Direct Testimony Presentation PUBLIC SESSION PREPARED BY: DAYMARK - PowerPoint PPT Presentation

Direct Testimony Presentation PUBLIC SESSION PREPARED BY: DAYMARK ENERGY ADVISORS PREPARED FOR: MANITOBA PUBLIC UTILITIES BOARD DATE: JANUARY 2018

Presentation Objectives and Agenda Presentation Objectives Agenda  1. Understanding of the Daymark Scope of Work general transaction and 2. Key Concepts status 3. Project History and Status  Understanding of general 4. 2016 Economic Analysis evaluation methodology 5. 2017 Updated Analysis  Understanding of current 6. Key Findings economics 2

1 2 3 4 1. Daymark Scope of Work 5 6 3

Daymark Scope of Work Our Charge 1 “Review and assess the economic justification for 2 the SaskPower 100 MW power sale and Manitoba- 3 Saskatchewan Transmission Project and provide an opinion on the merits of this project and whether it 4 is in Manitoba Hydro’s and ratepayers’ interests to 5 proceed.” 6 4

Daymark Scope of Work Our Approach and Relevant Materials 1 Daymark Approach 2  Reviewed MH transmission documents (CSI*) 3  Reviewed MH economic evaluation documents and workpapers (CSI) 4  Performed additional (limited) analysis 5 Daymark Materials Relevant to this Presentation 6  Produced public and CSI reports (already on record)  Responded to Information Requests (IR) related to reports (already on record) * “CSI” stands for “Commercially-Sensitive Information.” 5

1 2 3 4 2. Key Concepts 5 6 6

Key Concepts A Few Key Terms 1  MHEM – Manitoba Hydro Export Marketing 2  MHT – Manitoba Hydro Transmission 3  OATT – Open Access Transmission Tariff 4  CPJ – Capital Project Justification 5  FCA – Facilities Construction Agreement 6  GFS – Group Facilities Study  GSIS – Group System Impact Study  Transfer Capability – capacity, in MW, of a transmission intertie 7

1 2 3 4 3. Project History and Status 5 6 8

Project History and Status Existing System 1 Transmission System, Transmission System, 2 Pre-Agreement with Project  225 MW total transfer  325 MW total transfer 3 capability capability 4  Various commitments against  Retains capability to meet that capability (CSI) existing commitments (CSI) 5  45 MW available  Allows for full amount of 6 power sale to SaskPower 9

Project History and Status Status 1  Power Sale Agreement (January 2016) 2  Facilities Construction Agreement (May 2017) 3  Transmission project in development 4  First monthly status report for transmission 5 reviewed (October 2017)  Limited transmission costs incurred to date 6 (roughly $1.6 million)  Further information in the CSI presentation 10

Project History and Status Key Timeline Elements 1 <-- TODAY 2 2015 2016 2017 2018 2019 2020 2021 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4                                                                                3 Transmission-related and energy sale-related events <--2012 Facilities Study 4 Term sheet negotations Transmission Service Requests (TSR) submitted by MHEM MH and SaskPower execute term sheet 5 "Capital Project Justification for Manitoba - Saskatchewan Transmission Project" published GSIS  “Saskatchewan Power 100/140 MW Sale Evaluation” study issued 6 MH and SaskPower execute PSA …energy sale contract duration, 2020 - 2040 to 2040 --> GFS …earliest in-service date for transmission, per GFS FCA 1st status report  Provincal license decision Licensing Station construction Transmission line construction 11

1 2 3 4 4. 2016 Economic Analysis 5 6 12

2016 Economic Analysis Overview of the 2016 Sale Evaluation 1  Evaluation considered 100 MW sale plus 2 potential for additional 40 MW 3  Evaluation used Manitoba Hydro’ long-term 4 planning model (SPLASH)  Base case assumed future Manitoba Hydro need 5 would be met with new gas fired generation 6  Results were expressed as net present value (NPV) of sale plus transmission versus base case  Sensitivity analysis performed (Details in the CSI presentation) 13

2016 Economic Analysis Review of Key Assumptions 1  In general, late 2015 planning assumptions were used 2  Resource impacts of the sale were determined using 3 the July 2015 Resource Planning Assumptions and Analysis for 2015/16 Corporate Planning Report 4  Keeyask was assumed to be in-service in 2019 5  New 500-kV US connection assumed to be in-service 6 in 2020  Manitoba-Saskatchewan transmission project costs sourced from the 2015 GSIS 14

1 2 3 4 5. 2017 Updated Analysis 5 6 15

2017 Updated Analysis 1  Based on a Daymark request, Manitoba Hydro 2 updated the analysis 3 - Used Manitoba Hydro assumptions consistent with the current General Rate Application 4 - Updated transmission costs based on latest information 5 - Served as the starting point for Daymark analysis of key input assumptions 6  Daymark sensitivity analysis - Goal – test the current economics of the project - All information is commercially-sensitive 16

1 2 3 4 6. Key Findings 5 6 17

Key Findings 1  Transmission project is still in the early stages 2 of development 3  Any potential delays in the transmission 4 project do not present a significant risk to the 5 near-term value of the power contract  The transaction, including the transmission 6 project, remains in the best interest of Manitoba Hydro and its ratepayers  Addition findings will be discussed in the CSI portion of the presentation 18

End of Presentation Dan Peaco Doug Smith Daymark Energy Advisors Daymark Energy Advisors 48 Free Street 48 Free Street Portland, Maine 04101 Portland, Maine 04101 Tel: (207) 347-3194 Tel: (617) 778-2450 Email: dpeaco@daymarkea.com Email: dsmith@daymarkea.com www.DaymarkEA.com 19