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Board of Directors MeetingSeptember 27, 2018
2019 proposed budgetwork session
September 27, 2018
Agenda
• Budget • Schedule• Trends• Process• Budget document• 2019 overview
• Capital 5-year forecast
September
• Board work session
October
• Updates and budget discussion•Model prices and resource updates (JDA, Silver Sage wind sale)
•Load forecast
•Wheeling and ancillary services rate adjustments
•Capital investments & depreciation (Windy Gap firming project, HQ campus)
•Financing update & removal of interest during construction
•Other changes (medical, Craig, etc.)
• Public hearing
December
• Board adoption• File with the state of
Colorado
Budget schedule
2019 Proposed Budget
Trends
• Low municipal load growth – revenue impact• Lower surplus sales market – lower revenue supplement• Infrastructure advancements – increased capital requirements• Resource diversification – renewable additions• Increased customer solutions and products – energy efficiency,
demand response, electric vehicles, smart thermostats• Expanded communications and community outreach – trusted
energy partner• Focus on managing controllable expenses
Budget process
2019 BudgetProduction cost
model
O&M expenses
Project planning Review and refinement
Strategic initiatives and core operations
activities
Reporting improvements
2019 budget process included enhancements to:
1. budget document 2. overall internal process2019 Proposed Budget
Budget document
2019 Proposed Budget
2019 budget summary
• Three pillars• Strategic initiatives• Core operations• List of activities for each area
Financial review and budget schedules
• Summary of financial results• Consolidated budget schedules• Brief descriptions of revenues, operating
expenses, capital additions and debt expenditures
• Comparison schedules• Capital project descriptions and project
amounts
Budget process
• Budget development• Budget contingency• Management review• Budget document• Board review and adoption• Budget schedule
Financial governance
• Framework for financial activities and budget development
Strategic initiatives
27%
Core operations
73%
2019 Proposed Budget
2019 budget focus
4 initiatives1) Baseload and
peaking generation, transmission
2) PPAs for existing renewable resources & hydropower
Core operations: The primary area or activity that a company was founded on or focuses on in its business operations. Many market leaders aim to maintain a strong position in their core business areas, but they usually remain open to developing new areas of activity as perceived business opportunities arise.
Core pillars
1. System reliability 2. Environmental responsibility
3. Financial sustainability
Operating expenses & capital additions: $232.1 million
Strategic initiatives activities 27% of operating and capital: $232.1M
2019 Proposed Budget
Enhanced customer experience, $11.1 million, 5%• Energy efficiency business & consumer product expansion• Distributed energy resources – electric vehicles & smart thermostats• Demand response continuation• Wholesale rate redesign – implementation 2020
Communications and community outreach, $1.6 million, 1%• Public engagement• Effective communications – electronic tools, public & stakeholder materials, outreach, internal
communications, and employee activities & recognition
Resource diversification and alignment, $2.5 million, 1%• Resource planning – IRP• Renewable generation – development of 150 MW wind and 20 MW solar projects• Energy market – continue to pursue broader market
Infrastructure advancement and technology development, $46.6 million, 20%• Windy Gap firming project – increase water resource reliability• Headquarters campus – meet growing and changing needs of workforce, technologies and facilities• Physical security, cyber security, fiber and transmission projects
1
2
3
4
Rawhide Energy Station• Bottom ash conveying system and containment project final costs (proactive environmental
compliance)• Monofill upgrades (proactive environmental compliance)• Protective relays• Grading and drainage projects• Rotary car dumper variable frequency drives• Operational flexibility testing
Craig Station• Craig Units 1 and 2 scheduled maintenance outages
Transmission• SONET equipment upgrade• Oil breaker replacements• Generator step up transformer project planning• CIP requirements
Other expenses• Medical expenses• 6 new positions• IT investments (engineering & help desk)• Centralized fleet management program• Organic contract and power supply agreements renewals
Core operations activities73% of operating and capital: $232.1M
2019 Proposed Budget
Drivers of change 2018 budget to 2019 budget
2019 budgetDSM expansion
Craig Units 1 & 2 outages
Medical increase, new positions
Ongoing operations & maintenance
(IRP & IT)Capital
investments
Debt financing, higher cash
balances & interest rates
Surplus sales energy increase
2% Tariff 1 rate increase, muni load
reduction
2019 Proposed Budget
2018 2019Budget results budget budget
Total revenues ($ millions) 223.5$ 226.2$ 1.2%
Total expenditures ($ millions) 266.3$ 250.7$ (5.9%)
Board contingency ($ millions) 23.0$ 23.0$ 0.0%
Increase (decrease)
Financial results
* Contingency transfer required for 2018 capital additions. Amount to be determined later in the year.
