Presentation is loading. Please wait.

Presentation is loading. Please wait.

Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Copyright (c) 2006 Standard.

Similar presentations


Presentation on theme: "Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Copyright (c) 2006 Standard."— Presentation transcript:

1 Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Copyright (c) 2006 Standard & Poors, a division of The McGraw-Hill Companies, Inc. All rights reserved. Standard & Poors IPED Wind Conference May 8, 2008 Peter Murphy, Senior Director 212/ /

2 2. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Overview Overview of Standard & Poors credit ratings What is a credit rating? Public power and investor owned utilities rating distribution Public Power in a Carbon constrained World Wind and Renewable energy

3 3. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. What is a Credit Rating? A credit rating is Standard & Poors opinion of either the general creditworthiness of an obligor, or the creditworthiness of an obligor with respect to a particular debt security or other financial obligation, based on relevant risk factors.

4 4. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Credit Ratings Scale BB+ BBVulnerable BB- B+ BMore Vulnerable B- CCC+ CCCImminent Vulnerability CCC- CCHighly Imminent Vulnerability D Default AAA Extremely Strong AA+ AAVery Strong AA- A+ AStrong A- BBB+ BBBAdequate BBB- Investment Grade Speculative Grade

5 5. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Public Power Utilities Ratings Ratings Distribution: Public Power Utilities

6 6. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. U.S Investor-Owned Electric Companies Ratings Ratings Distribution: U.S. Investor-Owned Utilities (Electric)

7 7. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Key Issues Energy Supply Challenges: Quantity, and Regulatory Renewable Energy and Global Warming Renewable mandates, and incentives Challenges to wind development Project Finance issues System debt considerations Standard & Poors wind project ratings Wind Statistics

8 8. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Growing Demand For Electricity By 2030, global electricity demand expected to nearly double 2004 levels US electricity demand projected to rise 40% by 2030 China adding two plants per week

9 9. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors Generation by Energy Source Source: U.S. DOE EIA, October 2006 Total Generation: 4.1 billion mWh Coal: 2 billion mWh Nuclear: 782 mWh Natural Gas: 758 thousand mWh Hydroelectric: 270 thousand mWh Other Renewables: 95 thousand mWh

10 10. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Local and Regional Initiatives California –Assembly Bill 32 – the California Global Warming Solutions Act 25 % reduction in Greenhouse Gas (GHG) by 2020 –Senate Bill 1368 New long-term power supply contracts (with in- and out-of-state providers) from units with emissions no higher than combined cycle gas Regional Greenhouse Gas Initiative (RGGI) –10 Northeast & Mid-Atlantic states –Carbon Dioxide (CO2) Cap-and-Trade; Stabilize GHG emissions over ; 10% reduction by 2019 Midwestern Regional Greenhouse Reduction Accord –6 States and 1 Canadian Province as signatories + 3 states as observers –Agree to long-term 60-80% reduction target via cap-and-trade

11 11. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Renewable Portfolio Standards (RPS) RPS in 27 States; 25 Mandatory RPS applies to Public Power in 9 states: CO, MD, NC, NJ, RI, TX, VT, WA, & WI

12 12. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. The 110 th Congress Currently Pending Bills –Lieberman-Warner (S.2191) –Lieberman-McCain (S.280) –Murkowski (S. 298) –Bingaman-Spector (S. 1766) –Waxman-Allen (H.R. 1590) –Kerry-Snowe (S.485) –Oliver Gilchrist (H.R.620) –Udall-Petri (H.R. 509) –Feinstein-Carper(S.317) –Sanders-Boxer (S.309) –Alexander-Lieberman (S. 1168) Others undoubtedly will follow Bill Highlights –Mandatory Reductions –Cap & Trade of Allowances Market Driven Price Depends on –Structure and timeline for implementation –Number and allocation of allowances –Whether offsets will be allowed –Limitations of technology Legislative outlook: after November 2008

