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October 26, 2012

Preliminary Results

Guam Power Authority

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Overview

• The next set of slides summarize the assumptions and information discussed earlier and present modeling results for various scenarios.

• Results presented are preliminary. Discussions today may impact final recommendations in our Integrated Resource Plan.

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2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Dem

and

(MW

)

FY

Baseline

EPA Delay

H&L

L&H

H&H

New resources are not available until 2018 so the EPA Delay forecast would actually bring in units earlier than other forecasts because they are available when capacity is needed.

Except for the BASELINE forecast, RESERVE MARGINS are impacted by the high loads and unavailablility of New Resources. GPA will need to improve unit availability in order to meet reliability stds.

RICE

MAC

T CO

MPL

IAN

CE D

UE EG

U/B

OIL

ER

MAC

T CO

MPL

IAN

CE D

UE

NAA

QS

COM

PLIA

NCE

DU

E

Demand Forecast and Timeline

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Base Case Assumptions

• Study Period is 30 years • Fuel Forecast is Base Case • Load Forecast is the Baseline forecast • Includes recently contracted and pending contract for

35 MW of Renewable Energy from 2011 bid • Assumes capital costs for life extensions on existing

units • Assumes capital costs for EPA compliance

requirements (based on assumptions mentioned earlier)

• No new resources, including renewables, or unit conversions are considered

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Base Case

• Scenario results will be compared against the Base Case present value utility costs (PV) = $6,595,392,500 over a 30 year study period

Reference No. 0 1 1A

Forecast Baseline Baseline Baseline

PV Utility Costs ($000) 5,694,951.00 6,001,839.00 6,595,392.50 Variance from Base Case (CAPEX A) BASE YEAR

CAPEX Yes Yes

AQCS No YES

Add New Resources NO NO

QGP & PGR Yes Yes

SWAC

Renewable Firming & Shaping Assumption

Geothermal

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LNG Scenario Retirements

Scenarios Retirements (Year) Scenarios Retirements (Year)

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None

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Marbo(2012),Dededo Diesel 1-4(2012),Dededo CT #1(2012),Dededo CT #2(2012),Yigo CT(2012),Macheche CT(2018)

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Marbo(2012),Dededo Diesel 1-4(2012)

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Marbo(2012),Dededo Diesel 1-4(2012),Cabras #1-2018,Cabras #2-2018,

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Marbo(2012),Dededo Diesel 1-4(2012),Dededo CT #1(2012),Dededo CT #2(2012)

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Marbo(2012),Dededo Diesel 1-4(2012),Tanguisson #1(2018),Tanguisson #2(2018),Cabras #1-2018,Cabras #2-2018,

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Marbo(2012),Dededo Diesel 1-4(2012),Dededo CT #1(2012),Dededo CT #2(2012),Yigo CT(2012)

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Marbo(2012),Dededo Diesel 1-4(2012),Tanguisson #1-2018,Tanguisson #2-2018,

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LNG Scenarios Overview

• Considers all LNG conversions as competitive options to lower overall costs

• Considers reserve margin requirements in determining unit retirement scenarios

• Does not include small modular reactor due to fuel use requirements for LNG

• Considers all renewable alternatives as competitive resources

• Considers life extension costs initially to determine which of existing units would convert and then applies EPA compliance costs for comparison to Base Case

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LNG Scenario Results

RANKING Scenario ForecastPV Utility

Costs ($000)

Variance from Base Case

($000)

0 1A Baseline 6,595,393 BASE CASE

7 2A Baseline 5,335,147 (1,260,246)

6 3A Baseline 5,307,366 (1,288,027)

5 4A Baseline 5,287,531 (1,307,862)

4 5A Baseline 5,281,111 (1,314,282)

1 6A Baseline 5,219,673 (1,375,720)

2 7A Baseline 5,235,783 (1,359,610)

3 8A Baseline 5,255,627 (1,339,766)

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Preliminary Rank 1 Result

Reference No. 1A 6 6A 6R-A (R40) 6RO-A (R40) 6ROS-A (R40)Forecast Baseline Baseline Baseline Baseline Baseline Baseline

PV Utility Costs ($000) 6,595,392.50 5,214,764.50 5,219,673.00 4,874,452.50 4,916,038.50 4,912,742.00 Variance from Base Case (CAPEX A) BASE CASE (1,375,719.50) (1,720,940.00) (1,679,354.00) (1,682,650.50)

CAPEX Yes Yes Yes Yes Yes YesAQCS YES No YES YES YES YES

Add New Resources NO Yes Yes Yes Yes YesQGP & PGR Yes Yes Yes Yes Yes Yes

SWAC No No No No YESRenewable Firming & Shaping Assumption Yes Yes NO NO NO

Geothermal Yes Yes Yes NO NO

Apply compliance requirements to units that don't convert or retire

Evaluates Firming/Shaping Assumption Impact

Considers Geothermal Feasibility still pending

Evaluates the impact of Sea Water Air Conditioning (SWAC), ~12MW equivalent

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Reference No.Forecast Baseline Baseline Baseline Baseline Baseline