*
2019 Proposed Budget
Target 2018 2019minimums budget budget
Net income ($ millions) 3% of projected operating expenses 22.6$ 21.6$ (4.4%)
Fixed obligation charge coverage ratio 1.50x 2.48x 2.60x 4.8%
Debt ratio < 50% 38% 34% (10.5%)
Unrestricted days cash on hand 200 268 375 39.9%
Increase (decrease)Strategic financial plan indicators
$23 million contingency
Allowable under state budget law
and reduces need for amendments
Unforeseen expenses
(forced outages, gas usage, changes in capital
additions, business opportunities, etc.)
Requires board approval prior
to use
No impact on rates in budget
Based on approximately
10% of operating expenses and
capital additions
Budget contingency (reserved to the board)
2019 Proposed Budget
Revenues and expenditures
Expenditures in excess of revenues: $24.5M2019 Proposed Budget
$207 $216 $224 $227 $226
-
50
100
150
200
250
300
2016 actual 2017 actual 2018 budget 2018 estimate 2019 budget
Operating expenses Debt expenses Capital additions Revenues
$ millions
Owner communities
sales87%
Sales for resale and wheeling
11%
Interest and other income
2%
Variance
Owner communities ($0.9M)
Sales for resale $2.2M
Interest & other $1.3M
2019 revenues
$226.2 million | Variance from 2018 budget: $2.6M
• Loads developed on 10-year load forecast and energy changes from EE
• 2% Tariff 1 rate increase• Energy deliveries decrease 2.3%• Billing demand decrease 2%• Tariff 7 no rate change
Owner communities
sales
• Energy and prices – hourly model
• 2019 variance due to reduced owner communities’ loads
Sales for resale
• Interest income and other miscellaneous revenue
• 2019 variance due to higher projected interest rates and cash balances, no fiber revenues
Interest & other income
2019 Proposed Budget
Operating expenses
71%
Capital additions
22%
Debt expense
7%
2019 expendituresVariance
Operating $5.8M
Capital ($19.2M)
Debt ($2.2M)
$250.7 million | Variance from 2018 budget: ($15.6M)
Operating expenses• Long-term contracts• Other purchases (price/qty) – hourly model
Purchased power
• Generation – hourly model• Prices based on long-term contractsFuel
• O&M – Rawhide, Craig, CTs, power ops• Planned maintenance outagesProduction
• O&M – lines, substations, SCADA, fiber, telecomTransmission
• Support groups• O&M – HQ facilities
Administrative & general
• Energy efficiency• Distributed energy resources• Demand response
Demand side management
2019 Proposed Budget
Salaries and benefits
Salaries
• Regular wages increase $1.1M• Six new positions $0.7M
• 3.1% salary adjustment $0.9M
• Step increases/other $0.3M
• Other adjustments ($0.8M)
• Overtime decrease $0.7M• Outage in 2018
Benefits
• Increase of $2.5M from:• Medical/dental $2.2M
• Defined benefit $0.1M
• Defined contribution $0.1M
New positions
• Staff attorney *
• Accounting supervisor
• IT desktop support supervisor
• IT systems engineer
• System planning engineer
• Facilities electrician
2019 Proposed Budget
* Accelerated to 2018 by board concurrence.
