Midstream-LP/default.aspx, accessed 1/4/2017
154 http://www.shellmidstreampartners.com/index.cfm

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delivering pipeline quality natural gas and NGLs to various industrial and energy markets, as well as large
pipeline systems. The company operates four gas processing plants, two fractionation plants, and approximately
3,138 miles of pipeline in south Texas, Mississippi, and Alabama. The company was founded in 2009 and is
headquartered in Dallas, Texas. Southcross Energy Partners, LP is a subsidiary of Southcross Holdings
Borrower, LP.
Additional Company Information from Website:
Southcross Energy Partners, L.P. (Southcross) is a master limited partnership that provides natural gas
gathering, processing, treating, compression and transportation services and NGL fractionation and
transportation services. It also sources, purchases, transports and sells natural gas and NGLs. Its assets are
located in South Texas, Mississippi and Alabama and include four gas processing plants, two fractionation plants
and approximately 3,100 miles of pipeline. The South Texas assets are located in or near the Eagle Ford shale
region. Southcross is headquartered in Dallas, Texas Our integrated operations provide a full range of
complementary services extending from wellhead to market, including gathering natural gas at the wellhead,
treating natural gas to meet downstream pipeline and customer quality standards, processing natural gas to
separate NGLs from the natural gas, fractionating the resulting NGLs into the various components and selling or
delivering pipeline quality natural gas and NGLs to various industrial and energy markets as well as large
pipeline systems. Through our network of pipelines, we provide the means of connecting our suppliers of natural
gas to our customers, which include industrial, commercial and power generation customers and local
distribution companies.155
Why was the company not included?
This company is located in Texas, Mississippi, and Alabama. Those locations are in a different market than the
market of the companies for which the State Assessed Section is responsible for valuing.
Spectra Energy Corporation
Company Summary from Value Line:
Spectra Energy Corp gathers, processes, transmits, stores, and distributes natural gas in North America. The
company was spun off from Duke Energy (1/07). Spectra operates approximately 21,000 miles of transmission
pipeline and around 300 billion cubic feet of storage capacity in the U.S. and Canada. Its crude oil pipeline,
Express-Platte consists of over 1,700 miles. 2015 revenues: Spectra Energy Partners, 46%; Distribution, 29%;
Western Canada Transmission & Processing, 25%; Field Services, NMF. Has about 6,000 employees. Off./dir.
own less than 1% of stock, BlackRock, 6.2%; Vanguard, 6.2% (4/16 proxy).
Additional Company Information from Website:
Spectra Energy Corp (NYSE: SE), a FORTUNE 500 company, is one of North America's leading pipeline and
midstream companies. Based in Houston, Texas, the company's operations in the United States and Canada
include approximately 21,000 miles of natural gas and crude oil pipelines; approximately 300 billion cubic feet
(Bcf) of natural gas storage; 4.8 million barrels of crude oil storage; as well as natural gas gathering, processing,
and local distribution operations. 156
December 15, 2016 HOUSTON Spectra Energy Corp (NYSE: SE) (Spectra Energy) announced that during a
special stockholder meeting held earlier today, Spectra Energy stockholders voted overwhelmingly to approve
the previously announced combination of Spectra Energy with Enbridge Inc. (TSX, NYSE: ENB) (Enbridge)
in a stock-for-stock merger transaction. Approximately 73 percent of the total outstanding shares of Spectra
Energy common stock, and approximately 98 percent of the total shares voted at the meeting, were voted in

155 http://www.southcrossenergy.com/about/, accessed 1/4/2017


156 http://investors.spectraenergy.com/phoenix.zhtml?c=204494&p=irol-irhome, accessed 1/4/2017

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favor of the transaction. Once the transaction is completed, the combination will create the largest energy
infrastructure company in North America and one of the largest globally, with a pro-forma enterprise value of
approximately C$165 billion (US$127 billion).157
Why was the company not included?
This company was not included because we would use Spectra Energy Partners, L.P.

Spectra Energy Partners, L.P.


Company Summary from Value Line:
Spectra Energy Partners, LP is engaged in the transportation and gathering of natural gas. The company operates
in the United States and Canada and has more than 22,000 miles of natural gas, natural gas liquids, and crude oil
pipelines; approximately 300 billion cubic feet (Bcf) of natural gas storage; 4.8 million barrels of crude oil
storage; and natural gas gathering, processing, and local distribution operations. Spectra Energy is the general
partner of Spectra Energy Partners, one of the largest pipeline master limited partnerships in the United States
and owner of the natural gas, natural gas liquids, and crude oil assets in Spectra Energys US portfolio. In
October 2015, Spectra Energy Corp. and Spectra Energy Partners, LP executed an agreement for the acquisition
by Spectra Energy of Spectra Energy Partners one-third ownership interests in the Sand Hills and Southern Hills
natural gas liquids (NGL) pipelines.
Additional Company Information from Website:
Spectra Energy Partners, LP (NYSE: SEP) is a Houston-based master limited partnership, formed by Spectra
Energy Corp (NYSE: SE). SEP is one of the largest pipeline MLPs in the United States and connects growing
supply areas to high-demand markets for natural gas and crude oil. These assets include more than 15,000 miles
of transmission and gathering pipelines, approximately 170 billion cubic feet of natural gas storage, and
approximately 4.8 million barrels of crude oil storage.158
Spectra Energy Corp and Enbridge Inc. will combine to create North Americas largest energy infrastructure
company. This transaction creates the largest energy infrastructure company in North America with an enterprise
value of approximately C$165 billion (US$127 billion), a C$74 billion (US$57 billion) inventory of current and
potential growth projects and anticipated annual dividend growth of 10-12 percent through 2024. The combined
company will be exceedingly well positioned to invest in critical infrastructure to meet the needs of our
customers and create value for our shareholders.159
Why was the company not included?
This company is similar to the Gas Transmission Pipeline Companies that the State Assessed Section is
responsible for valuing. The company engages in the transportation, gathering, and storage of natural gas.
However, the Spectra Energy Partners, L.P.s general partner, Spectra Energy Corp, announced a merger with
Enbridge, Inc., the parent of Enbridge Energy Partners, L.P., which could affect the financial information for the
current year for all companies involved.

157 http://www.spectraenergy.com/Newsroom/News-Archive/Spectra-Energy-Stockholders-Overwhelmingly-Approve-
Merger-With-Enbridge/, accessed 1/4/2017
158 http://phx.corporate-ir.net/phoenix.zhtml?c=211014&p=irol-IRHome, accessed 12/28/2016
159 http://www.spectraenergy.com/Transaction/, accessed 12/28/2016

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Sprague Resources, L.P.


Company Summary from Value Line:
Sprague Resources, LP engages in the purchase, storage, distribution, and sale of refined petroleum products and
natural gas in the United States. The company purchases and sells various refined products, such as heating oil,
diesel fuel, residual fuel oil, kerosene, jet fuel, gasoline, and asphalt to wholesale and commercial customers. It
purchases, sells, and distributes natural gas to approximately 14,000 commercial and industrial customer
locations across 13 states in the northeast and Mid-Atlantic. It offloads, stores, and prepares for delivery of
customer owned products, including asphalt, clay slurry, salt, gypsum, coal, petroleum coke, caustic soda,
tallow, pulp, and heavy equipment. The company engages in the marketing and distribution of coal; commercial
trucking; and heating equipment service activities. It owns and/or operates a network of 19 refined products and
materials handling terminals located throughout the northeast United States and Quebec, Canada. Has 590
employees.
Additional Company Information from Website:
Founded in 1870 as the Charles H. Sprague Company, Sprague Resources LP is one of the largest independent
wholesale suppliers of energy and materials handling services in the Northeast. Sprague Resources LP offers an
extensive range of liquid distillate (e.g., heating oil and diesel), gasoline and residual fuel products and services
as well as competitive natural gas supply and materials handling capabilities. Sprague Resources LP's customers
benefit from its extensive network of owned and operated terminals throughout the Northeast and the companys
investment in customized products and solutions. Sprague Resources LP offers a diversity of offerings that is
unmatched in its service territories and it is constantly searching for ways to expand its capabilities.160

Why was the company not included?


This company purchases and sells various refined products and purchases, sells and distributes natural gas. The
company also offloads, stores, and prepares for delivery of customer owned products. The company engages in
the marketing and distribution of coal. These specializations are not the same market segments as the companies
in which the State Assessed Section is responsible for valuing.
Suburban Propane Partners, L.P.
Company Summary from Value Line:
Suburban Propane Partners, L.P., is a master limited partnership (MLP) that markets and distributes propane,
fuel oil, and other refined fuels in the U.S., operating in Propane; Fuel Oil and Refined Fuels; Natural Gas and
Electricity; and Heating, Ventilation, and Air Conditioning (HVAC). As of 9/26/15, serves about 973,000 active
propane customers through more than 750 locations in 41 states, concentrated on the east and west coasts of the
United States. Sold approximately 530.7 million gallons of propane and 49.1 million gallons of fuel oil in fiscal
2015. Has 3,933 employees.
Additional Company Information from Website:
Suburban Propane Partners (NYSE: SPH) has been in the customer service business since 1928. A Master
Limited Partnership since 1996, Suburban is a value-oriented company managed for long-term, consistent
performance. Headquartered in Whippany, New Jersey, Suburban is a nationwide marketer and distributor of a
diverse array of products to meet the energy needs of our customers, specializing in fuel oil and refined fuels, as
well as the marketing of natural gas and electricity in deregulated markets. With nearly 3,800 full-time
employees, Suburban maintains business operations in 41 states, providing prompt, reliable service to

160 http://www.spragueenergy.com/investor-relations, accessed 1/4/2017

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approximately 1.1 million residential, commercial, industrial and agricultural customers through 675
locations.161

Why was the company not included?


This company specializes in marketing and distributing fuel oil and refined fuels as well as the marketing of
natural gas and electricity in deregulated markets. These specializations are not the same market segments as the
companies in which the State Assessed Section is responsible for valuing.
Summit Midstream Partners, L.P.
Company Summary from Value Line:
Summit Midstream Partners, LP is a growth oriented limited partnership focused on developing, owning, and
operating midstream energy infrastructure assets that are situated in the core producing areas of unconventional
resource basins, primarily shale formations, in North America. It currently provides natural gas, crude oil and
produced water gathering services pursuant to long-term and fee-based gathering and processing agreements
with customers and counterparties in four unconventional resource basins: the Appalachian Basin (Marcellus
Shale formation in northern West Virginia); the Williston Basin (Bakken and Three Forks shale formations in
northwestern North Dakota); the Fort Worth Basin (Barnett Shale formation in north-central Texas); and the
Piceance Basin (Mesaverde formation and the Mancos and Niobrara shale formations in western Colorado and
eastern Utah). Summit owns and operates more than 2,600 miles of pipeline.
Additional Company Information from Website:
Summit Midstream Partners, LP (NYSE: SMLP) is a growth-oriented master limited partnership focused on
developing, owning and operating midstream energy infrastructure assets that are strategically located in the core
producing areas of unconventional resource basins, primarily shale formations, in the continental United States.
SMLP currently provides natural gas, crude oil and produced water gathering services pursuant to primarily
long-term and fee-based gathering and processing agreements with our customers and counterparties in five
unconventional resource basins: The Appalachian Basin, which includes the Marcellus and Utica shale
formations in West Virginia and Ohio; The Williston Basin, which includes the Bakken and Three Forks shale
formations in North Dakota; The Fort Worth Basin, which includes the Barnett Shale formation in Texas; The
Piceance Basin, which includes the Mesaverde formation as well as the Mancos and Niobrara shale formations in
Colorado and Utah; The Denver-Julesburg Basin, which includes the Niobrara and Codell shale formations in
Colorado. SMLP also owns substantially all of a 40% ownership interest in Ohio Gathering, which is developing
natural gas gathering and condensate stabilization infrastructure in the Utica Shale in Ohio. SMLP is
headquartered in The Woodlands, Texas, with regional corporate offices in Denver, Colorado and Atlanta,
Georgia.162

Why was the company not included?


