Download Template Notes - Financial Management Institute

Public/Private Partnerships:
Public Sector Management Workshop 2009
“Climate Change” in the Public Sector
Regina, Saskatchewan May 31 – June 2
Russ Hantho, Director Power Growth
TransCanada Corporation
TransCanada Corporation (TSX/NYSE: TRP)
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
2
Trends in the Power Industry
By 2020 Canada will have to…….
• Canadian and U.S. power
•Replace 8,000 MW of coal generation
capital stock needs
•Replace 11,500 MW of old (relatively clean) generation
replacing
•Attain adequate system reliability while doing this
•Meet demand growth of 30,000 MW by 2020
•Add more than 4,000 MW per year from now until 2020
•Plus inadequate transmission systems
•Plus export opportunities
• The opportunity to
participate in development,
and the mechanics of
participation, will vary by
region
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
• GHG policy may accelerate
the retirement of certain of
the capital stock
3
•Source: Cambridge Energy Research Associates.
GHG Regulations are changing the Power
business but not overnight…
…2008
2009
Traditional
2010
2011
2012
2013
Transition Period
2014
2015
2016…
Future
• No Emissions
Compliance Costs
• Freely Emit CO2
• Bridge the
• Self sustaining
• No R&D invested
in storage
• Enable implementation
of First Generation CCS
• No investment in
gasification/post
combustion capture
technology
• Projects with CCS
market price for
power pays for CCS
Caution
4
commercial
gap with subsidies
• Moving too fast will shock market
• Flow-through CCS costs will
cause consumer power prices to spike
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
Summary of P3 Models
Degree of Private Sector Risk
Privatization
Buy-Build-Operate
Build-Own-Operate
Build-Own-OperateTransfer
Build-Lease-OperateTransfer
Lease-Develop-Operate
Design-Build-Operate
Finance Only
Operation/Maintenance
Service/License
Design-Build
Crown Corporation/Agency
Government
Degree of Private Sector Involvement
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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
8
Belle Plaine, Saskatchewan
Western Grid Study – Alberta to Manitoba
• SaskPower, AESO,
Manitoba Hydro and Provincial
Governments
• Converter Stations: Calgary, Regina
and Winnipeg area
• HVDC technology – bi-directional
• Enables large scale generation
Wind, Gasification,
• 1050 km
Hydro, Nuclear
• Capital Cost: $3.0 B
9
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”
10
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
11
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)
Projects: Major Risks and Mitigations
Risk
• Development Costs
• Capital Costs
•
Materials
•
Labour
• Regulatory
•
GHG & pollution
•
Siting
• Fuel availability
• Counter-Party Credit
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Mitigation
• Staged study work
•
Pre-FEED
•
FEED
• Risk sharing
•
Counterparties
•
Governments
• Seek clarity on policy and
legislation
• Commitments and Timing
• Guarantees
Areas for Saskatchewan Government
Involvement
• Engage Federal government
Regulatory
• Risk sharing
•
• Advance regulatory policy and legislation
• Public Private Partnership (P3)
•
Repayable Loan Agreement
•
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Significant risk sharing mechanism for development costs
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
14
Thank you.
Russ Hantho, Director Power Growth
TransCanada Corporation