$232.1 million | Variance from 2018 budget: ($13.4M) 2019 Proposed Budget
Operating expenses & capital additions
Generation28%
Fuel21%Facilities
15%
Contract renewables and
hydropower13%
Transmission9%
General business9%
DSM4%
Market purchases
1%
-10
0
10
20
30
40
50
Fuel Purchasedpower
Salaries andbenefits
O&M Outages -Rawhide
Outageaccrual
Craig Units 1& 2
DSM Wheeling
2018 budget 2019 budget
$ millions
Operating expenses
$177.7 million | Variance from 2018 budget: $5.8M
Prices (RH & natural gas) No
replacement power for outages (2018 RH outage)
Medical, six positions, salary adj. 3.1%, partially offset by 2018 outage OT
EE program expansion, electric vehicles, smart thermostats2018 outage, 2019
screen outage
IRP, IT investments, cyber security insurance
CU 1 & 2 2019 outages
2019 Proposed Budget
Core generation and transmission expenses have been controlled through continued preventative and predictive maintenance strategies and proactive capital investments.
Strategic initiatives,
84%
Core operations,
16%
2019 Proposed Budget
2019 capital additions$54.3 million
Strategic projects:• Windy Gap firming project• HQ campus• CT controls• LED lighting• Circuit switchers• Revenue meters• Airflow spoilers• Solar interconnection• Hydrogen gas detectors• Trans line vault upgrades• Real time tools• Integrated tools for ops• Security – Loveland subs
Headquarters campus
54%
Windy Gap firming project
19%
Rawhide 13%
Transmission & substations
5%
General 4%
Craig Units 1 & 2 2%
Purchases 2%
Rawhide outage (final costs)
1%
2019 capital additions
$54.3 million | Variance from 2018 budget: $19.2 Excludes estimated 2018 capital carryovers of $2.6 million
Oil breakers, circuit switchers, relay upgrades, vault upgrades, revenue meters, airflow spoilers, solar interconnection
CTs controls upgrades, CTs protective relays, LED lighting, monofill upgrades, grading & drainage
Railcar moving equip, fire engine 12, vehicles
SONET equip, real time tools, IT
2019 Proposed Budget
Windy Gap firming project
$99.4
Rawhide $40.1
Headquarters campus
$34.4
Transmission and substations
$25.4
Craig Units 1 & 2 $16.1
Rawhide outages $8.6
General $5.1
Communications $1.2
Capital 5-year forecastYears 2019-2023$230.3 million
2019 Proposed BudgetIncludes estimated 2018 capital carryovers of $2.6 million
0
5
10
15
20
25
30
35
40
45
2019 2020 2021 2022 2023
$ millions
Capital 5-year forecastProduction additions = $164.2 million
Rotary car dumper to VFD, $2.5M
Controls conversion – CTs, $4.8M
Soldier Canyon 10” ductile replacement, $13.6M
Monofill upgrade, $6.6M
Rawhide outage, $6.9M
Chilled water system, $0.4M
CAT equipment replacements, $1.6M
Windy Gap firming project, 2001-2023, $109M
Craig Units 1 and 2 projects, $16.1M
Protective relays –CTs (outage), $1.5M
Grading & drainage, $2.1M
2019 Proposed Budget
Fire protection system upgrades – CTs, $1.2M
Dust collection system replacement – crusher building, $1.4M
Amounts represent total project cost. May have had costs prior to 2019 or extend past 2023.
0
5
10
15
20
25
30
35
40
45
2019 2020 2021 2022 2023
$ millions
Capital 5-year forecastTransmission additions = $25.4 million
Airflow spoilers, $1.8M
GSU transformer replacements, $8.5M
Aux and station service transformers, breaker, metering unit –Rawhide, 2021-2024 $7.2M