This companys main business segments are natural gas gathering, treating and compression services, which are
not the same main business segments of the companies in which the State Assessed Section is responsible for
valuing.
Sunoco Logistics Partners, L.P.
Company Summary from Value Line:
Sunoco Logistics Partners, L.P. owns and operates a logistics business that consists of a portfolio of energy
assets. The Crude Oil Pipelines segment has about 5,900 miles of crude oil pipelines. Its crude oil terminalling
services have storage capacity of roughly 28 million barrels. The Natural Gas Liquids (NGLs) segment contains

161 https://suburbanpropane.com/about/about-suburban-propane.php, accessed 1/4/2017


162 http://www.summitmidstream.com/, accessed 1/4/2017

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about 900 miles of NGLs pipelines, primarily in the northeast and southwest United States. The Refined
Products Pipelines segment has about 1,800 pipeline miles. In October 2012, became a consolidated subsidiary
of Energy Transfer Partners, LP. No employees.
Additional Company Information from Website:
Sunoco Logistics Partners L.P. (NYSE: SXL) is a master limited partnership that owns and operates a logistics
business consisting of a geographically diverse portfolio of complementary crude oil, natural gas liquids, and
refined products pipeline, terminalling and acquisition and marketing assets which are used to facilitate the
purchase and sale of crude oil, natural gas liquids, and refined products. SXLs general partner is a consolidated
subsidiary of Energy Transfer Partners, L.P. (NYSE: ETP). Our business is characterized by extensive industry
and safety experience, strong financial fundamentals, and operational flexibility. Collectively, a strong asset base
and the successful execution of our business strategies have consistently delivered substantial returns to
unitholders.163

Nov. 21, 2016-- Sunoco Logistics Partners L.P. (NYSE: SXL) and Energy Transfer Partners, L.P. (NYSE: ETP)
today announced that they have entered into a merger agreement providing for the acquisition of ETP by SXL in
a unit-for-unit transaction. The transaction was approved by the boards of directors and conflicts committees of
both partnerships and is expected to close in the first quarter of 2017, subject to receipt of ETP unitholder
approval and other customary closing conditions.164
Why was the company not included?
This company is similar to the Gas Transmission Pipeline Companies that the State Assessed Section is
responsible for valuing. The company engages in the transportation, gathering, and storage of natural gas.
However, this company is currently entered in an agreement to acquire by Energy Transfer Partners, L.P.
Tallgrass Energy GP, L.P.
Company Summary from Value Line:
Tallgrass Energy GP, LP (TEGP) is a limited partnership that has elected to be treated as a corporation for United States
federal income tax purposes. TEGP owns a controlling membership interest in Tallgrass Equity, LLC through its role as the
sole managing member. Tallgrass Equity, LLC owns, both directly and through its ownership of the general partner of
Tallgrass Energy Partners, LP, (TEP), all of TEPs incentive distribution rights, 100 % of the general partner interest in
TEP and 20,000,000 TEP common units. It provides natural gas transportation and storage services for customers in the
Rocky Mountain and Midwest regions. It performs water business services in Colorado and Texas through BNNWater
Solutions, LLC. Its operations are located in and provide services to certain main US hydrocarbon basins, including the
Denver-Julesburg, Powder River, Wind River, Permian and Hugoton-Anadarko Basins and the Niobrara, Mississippi Lime,
Eagle Ford, and Bakken shale formations. Has 9 employees.

Additional Company Information from Website:


Tallgrass Energy GP, LP (NYSE: TEGP) is a limited partnership that has elected to be treated as a corporation
for U.S. federal income tax purposes. TEGP owns a controlling membership interest in Tallgrass Equity, LLC
through its role as the sole managing member. Tallgrass Equity, LLC owns, both directly and through its
ownership of the general partner of TEP, all of TEP's incentive distribution rights, 100 percent of the general
partner interest in TEP and 20,000,000 TEP Common Units.165

163 http://www.sunocologistics.com/, accessed 12/28/2016


164 http://ir.energytransfer.com/phoenix.zhtml?c=106094&p=irol-newsArticle&ID=2224891, accessed 12/28/2016
165 http://ir-tep.tallgrassenergylp.com/, accessed 1/4/2017

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Why was the company not included?


This company was not included because we would use Tallgrass Energy Partners, L.P.
Tallgrass Energy Partners, L.P.
Company Summary from Value Line:
Tallgrass Energy Partners, LP acquires, owns, develops, and operates various midstream energy assets in North
America. The company operates in two segments, Gas Transportation and Storage, and Processing. The Gas
Transportation and Storage segment owns and operates natural gas pipelines and integrated natural gas storage
facilities with approximately 4,645 miles of transportation pipelines in Wyoming, Colorado, Kansas, Missouri,
and Nebraska. This segment provides services primarily to third-party local distribution companies, industrial
users, and other shippers. The Processing segment owns and operates natural gas processing, treatment, and
fractionation facilities that produces natural gas liquids and residue gases, which are sold in local wholesale
markets or delivered into pipelines for transportation to additional end markets. This segment serves retail
propane dealers and oil refiners.
Additional Company Information from Website:
Tallgrass Energy is a family of companies formed to own, operate, acquire and develop midstream energy assets
in North America. The Tallgrass Energy family is comprised of Tallgrass Energy Partners, LP, a publicly traded
master limited partnership (NYSE: TEP), and Tallgrass Development, LP. Through those two holding
companies, we currently provide natural gas transportation and storage services for customers in the Rocky
Mountain and Midwest regions of the United States through our pipelines and natural gas processing assets.166

Tallgrass Energy Partners, LP (NYSE: TEP) is a publicly traded, growth-oriented limited partnership formed to
own, operate, acquire and develop midstream energy assets in North America. We currently provide crude oil
transportation to customers in Wyoming, Colorado, and the surrounding regions through Tallgrass Pony Express
Pipeline, LLC, which owns a crude oil pipeline commencing in Guernsey, Wyoming and terminating in Cushing,
Oklahoma that includes a lateral in Northeast Colorado that commences in Weld County, Colorado, and
interconnects with the pipeline just east of Sterling, Colorado. We provide natural gas transportation and storage
services for customers in the Rocky Mountain, Midwest and Appalachian regions of the United States through:
(1) our 25% membership interest in Rockies Express Pipeline LLC, a Delaware limited liability company which
owns the Rockies Express Pipeline, a FERC-regulated natural gas pipeline system extending from Opal,
Wyoming and Meeker, Colorado to Clarington, Ohio, (2) the Tallgrass Interstate Gas Transmission system, a
FERC-regulated natural gas transportation and storage system located in Colorado, Kansas, Missouri, Nebraska
and Wyoming, and (3) the Trailblazer Pipeline system, a FERC-regulated natural gas pipeline system extending
from the Colorado and Wyoming border to Beatrice, Nebraska. We also provide services for customers in
Wyoming at the Casper and Douglas natural gas processing facilities and the West Frenchie Draw natural gas
treating facility, and NGL transportation services in Northeast Colorado. We perform water business services in
Colorado and Texas through BNN Water Solutions, LLC. Our operations are strategically located in and provide
services to certain key United States hydrocarbon basins, including the Denver-Julesburg, Powder River, Wind
River, Permian and Hugoton-Anadarko Basins and the Niobrara, Mississippi Lime, Eagle Ford, Bakken,
Marcellus and Utica shale formations. 167

Why was the company not included?


This company was formed in 2013. Consider using for the 2018 or 2019 Capitalization Rate Study.

166 http://www.tallgrassenergy.com/, accessed 1/4/2017


167 http://ir-tep.tallgrassenergylp.com/, accessed 1/4/2017

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Targa Resources Corporation


Company Summary from Value Line:
Targa Resources is a leading provider of midstream services and is one of the largest independent midstream
energy companies in N.A. It operates a diversified portfolio of midstream energy assets. Targa is engaged in the
business of gathering, compressing, treating, processing, and selling natural gas, along with storing,
fractionating, treating, transporting, and selling NGLs. Plant natural gas inlet 3,432.9 MMcf/d; Gross NGL
production, 305.4 MBbl/d; Crude oil gathered 105.7 MBbl/d (all as of 9/30/16). 2015 depr. rate: 5.8%. Has 1,870
employees.
Additional Company Information from Website:
Targa is a leading provider of midstream services and is one of the largest independent midstream energy
companies in North America. We own, operate, acquire, and develop a diversified portfolio of
complementary midstream energy assets. We are primarily engaged in the business of: gathering, compressing,
treating, processing, and selling natural gas; storing, fractionating, treating, transporting, and selling NGLs and
NGL products, including services to LPG exporters; gathering, storing, and terminaling crude oil; storing,
terminaling, and selling refined petroleum products. We believe our growth will be driven by continued organic
growth investments across our diversified asset footprint. Our assets are not easily replicated and are
strategically located in some of the most attractive basins in the U.S., and interconnected with key NGL markets
and logistics centers. Our gathering and processing assets are across multiple shale and natural resource plays,
including the Permian Basin, Barnett Shale, Bakken Shale, Eagle Ford Shale, Anadarko Basin, Arkoma Basin,
onshore Louisiana and the Gulf of Mexico. We have a leading position at Mont Belvieu, the NGL hub of North
America. We have the second largest fractionation ownership position at Mont Belvieu and world class LPG
export facilities on the Gulf Coast at our Galena Park Marine Terminal, which is interconnected to Mont
Belvieu.
On February 17, 2016 Targa Resources Corp. (NYSE: TRGP) acquired all of the outstanding common units of
Targa Resources Partners LP (NYSE: NGLS) that it did not already own.168
Why was the company not included?
This companys business segments include marketing & distribution, logistic centers, gathering lines, gas Plants,
etc. The company has minimal pipeline transportation services. Also, Targa Resources Partners, L.P. has been
fully acquired by Targa Resources Corp as of February 17, 2016.166
Targa Resources Partners, L.P.
Company Summary from Value Line:
Not Available
Additional Company Information from Website:
On February 17, 2016 Targa Resources Corp. (NYSE: TRGP) acquired all of the outstanding common units of
Targa Resources Partners LP (NYSE: NGLS) that it did not already own.169
Why was the company not included?
Targa Resources Partners, L.P. has been fully acquired by Targa Resources Corp as of February 17, 2016.
Tesoro Logistics, L.P.
Company Summary from Value Line:
Tesoro Logistics, LP owns, operates, develops, and acquires logistics assets related to crude oil and refined
products in the United States. The company consists of a crude oil gathering system in the Bakken

168 http://www.targaresources.com/about-us/overview, accessed 1/4/2017


169 http://www.targaresources.com/about-us/overview, accessed 1/4/2017

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Shale/Williston Basin area of North Dakota and Montana, which gathers and transports crude oil from various
production locations. It owns and operates the northwest products pipeline and a jet fuel pipeline; 20 crude oil
and refined products terminals and storage facilities in the western and midwestern US; four marine terminals in
California; a rail-car unloading facility in Washington; a petroleum coke handling and storage facility in Los
Angeles; and other pipelines, which transport products and crude oil from refineries to nearby facilities in Salt
Lake City and Los Angeles. In September 2016, Tesoro Logistics, LP acquired the refined products terminals in
Anchorage and Fairbanks, Alaska, with combined storage capacity of over 600,000 barrels.
Additional Company Information from Website:
Tesoro Logistics has capabilities in gathering, processing, fractionation, stabilization, storage, terminalling and
transportation for inbound and outbound logistics needs. We handle crude oil, natural gas, natural gas liquids,
refined product and water. Our operations include pipeline, rail, marine and trucking. Built from Tesoros proven
heritage, Tesoro Logistics has invested in and developed this complete set of skills and range of assets to better
meet the needs of our customers, serve the American energy market and position ourselves for continued growth.
We combine midstream experience in key basins, like the Bakken and Uinta, with detailed knowledge of
transportation networks from the mid-continent to the west coast. We understand what it takes to operate in
changing, challenging environments and are primed for new business. Tesoro Logistics offers cost efficient
services for a full suite of petroleum products across the supply chain.170

Why was the company not included?


