Contract analysis

I. Executive Summary The purpose of this memorandum is to present and support the proposed regulatory capital structure of 55% equity / 45% debt and the weighted average cost of debt of 5.25% for inclusion in the redesigned tariff filing of Ridgeline Midstream Services LLC ("Ridgeline" or the "Company") before the Federal Energy Regulatory Commission ("FERC" or the "Commission"). These two components, together with t

II. Background and Procedural Context A. The Ridgeline Pipeline System Ridgeline Midstream Services LLC is a Delaware limited liability company and wholly-owned subsidiary of Dunmore Energy Holdings Ltd., a Cayman Islands exempted limited company registered under Cayman Registry No. CR-381204. Ridgeline's federal employer identification number is 87-4231956, and its FERC Code is 960442. Ridgeline's principal office i

III. Ridgeline's Actual Capital Structure A. Overview of Financing Sources The total construction cost of the Ridgeline Pipeline System was $587.2 million, which was financed through three distinct sources of capital, all of which were arranged and closed prior to the System's in-service date of October 1, 2021:

1. Senior Secured Credit Facility: A $400 million term loan and a $75 million revolving credit facility, provided by a syndicate of three lenders led by Pinnacle National Bank, N.A. as administrative agent. The credit facility is secured by a first-priority lien on all assets of the Pipeline System and carries a variable interest rate of SOFR plus 325 basis points. This facility is discussed in detail in Section IV.A

2. Second Lien Senior Secured Notes: $150 million in privately placed senior secured notes bearing a fixed coupon of 7.875% and maturing in 2030. These notes are secured by a second-priority lien on the Pipeline System assets, subordinate to the senior secured credit facility. The noteholders are two institutional investors — Harborview Capital Management LLC and Sentinel Ridge Fund LP. This instrument is discussed i

3. Equity Contribution from DEH: The residual amount of $37.2 million ($587.2 million total construction cost minus $400 million term loan proceeds minus $150 million note proceeds) was contributed by Dunmore Energy Holdings Ltd. as equity capital. The aggregate debt financing of $550 million ($400 million term loan plus $150 million notes), combined with the $37.2 million equity contribution, fully funded the $587.2

IV. Analysis of Debt Components A. Senior Secured Credit Facility

1. Facility Terms The principal source of debt financing for the Ridgeline Pipeline System is the Senior Secured Credit Facility (the "Credit Facility"), which consists of a $400 million term loan and a $75 million revolving credit facility. The material terms of the Credit Facility are summarized below and are set forth in detail in the Credit Agreement dated September 15, 2021 (a summary of which is attached as App

2. Effective Interest Rate Calculation for Term Loan The effective interest rate on the term loan is determined by the sum of the SOFR base rate and the 325-basis-point credit spread. Because SOFR is a variable rate, the effective all-in cost of the term loan fluctuates over time. For purposes of the weighted average cost of debt calculation used in this memorandum and in the tariff redesign filing, we have used a re

3. Revolving Credit Facility The $75 million revolving credit facility was put in place contemporaneously with the term loan as part of the same Credit Agreement with the same syndicate of lenders and the same maturity date of October 1, 2028. The revolving facility carries the same SOFR + 325 basis point interest rate as the term loan on any drawn amounts. For purposes of the weighted average cost of debt calculatio

1. Note Terms The second source of debt financing for the Pipeline System is the Second Lien Senior Secured Notes (the "Notes"), the material terms of which are summarized below and set forth in detail in the Note Purchase Agreement dated September 22, 2021 (a summary of which is attached as Appendix B to this memorandum). Issuer: Ridgeline Midstream Services LLC. Principal Amount: $150 million. Coupon Rate: 7.875% p

2. Effective Interest Rate The effective interest rate on the Second Lien Notes is straightforward. The Notes bear a fixed coupon of 7.875% per annum, payable semi-annually, with no floating-rate component. There is no amortization of principal — the Notes have a bullet maturity in 2030, at which time the full $150 million principal amount will be due and payable. Because the interest rate is fixed and there is no am

1. Methodology. The weighted average cost of debt is calculated by weighting the effective interest rate on each debt instrument by its outstanding principal balance, expressed as a proportion of total outstanding debt. This is the standard methodology employed by FERC for computing the cost of debt component of the WACC in pipeline rate proceedings. For FERC ratemaking purposes, the cost of debt is computed on an em