Fort Collins NE Substation, 2022-2024, $3.0M net of reimbursement
Substation & Transmission – Loveland Southeast, 2020-2026, $18.4M
Walls – Loveland Substations, $3.2M
Transmission line vault upgrades, $0.9M
Circuit switchers, breakers, relays, $2.8M
Oil breaker replacements, $1.1M
Transformer T3 replacement – Timberline Sub, $3.1M
Transformer T1 & switchgear – Horseshoe Sub, $1.3M
Wind Bay Rawhide Sub, $1.7M
2019 Proposed BudgetAmounts represent total project cost. May have had costs prior to 2019 or extend past 2023.
Transformer replacement – Valley Sub, $0.7M, net of reimbursement
Switchgear & transformer replacement –Loveland East, $1.2M
Transformer T1 & switchgear replacement – Airport Sub, $1.1M
100% reimbursable projects
Revenue meter replacements, $0.6M
Solar interconnection – RH Sub, $0.3M
0
5
10
15
20
25
30
35
40
45
2019 2020 2021 2022 2023
$ millions
Capital 5-year forecastGeneral additions = $40.7 million General additions include:
• Facilities upgrades• Computer upgrades• Communication equipment• Vehicles
2019 Proposed Budget
Headquarters campus, 2016-2020, $51.6M
Financial info & payroll system
replacement, $0.6M
IT software and equipment, $1.6M
Vehicle replacements, $1.5M
SONET communication system replacement, $1.2M
SCADA equipment, $0.4M
Security – Loveland substations walls, $0.3M, net of 50% reimbursement
Amounts represent total project cost. May have had costs prior to 2019 or extend past 2023.
Real time tools, $0.6M
2019 budget focusOperating and capital: $232.1M
2019 Proposed Budget
Strategic initiatives, 27%Enhanced customer experience $11.1 million, 5%• Energy efficiency business & consumer product expansion• Distributed energy resources – electric vehicles & smart
thermostats• Demand response continuation• Wholesale rate redesign – implementation 2020
Communications and community outreach$1.6 million, 1%• Public engagement• Effective communications – electronic tools, public & stakeholder
materials, outreach, internal communications & employee activities & recognition
Resource diversification and alignment$2.5 million, 1%• Resource planning – IRP • Renewable generation – development of 150 MW wind and 20
MW solar projects• Energy market – continue to pursue broader market
Infrastructure advancement and technology development$46.6 million, 20%• Windy Gap firming project – increase water resource reliability• Headquarters campus – meet growing and changing needs of
workforce, technologies and facilities• Physical security, cyber security, fiber and transmission projects
Core operations, 73%Rawhide Energy Station• Bottom ash conveying system and containment
project final costs (proactive environmental compliance)
• Monofill upgrades (proactive environmental compliance)
• Protective relays• Grading and drainage projects• Rotary car dumper variable frequency drives• Operational flexibility testing
Craig Station• Craig Units 1 and 2 scheduled maintenance outages
Transmission• SONET equipment upgrade• Oil breaker replacements• Generator step up transformer project planning• CIP requirements
Other expenses• Medical expenses• 6 new positions• IT investments (engineering & help desk)• Centralized fleet management program• Organic contract and power supply agreements
renewals
Key variances2018 budget to 2019 budget
2019 Proposed BudgetPositioned to meet Platte River’s strategic direction.
2019 budget $273.7M
Craig outage•$2.1M•Maintenance & capital
Medical expenses increase•$2.2M
DSM expansion•$1.3M increase•$10M total
6 new positions•$0.7M
Ongoing operations & maintenance•$0.7M increase•IRP & IT
Capital investments•$19.2M overall decrease•$53.8M w/o Craig outage
Debt financing$100M financed
Interest income$1.5M increase
Surplus sales energy & wheeling•$2.2M increase
2% Tariff 1 rate increase$3.9M increase
Owner communities load reduction•$4.8M decrease
•
•
•
Questions
Budget details for your information (not presented)
Small differences may exist in the following tables compared to the budget document due to rounding.