This company is more aligned with the fluid transportation companies that the State Assessed Section is
responsible for valuing. However, this companys pipeline transportation business segment appears to be a
smaller part of its overall operations.
TransCanada Corporation
Company Summary from Value Line:
TransCanada Corp. operates the most extensive natural gas pipeline system in Canada, transporting natural gas
from the Alberta border to Ontario, Quebec, and the U.S. with more than 41,900 mi. of natural gas pipelines, and
2,640 mi. of liquids pipeline (Keystone Oil). Its three major segments are natural gas pipelines (48% of 15 rev.),
oil pipelines (17%), and energy (35%). It has interests in 13,100 mw of power generation assets, and has 250 Bcf
of nonregulated gas storage. Acq. ANR 2/07. Has more than 5,500 employees. Off./dir. own less than 1% of
stock.
Additional Company Information from Website:
We build and operate the energy infrastructure that North America needs. Experts in our field, known for our
solid financial track record, for our integrity and high standards of corporate governance and business ethics, we
are committed to being a good neighbour. With more than 65 years experience, TransCanada is a leader in the
responsible development and reliable and safe operation of North American energy infrastructure. Our network
of wholly owned and affiliated pipelines taps into virtually all major natural gas supply basins in North America.
TransCanada leads the North American pipeline industry and the world in system integrity. Weve demonstrated
an exceptional record of system reliability and safety. With increasing production from oil sands in Alberta, and
growing demand for secure, reliable sources of energy, TransCanada has identified opportunities to develop oil
pipeline capacity, complementing our natural gas transmission business, drawing on our extensive pipelines
experience and offering an efficient way to maximize the value of our current pipeline assets. TransCanada is

170 http://tesorologistics.com/operations-and-services/, accessed 1/4/2017

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one of the continents largest providers of gas storage and related services. A growing independent power
producer, TransCanada owns or has interests in over 10,700 megawatts of power generation.171
Why was the company not included?
This company was not included because we use TC PipeLines, L.P.
TransMontaigne Partners, L.P.
Company Summary from Value Line:
TransMontaigne Partners, LP is a terminaling and transportation company with operations in the US along the
Gulf Coast, in the Midwest, in Houston and Brownsville, TX, along the Mississippi and Ohio Rivers, and in the
southeast. It offers integrated terminaling, storage, transportation, and related services for customers engaged in
the distribution and marketing of light refined petroleum products (including gasolines, diesel fuels, heating oil,
and jet fuels); heavy refined petroleum products such as residual fuel oils and asphalt; crude oil, chemicals,
fertilizers; and other liquid products. It operates 7.1 million barrel terminal facility on the Houston Ship Channel;
eight refined product terminals in Florida with about 6.9 million barrels of aggregate active storage capacity; and
a 67-mile interstate refined products pipeline between Missouri and Arkansas, and two refined product terminals
in Missouri and Arkansas with an aggregate active storage capacity of about 421,000 barrels. Has 510
employees.
Additional Company Information from Website:
TransMontaigne Partners L.P. (NYSE: TLP) is a terminaling and transportation master limited partnership
providing integrated terminaling, storage, transportation and related services for customers engaged in the
distribution and marketing of petroleum products, crude oil, chemicals, fertilizers and other liquid products.172

Why was the company not included?


This companys main business segments are terminaling and storage. A main business segment of the companies
the State Assessed Section is responsible for valuing is a fluid transportation pipeline services or gas
transmission pipeline services.
Valero Energy Partners, L.P.
Company Summary from Value Line:
Valero Energy Partners, LP is a fee-based, traditional master limited partnership formed by Valero Energy Corp.
to own, operate, develop, and acquire crude oil and refined petroleum products pipelines, terminals, and other
transportation and logistics assets. With headquarters in San Antonio, the partnerships assets include crude oil
and refined petroleum products pipeline and terminal systems in the Gulf Coast and Mid-Continent regions of
the United States. The systems are integral to the operations of Valeros refinery in Port Arthur, Texas, its
McKee refinery in Sunray, Texas, and its refinery in Memphis, Tennessee. Valero subsidiaries employ
approximately 10,000 people, and its assets include 15 petroleum refineries with a combined throughput capacity
of approximately 3.0 million barrels per day, 11 ethanol plants with a combined production capacity of 1.3
billion gallons per year, a 50-megawatt wind farm, and renewable diesel production from a joint venture.
Additional Company Information from Website:
Valero Energy Partners LP (NYSE: VLP) began trading on the New York Stock Exchange on Dec. 11, 2013.
Headquartered in San Antonio, Texas, Valero Energy Partners is a fee-based, growth-oriented, traditional master
limited partnership formed by Valero Energy Corporation to own, operate, develop and acquire crude oil and
refined petroleum products pipelines, terminals and other transportation and logistics assets. The partnership
serves as Valeros primary vehicle to expand the transportation and logistics assets supporting its business.

171 http://www.transcanada.com/about-us.html, accessed 1/4/2017


172 http://www.transmontaignepartners.com/, accessed 1/4/2017

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Assets consist of crude oil and refined petroleum products pipeline and terminal systems in the Gulf Coast and
Mid-Continent regions of the United States, which are integral to the operations of Valeros refineries located in
Port Arthur, Sunray (McKee refinery), Houston, Three Rivers and Corpus Christi (Bill Greehey refineries),
Texas; Meraux and Norco (St. Charles refinery), La.; Memphis, Tenn.; and Ardmore, Okla. The Port Arthur
Logistics System includes the Lucas Crude System and the Port Arthur Products System. The McKee Logistics
System consists of the McKee Crude System, the McKee Products System and the McKee Terminal. The
Memphis Logistics System includes the Collierville Crude System and the Memphis Products System. The
Wynnewood Products System is the primary distribution outlet for the Ardmore refinery. The Three Rivers
Logistics System includes the Three Rivers Crude System, which connects domestically produced crude oil to
the Three Rivers refinery, and the Three Rivers Terminal. The Houston Terminal is a crude oil, intermediates
and refined petroleum products terminal that supports the Houston refinery. The St. Charles Terminal is a crude
oil, intermediates and refined petroleum products terminal serving the St. Charles refinery. The Corpus Christi
Terminals operate crude oil, intermediates and refined petroleum products terminals that support the Bill
Greehey refineries east and west plants. The Meraux Terminal is a crude oil, intermediates and refined petroleum
products terminal supporting the Meraux refinery.173

Why was the company not included?


This companys main business segments include refineries and terminalling. A main business segment of the
companies the State Assessed Section is responsible for valuing is a fluid transportation pipeline services or gas
transmission pipeline services.
Vanguard Natural Resources
Company Summary from Value Line:
Vanguard Natural Resources, LLC, through its subsidiaries, is focused on the acquisition, production, and
development of natural gas and oil properties. The companys assets consist primarily of producing and
nonproducing natural gas, and oil reserves in the southern portion of the Appalachian Basin, the Permian Basin,
south Texas, and Mississippi. Vanguard owns a 100% controlling interest in properties and oil and natural gas
reserves in four operating areas: the Permian Basin in west Texas and New Mexico; south Texas; the southern
portion of the Appalachian Basin, primarily in southeast Kentucky and northeast Tennessee; and Mississippi. As
of December 31, 2015, the company owned properties and oil and natural gas reserves primarily located in ten
operating basins. Vanguard Natural Resources, LLC was founded in 2006 and is headquartered in Houston,
Texas. Has 381 employees.
Additional Company Information from Website:
We are a publicly traded limited liability company focused on the acquisition and development of mature, long-
lived oil and natural gas properties in the United States. Our primary business objective is to generate stable cash
flows allowing us to make monthly cash distributions to our unitholders and, over time, increase our monthly
cash distributions through the acquisition of additional mature, long-lived oil and natural gas properties. Through
our operating subsidiaries, as of December 31, 2015, we own properties and oil and natural gas reserves
primarily located in ten operating basins: the Green River Basin in Wyoming; the Permian Basin in West Texas
and New Mexico; the Gulf Coast Basin in Texas, Louisiana, Mississippi and Alabama; the Anadarko Basin in
Oklahoma and North Texas; the Piceance Basin in Colorado; the Big Horn Basin in Wyoming and Montana; the
Arkoma Basin in Arkansas and Oklahoma; the Williston Basin in North Dakota and Montana; the Wind River
Basin in Wyoming; and the Powder River Basin in Wyoming.174

173 https://www.valeroenergypartners.com/Pages/About.aspx, accessed 1/4/2017


174 http://www.vnrllc.com/wp-content/uploads/2016/03/10-K-3.8.16.pdf, accessed 1/4/2017

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Why was the company not included?


