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Transcript of Public/Private Partnerships: Public Sector Management Workshop 2009 “Climate Change” in the...
Public/Private Partnerships:Public Sector Management Workshop 2009
“Climate Change” in the Public Sector Regina, Saskatchewan May 31 – June 2
Russ Hantho, Director Power GrowthTransCanada Corporation
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Gas Pipelines
• 59,000 km wholly owned
• 7,800 km partially owned
• 250 Bcf of regulated natural gas storage capacity
• Average volume of 15 Bcf/d
Energy• 19 power plants, 10,900 MW
• Diversified portfolio, primarily low-cost, base-load generation
• 120 Bcf of non-regulated natural gas storage capacity
Oil Pipelines
• Keystone 1.1 million Bbl/d
• Expandable to 1.5 million Bbl/d
TransCanada Corporation (TSX/NYSE: TRP)
3
Trends in the Power Industry
• Canadian and U.S. power capital stock
needs replacing
• The opportunity to participate in
development, and the mechanics of
participation, will vary by region
• GHG policy may accelerate the
retirement of certain of the capital stock
By 2020 Canada will have to…….
•Replace 8,000 MW of coal generation•Replace 11,500 MW of old (relatively clean) generation•Meet demand growth of 30,000 MW by 2020•Attain adequate system reliability while doing this•Add more than 4,000 MW per year from now until 2020
•Plus inadequate transmission systems•Plus export opportunities
In the next 15 years the U.S. will have to……
•Spend $150 billion on new transmission infrastructure•Spend $350 billion on new generation capacity•Spend $50 billion on environmental retrofits on existing
generation•Retire 52,000 MW of existing capacity•Build 230,000 MW of new capacity•Attain adequate system reliability while doing this•Add more than 15,000 MW per year from now until 2020•Source: Cambridge Energy Research Associates.
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• No Emissions Compliance Costs
• Freely Emit CO2
• No R&D invested
in storage
• No investment ingasification/post combustion capturetechnology
• Self sustaining
• Projects with CCS market price for power pays for CCS
GHG Regulations are changing the Power business but not overnight…
Traditional Future
• Bridge the commercialgap with subsidies
• Enable implementation of First Generation CCS
20092009 2016…2016…201520152014201420132013201220122011201120102010……20082008
• Moving too fast will shock market• Flow-through CCS costs will cause consumer power prices to spike
Caution
4
Transition Period
5
Public Private Partnership (P3) Option
“A cooperative venture between the public and private sectors, built on the expertise of each
partner, that best meets clearly defined public needs through the appropriate allocation of resources,
risks and rewards.”
http://www.pppcouncil.ca/aboutPPP_definition.asp
“The key questions here are how to improve the efficiency of infrastructure investment, and how to finance that investment. There is evidence from
other countries that public-private partnerships can both increase the efficiency of investments and support their financing. Now is the right time
to encourage partnerships between the Government … and private providers, given the climate of low nominal interest rates and the presence
of large pension funds that are searching for these kinds of investment opportunities.”
(David Dodge, Governor of the Bank of Canada,)
5
6
Summary of P3 Models
6
Government
Crown Corporation/Agency
Design-Build
Operation/MaintenanceService/License
Finance Only
Design-Build-Operate
Lease-Develop-Operate
Build-Lease-Operate-Transfer
Build-Own-Operate-Transfer
Build-Own-Operate
Buy-Build-Operate
Privatization
Degree of Private Sector Involvement
Deg
ree
of
Pri
vate
Sec
tor
Ris
k
7
TransCanada and Saskatchewan Collaboration
• Belle Plaine Polygeneration project Gasification with CO2 capture
Governments of Saskatchewan and Canada and TransCanada sharing in funding
• Western Transmission Grid
• Nuclear generation
• Wind
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Belle Plaine Polygeneration
• Utilization of low value feedstock for high grade products
• Power, steam, H2, N2
• Uses Carbon Capture & Storage (CCS)
• Approx. $5.0 Billion (2008$)
• Feasibility study initiated
• In-service potential was 2015; on hold pending GHG policy and improved economy
Belle Plaine, Saskatchewan
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Western Grid Study – Alberta to Manitoba
• SaskPower, AESO, Manitoba Hydro and Provincial Governments
• Enables large scale generation Wind, Gasification, Hydro, Nuclear
• Capital Cost: $3.0 B
• Converter Stations: Calgary, Regina and Winnipeg area
• HVDC technology – bi-directional
• 1050 km
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Nuclear
• Significant GHG benefits by using nuclear to replace coal or natural gas
• Bruce Power is currently evaluating nuclear sites in Saskatchewan and Alberta, or sites that could serve both Provinces
• Government of Saskatchewan’s Uranium Development Partnership’s mandate: ”assess opportunities for development of the province’s uranium industry, including nuclear power generation”
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Wind Generation
Renewable portfolio standards (RPS) have been a
catalyst for the rapid development of wind farms - many developments are currently unable to access financing.
12 Months Ago
• Wind energy in high demand• Numerous development
companies launched• IPO and liquidation upside
substantial• Strong project economics• Capital costs accelerating
Today
• Developers move into build phase
• Sale of companies and IPO’s have failed
• Demand for wind energy continues to be strong
• Turbine availability improves and cost declines are occurring
• Saskatchewan wind 4000 + MWs (not considering operability issues)
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Projects: Major Risks and Mitigations
MitigationRisk
• Development Costs
• Capital Costs
• Materials
• Labour
• Regulatory
• GHG & pollution
• Siting
• Fuel availability
• Counter-Party Credit
• Staged study work
• Pre-FEED
• FEED
• Risk sharing
• Counterparties
• Governments
• Seek clarity on policy and legislation
• Commitments and Timing
• Guarantees
12
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• Engage Federal government• Regulatory• Risk sharing
• Advance regulatory policy and legislation
• Public Private Partnership (P3)• Repayable Loan Agreement
• Significant risk sharing mechanism for development costs
Areas for Saskatchewan Government Involvement
13
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Looking to the future - Public Private participation
• Emerging climate change policy and technological advances presents opportunities for transmission and generation
• Saskatchewan government has a principle and potential role for facilitating private investment / joint ventures in energy infrastructure
• TransCanada’s financial strength and power growth objectives good fit with Saskatchewan’s government objectives
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Thank you.
Russ Hantho, Director Power GrowthTransCanada Corporation