Owner communities sales
646Budget659
Budget
659 Actual
2019 Proposed Budget
2018 2019budget budget
Owner communities revenues Tariff 1 average rate increase 2%, load reduction estimate 2.3%Demand 58.5$ 58.2$ (0.3)$
Energy 135.9 135.3 (0.6)
Renewable energy premium 2.6 2.6 - Tariff 7 $26/MWh, no rate change
Total 197.0$ 196.1$ (0.9)$
($ millions) Increase (decrease) Explanation
659 661 658690
665
300
400
500
600
700
2016 actual 2017 actual 2018 budget 2018 estimate 2019 budget
MW Peak Load
$20.1 $23.7 $23.5
$26.2 $25.7
0
5
10
15
20
25
30
2016 actual 2017 actual 2018 budget 2018 estimate 2019 budgetShort-term sales Wheeling revenues
$ millions
Sales for resale and wheeling
2019 Proposed Budget
2018 2019budget budget
Sales for resale and wheeling
Short-term 18.9$ 20.3$ 1.4$ Energy increase 8% due to lower generation (owner communities load decrease), price decrease 0.5% due to market data
Wheeling 4.6 5.4 0.8 Increase in third party customer loads and Tariff 4 rate increase
Total 23.5$ 25.7$ 2.2$
($ millions) Increase (decrease) Explanation
$21.35 $21.66$23.12 $23.38 $23.00
0
5
10
15
20
25
30
2016 actual 2017 actual 2018 budget 2018 estimate 2019 budget
$/MWh Average short-term wholesale price
Sales for resale prices
$26.10 budget
$23.38 budget
$24.05YTD
2018 *
2019 Proposed Budget
Excludes sales from the combustion turbines and JDA transactions.
* Pricing was strong during the summer of 2018 due to higher temperatures and high natural gas prices in California leading to higher than anticipated prices in the region.
Other revenues
2019 Proposed Budget
$1.9 $2.4
$3.1 $2.8
$4.4
0
1
2
3
4
5
2016 actual 2017 actual 2018 budget 2018 estimate 2019 budget
Interest income Other income
$ millions
2018 2019budget budget
Other revenues
Interest income 2.8$ 4.3$ 1.5$ Projected increase in interest rates and cash balances
Other income 0.3 0.1 (0.2) Includes miscellaneous leases and Trapper Mine refund; no fiber revenue due to transfer of fiber assets
Total 3.1$ 4.4$ 1.3$
($ millions) Increase (decrease) Explanation
$(2.1) $(2.1)
$33.3 $35.4 $34.5 $36.6 $34.2
-5
5
15
25
35
45
2016 actual 2017 actual 2018 budget 2018 estimate 2019 budgetWestern Other purchases Wind & REC Solar Solar - owner communities Outage accrual
$ millions
net net
Purchased power
2019 Proposed Budget
2018 2019budget budget
Purchased powerWestern Area Power Admin 16.9$ 16.9$ -$
Other purchases 5.4 2.3 (3.1) Market: 2018 included replacement power for Rawhide Unit 1 maintenance outage. 2019 also lower reserves.
Wind and RECs 10.5 10.7 0.2 Contract rate escalations
Solar 3.6 3.5 (0.1) Contract, slight decrease in generationSolar - owner communities programs 0.2 0.3 0.1 Contract
Outage accrual (2.1) 0.5 2.6 2018 Rawhide Unit 1 outage accrual reversal 100% of estimated expenses. 2019 accrual for 2021 outage.
