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KEVIN JOYCE

PV OPERATIONS AND MAINTENANCE – AN INDEPENDENT ENGINEER’S PERSPECTIVE

AGENDA

Who is Black & Veatch?

What does an investor care about?

What does an IE look at in an O&M plan?

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• 9,000 person international engineering firm based in Overland Park, KS, founded in 1915.

• Majority of work in energy sector.

• Ranked Number One in Power by Engineering News-Record for last three years.

• Significant expertise in solar power:

• Performance testing, technical due diligence, contract review, construction monitoring, detailed design, policy, integrated resource planning.

• Independent Engineer for investors financing over 2000 MW of utility scale PV projects.

• Independent Engineer for investors financing several giant distributed rooftop portfolios, 1000+ MW -- 170,000+ systems!

• Technical adviser to multiple utilities purchasing utility scale PV plants and energy from PV plants.

BLACK & VEATCH

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First bond issuance back by revenue from the 550 MW Topaz Plant: A Black & Veatch IE engagement

Is the investor financially protected from operating risks by the operations and maintenance (O&M) plan and contingencies?

1. Will the plant operate as expected (revenue)?

2. Are the budgeted operating costs reasonable?

3. Are any known operating risks monetized in the financial model?

ANSWER THE BIG QUESTIONS

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• O&M service fee – paid to contractor per the O&M agreement

• Typically budgeted at $10-$20 per kWdc (varies widely with scope, technology, labor rates, etc.)

• Additional owners costs

• Parts of the O&M plan not covered by the service fee.

• Reserve funds including contingencies

• Non-O&M expenses like land lease, insurance, etc.

O&M BUDGET

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Not all tasks are in the O&M agreement but they must all be in the O&M plan and budget.

• Emergency response plan

• Safety and health plan

• Security

• Warranty management

• Parts management

• Telecom and electricity

• Staffing & training

• Operations & compliance

• Monitoring & reporting

• Regular inspections

• Regular component testing

• Preventative maintenance

• Env. management (mowing)

• Washing

• Permit compliance & maint

OPERATIONS AND MAINTENANCE SCOPE

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Are all the unique requirements of the project met by the O&M plan?

• Energy scheduling and forecasting

• Day ahead weather adjusted forecasts

• Notification of failures or outages

• Plant performance requirements

• Reactive power / power factor

• Ramp rate and LVRT

• Permitting and environmental compliance

CONSISTENCY AMONG COMMERCIAL AGREEMENTS

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• Performance guarantees (EPC)

• Should be based on the production assumption used in the financial model

• Use best practices for PV performance testing (exclusions, test calculation, etc.)

• Availability guarantees

• Definition and calculation of availability

• Liquidated damages

• Will the project be covered financially in the case of a shortfall?

• Lost revenue and penalties

• LD caps are commonly tied to contract value.

GUARANTEES AND LIQUIDATED DAMAGES

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Can the project keep a good price? Get rid of a bad contractor?

• Term of the O&M agreement compared to project life

• Renewal or extension options?

• Termination of the agreement

• Can the project terminate the contract:

• at will?

• for cause?

• in default?

TERM AND TERMINATION

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• For expected expenses

• Inverter overhaul/ replacement

• Plant decommissioning (when required)

• As contingency for known risks

• Unscheduled maintenance

• Project specific risks

• Short term O&M agreement

• Frost heave

• Inverter or module concerns

RESERVE FUNDS

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• O&M plan scope and budget

• Is the plan adequate to maintain revenue at a reasonable cost?

• Consistency in project agreements

• Are the unique requirements of the project met?

• Guarantees and LD’s

• Is the project protected against O&M failures?

• Reserve funds

• Has the project budgeted for known expenses and risks?

IN SUMMARY – AN IE REVIEW CONSIDERS THE FOLLOWING

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© Black & Veatch Holding Company 2012. All Rights Reserved. The Black & Veatch name and logo are registered trademarks of Black & Veatch Holding Company.

• Spare parts inventory

• Originally supplied by constructor

• Storage responsibility / strategy varies

• Agreement with equipment (inverter) manufacturer service

• Inadequate spares of critical equipment can increase risk of unplanned downtime.

• Transformers – MV and HV

• Inverter IGBTs

SPARE PARTS INVENTORY

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