This companys main business segments are producing and nonproducing natural gas and oil reserves. A main
business segment of the companies the State Assessed Section is responsible for valuing is a fluid transportation
pipeline services or gas transmission pipeline services.
Western Gas Equity Partners, L.P.
Company Summary from Value Line:
Western Gas Equity Partners, LP (WGP) is a Delaware master limited partnership formed in September 2012 to
own three types of partnership interests in Western Gas Partners, LP (WES), which includes the general partner
interest in WES, held through WES GP; 100% of the incentive distribution rights in WES, which entitle WGP to
receive increasing percentages, up to the maximum level of 48% of any incremental cash distributed by WES as
certain target distribution levels are reached in any quarter; and a significant limited partner interest in WES.
WES was formed by Anadarko Petroleum Corp. in 2007 to acquire, own, develop, and operate midstream energy
assets. With midstream assets located in the Rocky Mountains, the Mid-Continent, north-central Pennsylvania
and Texas, WES is engaged in the business of gathering, processing, compressing, treating, and transporting
natural gas, condensate, natural gas liquids, and crude oil for Anadarko, as well as for other producers and
customers.
Additional Company Information from Website:
Western Gas Equity Partners, LP is a Delaware master limited partnership formed by Anadarko to own WESs
general partner, all of WESs incentive distribution rights, and a substantial limited partner interest in WES.
Through its ownership of WESs general partner, WGP manages and controls WES. The incentive distribution
rights entitle WGP to increasing percentages, up to a maximum level of 48.0%, of any incremental cash
distributed by WES as certain target distribution levels are reached with respect to any quarter.175
Why was the company not included?
This companys main business segments include gathering and treating. A main business segment of the
companies the State Assessed Section is responsible for valuing is a fluid transportation pipeline services or gas
transmission pipeline services.
Western Gas Partners, L.P.
Company Summary from Value Line:
Western Gas Partners, LP engages in the acquisition, ownership, and operation of midstream energy assets in
East and West Texas, the Rocky Mountains, and the Mid-Continent. It is involved in the gathering, compressing,
treating, and transporting of natural gas for its ultimate parent, Anadarko Petroleum Corporation, and third-party
producers and customers. The companys assets consist of gathering systems, natural gas treating facilities,
processing facilities, pipelines, and interests accounted for under the equity method. Western Gas Holdings, LLC
serves as the general partner.
Additional Company Information from Website:
Western Gas Partners, LP is a growth-oriented Delaware master limited partnership formed by Anadarko to own,
operate, acquire and develop midstream energy assets. WESs assets are located in East, West and South Texas,
the Rocky Mountains (Colorado, Utah and Wyoming), North-Central Pennsylvania and the Mid-Continent
(Kansas and Oklahoma), and WES is engaged in the business of gathering, processing, compressing, treating and
transporting natural gas, condensate, natural gas liquids and crude oil for Anadarko, as well as third-party
producers and customers.176

175 http://www.westerngas.com/About/, accessed 1/4/2017


176 http://www.westerngas.com/About/, accessed 1/4/2017

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Why was the company not included?


This companys main business segments include gathering and treating. A main business segment of the
companies the State Assessed Section is responsible for valuing is a fluid transportation pipeline services or gas
transmission pipeline services.
Western Refining Logistics, L.P.
Company Summary from Value Line:
Western Refining Logistics, LP is engaged in the ownership, acquisition, development, and operation of
terminals, storage tanks, pipelines, and other logistics assets in the southwestern United States. The company has
pipeline and gathering assets, including approximately 300 miles of crude oil pipelines and gathering systems,
and approximately 685,000 barrels of active crude oil storage located primarily in the Delaware Basin. It has
terminaling, transportation, and storage assets comprising terminals and storage assets located at El Paso and
Gallup refineries, and refined products terminals located in Bloomfield and Albuquerque, New Mexico that
consist of 8.2 million barrels of active storage capacity, which receive, store, and distribute crude oil, feedstock,
and refined products; and asphalt plant and terminal that provides asphalt terminaling and processing services in
El Paso. The company also distributes gasoline, diesel fuel, and lubricant products. Has 780 employees.
Additional Company Information from Website:
Western Refining Logistics, LP (NYSE: WNRL) is principally a fee-based, growth-oriented master limited
partnership formed by Western Refining, Inc. (NYSE: WNR) to own, operate, develop and acquire terminals,
storage tanks, pipelines and other logistics assets related to the terminalling, transportation and storage of crude
oil and refined products. Headquartered in El Paso, Texas, Western Refining Logistics, LP's assets include
approximately 685 miles of pipelines, approximately 8.2 million barrels of active storage capacity, distribution
of wholesale petroleum products and crude oil trucking. WNRL began trading on the New York Stock Exchange
on October 10, 2013.
Our pipeline and gathering assets are positioned to support crude oil supply options for Westerns El Paso,
Gallup and St. Paul Park refineries as well as third parties and consist of crude oil pipelines and gathering assets
located primarily in the Delaware Basin and in the Four Corners area of Northwestern New Mexico, and the
Bakken Formation in North Dakota. These systems gather and transport crude oil by pipeline from various
production locations to Westerns refineries utilizing approximately 685 miles of pipeline, crude oil storage
tanks with a total combined active shell storage capacity of 828,000 barrels, truck loading and unloading
locations and pump stations. Westerns St. Paul Park refinery in Minnesota is strategically located with direct
access, primarily via the Minnesota Pipeline, to what the Company believes are abundant supplies of advantaged
crude oils. The complexity of refinery operations allows it to process a variety of light, heavy, sweet and sour
crudes into higher value refined products.
Our terminalling, transportation and storage assets support crude oil supply and refined product distribution for
Westerns El Paso, Gallup and St. Paul Park refineries as well as third parties and primarily consist of storage
tanks, terminals, transportation and other assets located in El Paso, Texas; Gallup, Bloomfield and Albuquerque,
New Mexico; and Phoenix and Tucson, Arizona. These assets include crude oil, feedstock, blendstock, refined
product and asphalt storage tanks with a total combined shell storage capacity of 7.4 million barrels; truck
loading racks; railcar loading racks; pump stations and pipeline and related logistics assets to service Westerns
operations.
WNRL's wholesale business includes the operations of several lubricant and bulk petroleum distribution plants
and a fleet of crude oil, refined product, asphalt and lubricant delivery trucks. WNRL distributes commercial
wholesale petroleum products primarily in Arizona, Colorado, Nevada, New Mexico and Texas. WNRL
purchases petroleum fuels and lubricants from WNR's refining segment and from third-party suppliers. WNRL
provides logistical services to WNR's refineries in the Southwest and operates several lubricant and bulk

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petroleum distribution plants and a fleet of crude oil and refined product delivery trucks. WNRL distributes
wholesale petroleum products primarily in Arizona, Colorado, Nevada, New Mexico and Texas.177
Why was the company not included?
This company has many business segments and the main business segments do not include pipeline
transportation services. A main business segment of the companies the State Assessed Section is responsible for
valuing is a fluid transportation pipeline services or gas transmission pipeline services.
Williams Companies, Inc.
Company Summary from Value Line:
The Williams Companies, Inc., gathers, processes, and transports natural gas throughout the United States. It
also performs gas marketing services. Acquired Access Midstream Partners, 7/14; Barrett Resources, 8/01;
MAPCO, 3/98. Sold Texas Gas Pipeline, 5/03; Kern River Pipeline, 3/02. Spun off Williams Communications,
4/01; WPX Energy, 1/12. Initial public offering for Williams Partners L.P., 8/05; Williams Pipeline Partners
L.P., 1/08. Has about 4,910 employees. Off./dir. own less than 8.9% of common shares; Corvex Management
LP/Soroban Master Fund LP, 8.4%; The Vanguard Group, 5.8% (4/16 Proxy).
Additional Company Information from Website:
Williams, including its assets held through Williams Partners L.P., is an energy infrastructure company focused
on connecting North Americas significant hydrocarbon resource plays to growing markets for natural gas,
natural gas liquids (NGLs) and olefins. Williams operations span from the deepwater Gulf of Mexico. Williams
owns and operates midstream gathering and processing assets, and interstate natural gas pipelines. In addition,
Williams produces olefins for petrochemical feedstocks. Williams headquarters are located in Tulsa,
Okla. Other major offices are in Houston, Pittsburgh, Oklahoma City and Salt Lake City. Founded in 1908,
Williams employs more than 5,600 people and is an equal opportunity employer. The Company does not
discriminate in any employer/employee relations based on race, color, religion, sex, sexual orientation, gender
identity and expression, national origin, age, marital status, disability, military status, genetic information or any
other basis protected by applicable discrimination laws. Williams common stock (WMB) and Williams Partners
units (WPZ) are listed on the New York Exchange.178
Why was the company not included?
This company was not included because we would use Williams Partners, L.P.
World Fuel Services Corp.
Company Summary from Value Line:
World Fuel Services Corp., a leading global fuel logistics company, is engaged in the worldwide marketing and
sale of marine, aviation, and land fuel products and related services. Its Marine segment offers fuel and related
services to maritime customers, including international container and tanker fleets among others. The Aviation
segment provides aviation fuel to commercial airlines, and others. The Land segment provides fuel and related
services to petroleum distributors among others. Has 2,758 employees. Officers/Directors own 2.3% of shares
(4/16 proxy).
Additional Company Information from Website:
World Fuel Services Corporation (NYSE: INT) is a Fortune 100 company providing aviation, marine and land
energy, logistics, and technology solutions to customers and suppliers around the world. Our global team of local
professionals delivers innovative products and services at more than 8,000 global locations.179

177 http://www.wnrl.com/, accessed 1/4/2017


178 http://co.williams.com/our-company/, accessed 1/4/2017
179 https://www.wfscorp.com/about-wfs, accessed 1/4/2017

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Why was the company not included?


This company is a global fuel distributor. A main business segment of the companies the State Assessed Section
is responsible for valuing is a fluid transportation pipeline services or gas transmission pipeline services.
World Point Terminals, L.P.
Company Summary from Value Line:
World Point Terminals, LP owns, operates, develops, and acquires terminals and other assets for the storage of
light refined products, heavy refined products, and crude oil in the east coast, gulf coast, and Midwest regions of
the US. The company stores gasoline, distillates, and jet fuel light refined products; residual fuel oils and liquid
asphalt heavy refined products; and crude oil. The company owns 15.3 million barrels of storage capacity at 17
strategically located terminals. The company also provides storage services to distributors, marketers, and traders
that require access to large, strategically located storage capacity with efficient access to transportation
infrastructure and in close proximity to refineries, demand markets or export hubs. The companys storage
terminals are strategically located in the East Coast, Gulf Coast, and midwest regions of the US. WPT GP, LLC
operates as a general partner of the company. The company is headquartered in St. Louis, Missouri. Has 157
employees.
Additional Company Information from Website:
World Point Terminals, LP is a fee-based, growth-oriented limited partnership formed to own, operate, develop
and acquire terminal assets relating to the storage of light refined products, heavy refined products and crude oil.
Our storage facilities are strategically located in the East Coast, Gulf Coast and Midwest regions of the United
States. Refiners typically use our terminals because they prefer to subcontract terminaling and storage services
or their facilities do not have adequate storage capacity or dock infrastructure or do not meet specialized
handling requirements for a particular product. We also provide storage services to distributors, marketers and
traders that require access to large, strategically located storage capacity with efficient access to transportation
infrastructure and in close proximity to refineries, demand markets or export hubs. Our combination of
geographic location, efficient and well-maintained storage assets and access to multiple modes of transportation
gives us the flexibility to meet the evolving demands of our existing customers, as well as the demands of
prospective customers. Our primary business objective are to generate stable cash flows to enable us to pay
quarterly cash distributions to our unit holders and to increase our quarterly distributions over time. We intend
to achieve these objectives by anticipating long-term infrastructure needs in the areas we serve and by growing
our storage terminal network through acquisitions of complementary assets from our sponsors, expansion of our
existing facilities, the construction of new terminals in existing or new markets and strategic acquisitions from
third parties.180

Why was the company not included?


This companys main business segments are terminals and storage. A main business segment of the companies
the State Assessed Section is responsible for valuing is a fluid transportation pipeline services or gas
transmission pipeline services.