Total 34.5$ 34.2$ (0.3)$
($ millions) Increase (decrease) Explanation
$46.4 $47.7 $49.7 $47.5 $49.1
0
10
20
30
40
50
60
2016 actual 2017 actual 2018 budget 2018 estimate 2019 budgetRawhide Unit 1 Craig Units 1&2 Combustion turbines
$ millions
Fuel expense
2019 Proposed Budget
2018 2019budget budget
Fuel expense
Rawhide Unit 1 29.3$ 31.9$ 2.6$ Capacity factor of 95.5% due to generation increase of 13% (no outage), average delivered coal cost decrease of 3% (price based on market)
Craig Units 1 and 2 20.1 16.4 (3.7) Capacity factor of 57.6% due to generation decrease of 20% (2019 both units have outages) partially offset by an average delivered coal cost increase of 2%
Combustion turbines 0.3 0.8 0.5 Generation increase 297% (model projections & more in line with actual) partially offset by a natural gas price decrease of 23%
Total 49.7$ 49.1$ (0.6)$
Increase (decrease) Explanation($ millions)
0
1
2
3
4
5
2016 actual 2017 actual 2018 budget 2018 estimate 2019 budget
Rawhide Unit 1 Craig Units 1&2 Combustion turbines
$ per MBtu
Fuel expense
2019 $/MBtuRawhide $1.33Craig $2.00CTs $2.48
$3.31/MBtuYTD 2018
2019 Proposed Budget
Fuel unit cost per million Btu
$(7.0) $(7.0)
$44.6 $49.6 $45.2 $44.9 $47.4
-10
0
10
20
30
40
50
60
2016 actual 2017 actual 2018 budget 2018 estimate 2019 budgetRawhide Unit 1 Rawhide Unit 1 outage Outage accrualCraig Units 1&2 Combustion turbines Power operations
$ millions
net net
Production expenses
2019 Proposed Budget
2018 2019budget budget
Production expenses
Rawhide 31.8$ 32.1$ 0.3$ Increases in personnel expenses (medical), chemicals (off outage), screen outage, offset by decreases in routine expenses and closure of ash ponds
Craig Units 1 and 2 9.6 11.2 1.6 Both unit maintenance outages in 2019 vs. no maintenance outages in 2018
Combustion turbines 1.3 1.6 0.3 Personnel expenses (medical) and tuning and machine testing after controls system upgrade
Power operations 2.5 2.5 -
Total 45.2$ 47.4$ 2.2$
($ millions) Increase (decrease)
Explanation
$12.8 $14.2
$17.2 $16.2 $17.0
02468
101214161820
2016 actual 2017 actual 2018 budget 2018 estimate 2019 budgetTransmission O&M Wheeling expense
$ millions
Transmission expenses New position:Engineering
2019 Proposed Budget
2018 2019budget budget
Transmission expenses
Transmission 12.8$ 12.6$ (0.2)$ Decrease in Craig transmission line maintenance and the NW water line repair project, increases in personnel expenses (medical). Personnel expenses fluctuate with capital projects.
Wheeling 4.4 4.4 -
Total 17.2$ 17.0$ (0.2)$
($ millions) Increase (decrease) Explanation
$13.4$15.4 $16.7 $16.8
$20.0
0
5
10
15
20
25
2016 actual 2017 actual 2018 budget 2018 estimate 2019 budget
A&G Operations A&G Maintenance
$ millions
A&G expensesNew positions in areas of:• Information technology (2)• General counsel• Accounting• Facilities
2019 Proposed Budget
2018 2019budget budget
Administrative and general
Operations 14.8$ 17.4$ 2.6$ Personnel expenses for new positions and increased medical expenses. IRP contracted services.
