Local understanding forms a global perspective GL Garrad Hassan: 1,000+ staff, 44 locations, 26 countries Vancouver Ottawa Portland San Diego Montreal Peterborough Austin Querétaro Porto Alegre Santiago Beijing Seoul Tokyo Shanghai Mumbai Bangkok Bangalore Singapore Newcastle Wellington Melbourne Bristol Cork Paris Izmir Cairo Copenhagen Hinnerup Oldenburg Hamburg Warsaw Lisbon Barcelona Zaragoza Madrid Imola London Slough Glasgow Cape Town Heerenveen Sint Maarten Kaiser-Wilhelm- Koog Part of the GL Group: renewables, oil & gas, maritime
GL Garrad Hassan Capabilities The worlds largest renewable energy consultancy. It offers independent technical and engineering services, products, and training courses to the onshore and offshore wind, wave, tidal and solar sectors. Has been supporting investors in wind farms for over two decades. The detailed technical understanding of its experts provides a solid basis for informing intelligent decisions, regardless of the scale of the project or investment, or the lifecycle stage. Has worked with almost every major manufacturer. It has led the market for manufacturer services for many years and is continuously developing its industry standard turbine design software.
Wind: Experience Matters Energy Assessment analysing 20,000 MW of new projects per year 25% of all projects worldwide 70% of UK installed capacity 75% of Irish installed capacity Operational Assessment 15% of the worlds installed capacity Due Diligence over 25% of the worlds project financed wind farms worlds largest wind farm portfolio acquisition worlds first wind energy bond deal Independent Engineer 45% of US wind farms The worlds five largest wind farm financings The first project financed offshore wind farm Short-term forecasting over 20% of the worlds operational capacity Measurements power curve measurements on 500+ turbines load measurements on 100+ turbines founding member of MEASNET first ever load measurements on offshore wind farm Products / software solutions Industry standard wind turbine design software - Bladed Bladed used to design worlds largest turbine worlds largest independent SCADA supplier – 6,000 MW Offshore Wind project management of worlds largest offshore wind farm - Thanet
SITE DISCOVERY DEVELOPMENT PHASE (0.5 to several years) FINACIAL CLOSE CONSTRUCTION PHASE (12 to 18 months) TAKE OVER OPERATIONAL PHASE (20 to 25 years) DISCONNECTION CONCLUSION DECOMISSIONING PHASE (3 to 4 months) CASH FLOW MEDIUM RISK &LOW INVESTMENT HIGH RISK &HIGH INVESTMENT MEDIUM RISK &MEDIUMRETURN MEDIUM RISK & HIGH RETURN LOW RISK & LOW RETURN BREAK EVEN (loan repaid) Wind Farm Project Cashflow
Wind Farm Investment Risks What are some of the key investment risks in a wind farm project? RiskExample Energy Measurement and Analysis Deviation from base case due to uncertainty or error in the measurement and/or analysis? Operating PerformanceDeviation from the base case due to machine breakdown or other reason to shut down turbines or the wind farm? TechnologyIs it reliable and how much will it cost to operate? Cost OverrunWill there be an additional funding requirement for additional equipment or will the contracts claim for additional costs? DelayWill the revenues start in time to pay the first loan repayment? Credit RiskWhat is the risk of bankruptcy of a counterparty RegulationIs there a risk of change in green energy support pricing or grid regulation? InsuranceWill it be available and at what price? FinancialIs there a risk of interest rate and foreign exchange changes? Country RisksPolitical instability or regulation change. Also climate risks.
Initial Proposal Initial Banking Model Term Sheet Credit Approval Syndication FINACIAL CLOSE - 6 months - 5 months - 2 months - 1 month Construction Draw Down Detailed Banking Model, audit & tax Basic Feasibility Model +18 months Operational Repayments + X years Energy Assessment Due Diligence (legal, technical, insurance) Due Diligence Monitoring Due Diligence Monitoring Final Acceptance Final Payment Wind Farm Project Financing Timeline
Why is an O&M agreement required? To ensure that the wind farm assets continue to be cared for and operated in an appropriate and effective manner for as long as possible. To drive an adequate return on investment on the wind farm assets through a contractual framework that incentivises the operating parties to ensure that the wind farm is always technically available to produce power, and converts the wind energy to electrical energy as efficiently as possible. Optimise the availability and efficiency of the asset so that valuable wind windows are not missed.
O&M Commercial Options All turbine suppliers will typically provide some form of service agreement to support the owner for a designated period following the capital investment. These contracts are named differently by suppliers and will vary in cost, guarantees etc.: WOM: Warranty, Operations and Maintenance SAA: Service and Availability Agreement AOM: Availability, Operations and Maintenance MSA: Maintenance and Service Agreement Different contract packages are available at different costs depending on the level of insulation the owner is looking for from the operational risks.