180 http://www.worldpointlp.com/about/, accessed 1/4/2017

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MarketSegment:Railroad,ClassIandOtherRailroads
CompaniesIncludedintheRailroadMarketSegment
Canadian National Railway Company
Company Summary from Value Line:
Canadian National Railway operates Canadas largest railroad system with 20,000 route miles spanning East-
West across Canada and North-South to the Gulf of Mexico through the U.S. Midwest. Acquired Wisconsin
Central 10/01; BC Rail and GLT mid- 04; EJ&E 1/09. Petroleum & Chemicals, 19% of 15 revenues; Metals &
Minerals, 11%; Forest Products, 14%; Intermodal, 23%; Coal, 5%; Grain & Fertilizer, 16%; Automotive, 6%;
Other, 6%. 2015 labor costs: 19% of revenue. 2015 operating ratio: 58.2%. Has about 23,170 employees.
Offs./dirs. own or control 0.2% of stock (2015 40-F).
Additional Company Information from Website:
CN [Canadian National] is engaged in the rail and related transportation business. CNs network of
approximately 20,000 route miles of track spans Canada and mid-America, uniquely connecting three coasts: the
Atlantic, the Pacific and the Gulf of Mexico. CNs extensive network and efficient connections to all Class I
railroads provide CN customers access to all three North American Free Trade Agreement (NAFTA) nations. A
true backbone of the economy, CN handles over $250 billion worth of goods annually and carries more than 300
million tons of cargo, serving exporters, importers, retailers, farmers and manufacturers. CNs freight revenues
are derived from seven commodity groups representing a diversified and balanced portfolio of goods transported
between a wide range of origins and destinations. This product and geographic diversity better positions the
Company to face economic fluctuations and enhances its potential for growth opportunities. In 2015, no
individual commodity group accounted for more than 23% of total revenues. From a geographic standpoint, 18%
of revenues relate to United States (U.S.) domestic traffic, 33% transborder traffic, 18% Canadian domestic
traffic and 31% overseas traffic. The Company is the originating carrier for approximately 85% of traffic moving
along its network, which allows it both to capitalize on service advantages and build on opportunities to
efficiently use assets.181
Why was the company included?
This company is similar to (and is the parent of) the railroad companies that the State Assessed Section is
responsible for valuing. The company engages in railroad transportation services.
Canadian Pacific Railway Limited
Company Summary from Value Line:
Canadian Pacific Railway Limited provides rail and intermodal freight transportation services over a 12,500-mile
network from Montreal to Vancouver. It extends into the U.S. midwest and northeast via Soo Line, Delaware &
Hudson, and DM&E (purchased 10/4/07) subsidiaries. Alliances with other carriers extend market reach beyond
its owned network. Grain shipments 24%, of 2015 freight revenue; intermodal, 21%; coal, 10%; other, 45%.
Operating ratio in 2015: 61.0%. Employs 12,900 as of 12/31/15. T. Rowe Price Assoc. owns 10.8% of common
(2016 proxy). Pershing Square sold its 9.1% stake over the summer of 2016.
Additional Company Information from Website:
Canadian Pacific Railway Limited (CPRL), together with its subsidiaries (CP or the Company), operates a
transcontinental railway in Canada and the United States (U.S.). CPs diverse business mix includes bulk
commodities, merchandise freight and intermodal traffic over a network of approximately 12,500 miles, serving

181 Canadian National Railway Company, 2015 Annual Report, page 11

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the principal business centres of Canada from Montreal, Quebec, to Vancouver, British Columbia, and the U.S.
Northeast and Midwest regions.182
Why was the company included?
This company is similar to (and is the parent of) the Railroad Companies that the State Assessed Section is
responsible for valuing. The company engages in railroad transportation services.
CSX Corporation
Company Summary from Value Line:
CSX Corporation provides rail, intermodal transportation, and rail-to-truck transload services. Has about 21,000
route miles in 23 states and two Canadian provinces, with links to more than 240 short-line railroads. Connects
the Northeast, Midwest, and Canada with the Southeast. Principal freight: coal, fertilizer, chemicals, automobiles
& parts, agricultural products, and intermodal cargo. Sold CSX Lines 2/03; CSX World Terminals 2/05. 2015
rail operating ratio: 69.7%. Ave. employee count in Q4 2015: 29,760. Capital Research owns 8.7% of common;
Vanguard Group 6.2%; offs/dirs less than 1% (3/16 proxy).
Additional Company Information from Website:
CSX Corporation, together with its subsidiaries based in Jacksonville, Fla., is one of the nation's leading
transportation suppliers. The companys rail and intermodal businesses provide rail-based transportation services
including traditional rail service and the transport of intermodal containers and trailers. Overall, the CSX
Transportation network encompasses about 21,000 route miles of track in 23 states, the District of Columbia and
the Canadian provinces of Ontario and Quebec. Our transportation network serves some of the largest population
centers in the nation. Nearly two-thirds of Americans live within CSXs service territory. Our transportation
network serves some of the largest population centers in the nation. Nearly two-thirds of Americans live within
CSXs service territory. CSX serves major markets in the eastern United States and has access to over 70 ocean,
river and lake port terminals along the Atlantic and Gulf Coasts, the Mississippi River, the Great Lakes and the
St. Lawrence Seaway. The company also has access to Pacific ports through alliances with western railroads.
CSX moves a broad portfolio of products across the country in a way that minimizes the effect on the
environment, takes traffic off an already congested highway system, and minimizes fuel consumption and
transportation costs.183

Why was the company included?


This company is similar to the Railroad Companies that the State Assessed Section is responsible for valuing.
The company engages in railroad transportation services.
Genesee & Wyoming, Inc.
Company Summary from Value Line:
Genesee & Wyoming owns and operates 63 short line and regional freight railroads. Also performs contract coal
loading and railcar switching for industrial customers. Has operations in North America (62% of 15 revenue),
Australia (12%), and U.K./Europe (26%). 15 freight revenue mix: Pulp & Paper, 12%; Coal, 10%; Minerals &
Stone, 12%; Metals, 11%; Other, 55%. Has 7,500 employees. 15 operating ratio: 80.8%. Off. & dir. own 2.4%
of class A and 99.9% of class B shares outstanding (representing 14.2% of total voting rights); FMR, 10.7% of
class A; Wellington Man., 10.2%; Vanguard, 6.6% (4/16 proxy).
Additional Company Information from Website:
Genesee & Wyoming Inc. owns or leases 122 freight railroads worldwide (collectively "G&W" or the
"company")* that are organized into 10 operating regions with approximately 7,300 employees and more than

182 http://www.cpr.ca/en/investors-site/Lists/FinancialReports/cp-ar-2015.pdf, accessed 1/4/2017 (page 32)


183 https://www.csx.com/index.cfm/about-us/company-overview/, accessed 1/4/2017

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2,800 customers. G&Ws eight North American regions serve 41 U.S. states and four Canadian provinces and
include 115 short line and regional freight railroads with more than 13,000 track-miles. G&Ws Australia Region
provides rail freight services in New South Wales, including in the Hunter Valley coal supply chain, and in the
Northern Territory and South Australia, including operating the 1,400-mile Tarcoola-to-Darwin rail line. The
Australia Region is 51% owned by G&W and 49% owned by a consortium of funds and clients managed by
Macquarie Infrastructure and Real Assets. G&Ws U.K./Europe Region is led by Freightliner, the U.K.s largest
rail maritime intermodal operator and second-largest rail freight company. Operations also include heavy-haul in
Poland and Germany and cross-border intermodal services connecting Northern European seaports with key
industrial regions throughout the continent. G&W subsidiaries provide rail service at more than 40 major ports in
North America, Australia and Europe and perform contract coal loading and railcar switching for industrial
customers.184

Why was the company included?


This company is similar to (and is the parent of) the Railroad Companies that the State Assessed Section is
responsible for valuing. The company engages in railroad transportation services.
Kansas City Southern
Company Summary from Value Line:
Kansas City Southern, Inc. is a holding company that has railroad investments in the U.S., Mexico, and Panama.
Kansas City Southern, its primary holding, serves the central and south central U.S. Kansas City Southern de
Mexico serves northeastern and central Mexico, as well as the port cities of Lazaro Cardenas, Tampico, and
Veracruz. Panama Canal Railway (50% stake) provides ocean-to-ocean service along the Panama Canal. Spun
off Stilwell Finl to shareholders, 7/00. 2015 rail operating ratio: 66.4%. Has 6,260 employees. Officers &
directors own 1.5% of common stock; BlackRock, 6.7%; T. Rowe Price, 5.2% (4/16 Proxy). Kansas City
Southern, Inc. is a holding company that has railroad investments in the U.S., Mexico, and Panama.
Additional Company Information from Website:
KCS is a complete network of capabilities, possibilities and advantages for businesses and shippers of all sizes.
You produce it or need it and we can ship it. From accordions to zippers, KCS can ship your cargo. We are a
full-service railroad capable of shipping anything from the tiniest plastic pieces to the largest machinery. Liquid
or metal. Large or small. Finished or Unfinished. We've got your shipment needs covered.185

Why was the company included?


This company is similar to the Railroad Companies that the State Assessed Section is responsible for valuing.
The company engages in railroad transportation services.
Norfolk Southern Corporation
Company Summary from Value Line:
Norfolk Southern Corp. is the holding company formed by the merger of Norfolk & Western Railway and
Southern Railway on 6/1/82. Its Norfolk Southern Railway subsidiary operates approximately 21,000 route miles
of track in 22 eastern and southern states, plus the District of Columbia. Also owns a 58% stake in Conrail. 15
freight revenue mix: coal, 17%; intermodal, 23%; agriculture/ consumer prod./govt, 14%; metals/construction,
12%; other, 34%. 15 labor costs: about 28% of revenue. 15 operating ratio: 72.6%. Has 30,456 employees; Off.
& Dir. own 1% of common stock (3/16 Proxy).

184 https://www.gwrr.com/about_us, accessed 1/4/2017


185 http://www.kcsouthern.com/en-us/why-choose-kcs/what-we-ship, accessed 1/4/2017

Page | G - 89 Class I and Other Railroads


Guideline Companies 2017 Capitalization Rate Study

Additional Company Information from Website:


Norfolk Southern Corporation is one of the nations premier transportation companies. Its Norfolk Southern
Railway subsidiary operates approximately 20,000 route miles in 22 states and the District of Columbia, serves
every major container port in the eastern United States, and provides efficient connections to other rail carriers.
Norfolk Southern operates the most extensive intermodal network in the East and is a major transporter of coal,
automotive, and industrial products.186

Why was the company included?


This company is similar to the Railroad Companies that the State Assessed Section is responsible for valuing.
The company engages in railroad transportation services.
Union Pacific Corporation
Company Summary from Value Line:
Union Pacific Corporation owns Union Pacific Railroad, the largest railroad in the U.S. in both track miles and
total revenues, with nearly 31,974 route miles serving the western two thirds of the United States. 15 RR
revenue mix: Coal, 16%; Intermodal, 20%; Agricultural, 17%; Industrial, 19%; Chemicals, 17%; Automotive,
11%. Spun off UP Resources 9/96. Acqd Southern Pacific 9/96. Sold Overnite Transport. 11/03. 15 RR
operating ratio: 63.1%. Has 47,457 employees. Officers/directors own less than 1% of stock; Capital Research
Investors, 6.7%; BlackRock, 6.1%; Vanguard, 5.8% (4/16 proxy).
Additional Company Information from Website:
Union Pacific Corporation (NYSE:UNP) is one of America's leading transportation companies. Its principal
operating company, Union Pacific Railroad, is North America's premier railroad franchise, covering 23 states
across the western two-thirds of the United States.187

Why was the company included?