Maintenance 1.9 2.6 0.7 IT investments and cyber security insurance
Total 16.7$ 20.0$ 3.3$
($ millions) Increase (decrease) Explanation
Demand side management
2019 Proposed Budget
2018 2019budget budget
Demand side managementPersonnel expenses 0.8$ 0.9$ 0.1$ Salary adjustments and increase in medical expenses
Energy efficiency 7.3 8.8 1.5 Expansion of business and consumer product offerings
Distributed energy resources 0.6 0.3 (0.3) Decrease in demand response, increases in electric vehicles and smart thermostat programs
Total 8.7$ 10.0$ 1.3$
($ millions) Increase (decrease) Explanation
$4.0
$6.1
$8.7 $8.6 $10.0
0
2
4
6
8
10
12
2016 actual 2017 actual 2018 budget 2018 estimate 2019 budgetEnergy efficiency Personnel expenses Distributed energy resources
$ millions
$38.4 $38.3
$73.5 $72.1
$54.3
0
15
30
45
60
75
90
2016 actual 2017 actual 2018 budget 2018 estimate 2019 budgetProduction Transmission General
$ millions
Capital additions
2019 Proposed Budget
2018 2019budget budget
Capital additions
Production 45.2$ 19.9$ (25.3)$ Windy Gap firming project, Rawhide CT controls upgrades, monofill updgrades, protective relays, grading & drainage, chilled water system upgrade, finalize outage projects, Craig Unit 1 and 2 projects (outage)
Transmission 5.8 2.5 (3.3) Circuit switchers, revenue meter replacements, airflow spoilers, solar interconnection, oil breaker replacements
General 22.5 31.9 9.4 Headquarters campus, SONET equipment replacement, IT projects, real time tools, vehicle and equipment replacements
Total 73.5$ 54.3$ (19.2)$
($ millions) Increase (decrease) Projects
$29.6 $27.9 $23.1
$20.8 $20.8
0
5
10
15
20
25
30
35
2016 actual 2017 actual 2018 budget 2018 estimate 2019 budgetPrincipal Interest
$ millions
Debt service expenditures
2019 Proposed Budget
2018 2019budget budget
Debt service expenditures Series KK debt issuance planned for $100 million to fund the Windy Gap firming and the headquarters campus projects
Principal 12.2$ 10.4$ (1.8)$
Interest 10.9 10.4 (0.5)
Allowance for funds used during construction (2.3) (2.2) 0.1 Interest on bond funds allocated to capital assets
Total 20.8$ 18.6$ (2.2)$ Based on scheduled debt service payments, Series HH paid off, and Series KK (new) included for $2.4M
($ millions) Increase (decrease) Explanation
Board of Directors MeetingSeptember 27, 2018
Update on the 75 MW wind option
September 27, 2018
• Platte River – Roundhouse Wind Power Purchase Agreement (PPA) includes an option to purchase up to an additional 75 MW
• Option must be exercised prior to December 31, 2018• Resource Planning has been evaluating the risks
associated with adding additional wind• Operations has been analyzing various options to
accommodate additional intermittent resources on the Platte River system
Background
Base assumptions:• Carbon costs start at about $4/ton in 2025, escalating to about
$16/ton in 2035• Rawhide operates with a 140 MW minimum capacity• Craig 2 retires in 12/29
Many different price / volatility cases were evaluated to develop range for option value:• Various market depth amounts• SPP-based market price shapes / volatility • SPP-based market price shapes / volatility (with curtailments)• 2018 market prices escalating at two percent • Carbon / no carbon (Craig 2 retires earlier or later)
Resource planning analysis
Key assumptions• Coal plants at minimum output levels• Craig 2 retires in 12/29• No long-term forward energy sales
Key risk considerations• Forward sales amounts and prices less predictable as surplus
energy is driven by high wind output• Cycling is expected to add another $1-2/MWh in maintenance
costs (Burns McDonnell study underway)• Incremental wind increases required sales
Resource planning - risk analysis
Resource planning - risk analysis
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
15 20 25 30 35 40 45 50 55 60 65 70 75
New MW of wind
Amount of wind that must be sold to market
2022
2026Value of wind being sold is dependent on actual market prices
Potential operational improvements
POTENTIAL IMPROVEMENT STATUSSell 12 MW of Silver Sage wind to Black Hills Power and replace with a purchase of a similar amount of additional Roundhouse wind
Complete
Sell up to 50 MW of Craig Output for five years, starting in 2019
Evaluating responses to our Reverse Request for Proposals
Review options to the reduce Rawhide operating minimum from 140 MW to 90 MW
Planning to perform testing at lower minimums in April 2019
Develop options for future renewable resources
Submitted interconnection requests for 150 MW of injection of solar at Rawhide and Ault substations
Discuss sales with potential buyers of Platte River’s surplus energy
Meetings 9/18 and 9/25
• All reasonable possibilities are being considered in an attempt to accommodate more wind
• Unless forward sales can be accomplished, a significant share of the incremental wind will need to be sold into market
• During times of high wind output, market prices could be extremely low or potentially no opportunity to sell output
• Must ensure additional wind meets Platte River’s three pillars i. system reliabilityii. environmental responsibility iii. financial sustainability
Key takeaways
Schedule
SCHEDULESeptember 2018 Complete the financial analysisNovember 2018 Evaluate and complete, if appropriate, the
sales of surplus energy for the years 2020 through 2025
December 2018 Develop a recommendation for Platte River’s Board of Directors meeting
December 2018 Send Enyo / NextEra a notice specifying the additional amount of wind that Platte River will purchase
Questions
Board of Directors MeetingSeptember 27, 2018
2018 Rawhide outageSeptember 27, 2018
Thank you
Everything starts with safety
Our goal is for no one to get hurt during the outage. This is for all Platte River employees and contractors.