13 13. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Dead or Dying Coal Projects On Life Support –Seminole Electric Cooperatives Seminole Generating Station Unit 3 Last Rites: –TXU pulls plug on eight of 11 coal units planned for Texas –Taylor Energy Center -- JEA, Tallahassee, Reedy Creek, and Florida Municipal Power Agency –OUC cancels coal gasification portion of project with the US Dept. of Energy –Sunflower Powers Holcomb, KS unit – Tri-State and Golden Spread

14 14. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Current and Continuous Efforts to Reduce Carbon Efficiency, Conservation, Demand Side Management (DSM) –Demand reduction –Load Management Peak shifting, shaving, or shaping Eliminate need for nth plant or optimize electricity dispatch Some substantial successes –Florescent bulbs, appliance efficiency, air conditioning cycling, green building, time-of-use rates, irrigation programs Limitations: Retail, not wholesale reductions; behavioral changes needed for substantive reductions Savings have plateaued

15 15. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Planning the Next Generation of Generation More efficient coal generation –Todays coal units Lower heat rates = less fuel needed Less fuel = less CO2 –Springfield (ILL) City Water, Light & Power settlement with Sierra Club Switching to less carbon intensive fuels –Great if its hydro, not so good if its natural gas or oil –GHG reduced but not eliminated –Substantial fixed costs to retro-fit or build new –Higher, more volatile commodity costs –May become more attractive if carbon tax or cap-and-trade allowance costs becomes onerous

16 16. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Nuclear Increasing interest driven by concerns about global warming and fossil fuel price and availability Major hurdles –Poor public perception –Long lead times for approval, siting and construction –Very expensive –Insufficient loan guarantees –Bottlenecks for components –Disposal of radioactive waste 2018+?

17 17. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Integrated Gasification Combined Cycle (IGCC) Great, but very expensive means of reducing SO2 and NOx Real value potential for carbon capture Without carbon capture and sequestration, not cost effective Requires subsidization

18 18. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Carbon Capture and Sequestration (CCS) Doesnt exist on a commercial scale yet Technological, environmental and legal hurdles –Requires underground formations for CO2 injection –Insufficient CO2 pipeline infrastructure –Rights of way, eminent domain, inter and intra state laws –Catastrophic leakage, long term liability and insurability –Substantial costs, require subsidy to aid in development –Parasitic energy costs

19 19. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Conclusion Certain units and utilities may become uneconomical Lack of means to reduce doesnt seem to be slowing the mandate momentum Currently assessing utilities exposure in light of operating and financial profiles, and focusing on managements efforts to evaluate remedial options Lack of exposure does not enhance credit quality Currently may limit upward rating potential –Full financial impact remains uncertain Full credit impact dependent on: –The ultimate legislation enacted –The remedial actions identified by management, and –The willingness and ability to pass costs onto ratepayers and maintain bondholder security

20 20. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Incentives For Renewable Energy Clean Renewable Energy Bonds (CREBS) Production Tax Credit Renewable Energy Production Incentive (REPI)

21 21. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Clean Renewable Energy Bonds Incentive to invest in renewable energy generation. Generate a tax credit to be claimed against federal income taxes in lieu of interest. Public power equivalent of Production Tax Credit. Program oversubscribed. Renewed by Congress on Short-term basis.

22 22. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Renewable Energy Production Incentive Before CREBS, REPI was primary renewable energy subsidy for public power. Provides annual incentive payments (now 1.8 cents per kWh) for production of eligible renewable resources. Incentive payments for first 10 years of operation. Requires Congressional appropriation of funds, causing funding shortfalls.

23 23. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. New England New England States are leaders in the Environmental Movement (RPS, Reggie). Maine, #1 state in Non-Hydro Renewable Energy Geothermal, Solar: Limited to Small Applications Biomass: Wood, Solid Waste, Livestock waste. Solid Potential Transmission and Size make Distributed Generation suitable Wind, despite difficulties, has great potential (On and Off shore)

24 24. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Obstacles to Wind Environmental Impact Study Bats and Birds Transmission Concerns NIMBY Local Permitting Eyesore or tourist attraction?

