Enchant Energy City of Farmington Sargent & Lundy San Juan Generating Station Carbon Capture Utilization & Storage Project Presentation to Senate Finance Committee February 4, 2020 1
Presenters Peter Mandelstam Chief Operating Officer Enchant Energy Hank Adair Electric Utility Director Farmington Electric Utility System Sean C. McHone, P.E. Sr. Vice President and Project Director Sargent & Lundy 2 2
Background • Beginning in 2015, PNM agreed to shut-down two units of SJGS and install state-of-the-art pollution control equipment and other improvements in the remaining 2 units. • In 2018, PNM and all other owners, except the City of Farmington, gave notice that they would be exiting SJGS and planned to shut down all 4 units. • Based on independent third-party review, the closure of SJGS and the San Juan Mine is anticipated to result in a loss of over 1,500 jobs, $53 million annually in state and local tax revenues, and critical losses to the Central Consolidated School District (“CCSD”). • In order to avoid this drastic result, and in accordance with the underlying Participation Agreement between the owners of SJGS, the City of Farmington conducted a nationwide search to market the opportunity to continue to operate SJGS. • After evaluating a number of interested parties, the City of Farmington chose to work with what is now Enchant Energy due to its proposal to utilize carbon capture equipment to continue operations at SJGS in compliance with the Energy Transition Act. • With the closure of Navajo Generating Station, and the announced closures of Four Corners as well as Escalante, finding a way to avoid extreme economic impact to the Four Corners region is even more important. • This Project is a Win, Win, Win, Win: A) Win for Ratepayers; B) Win for Workers and Community; C) Win for Schools and Students; and D) Win for Climate. 3 3
Introductions of Stakeholders • City of Farmington – City Manager Rob Mayes • Central Consolidated School District – Dr. Dave Goldtooth, Interim Superintendent • Westmoreland – San Juan Mine – Paul Fritzler and Steve Pierro, and Miners • New Mexico Tech President Emeritus Dr. Daniel H. Lopez • San Juan County Officials - • Union Leaders & Members - • San Juan College - 4 4
Peter Mandelstam Enchant Energy
Disclaimer Certain information contained in this presentation may constitute forward-looking statements within the meaning of the federal securities laws. Forward - looking statements involve significant risks and uncertainties, which are difficult to predict, and are not guarantees of future performance. Such statements can generally be identified by words such as “anticipates,” “expects,” “intends,” “may,” “will,” “should,” “could,” “believes,” “estimates,” “project,” “plan,” “continue,” and similar expressions. Forward - looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain financial and operating projections or state other forward - looking information. Our ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward - looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in, or implied by, the forward - looking statements. You should not place undue reliance on any forward - looking statement and should consider all of the uncertainties and risks described above. These forward-looking statements speak only as of the date of this presentation. We expressly disclaim any obligation or undertaking to update or supplement any forward-looking statement contained in this presentation. • This presentation is not, and should not be construed as, an offer to sell or a solicitation of an offer to buy any securities of or to make any investments in, Enchant Energy Corporation or any of its affiliates (collectively, the “Enchant Entities”) in any jurisdiction. If at any time there should commence an offering of securities, any decision to invest in any such offer and to subscribe for or acquire such securities must be based wholly on the information contained in a final offering circular provided or to be provided in connection with any such offer and not on the contents of these materials. That later information would amend and supersede any information provided in these materials. • This presentation does not create any binding obligation on any Enchant Entity, which may be created only through entry into a definitive agreement by the Enchant Entity. We do not make any representation or warranty, either express or implied, as to the accuracy, completeness or reliability of the information contained in this presentation, except as set forth in a definitive agreement to which the Enchant Entity is a party. References to any services available on any Enchant website to potential residents does not extend to the contents of any such website (which contents are not incorporated by reference herein or otherwise included as a part of this confidential information). 6
Summary • In partnership with the City of Farmington, Enchant Energy Corporation has obtained the right to acquire the 847 MW Coal-fired San Juan Generating Station (“SJGS”) for $1 effective 6/30/2022 when the current owners exit the plant: 95% to Enchant, and 5% to City of Farmington municipal utility. • PNM has applied to the PRC to abandon its portion of the plant with the Energy Transition Act (“ETA”) as part of that decision. • Under the ETA, the plant would have to comply with a new CO 2 emissions intensity limit of 1,100 lbs. per MWh by January 1, 2023. SJGS currently has an intensity of 2,200 lbs. per MWh. • Farmington & Enchant Energy plan to retrofit the plant with proven, post-combustion Carbon Capture Utilization and Storage (“CCUS” or “Project”) technology that will lower the CO 2 emissions by up to 90%. The Project does not require any State or local subsidies. • Post-CCUS, SJGS will have CO 2 emissions reduced to 247 lbs. per MWh – becoming Low Emissions Electricity (“LEE”). • LEE produces 70% less CO 2 emissions than a typical, new combined-cycle gas turbine (“CCGT”), and 80% less emissions than a gas peaking plant. • The Project adds $1.3 Billion in private investment to the Four Corners / Farmington area during construction and will operate until 2035, financed through the monetization and forward sale of IRS Section 45Q tax credits. • Notice to Proceed (“NTP”) and Commencement of Construction can occur in 2021, if PNM and all the other SJGS owners who pledged legally to exit by June 30, 2022 (the “Exiters”) allow early CCUS site construction access north of Unit 3. 7
What is San Juan Generating Station ? • 847 MW (net) Coal-fired Electricity Generation Station in Northwest New Mexico originally built in the 1970s, expanded in the 1980s. • High BTU Coal is supplied by the adjacent San Juan coal mine, owned by Westmoreland Mining Holdings. Enchant signed MOU to extend coal supply through 2035. • SJGS is operated by PNM on behalf of PNM (66%), TEP (20%), Farmington (5%), Los Alamos (4%), & UAMPS (4%). • Plant size decreased from 1,828 MW (gross) in 2017 through shutdown of Units 2 & 3 in conjunction with installation of Selective Non-Catalytic Reduction (“SNCR”) equipment, and settlement with US EPA. • Low cost generator with low NO X /SO X /Mercury/Particulates emissions, but currently significant CO 2 emissions. • Located at the center of the Southwestern transmission grid, with connections to rest of New Mexico, Arizona, California, Colorado, Nevada, and Utah. 8
Project Schematic McElmo Dome CO 2 Field, Cortez CO San Juan Coal Mine/ Westmoreland Kinder Morgan Cortez CO 2 Pipeline SJGS 847 MW New 20-mile Power Plant connector CO 2 Pipeline § Flue gas transferred from SJGS to carbon capture island: 6 million metric tonnes per year captured, Transmission of electricity under compressed, and transported to Cortez pipeline, then to Enhanced Oil Recovery (“EOR”). PPA to customers; excess power to § 124 MW of power and steam to be used by CCUS. be traded at Palo Verde Hub, and EPA approved permanent § With NM Tech, applied for DOE funds to explore CO 2 storage sites in EOR points West. CO 2 storage in New Mexico wells, along with fields in the Permian partners Schlumberger and Hilcorp. Basin. 9 9
Construction Team Announced • Enchant Energy Corporation and Farmington announced on December 10, 2019 that globally-leading companies have joined the Enchant Team: • Mitsubishi Heavy Industries America (“MHIA”) is the carbon capture technology provider. • Kiewit Power Constructors Co. (“Kiewit”) / Sargent & Lundy (“S&L”) will serve as the combined engineering, procurement, and construction (“EPC”) contractor. 10
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