Artist Producer Joint Venture Contract by dwf91931

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									        New
Opportunities
  For Hydro
            New Opportunities for Hydro
     The Columbia Power Corporation Experience

                        Prepared for
                Waterpower XIV – July 20, 2005
                       Austin, Texas


                                   Lorne Sivertson, President
                                 Columbia Power Corporation
                                lorne.sivertson@columbiapower.org
        New
Opportunities
  For Hydro       INTRODUCTION

     • The Company I represent, Columbia Power Corporation (CPC),
       is a unique venture, capitalizing on new opportunities for hydro
       development.
     • Our new opportunities have been in the areas of:
       -      developing a new public sector business model for power
              development;
       -      developing new power from existing dams; and
       -      creating new environmental benefits from existing dams.
     • I will give you some background on CPC and then discuss these
       opportunity areas.



         Waterpower XIV – July, 2005                                      2
        New
Opportunities
  For Hydro      BACKGROUND
• 1964 Canada/U.S. Columbia River Treaty: B.C agrees to build three new
  storage dams in the Canadian section of Columbia River – Keenleyside
  (1968), Duncan (1970) and Mica (1973).
• New dams created 15.5 million acre feet of water storage to control
  flooding in Washington and Oregon and allowed states to produce
  2400 MW/year additional power known as downstream benefits (“DSBs”).
• B.C. received $64.4 million for dam construction and half of DSBs, which it
  sold to U.S. utilities for 30 years, expiring in 1998.
• Since 1998, BC Hydro’s subsidiary Powerex has been re-selling DSBs in
  the U.S. on a short-term basis; DSBs thru 2025 estimated at C$7.0 billion.
• Dams benefited Province but cost residents of Columbia Basin Region.
• In 1995, Province created unique program to compensate Region – 8% of
  DSBs’ value allocated for new power project development in Region.
         Waterpower XIV – July, 2005                                    3
        New
Opportunities
  For Hydro      COLUMBIA POWER CORPORATION
• 1995 Financial Agreement: Columbia Basin Trust (CBT, a regional entity)
  and CPC (a Crown corporation), receive $500 million over 10 years for
  equity investment in new power projects.
• 3 core hydroelectric projects designated – Arrow Lakes Generating
  Station, Brilliant Expansion and Waneta Expansion.
• CPC designated manager of project development and operations for CBT
  and Province, with following mandate:
     –   Develop cost-competitive core power projects;
     –   Earn acceptable rate of return;
     –   Finance projects on commercial terms without government guarantees;
     –   Promote economic development through power project development; and
     –   Pay dividends to Region and Province.
• CPC/CBT have 330 MW hydroelectric capacity in operation, 125 MW
  under construction and 435 MW in permitting, making them the 4th largest
  power producer in B.C. with $800 million in assets.
         Waterpower XIV – July, 2005                                           4
        New
Opportunities
  For Hydro     LOCATION OF TREATY DAMS & PROJECTS

                       MICA
                       DAM
                                       DUNCAN
                                        DAM
                                                Arrow Lakes Generating Station
                                                185 MW - completed


                KEENLEYSIDE
                                                Brilliant Expansion
                   DAM                          125 MW – under construction

                                                Waneta Expansion
                                                up to 435 MW – in permitting




         Waterpower XIV – July, 2005                                       5
        New
Opportunities
  For Hydro      ARROW LAKES PROJECT AT KEENLEYSIDE DAM




         Photo of by-pass channel and new powerhouse completed in 2002

         Waterpower XIV – July, 2005                                     6
        New
Opportunities
  For Hydro      BRILLIANT EXPANSION UNDER CONSTRUCTION




                                                    Berm in place to protect
                                                    powerhouse excavation


                                          Service
                                          Tunnel                     Access
                                                                     Tunnel




                                                        Roller Compacted
                                                        Concrete Backing
Artist’s rendering of new powerhouse at
Brilliant Dam to be completed in 2006


         Waterpower XIV – July, 2005                                   7
        New
Opportunities
  For Hydro      WANETA EXPANSION IN PERMITTING




       Artist’s rendering of proposed new powerhouse at existing Waneta Dam

         Waterpower XIV – July, 2005                                          8
        New
Opportunities
  For Hydro      BUSINESS MODEL
• Business of CPC is to plan, develop and operate commercially viable,
  environmentally sound and safe power projects in the Columbia Basin
  Region, with the first priority being the core projects.
• In carrying out this mission CPC relies to a great extent on the private
  sector. Planning, design, financing, construction, operation and power
  sales involve private sector firms wholly or in part.
• CPC follows a public-private-partnership (P3) model.
• Allows CPC to allocate, manage risks, realize innovation and efficiency
  through competition.
• Model has five components involving design, evaluation, construction
  (build), operation and management of power assets.