This company is one of the Railroad Companies that the State Assessed Section is responsible for valuing. The
company engages in railroad transportation services.

CompaniesNotIncludedintheRailroadMarketSegment
American Railcar Industries, Inc.
Company Summary from Value Line:
American Railcar Industries, Inc. designs and manufactures hopper (used to transport dry bulk products) and
tank railcars. The companys operations are divided into three segments: Manufacturing (accounted for 79% of
2015 total revenues); Railcar leasing (13%); and Railcar Services (8%). At 12/31/15, its backlog exceeded 7,081
railcars of which 80% are for direct sale and 70% are scheduled for delivery in 2016. It has more than 2,407
employees. Officers/directors own 60.8% of the common stock; Dimensional Fund Advisors, 7.1% (4/16 proxy).
Additional Company Information from Website:
ARI [American Railcar Industries] is a leading North American designer and manufacturer of hopper and tank
railcars. ARI provides its railcar customers with integrated solutions through a comprehensive set of high quality
products and related services. ARI manufactures and sells railcars, custom designed railcar parts, and other
industrial products. ARI and its subsidiaries also lease railcars manufactured by the company to certain markets.
In addition, ARI provides railcar services through its various repair facilities, including mini-shops and mobile

186 http://www.nscorp.com/content/nscorp/en/about-ns/corporate-profile.html, accessed 1/4/2017


187 http://www.up.com/aboutup/corporate_info/uprrover/index.htm, accessed 1/4/2017

Page | G - 90 Class I and Other Railroads


Guideline Companies 2017 Capitalization Rate Study

units, offering a range of services from full to light repair. We partner in two separate and distinct joint ventures:
Axis, LLC, and Ohio Castings Company, LLC.188
Why was the company not included?
This company designs and manufactures railcars.
Berkshire Hathaway, Inc.
Company Summary from Value Line:
Berkshire Hathaway Inc. is a holding company owning subsidiaries engaged in property and casualty insurance
on a direct and reinsurance basis through GEICO, General Re and Berkshire Reinsurance. Other business
activities include electric utilities, railroads, flight training services, candy manufacturing, ice cream, building
products, newspapers, retailing, fine jewelry, etc. Also, fractional ownership programs for general aviation
(NetJets), energy (Mid-American Energy). Has approximately 361,270 employees. Officers & directors control
23.4% of voting power (3/16 proxy).
Additional Company Information from Website:
Berkshire Hathaway Inc. (Berkshire, Company or Registrant) is a holding company owning subsidiaries
engaged in a number of diverse business activities. The most important of these are insurance businesses
conducted on both a primary basis and a reinsurance basis, a freight rail transportation business and a group of
utility and energy generation and distribution businesses. Berkshire also owns and operates a large number of
other businesses engaged in a variety of activities, as identified herein. Berkshire is domiciled in the state of
Delaware, and its corporate headquarters are located in Omaha, Nebraska. Berkshires operating businesses are
managed on an unusually decentralized basis. There are essentially no centralized or integrated business
functions (such as sales, marketing, purchasing, legal or human resources) and there is minimal involvement by
Berkshires corporate headquarters in the day-to-day business activities of the operating businesses. Berkshires
corporate office senior management participates in and is ultimately responsible for significant capital allocation
decisions, investment activities and the selection of the Chief Executive to head each of the operating businesses.
It also is responsible for establishing and monitoring Berkshires corporate governance practices, including, but
not limited to, communicating the appropriate tone at the top messages to its employees and associates,
monitoring governance efforts, including those at the operating businesses, and participating in the resolution of
governance-related issues as needed. Berkshire and its consolidated subsidiaries employed approximately
331,000 people world-wide at the end of 2015. Berkshires corporate headquarters has 25 employees.189
Why was the company not included?
We reviewed Berkshire Hathaway, Inc. because the company is the parent of BNSF Railway, which operates in
Minnesota. However, BNSF Railway is not the majority business segment of Berkshire Hathaway, Inc.
GATX Corporation
Company Summary from Value Line:
GATX Corp. specializes in tank car, freight car, and locomotive leasing. The company owns or has an interest in
154,096 railcars, and manages 2,143 railcars for third-party owners. Specialty unit finances marine and industrial
equipment. American Steamship unit operates a fleet of vessels on the Great Lakes, providing waterborne
transportation of dry bulk commodities. Invests in joint ventures that complement existing businesses. Has about
2,200 employees. Off. & dir. own 2.9% of common; State Farm, 15.6%; GAMCO, 12.1%; Wellington, 10.1%;
Dimensional Fund Advisors, 9.1%; BlackRock, 7.1% (3/16 Proxy).

188 http://www.americanrailcar.com/Home/About, accessed 1/4/2017


189 http://www.berkshirehathaway.com/2015ar/201510-K.pdf, accessed 1/4/2017

Page | G - 91 Class I and Other Railroads


Guideline Companies 2017 Capitalization Rate Study

Additional Company Information from Website:


GATX Corporation, founded in 1898, is the leading global railcar lessor. We strive to be recognized as the finest
railcar leasing company in the world by our customers, our shareholders, our employees, and the communities
where we operate. We own railcar fleets in North America, Europe, and Asia. In addition, we operate the largest
fleet of US-flagged vessels on the Great Lakes and own and manage other long-lived, widely-used assets. We
operate through four primary business segments: Rail North America, Rail International, American Steamship
Company (ASC), and Portfolio Management.190
Why was the company not included?
This companys business segments include substantial non railroad investments, including financing marine and
industrial equipment.
Greenbrier Companies, Inc.
Company Summary from Value Line:
The Greenbrier Companies, Inc. designs, manufactures, repairs, and markets railroad freight cars and related
equipment in North America and Europe. It also manufactures oceangoing marine barges. The company operates
in three business segments: Manufacturing (78% of 2016 revenues); Wheel Services, Refurbishment & Parts
(12%); Leasing & Services (10%). Inc.: OR. At 8/31/16, its backlog consisted of 27,500 railcars. Has about
10,000 employees. President, Chairman, and CEO: William A. Furman. Officers/directors. own 4.6% of
common stock; The Vanguard Group, 15.5%; BlackRock, 10.3%; Dimensional Fund, 6.9% (11/16 proxy).
Additional Company Information from Website:
Greenbrier designs, builds and markets freight railcars in North America and Europe, we build freight railcars
and rail castings in Brazil through a strategic partnership, and build and market marine barges in North America.
Recently, through our European manufacturing operations, we also began delivery of US-designed tank cars in
Saudi Arabia. In October 2016, we entered into an agreement with Astra Rail Management GmbH to form a new
company, Greenbrier-Astra Rail, which will create an end-to-end, Europe-based freight railcar manufacturing,
engineering and repair business. We expect this combination will be completed during 2017. We are a leading
provider of wheel services, parts, leasing and other services to the railroad and related transportation industries in
North America and a provider of freight railcar repair, refurbishment and retrofitting services in North America
through a joint venture partnership with Watco Companies, LLC. Through other joint ventures we produce rail
castings, tank heads and other railcar components. Greenbrier owns a lease fleet of over 9,000 railcars and
performs management services for over 268,000 railcars.191

Why was the company not included?


This company designs, manufactures, repairs, and markets railroad freight cars and related equipment.
Packaging Corporation of America
Company Summary from Value Line:
Packaging Corporation of America is the fourth-largest producer of containerboard and corrugated products in
the United States in terms of production capacity. Revenue breakdown; Packaging (78% of 2015 sales), Paper
(20%), and Corporate and Other and Eliminations (2%). In 2015, it produced 3.7 million tons of containerboard
at its mills. Corrugated products manufacturing plants sold about 48.9 billion square feet. Has 13,000 employees.
Acquired Boise (10/13). Off/dirs. own 1.1% of common stock; Black- Rock, 9.0%; The Vanguard Group, 7.4%
(3/16 proxy).

190 http://www.gatx.com/wps/wcm/connect/GATX/GATX_SITE/Home/About/, accessed 1/4/2017


191 http://www.gbrx.com/about-us/, accessed 1/4/2017

Page | G - 92 Class I and Other Railroads


Guideline Companies 2017 Capitalization Rate Study

Additional Company Information from Website:


At PCA [Packaging Corporation of America], we think of ourselves as more than a box manufacturer. We are an
ideas and solutions company. We seek to be the leader in helping our customers large and small package,
transport and display products of all kinds. It just happens to be that corrugated products are our area of
expertise. So a partnership with PCA isnt just about buying boxes. Its about building a relationship with a
knowledgeable, trusted, committed source; adding value to your business; and actively contributing to your
success in the marketplace. Whether you are looking for conventional shipping containers, custom-printed
corrugated boxes, custom packaging or eye-catching retail visual displays, PCA is here to deliver the right
packaging solution on time and on budget. At PCA, our people are as sharp at posing questions as they are at
providing answers. With good reason We realize that the key to offering responsive customer service is never
taking our customers for granted. Thats why at the same time youre learning about our products and how we do
business, were learning about yours. So dont be surprised if PCA people collaborate more than youre used to,
or engage you in conversations that go beyond flute profiles and stacking strength. For PCA people, its all about
understanding customer service doing our very best to give you the ideas and products that support your
needs.192
Why was the company not included?
We reviewed Packaging Corporation of America because the company is the parent of Boise Paper, which is the
parent of Minnesota, Dakota & Western Railroad. Minnesota, Dakota & Western Railroad operates in
Minnesota. However, Minnesota, Dakota & Western Railroad is not the majority business segment Packaging
Corporation of America.
Trinity Industries, Inc.
Company Summary from Value Line:
Trinity Industries, Inc. manufactures a variety of metal products for many industries. Its five principal operating
segments are: Rail (railcars and component parts), Construction Products (highway safety products, concrete,
and aggregate), Inland Barge (barges and related products), Energy Equipment (wind towers), and Railcar
Leasing and Management. Acquired Thrall 10/01. 15 depr. rate: 3.4%. Has about 21,900 employees. Officers &
directors own 1.8% of common stock; Vanguard Group, 8.3%; BlackRock, 7.0%; Southern Sun Asset. Man.,
5.4% (4/16 Proxy).
Additional Company Information from Website:
Trinity Industries, Inc. is a diversified industrial company that owns market-leading businesses providing
products and services to the energy, transportation, chemical, and construction sectors. Trinity reports its
financial results in five principal business segments: the Rail Group, the Railcar Leasing and Management
Services Group, the Inland Barge Group, the Construction Products Group and the Energy Equipment Group.
Our common stock is traded on the New York Stock Exchange under the symbol TRN. Trinitys businesses
provide industrial products and services ranging from barges, storage and distribution containers, aggregates, and
highway products to wind tower and utility structures, railcars, railcar parts, and railcar leasing, management,
and maintenance services. Our businesses play an important role in the overall economy by supplying essential
infrastructure-related products and services.193
Why was the company not included?
This company manufactures metal products for many industries.

