Prepared direct testimony of J Peter Williamson on behalf Sourthern LNG Inc under CP99-579.

Jnofflclal FERC-Generated PDF of 20041207-0020 Received by FERC OSEC 12/01/2004 i n D o c k e t # : CP99-579-003 Exhibit No. LN~__.._ (JPW-I) Page I of 37 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Southern LNG Inc. Docket No. CP99-579 PREPARED DIRECT TESTIMONY OF J. PETER WILLIAMSON ON BEHALF OF SOUTHERN LNG INC. I. INTRODUCTION 1 9e nk ton. 2 .V 3 Q. Please state your name and business address. 4 5 A. My name is J. Peter Wlliiamson. My business addresses are 89 Main Street, West Lebanon, 6 New Hampsh~ 03784, and P.O. Box 5160, Hanover, New Hampshire 03755. 7 8 Q. What is your occupation? 9 I0 A. I am the Lanrea~ F. Wh/ttemore Professor of Finance Emeritus at the Amos Tuck School of II Business Administration, Dar~outh College. I have retired from teach/n8 and cont/nue to act 12 as a consuitant to various organizations, both busine6s and nonprofit institutions, on martin's W Jnofflclal FERC-Generated PDF of 20041207-0020 Received by FERC OSEC 12/01/2004 in D o c k e t # : C P 9 9 - 5 7 9 - 0 0 3 (YPw-D Page 2 of 37 V 1 pertaining to corporate finance and investments. I have testified in numerous proceedings 2 before the Federal Energy Regulatory Commission (Commission) and other rcgulatory 3 agencies regarding cost of equity, capital sCuctme, and other financial rnatt~s. My education 4 and qualifications are set out in some detail in my Exhibit No. LNG- _ _ (YPW-2). 5 6 B. Purlp~ of Te~imonv 7 8 Q. What is the purpose of your direct testimony in this case? 9 10 A. I have been asked to determine an appropriate cost of common equity for Southern LNG Inc. 11 (SING) for use in this proceeding and to comment on the capital structure proposed by the 12 Company. 13 14 C. 15 16 Q. Arc you ~msoring any exlu'bits to ~ ~ y ~ 17 18 A. Yes. Iamsponmr/ngExl~1~itsNos. LNG- (JPW-2)throughLNG- (JPW-10). 19 20 D. S c s n a r v of Testimotv 21 22 Q. Please summarize your determination of the cost of common equity for SLNG. 23 Jnofflclal FERC-Generated PDF of 20041207-0020 Received by FERC OSEC 12/01/2004 in D o c k e t # : C P 9 9 - 5 7 9 - 0 0 3 OPW-D Page 3 of 37 I A. My overall approach was to determine the required return on common equity for a set of 2 publicly U-aded proxy companies. It is impossible to establish directly the cost of equity for 3 SLNG. The common equity of SLNG is 100% owned by Southvrn Natural Gas Company 4 (SNG). In determining the cost of common equity for the proxy companies, I relied ...