         Waterpower XIV – July, 2005                                    9
        New
Opportunities
  For Hydro       BUSINESS MODEL

     Design

     • Involves assessment of over-all financial, economic and
       environmental feasibility.
     • Includes basic engineering design, capital cost estimates, market
       price forecasts, stakeholder consultations, regulatory
       submissions and solicitation of contractor interest.
     • Concludes with an initial go, no go decision based on critical
       criteria.
     • Carried out by CPC with its consultants.
     .


         Waterpower XIV – July, 2005                                  10
        New
Opportunities
  For Hydro       BUSINESS MODEL

     Evaluate

     • All the information obtained in the design component, including
       fixed-price design-build bids assessed and taken, along with
       negotiated power sales agreements and permits received, to
       determine if project can proceed and a design-build contract can
       be executed.
     • CPC, on behalf of the Joint Venture, is responsible for this
       evaluation and due diligence.




         Waterpower XIV – July, 2005                                  11
        New
Opportunities
  For Hydro       BUSINESS MODEL

     Build

     • With signing of a design-build contract many responsibilities
       transferred to the contractor.
     • CPC, however, engages an “Owners Consultant” to ensure
       compliance with contract terms, including monitoring of quality
       control and environmental permit requirements.




         Waterpower XIV – July, 2005                                     12
        New
Opportunities
  For Hydro       BUSINESS MODEL

     Operate

     • Once project completed and commissioned, operations and
       power sales begin, making sure all deficiencies are resolved and
       the facility is “fit for purpose”.
     • CPC has in-house engineers but has chosen, for cost and
       efficiency purposes, to engage a contractor to operate and
       maintain the Joint Venture’s plants, with oversight by CPC.
     • Contractor responsible for a number of activities, including
       compliance with dam safety and environmental requirements.



         Waterpower XIV – July, 2005                                  13
        New
Opportunities
  For Hydro       BUSINESS MODEL

     Manage

     • CPC is Manager for the Joint Venture and is responsible for all
       activities in the business model components. Includes
       negotiating and administering agreements, raising financing,
       paying lenders, paying taxes, complying with approvals,
       employing qualified staff and advisors and, overall, serving the
       public interest.
     • CPC business model is represented below.




         Waterpower XIV – July, 2005                                      14
        New
Opportunities
  For Hydro                     BUSINESS MODEL
   Businesses                    Design                              Evaluate                     Build                       Operate                   Manage


   Responsibility                  CPC                                  CPC                    Contractors                  Contractors                   CPC


      Key               Assess Feasibility:                  Assess competing            Oversee construction             Maintenance           Financial
    Activities          -Community and First                 proposals from              Carry out construction                                 Regulatory
                         Nations communication               contractors                 Follow up on                     Upgrades              Contract Administration
                        -Environmental & other                                           commitments                                            Human Resources
                         assessments                         Negotiate contracts         Related sub-projects             Dispatch              Joint Venture Interface



      Key               Initial Plans:                       Updated Plans:              Compliance                       Generation            Budgets
    Products            -Financial                           -Financial                                                                         Expenditures
                        -Marketing                           -Marketing                  Studies & Reports                Power Sales           Debt issues
                        -Engineering                         -Engineering                                                                       Sales contracts
                        -Community/First                     -Community/First            Stakeholder                                            Regulatory compliance
                         Nations                              Nations                    Communications                                         Human resource
                        -Environmental                       -Environmental                                                                     plans and services

                        Requests for proposals               Signed contracts



                        Initial go/stop decision,            Updated go/stop decision    Projects completed to            Efficient, reliable   Cost-effective
   Outcomes                                                                              specifications                   plant operations      operations
                        Balance achieved                     Clear expectations                                                                 Dividends
                        between capital and                                              Construction                     Cash flow             Taxes and
                        dividend requirements                Risks assessed, allocated   employment/income                                      water rentals




                                                Value for money/profitability                Risks Managed
      Goals
                                                Acceptance by key stakeholders               Motivated, skilled staff

                                                Environment protected                        Compliance with regulatory parameters




                    Waterpower XIV – July, 2005                                                                                                                  15
        New
Opportunities
  For Hydro       NEW POWER FROM EXISTING DAMS

     Arrow Lakes Generating Station

     • The H.L.Keenleyside storage dam on the mainstem of the
       Columbia River constructed in late 1960’s for flood control and
       downstream power generation purposes under Columbia River
       Treaty.
     • In late 1990’s, CPC developed an environmentally friendly
       concept for a two-unit powerhouse compatible with the dam’s
       primary storage uses.
     • Resulting 185 MW Arrow Lakes Generating Station completed in
       2002 now providing economic and environmental benefits.