192 https://www.packagingcorp.com/our-company, accessed 1/4/2017


193 http://www.trin.net/aboutus/default.html, accessed 1/4/2017

Page | G - 93 Class I and Other Railroads


Cap Rate Study Comparison - Electric AppendixHSummaryof 2017 Capitalization Rate Study
January 2, 2017 Assessment StudiesCompletedbyOthers

YieldCapitalizationRatesforElectric
Capital Capital
Selected Costof Costof Composite
Author Structure Structure Comments
YieldRate Debt Equity Rate
(Debt) (Equity)
MNDepartmentofRevenue 7.13% 4.79% 8.44% 36.00% 64.00% 7.13%
FC
CaliforniaStateBoardofEqualization 7.71%9.82% 4.40%4.80% 10.73%14.06% 43%47% 52%57% N/A SeeComment(1)
ColoradoDepartmentofRevenue 7.55% 4.44% 9.23% 35.00% 65.00% 7.55%
IdahoStateTaxCommission 7.54%FC 4.59% 8.89% 36.00% 64.00% 7.34%
KansasDepartmentofRevenue 8.40%FC 4.79% 10.00% 35.00% 65.00% 8.18%
MissouriStateTaxCommission 7.75% 4.50% 9.50% 36.00% 64.00% 7.70%
MontanaDepartmentofRevenueAT 5.40%AT 2.60%AT 7.20% 40.00% 60.00% 5.36%
OklahomaTaxCommission 7.90% 4.68% 9.90% 38.29% 61.71% 7.90%
OregonDepartmentofRevenueAT 6.40%,6.80%AT 2.85%AT 8.80%9.50% 40.00% 60.00% 6.42%,6.84% SeeComment(2)
OregonDepartmentofRevenue 7.10%7.50% 4.60% 8.80%9.50% 40.00% 60.00% 7.12%,7.54%
SouthDakotaDepartmentofRevenue 8.71%FC 4.83%FC 10.80%FC 35.00% 65.00% 8.71%
UtahStateTaxCommission N/A 4.79% 8.43% 35.00% 65.00% 7.16% SeeComment(3)
WashingtonDepartmentofRevenueAT 6.51%AT 2.92%AT 8.90% 40.00% 60.00% 6.51%
WyomingDepartmentofRevenue 8.30% 4.97% 10.50% 40.00% 60.00% 8.29% SeeComment(4)
XcelEnergy 8.30%FC 4.50% 9.90% 36.00% 64.00% 7.96%
DamodaranWACCAT 3.47%AT 1.83%AT 4.59% 40.61% 59.39% 3.47% SeeComment(5)

DirectCapitalizationRatesforElectric

Capital Capital
Selected Costof Costof Composite
Author Structure Structure Comments
DirectRate Debt Equity Rate
(Debt) (Equity)
MNDepartmentofRevenue 5.20% 4.79% 5.43% 36.00% 64.00% 5.20%
MissouriStateTaxCommission 5.00% 4.57% 5.24% 36.00% 64.00% 5.00%
MontanaDepartmentofRevenue 5.30% 4.95% 5.50% 40.00% 60.00% 5.28% SeeComment(6)
MontanaDepartmentofRevenue 9.00% 4.95% 11.60% 40.00% 60.00% 8.94% SeeComment(7)
MontanaDepartmentofRevenueAT 4.60%AT 3.07%AT 5.50% 40.00% 60.00% 4.53% SeeComment(6)
MontanaDepartmentofRevenueAT 8.20%AT 3.07%AT 11.60% 40.00% 60.00% 8.19% SeeComment(7)
OregonDepartmentofRevenueAT 4.10%AT 2.79%AT 4.90% 40.00% 60.00% 4.06%
OregonDepartmentofRevenue 4.70% 4.50% 4.90% 40.00% 60.00% 4.74%

AT
=AfterTaxFC=FlotationCostComponent

Page | H-1 Cap Rate Study Comparison


Cap Rate Study Comparison - Electric AppendixHSummaryof 2017 Capitalization Rate Study
January 2, 2017 Assessment StudiesCompletedbyOthers
Comments
(1)Californiacalculatesarangeofcapratesdeterminedbyaspecificcompany'sbondratingwithineachindustryIncludeelectricandgascompaniesinguidelinecompanyselectionLowestCOE
figuredoesnotincludepreferredequityrates
(2)CostofEquityissizeadjustedforMidcapandSmallCap
(3)AnestimatedaverageCostofDebtisimpliedfromtheMarketValueofDebt(PublicUtilityBaa)usedincapitalstructuretable
(4)Unabletoconfirmguidelinecompaniesused.Usedthegroupfromstudytitled"InvestorOwnedandGandT's"
(5)Ratesselectedfromindustryname"Utility(General)"
(6)NOIAftertaxDirectCapRate
(7)GrossCashFlowDirectCapRate

Page | H-2 Cap Rate Study Comparison


Cap Rate Study Comparison - Gas Distribution 2017 Capitalization Rate Study
January 2, 2017 Assessment

YieldCapitalizationRatesforGasDistribution

Capital Capital
Selected Costof Costof Composite
Author Structure Structure Comments
YieldRate Debt Equity Rate
(Debt) (Equity)
MNDepartmentofRevenue 6.81% 4.53% 7.61% 26.00% 74.00% 6.81%
FC
CaliforniaStateBoardofEqualization 7.62%11.19% 4.40%6.11% 10.52%14.58% 40%46% 54%60% N/A SeeComment(1)
ColoradoDepartmentofRevenue 8.24% 4.60% 9.52% 26.00% 74.00% 8.24%
IdahoStateTaxCommission 6.90% 4.04% 7.81% 24.00% 76.00% 6.91%
KansasDepartmentofRevenue 9.47%FC 4.79% 11.25% 32.00% 68.00% 9.18%
MissouriStateTaxCommission 11.25% 8.00% 13.00% 35.00% 65.00% 11.25% SeeComment(2)
OklahomaTaxCommission 8.08% 4.68% 9.80% 33.65% 66.35% 8.08%
OregonDepartmentofRevenueAT 6.40%AT 2.79%AT 8.00% 30.00% 70.00% 6.44%
OregonDepartmentofRevenue 7.00% 4.50% 8.00% 30.00% 70.00% 6.95%
SouthDakotaDepartmentofRevenue 9.26%FC 4.83% FC 10.74%FC 25.00% 75.00% 9.26%
UtahStateTaxCommission N/A 4.79% 7.80% 35.00% 65.00% 6.75% SeeComment(3)
WashingtonDepartmentofRevenueAT 6.42%AT 2.73%AT 8.00% 30.00% 70.00% 6.42%
WyomingDepartmentofRevenue 9.90% 4.55% 11.78% 26.00% 74.00% 9.90%
DamodaranWACCAT 3.47%AT 1.83%AT 4.59% 40.61% 59.39% 3.47% SeeComment(4)

DirectCapitalizationRatesforGasDistribution

Capital Capital
Selected Costof Costof Composite
Author Structure Structure Comments
DirectRate Debt Equity Rate
(Debt) (Equity)
MNDepartmentofRevenue 4.70% 4.53% 4.76% 26.00% 74.00% 4.70%
MissouriStateTaxCommission 3.00% 4.27% 2.38% 35.00% 65.00% 3.04%
OregonDepartmentofRevenueAT 4.00%AT 2.65%AT 4.60% 30.00% 70.00% 4.02%
OregonDepartmentofRevenue 4.50% 4.28% 4.60% 30.00% 70.00% 4.50%

AT
=AfterTaxFC=FlotationCostComponent

Page | H-3 Cap Rate Study Comparison


Cap Rate Study Comparison - Gas Distribution 2017 Capitalization Rate Study
January 2, 2017 Assessment

Comments
(1)Californiacalculatesarangeofcapratesdeterminedbyaspecificcompany'sbondratingwithineachindustryIncludebothelectricandgasinguidelinecompanyselection
(2)GuidelinecompaniesusedareValueLine's"NaturalGas(Diversified)"companies
(3)AnestimatedaverageCostofDebtisimpliedfromtheMarketValueofDebt(PublicUtilityBaa)usedincapitalstructuretable
(4)Ratesselectedfromindustryname"Utility(General)"

Page | H-4 Cap Rate Study Comparison


Cap Rate Study Comparison - Gas Transmission Pipeline 2017 Capitalization Rate Study
January 2, 2017 Assessment

YieldCapitalizationRatesforGasTransmission Pipeline

Capital Capital
Selected Costof Costof Composite
Author Structure Structure Comments
YieldRate Debt Equity Rate
(Debt) (Equity)
MNDepartmentofRevenue 8.96% 4.85% 11.59% 39.00% 61.00% 8.96%
CaliforniaStateBoardofEqualization 10.37%FC 4.77% 12.24% 25.00% 75.00% 10.37% SeeComment(1)
ColoradoDepartmentofRevenue 11.23% 5.56% 14.71% 38.00% 62.00% 11.23%
IdahoStateTaxCommission 10.30% 5.50% 13.00% 36.00% 64.00% 10.30%
KansasDepartmentofRevenue 10.79%FC 4.79% 13.95% 38.00% 62.00% 10.47%
MissouriStateTaxCommission 11.00% 6.25% 13.00% 28.00% 72.00% 11.11% SeeComment(2)
MontanaDepartmentofRevenueAT 7.90%AT 3.04%AT 11.00% 40.00% 60.00% 7.82%
OklahomaTaxCommission 10.53% 4.75% 12.50% 25.36% 74.64% 10.53%
OregonDepartmentofRevenueAT 8.90%,11.00%AT 2.79%AT 13%,16.42% 40.00% 60.00% 8.92%,10.97% SeeComment(3)
OregonDepartmentofRevenue 9.60%,11.70% 4.50% 13%,16.42% 40.00% 60.00% 9.60%,11.65%
SouthDakotaDepartmentofRevenue 11.39%FC 6.64%FC 13.94%FC 35.00% 65.00% 11.39%
UtahStateTaxCommission N/A 4.83% 11.81% 45.00% 55.00% 8.67% SeeComment(4)
WashingtonDepartmentofRevenueAT 8.59%AT 3.47%AT 12.00% 40.00% 60.00% 8.59% SeeComment(5)
WyomingDepartmentofRevenue 13.00% 5.89% 17.57% 39.00% 61.00% 13.01%
TegardenCapRateStudy 10.70% 5.63% 12.90% 30.00% 70.00% 10.72%
DamodaranWACCAT 6.19%AT 2.22%AT 9.25% 43.52% 56.48% 6.19% SeeComment(6)

DirectCapitalizationRatesforGasTransmission Pipeline

Capital Capital
Selected Costof Costof Composite
Author Structure Structure Comments
DirectRate Debt Equity Rate
(Debt) (Equity)
MNDepartmentofRevenue 7.08% 4.79% 8.55% 39.00% 61.00% 7.08%
MissouriStateTaxCommission 6.75% 4.58% 7.69% 28.00% 72.00% 6.82%
MontanaDepartmentofRevenueAT 4.40%AT 3.41%AT 5.00% 40.00% 60.00% 4.36% SeeComment(7)
MontanaDepartmentofRevenueAT 7.20%AT 3.41%AT 9.70% 40.00% 60.00% 7.18% SeeComment(8)
OregonDepartmentofRevenueAT 3.60% AT 3.08%AT 4.00% 40.00% 60.00% 3.63% SeeComment(9)
OregonDepartmentofRevenue 4.40% 4.96% 4.00% 40.00% 60.00% 4.38% SeeComment(9)