25 25. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Avian and Bat Impact Bird and Bat deaths caused by collisions with wind turbines. Mortality of different species are associated with different project attributes. Raptors at higher risk than songbirds. Migration. Site assessments can reduce impact on birds and bats.

26 26. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Transmission and Dispatch Transmission access is major barrier to wind energy development. Little investment in transmission lines over past 20 years. Development of wind power project takes as little as one year, but building new transmission lines takes much longer. Critical Congestion Areas: U.S. DOE designation of southern California and Mid-Atlantic.

27 27. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Project Siting The Optimal Site High wind speeds Timing of wind matches needs of load Near Transmission Infrastructure Not on migration path Source: NREL

28 28. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Project Financings – Key factors Contract StructurePenalties, Liquidated Damages Legal What is pledged? RegulatoryLocal, State, Federal CounterpartyContractors, Off-takers Construction Schedule, Geographical hurdles TechnologyEvolution, and risk OperationsWind issues, Equipment Competitive ExposureRegional pricing FinancialDebt Service Coverage

29 29. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. System Financing Reduces Risk Pledge of all system revenues Parity with other generation, transmission, and distribution debt Wind project scale is minimal compared to total operations of the utility

30 30. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Rated Wind Projects U.S. Energy Northwest, WA, 9 Canyon Wind (Phase I, II, III)A-/Stable ** FPL Energy American Wind LLCBBB/Stable FPL National Wind LLCBBB-/Stable FPL Energy National Wind Portfolio LLCBB-/Stable FPL Wind Funding LLC (Calif, New Mexico)BB/Stable Europe Max Two Ltd. (Breeze One)BBB-/Negative CRC Breeze Finance S.A. (Breeze Two)BBB/Stable Breeze Finance S.A. (Breeze Three)BBB/Stable Alte Liebe 1 Ltd.BBB-/Stable ** rating based on 10 public utilities system-wide pledge

31 Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Copyright (c) 2006 Standard & Poors, a division of The McGraw-Hill Companies, Inc. All rights reserved. RenewableEnergyStatistics

32 32. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. U.S. Renewable Energy CapacityGeothermal Solar Wind Wood/Wood Waste Other Biomass MSW/Landfill Gas Source: U.S. DOE EIA, August 2005 YearYear Installed Capacity, MW ,00010, U.S. Renewable Energy Capacity

33 33. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. U.S. Wind Resource Potential

34 34. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Current Wind Power Capacity

35 35. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Economics of Power Production Cost of Power from Competing Technologies ($/MWh) Pulverized Coal Natural Gas Combined Cycle IGCC Eastern IGCC PRBNuclearSolarBiomassWind Plant Capital Cost Plant Fuel Cost Plant Operations and Maintenance Cost of Power Cost of Power with Carbon Capture & Sequestration IGCC - Integrated gasification combined cycle, MWh - Megawatt-hour, PRB - Powder River Basin

36 36. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors COE (¢/kWh [constant 2000 $]) Low wind speed sites High wind speed sites New Bulk Power Competitive Price Band 2006: New Wind Depreciated Coal Depreciated Wind Natural Gas (fuel only) Wind Cost of Energy Source: NREL

37 37. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Visual Impact

38 38. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Offshore Projects 900 GW potential wind energy capacity Near U.S. Population Centers Stronger, Smoother Wind High cost for installation, O&M Need for continued technology advancements

39 39. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Who is Invested in Wind? 16,100 MW total U.S. wind power capacity in 2007.

40 40. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Public Power Invested in Wind

41 41. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Analytic services and products provided by Standard & Poors are the result of separate activities designed to preserve the independence and objectivity of each analytic process. Standard & Poors has established policies and procedures to maintain the confidentiality of non-public information received during each analytic process.


Download ppt "Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poors. Copyright (c) 2006 Standard."

Similar presentations


Ads by Google