2. Calculation. The weighted average cost of debt of 5.25% is calculated based on the following inputs: Term Loan: • Outstanding balance (for weighting purposes): $362.8 million (as of December 31, 2024) • Effective interest rate: approximately 3.92% (SOFR + 325 bps, using the representative SOFR level) • Weight in total debt: $362.8M ÷ ($362.8M + $150.0M) = $362.8M ÷ $512.8M = 70.75% Second Lien Senior Secured Notes

3. Sensitivity Analysis Given the variable-rate nature of the term loan (which constitutes the majority of Ridgeline's outstanding debt), the weighted average cost of debt is sensitive to movements in SOFR. The following sensitivity analysis illustrates the impact of SOFR changes on the weighted average cost of debt, the WACC, and the return on rate base: As the table illustrates, a 50-basis-point increase in SOFR wo

V. Weighted Average Cost of Capital (WACC) A. Original Filing WACC (May 2022) The WACC proposed in Ridgeline's original filing of May 12, 2022 was calculated as follows: Applied to the rate base of $612.40 million, the original WACC of 10.0625% produced a return on rate base of $61.62 million ($612.40 million × 10.0625%). This return was a central component of the original total cost of service of $97.36 million and

VI. Rate Base Summary The WACC is applied to the rate base to determine the return on rate base, which is a key component of the total cost of service. The following is a brief summary of the rate base composition, provided as context for the WACC analysis. A comprehensive discussion of the rate base is provided in the separate Memorandum: Revised Cost-of-Service Model and Rate Derivation. The rate base for the test

VII. Regulatory Covenant Considerations A. Credit Facility Covenants The Senior Secured Credit Facility dated September 15, 2021, contains certain regulatory covenants that tie financial covenant calculations and compliance determinations to the status and outcome of the FERC tariff approval process. Specifically, certain financial covenants — including the debt service coverage ratio and the leverage ratio — are cal

VIII. Comparison to Comparable Interstate Pipelines To provide additional support for the reasonableness of Ridgeline's proposed 55% equity / 45% debt capital structure and 5.25% weighted average cost of debt, we have conducted a comparison to the capital structures and cost of debt approved by FERC for comparable new-build interstate natural gas pipelines, with particular emphasis on pipelines in the Appalachian Bas

IX. Response to Anticipated Intervenor Arguments Based on the positions taken by ATPC and MGPC in their answering testimony filed on January 9, 2023, and on the general arguments that intervenors have raised in comparable FERC proceedings, we anticipate the following potential challenges to Ridgeline's capital structure and cost of debt. We address each below and recommend how Ridgeline should respond. A. "Actual Cap

X. Coordination with Other Workstreams This memorandum is one component of a comprehensive set of analytical memoranda being prepared in support of the redesigned tariff filing. It should be read in conjunction with the following related memoranda and workstreams:

1. Memorandum: DCF Proxy Group Analysis — Updated Q3 2024. This memorandum presents the updated discounted cash flow analysis supporting the revised ROE of 12.50%. It identifies the proxy group of comparable companies, applies the constant-growth and two-stage DCF models, and derives the range and midpoint ROE used in the WACC calculation. The proxy group equity ratios also provide corroborative support for the 55% e

2. Memorandum: Depreciation Rates and Negative Salvage. This memorandum supports the 2.5% annual straight-line depreciation rate applied to the Pipeline System and the resulting depreciation expense of $14.68 million. It addresses the estimated useful life of the pipeline, anticipated negative salvage costs, and the consistency of the proposed depreciation rate with FERC precedent and industry practice.

3. Memorandum: Income Tax Allowance Calculation. This memorandum addresses the grossed-up methodology used to calculate the income tax allowance component of the cost of service, including the application of the corporate income tax rate to the equity component of the WACC. The revised income tax allowance of $15.04 million is a direct function of the revised ROE and the proposed capital structure.

4. Memorandum: Revised Cost-of-Service Model and Rate Derivation. This memorandum presents the comprehensive revised cost of service of $103.15 million, integrating all component analyses — including the WACC, dep