• There were no injuries during the 2015 outage.• There was one first aid and one near miss incident.• This is an achievable goal but it takes a lot of planning.
Thank you
Schedule and budget
Outage schedule • Off-line date: 9/24/18• On-line date: 11/12/18• Seven weeks: critical path - generator and bottom ash
26%
66%
8%
Outage budget allocation
Regulatory compliance Reliability Efficiency
Thank you
Major projects
• Generator • Bottom ash system• Air preheater baskets• Feedwater heater• Large number of Operations and Maintenance (O&M) work orders
Thank you
Generator
• The generator has two internal shorted turns that were initially discovered in 2000. Shorted turns occur when there is a breakdown in the insulation between the turns on the rotor.
• Pole imbalance testing of the shorted turns has shown that this issue has worsened each time that they have been inspected and tested. Tests were conducted in 2005, 2008 and 2015.
• The turbine manufacturer recommends addressing this issue, as the tested value increases towards ten percent. A third party consulted states that, from their experience, when the shorted turns increase to over five percent, the rotor can begin to experience problems.
Thank you
Generator
0%
2%
4%
6%
8%
10%
12%
14%
2005 2008 2012 2015 2018 2021
Pole imbalance trends
2005-2008; .87%/yr increase
2008-2015; .24%/yr increase
2005-2015 Avg; .20%/yr increase
Thank you
Generator
• The original generator rotor will be removed and replaced with the new rotor.
• All stator windings will be removed an replaced with new components.
• The recent iso-phase repairs will also be inspected.• Relay testing, as required for NERC compliance, will be performed.
Thank you
Bottom ash system
• The original bottom ash system will be removed and replaced with the new conveyor system.
• This project is being done to comply with Coal Combustion Residuals (CCR) regulation.
• The bottom ash will be conveyed out of the boiler building and trucked to the monofill.
Thank you
Bottom ash system
Thank you
Air preheater
• The APH baskets and seals will be replaced during the outage.• This will improve the thermal performance, returning it back to
its original specifications
Thank you
Feedwater heater
• The LP Feedwater heater 102 will be replaced during the outage.
Questions
Board of Directors MeetingSeptember 27, 2018
August operational results
Variance key: Favorable: >2% | Near budget: +/- 2% | Unfavorable: <-2%
Category August variance YTD variance
Municipal demand (6.8%) 2.0%
Municipal energy (3.7%) (0.9%)
Baseload generation (13.5%) (10.4%)
Wind generation (7.5%) (4.3%)
Solar generation 7.8% (0.7%)
Surplus sales volume 33.0% 1.2%
Surplus Sales Price 69.0% 14.7%
Dispatch cost (1.7%) (1.1%)
Board of Directors MeetingSeptember 27, 2018
CategoryAugust
Variance from Budget($ in millions)
Year to DateVariance from Budget
($ in millions)
Net Income $1.5 $9.0
Debt Coverage 1.0x .58x
Revenues $1.3 $3.1
Operating Expenses ($0.4) $4.4
Capital Additions $1.5 $16.7
Financial summary
> 2% Favorable | 2% to -2% At or Near Budget | < -2% Unfavorable
Board of Directors MeetingSeptember 27, 2018
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