O&M Commercial Options Three main formats of service agreement: Full Service Contract - typically offered by manufacturers for newly purchased wind farms 24/7 monitoring of the wind farm All scheduled (routine) maintenance in line with the original equipment manuals All minor and major unscheduled (failure) maintenance, through defect or breakdown Availability warranty Limited Service Contract - typically offered by manufacturers following expiry of initial FSC term 24/7 monitoring of the wind farm All scheduled (routine) maintenance in line with the original equipment manuals Some minor unscheduled (failure) maintenance, whether through defect or other breakdown Availability warranty Management of the aforementioned activities on site
Service Only Contract - offered by both turbine suppliers and third parties Periodic, as needed routine maintenance in line with the original equipment manuals Periodic, as needed replacements, whether through defect or other breakdown O&M Commercial Options Three main formats of service agreement: Management activities, monitoring and performance guarantees are excluded from a Service Only Contract. It is expected that the owner will manage the day to day running of the wind farm, monitor its performance, schedule and coordinate routine and replacement maintenance and manage supply of spares and equipment to site. All scheduled and unscheduled maintenance is at extra cost.
What are the turbine maintenance works? The turbine service contractor will typically manage the following maintenance: TURBINES Un Scheduled Scheduled Gear box & Generator Blades & pitch system Drives, shafts, gears & brakes Computers and Circuit boards Hoses and cables Fixtures & fittings Lubrication & coolants Lifts & ladders Doors & hatches Safety equipment
WARRANTIES & DAMAGES PRICE & SCOPE TERM & CONDITIONS SPARES & MONITORING What is the lead time for parts? How much do parts cost? Is a reserve fund needed? When will parts fail? What are the strategic considerations?
Other Strategic Measures Access of owners and technicians to central experts within the turbine suppliers organisation. Technicians based permanently on site, or at nearby service centres. Dedicated and focused service managers working under efficient organisational structures with proven procedures and work instructions. Motivated, skilled and well equipped service technicians, trained in the best techniques to identify and address turbine faults in a safe and efficient manner
What are the operational warranties? DEFECTS : - Replaced parts - 12 months AVAILABILITY: Normally 95% to 97% Often lower in first 3 months Calculation : Total Time – Down time + Allowable events Total Time Allowable events: Scheduled maintenance, FM, no wind, 3 rd party stop Damages payable if below warranted level Sometimes bonuses above warranted level Curtailment Power Curve / Noise: WOM
Warranty Omissions & Exclusions The warranty provider may also define a number of events that are excluded from the warranty cover, thus pushing an element of risk back onto the owner. Safety restrictions under site rules or otherwise. Customer ordered stops not due to the fault of the contractor. Agreed additional services. Operational constraints from customer or 3rd party. Works driven out of changes in Law. In addition, delays or damage caused by those events defined as Employers risk can include: Unauthorised repairs to the turbines; Weather conditions outside of defined operating or design parameters; Yearly grid drop outs above a certain frequency; and Failure of the balance of plant equipment etc.
Service Agreement Costs & Structures Approximately 20% to 25% of overall LCOE to be used to cover all fixed and variable operational costs associated with a typical project. Contract pricing can be approached in two different ways, through fixed and variable pricing. A fixed price contract will entail a specific lump sum which will include a certain defined scope of work. A variable price component is based on a figure calculated retrospectively from the energy generated from an asset. Often additional supplementary (sometimes called variable !!!) costs relating to management, BOP maintenance, land lease fees, utility bills, insurance fees. etc.
How is wind farm operating cost split? Total varies by machine size, age and supplier 20k – 100k / WTG / Year (Plus variable site costs) Offshore is more expensive again Typically % of LCOE Scheduled & unscheduled maintenance services Taxes, rents, power, coms, leases, interest, community funds & insurance Coordination, monitoring & reporting
Wind Farm Operating Costs Typical wind farm operation and maintenance costs for new projects in 2010: Source: International Renewable Energy Agency
Wind Farm Operating Costs Operation and maintenance costs for US projects, : Source: International Renewable Energy Agency
Wind Farm Operating Costs Operation and maintenance costs for US projects, years since commissioning: Source: International Renewable Energy Agency
Reliability, Major & Minor Failure Rates If not FSC, consideration of major (and minor failure rates if SOC) needs to be considered over the life of the wind farm. Source: ReliaWind Project
O&M agreements ensure the wind is maintained and operated effectively, to drive an adequate return on investment and to optimise the availability and efficiency of the asset. Different commercial options exist (ie. WOM, FSC, LSC, SOC), each requires careful consideration. Key considerations include spare parts, resourcing, operational warranties (and there omissions and exclusions). O&M pricing is significant, comprises multiple components (ie. fixed, variable, supplementary) and will vary by project and over time. Reliability and failure rates of major (and minor) components is a critical consideration outside FSC.
Thank-you! Daniel Astbury – Senior Engineer, Business Development Manager – Thailand