AT
=AfterTaxFC=FlotationCostComponent

Page | H-5 Cap Rate Study Comparison


Cap Rate Study Comparison - Gas Transmission Pipeline 2017 Capitalization Rate Study
January 2, 2017 Assessment
Comments
(1)Californiacalculatesarangeofcapratesdeterminedbyaspecificcompany'sbondratingwithineachindustry
(2)SameratesforLiquidPipelineindustry
(3)SizeadjustedCostofEquity,andsameratesusedforLiquidPipeline
(4)AnestimatedaverageCostofDebtisimpliedfromtheMarketValueofDebt(CorporateBaa)usedincapitalstructuretable
(5)SameratesforLiquidPipelineindustry
(6)Ratesselectedfromindustryname"Oil/GasDistribution",whichincludecompanieswithinGasTransmissionindustry
(7)GrossCashFlowDirectCapRate
(8)NOIAftertaxDirectCapRate
(9)SameratesforLiquidPipelineIndustry

Page | H-6 Cap Rate Study Comparison


Cap Rate Study Comparison - Fluid Transportation 2017 Capitalization Rate Study
Pipeline January 2, 2017 Assessment

YieldCapitalizationRatesforFluid TansportationPipeline

Capital Capital
Selected Costof Costof Composite
Author Structure Structure Comments
YieldRate Debt Equity Rate
(Debt) (Equity)
MNDepartmentofRevenue 10.08% 5.79% 12.49% 36.00% 64.00% 10.08%
CaliforniaStateBoardofEqualization 10.04%11.39%FC 4.80%5.81% 13.54%15.10% 40.00% 60.00% N/A SeeComment(1)
ColoradoDepartmentofRevenue 11.17% 5.27% 14.49% 36.00% 64.00% 11.17%
IdahoStateTaxCommission 10.34% 4.67% 11.93% 30.00% 70.00% 9.75%
KansasDepartmentofRevenue 11.60%FC 4.79% 14.00% 30.00% 70.00% 11.24% SeeComment(2)
MissouriStateTaxCommission 11.00% 6.25% 13.00% 28.00% 72.00% 11.11%
MontanaDepartmentofRevenueAT 7.20%AT 2.91%AT 10.00% 40.00% 60.00% 7.16%
OklahomaTaxCommission 10.25% 4.75% 13.80% 39.24% 60.76% 10.25%
OregonDepartmentofRevenueAT 8.90%,11.00%AT 2.79%AT 13%,16.42% 40.00% 60.00% 8.92%,10.97% SeeComment(3)
OregonDepartmentofRevenue 9.60%,11.70% 4.50% 13%,16.42% 40.00% 60.00% 9.60%,11.65%
SouthDakotaDepartmentofRevenue 11.19%FC 6.64%FC 13.94%FC 35.00% 65.00% 11.39%
UtahStateTaxCommission N/A 4.83% 12.31% 40.00% 60.00% 9.32% SeeComment(4)
WashingtonDepartmentofRevenueAT 8.59%AT 3.47%AT 12.00% 40.00% 60.00% 8.59% SeeComment(5)
WyomingDepartmentofRevenue 13.00% 5.89% 17.57% 39.00% 61.00% 13.01%
Duff&PhelpsPipelineIndustry 11.15%FC 5.40% 13.35% 31.00% 69.00% 10.89%
EnterpriseProductsPartners 12.40%12.60%FC 5.45% 15.20%15.50% 34.00% 66.00% N/A SeeComment(6)
DamodaranWACCAT 6.19% AT
2.22%AT 9.25% 43.52% 56.48% 6.19% SeeComment(7)

DirectCapitalizationRatesforFluid TransportationPipeline
Capital Capital
Selected Costof Costof Composite
Author Structure Structure Comments
DirectRate Debt Equity Rate
(Debt) (Equity)
MNDepartmentofRevenue 7.20% 5.76% 8.01% 36.00% 64.00% 7.20%
MissouriStateTaxCommission 6.75% 4.58% 7.69% 28.00% 72.00% 6.82%
MontanaDepartmentofRevenueAT 4.60%AT 3.53%AT 5.25% 40.00% 60.00% 4.56% SeeComment(8)
MontanaDepartmentofRevenueAT 6.30%AT 3.53%AT 8.00% 40.00% 60.00% 6.21% SeeComment(9)
OregonDepartmentofRevenueAT 3.60% AT 3.08%AT 4.00% 40.00% 60.00% 3.63%
OregonDepartmentofRevenue 4.40% 4.96% 4.00% 40.00% 60.00% 4.38%

AT
=AfterTaxFC=FlotationCostComponent

Page | H-7 Cap Rate Study Comparison


Cap Rate Study Comparison - Fluid Transportation Pipeline 2017 Capitalization Rate Study
January 2, 2017 Assessment
Comments
(1)Californiacalculatesarangeofcapratesdeterminedbyaspecificcompany'sbondratingwithineachindustry
(2)RangeofratesdeterminedfromSmall,MediumandLargeguidelinecompanies,usedratesfromLageCapsegmentabove
(3)SizeadjustedCostofEquity,andsameratesasGasTransmissionPipeline
(4)AnestimatedaverageCostofDebtisimpliedfromtheMarketValueofDebt(CorporateBaa)usedincapitalstructuretable
(5)SameratesforGasTransmissionindustry
(6)TherangeinCostofEquityandSelectedCostofCapitalareduetovariationsofSizePremiumcalculationsbasedonmarketcapitalization
(7)Ratesselectedfromindustryname"Oil/GasDistribution",whichincludecompanieswithintheFluidTransportationPipelineindustry
(8)NOIAftertaxDirectCapRate
(9)GrossCashFlowDirectCapRate

Page | H-8 Cap Rate Study Comparison


Cap Rate Study Comparison - Class 1 Railroads 2017 Capitalization Rate Study
January 2, 2017 Assessment

YieldCapitalizationRatesforClass 1 Railroads
Capital Capital
Selected Costof Costof Composite
Author Structure Structure Comments
YieldRate Debt Equity Rate
(Debt) (Equity)
MinnesotaDepartmentofRevenue 9.16% 4.85% 10.31% 21.00% 79.00% 9.16%
CaliforniaStateBoardofEqualization 11.17FC 4.80% 12.76% 20.00% 80.00% 11.17% SeeComment(1)
ColoradoDepartmentofRevenue 11.02% 4.47% 12.65% 20.00% 80.00% 11.01%
IdahoStateTaxCommission 9.63% 4.67% 10.87% 20.00% 80.00% 9.63%
KansasDepartmentofRevenue 12.38%FC 4.85% 13.75% 20.00% 80.00% 11.97%
MissouriStateTaxCommission 11.25% 4.75% 13.00% 21.00% 79.00% 11.27%
MontanaDepartmentofRevenueAT 7.90%AT 2.54%AT 9.80% 27.00% 73.00% 7.84%
OklahomaTaxCommission 11.76% 4.75% 13.20% 17.03% 82.97% 11.76%
OregonDepartmentofRevenueAT 8.80%AT 4.64%AT 10.15% 25.00% 75.00% 8.77%
OregonDepartmentofRevenue 8.30% 2.88% 10.15% 25.00% 75.00% 8.33%
SouthDakotaDepartmentofRevenue 11.43%FC 4.88%FC 13.06%FC 20.00% 80.00% 11.42%
UtahStateTaxCommission N/A 4.83% 11.08% 20.00% 80.00% 9.83% SeeComment(2)
WashingtonDepartmentofRevenueAT 9.70%AT 2.95%AT 11.75% 23.00% 77.00% 9.73% SeeComment(3)
WyomingDepartmentofRevenue 11.30% 5.66% 12.88% 22.00% 78.00% 11.29%
UnionPacificRailroadCompany 11.41%,11.58%FC 4.72%,4.74% 13.40%,13.62% 23.00% 77.00% 11.41%,11.58% SeeComment(4)
DamodaranWACCAT 5.87% AT
2.10% AT
6.92% 21.84% 78.16% 5.87% SeeComment(5)

DirectCapitalizationRatesforClass 1 Railroads

Capital Capital
Selected Costof Costof Composite
Author Structure Structure Comments
DirectRate Debt Equity Rate
(Debt) (Equity)
MNDepartmentofRevenue 5.38% 4.85% 5.52% 21.00% 79.00% 5.38%
MissouriStateTaxCommission 5.25% 3.26% 5.65% 21.00% 79.00% 5.15%
MontanaDep
Cap Rate Study Comparison - Class 1 Railroads 2017 Capitalization Rate Study
January 2, 2017 Assessment
Comments
(1)Californiacalculatesarangeofcapratesdeterminedbyaspecificcompany'sbondratingwithineachindustry.Theratesusedabovearebasedontwoguidelinecompaniesonly(BNSFRailwayCompany
andUnionPacificRailroadCompany),duetonootherClass1Railroadslistedintheirstudy
(2)AnestimatedaverageCostofDebtisimpliedfromtheMarketValueofDebt(CorporateBaa)usedincapitalstructuretable
(4)Ratesabovereferenceacostofcapitalcalculationwithoutandwithaflotationcostadjustment
(5)Debtrateusedisaftertax
(6)NOIAftertaxDirectCapRate
(7)GrossCashFlowDirectCapRate

Page | H-10 Cap Rate Study Comparison


Cap Rate Study Comparison - Other Railroads 2017 Capitalization Rate Study
January 2, 2017 Assessment

YieldCapitalizationRatesforOther Railroads

Capital Capital
Selected Costof Costof Composite
Author Structure Structure Comments
YieldRate Debt Equity Rate
(Debt) (Equity)
MinnesotaDepartmentofRevenue 9.78% 7.21% 10.93% 31.00% 69.00% 9.78%
CaliforniaStateBoardofEqualization 11.4312.00% 6.32%7.34% 14.84%15.10% 40.00% 60.00% N/A SeeComment(1)
FC
KansasDepartmentofRevenue 13.68% 4.85% 16.50% 28.00% 72.00% 13.24%
MissouriStateTaxCommission 11.25% 4.75% 13.75% 27.00% 73.00% 11.32%
OregonDepartmentofRevenueAT 10.30%AT 2.88%AT 12.00% 25.00% 75.00% 9.72%
OregonDepartmentofRevenue 10.20% 4.64% 12.00% 25.00% 75.00% 10.16%
SouthDakotaDepartmentofRevenue 14.44%FC 4.88%FC 16.84%FC 20.00% 80.00% 14.45%
UtahStateTaxCommission N/A 4.83% 11.23% 25.00% 75.00% 9.63% SeeComment(2)

DirectCapitalizationRatesforOther Railroads

Capital Capital
Selected Costof Costof Composite
Author Structure Structure Comments
DirectRate Debt Equity Rate
(Debt) (Equity)
MNDepartmentofRevenue 6.00% 7.21% 5.46% 31.00% 69.00% 6.00%
MissouriStateTaxCommission 6.00% 3.10% 7.14% 27.00% 73.00% 6.05%
OregonDepartmentofRevenueAT 6.10%AT 2.98%AT 7.10% 25.00% 75.00% 6.07%
OregonDepartmentofRevenue 6.50% 4.80% 7.10% 25.00% 75.00% 6.53%

AT
=AfterTaxFC=FlotationCostComponent

Comments

(2)