         Waterpower XIV – July, 2005                                 16
        New
Opportunities
  For Hydro       NEW POWER FROM EXISTING DAMS
     Brilliant Expansion

     • 145 MW Brilliant Dam built in 1940’s located on the Kootenay
       River near confluence with Columbia River.
     • 42-meter high structure with 4-unit powerhouse, upgraded
       recently to add another 20 MW of capacity.
     • Fully permitted and now under construction, Brilliant Expansion
       project will see the addition of a second powerhouse with a
       single 120 MW Kaplan unit.
     • Combined capacities will bring generation at Brilliant into
       hydraulic balance with powerplants upstream.



         Waterpower XIV – July, 2005                                     17
        New
Opportunities
  For Hydro       NEW POWER FROM EXISTING DAMS

     Waneta Expansion

     • Waneta Dam, built in 1950’s, located on pend d’Oreille River
       near confluence with the Columbia River and close to H.L.
       Keenleyside Dam.
     • Waneta Dam has existing 4-unit powerplant with capacity of
       475 MW.
     • Hydraulic capacity much less than the upstream powerplants on
       the same system.
     • CPC’s working on addition of second powerhouse, Waneta
       Expansion Project, to bring generation into hydraulic balance.
     • 435 MW Waneta Expansion Project currently undergoing federal
       and provincial environmental assessment and permitting.

         Waterpower XIV – July, 2005                                18
        New
Opportunities
  For Hydro       NEW ENVIRONMENTAL BENEFITS

     Greenhouse Gases

     • CPC engaged the Pembina Institute to carry out full life-cycle
       analysis of greenhouse gases (GHG) that the Brilliant Expansion
       project would generate and save.
     • Conclusion was 951 tonnes of CO2 per GWh of electricity or
       375,000 tonnes of GWG avoided or offset annually.
     • Including Arrow Lakes and proposed Waneta Expansion
       projects, three projects avoid or offset about 2 million tonnes of
       GHG annually.
     • Equivalent to taking about 350,000 cars off the roads in B.C.
     • At $5 per tonne of GHG, offset value on an annual basis, is
       $10 million.

         Waterpower XIV – July, 2005                                    19
        New
Opportunities
  For Hydro       NEW ENVIRONMENTAL BENEFITS

     Dissolved Gases

     • In Columbia River system, major water quality problem is
       formation of supersaturated water by air entrainment at dam
       spillways.
     • As a result, total dissolved gas pressure (TGP) levels exceed
       Canadian guidelines and U.S. standards for fish health.
     • Putting water through turbines reduces TGP.
     • Figure below shows post-project TGP levels on Columbia River
       at the U.S. border.
     • TGP benefits realized by CPC projects have been acknowledged
       by 9 regulatory agencies and aboriginal groups in the United
       States, including the EPA.

         Waterpower XIV – July, 2005                              20
        New
Opportunities
  For Hydro                                                 NEW ENVIRONMENTAL BENEFITS

                                                           TOTAL GAS PRESSURE (TGP) IN COLUMBIA RIVER ENTERING U.S.
       % of Avg Year that TGP Exceeds Guidelines




                                                     45%

                                                     40%
                                                                                                     >110%            >115%          >120%
                                                     35%

                                                     30%

                                                     25%

                                                     20%

                                                     15%

                                                     10%

                                                     5%

                                                     0%
                                                              US Border             US Border              US Border              US Border
                                                              before any         after 1st Project     after 2nd Project       after 3rd Project
                                                            CPC/CBT Projects      (Arrow Lakes)      (Brilliant Expansion)   (Waneta Expansion)




                                                   Waterpower XIV – July, 2005                                                                     21
        New
Opportunities
  For Hydro       CONCLUSION

     • CPC is not following a standard model for hydro development in
       British Columbia, or in Canada, or perhaps many jurisdictions.
     • So far it has worked relatively well.
     • The new hydropower opportunities we are focusing on include:
       -     a new P3 business model for engineering, procurement,
             financing, operations and risk management;
       -     developing new efficient run-of-the-river power plants at
             existing dams; and
       -     creating new fisheries and other environmental benefits
             from new generation projects at existing dams
     • If you have any questions or would like more information about
       our next project, the Waneta Expansion please contact me.


         Waterpower XIV – July, 2005                                 22

								
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