PV Utility Costs ($000) 5,214,764.50 5,219,673.00 4,874,452.50 4,916,038.50 4,912,742.00 Variance from Base Case (CAPEX A) (1,375,719.50) (1,720,940.00) (1,679,354.00) (1,682,650.50)

CAPEX Yes Yes Yes Yes YesAQCS No YES YES YES YES

Add New Resources Yes Yes Yes Yes YesQGP & PGR Yes Yes Yes Yes Yes

SWAC No No No No YESRenewable Firming & Shaping Assumption Yes Yes NO NO NO

Geothermal Yes Yes Yes NO NO

STRATEGIST RESULTS for ALTERNATIVE SELECTIONS by Fiscal Year:

2017PV(2),WIND(1)

PV(2),WIND(1)

PV(2),WIND(1)

2018

Piti7 CC/LNG,New CC LNG (1),Cab3 LNG,Cab4 LNG,MEC8 LNG,MEC9 LNG

Piti7 CC/LNG,New CC LNG (1),Cab3 LNG,Cab4 LNG,MEC8 LNG,MEC9 LNG

Piti7 CC/LNG,New CC LNG (1),Cab3 LNG,Cab4 LNG,MEC8 LNG,MEC9 LNG

Piti7 CC/LNG,New CC LNG (1),Cab3 LNG,Cab4 LNG,MEC8 LNG,MEC9 LNG

Piti7 CC/LNG,New CC LNG (1),Cab3 LNG,Cab4 LNG,MEC8 LNG,MEC9 LNG

2019Geothermal Geothermal Geothermal

2020Tango1 LNG,Tango2 LNG

Tango1 LNG,Tango2 LNG

Tango1 LNG,Tango2 LNG

Tango1 LNG,Tango2 LNG

Tango1 LNG,Tango2 LNG

2035 WIND(1) WIND(1)

6 6A 6R-A (R40) 6RO-A (R40) 6ROS-A (R40)

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Results Discussions

• Reduces GPA’s overall generation capacity • Reduces overall costs

• Fixed costs: reduced capacity requires less fixed costs • Fuel costs: LNG vs. RFO fuel prices • Efficiency improvement: new combined cycle with better heat

rates also lowers fuel costs • Maintains diversification • Meets or near minimum of the LNG fuel use

requirements to cover cost of LNG import terminal and regasification infrastructure debt.

• Contributes to Renewable Portfolio Standards goals

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Additional Runs to be Explored

• Based on this scenario, GPA will look at further improving efficiencies for resources in the north by retrofitting the smaller combustion turbine plants with heat recovery steam generators to become combined cycle plants burning natural gas. • This requires firming of cost and operation assumptions

for these scenarios. • May require restricting other unit LNG conversions or

new resources for diversification and addressing EPA compliance requirements.

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Small Modular Reactor (SMR)

• Assumes earliest availability is 2022 • Assumes no LNG-fueled conversions or new

resources are modeled due to restrictions on fuel use requirements.

• Assumes capital costs for EPA compliance is required due to protracted timing of SMR availability.

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SMR Results

RANKING Scenario ForecastPV Utility

Costs ($000)

Variance from Base Case

($000)

0 1A Baseline 6,595,393 BASE CASE

8 10AQCS Baseline 5,639,968.50 (955,424.00)

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SMR Results Discussions

• SMR availability • Too far out from compliance requirements • Requires units to continue running on higher cost fuel to meet

reserve margin requirements through 2022/2023 but over the 30-year study period, is the lowest cost option.

• Licensing and siting approval is uncertain • This will impact considerations in compliance extensions and may

be too late to avoid penalties if SMR does not happen. • Waste and safety concerns would need to be addressed.

• Long-term considerations • SMR could be a viable alternative further out in about 20 or 30

years especially if GPA has not replaced units that were converted for LNG.

• GPA should continue to monitor and evaluate SMR as a potential resource in later years.

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Renewables

• 40 MW of renewables (without firming & shaping costs) coming in as early as 2017 reduce present value costs. • The difference between scenarios with firming & shaping costs and

without is $345 million. • GPA should evaluate alternate firming and shaping options to address

stability concerns. • What are the stability issues? These are dependent on the size, type,

and even location of the renewable resource. • Geothermal is another viable option, if the potential is there.

• Although a higher cost scenario, this is a firm power alternative that is competitive with LNG conversions and new resources.

• Should GPA invest in feasibility studies to determine geothermal potential on Guam?

• Wind/Solar PV and Geothermal are “proxies” for other renewable alternatives.

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Conclusions

• Preliminary results point towards LNG fuel as a viable option which: • Lowers overall costs over the study period; and • Addresses EPA air emissions compliance requirements near

compliance dates.

• The addition of 40 MW for renewables (Phase II acquisition) will help lower costs and meet RPS goals.

• SMR may be a viable option in the distant future. • Geothermal is competitive to LNG alternatives and as firm

power and its potential for Guam may be worth investigating further.

• GPA should continue to evaluate efficiency improvements of existing units.

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To come…

Does GPA address stakeholder concerns?

What do you feel GPA needs to evaluate further?

Let’s discuss.