Business Interruption Resulting from Machinery Breakdown

Transcription

1 Business Interruption Resulting from Machinery Breakdown Dipl.-Ing. (Univ) Jürgen Kolbe Managing Director Presentation IMIA 2017

2 Description: The plant is coal fired with fluidized bed combustion. There were certain outfalls, which resulted in trip of the turbine unit (capacity 125 Mw) Those were caused by clumping of the grinded coal then used in the fluidized bed combustion process. This basically occurred due to the high humidity of the air at the spot being high temperature and coastal climate. Note: The situation was amended afterwards and the coal, after grinding, passed a drying procedure. Nevertheless, the event occurred during the first production years following an irregularity of the lubrication system of the turbine. 2

3 In our present case we are concentrating on the Business Interruption following Loss of Availability. However, just to complete on the material damage section: Insured s claim: Material Damage: 2,276,007 Loss of Availability: 2,484,568 Total Claim: 4,760,575 Adjustment (taking into consideration cost not claims related like overhaul, betterment, maintenance...) Material Damage: 1,790,099 Loss of Availability: 1,760,548 Total Adjustment: 3,550,647 Deductible : 250,000 Following damage was caused See photos 3

4 DAMAGES FROM THE LOSS DAMAGE TO BEARINGS AND TURBINE BLADE TURBINE SHAFT IN THE SUPPORTING AREA OF THE BEARING A = AFFECTED AREA A 4

5 DAMAGES FROM THE LOSS DAMAGE TO BEARINGS AND TURBINE BLADE DAMAGES TO THE GENERATOR SHAFT 5

6 DAMAGES FROM THE LOSS DAMAGE TO THE FAN BLADES FRICTION WITH HOUSING 6

7 DAMAGES FROM THE LOSS LUBE FAILURE AXIAL THRUST BEARING REPAIRED BY TURBOCARE (USA) 7

8 DAMAGES FROM THE LOSS Displacement of Turbine Shaft Repair of the shroud band of Wheel 8, by welding points Tenons

9 CAUSE OF LOSS During the trip resulting in the damages, the plant lost its in and outside supply of energy, and therefore the Main and Auxillary Lubricating systems did not work, which operate with alternate electricity (AC). The Lubricating system has an emergency system, which works with continuous electricity (DC) but did not opérate since the automated control was in the OFF position. 9

10 SUMMARY ON CAUSATION Human Error: Procedures for re-start of the plant were not correctly carried out. The plant was not sufficiently protected against human errors. COVERAGE Failure of the emergency system was due to human error by the Insured operators (being in the OFF position), which is covered under the Policy. 10

11 SUMMARY ON CAUSATION The incident resulted in: Loss of generation, which should have taken place during production of energy. This calculation is straight forward relating the shortfall of production to the agreed energy prices by the energy board and is not the subject of this conference. It also results in a shortfall of availability of the generating unit. As in many countries and also in energy generating systems in Europe, like the Green Energy, shortfalls cannot always be avoided. The Energy Boards reaches an agreement to pay for Availability of the Generating Units. Thus they are obtaining stand by capacities. The exact conditions of penalizing for non availability are laid down in the contract conditions between Energy Board and the individual supplier. Normally, these penalizations do not end with regaining availability after repair again. In may cases, they go month s further after availability is given (up to 12 months later). These facts should be considered in the Premium calculation, as they influence the BI loss scenario. The conditions are defined by the Energy authority and can differ from country to country. In the following, some general principles of BI Insurance and Loss Mitigation. 11

12 MATERIALS CONTENTS Concepts and Definitions LABOUR RAW MATERIALS PRODUCTS FOR SALE Loss Investigated Adjustment Procedure EQUIPMENT AND INSTALLATIONS Insured Company OTHERS ENERGY 12

13 Definitions Sum Insured= Gross Profit Gross Profit = Sale figures Variable Expenses Variable Expenses = Electricity used for machinery, raw material, etc. Rate of Gross Profit = Gross Profit/ Sale figures Standard Turnover Indemnity Period From a cost viewpoint: Interruption Period FC+ VC+ P= SALES FC = Fixed Costs, VC= Variable Costs, P = Profit, S = Sales Gross Profit = Fixed Costs+ Profit = Sales Variable Costs 13

14 Period in reference: Standard turnover same as the period of loss,12 months prior Period of business interruption: Definitions Sales Figures Method: the end of the interruption is determined when the previous sales figures are reached (loss of market has no coverage.). In this regard, evaluation and consideration is given to the material in stock. Production Method: the end of interruption is determined when production figures reach the previous levels. Limit of Indemnity: this period is established in the Policy and represents the maximum indemnity for this policy. 14

15 Bottle Neck Situations: should be identified at the begining of the suscription. For example: one turbine generates 80% and the other 20% of the sale. The factor of relative importance is therefore determined with respect to 100% of production (Factor of Relative Importance - FRI). Temporary Deductible: applicable at the beginning of the interruption period, taking into consideration the details of the values or production method, that is, the stock may or may not be taken into account to determine the initiation of the interruption period, in accordance with the Policy. Porportional Deductible: the amount of the temporary deductible is calculated with respect to the total period of interruption. Loss of Generation: is direct loss of sales Loss from Reduction of Availability: is an indirect loss due to unavailability of the unit. Trend Definitions 15

16 Mitigation of Loss Selection of Products: reference to higher prices Selection of Sales Schedule: satisfy the situations of higher income Technical Loss Adjusters Spot Marketing: in the case of purchase of raw material or replacement with lower prices. Purchase of materials from other plants Stock Replacement of Stock Postponement of shutdown or maintenance periods Use of outside energy. Outsourcing Incentives to shorten shutdown periods According to the Policy, the maximum cost to be acknowledged with the application of measures,( increased cost of working ) is the cost of the loss that is being avoided. 16

17 2. Adjustment of Loss for Business Interruption Decrease in Availability (1) Scheduled and Maintenance shutdowns, is estimated, according to statistics up to 15% of the maximum monthly period. The regulating authority imposes a consecutive sanction of 12 months, for each month with shortfall below 85% (unavailability). Based on operations records, unavailability of the plant was estimated, which excludes period for maintenance and force majeure.. Only forced shutdown was considered. The average of the days that the turbine was out of service was registered monthly. 17

18 Decrease in Availability (2) Time Base Study Year 2014 Invoicing Hours RECORD- Base Availability (Theoretic without Loss) Normal Monthly hours (calendar hours) Monthly Availability Force Majeure Classification of hours Maintenance h Forced Shutdown h January 228 0,94 2,90 0,00 14,40 February 744 0,85 15,00 0,00 107,30 March 696 0,87 13,90 0,00 90,80 April 744 0,85 6,50 138,00 90,50 May 720 0,85 108,00 June 744 0,85 111,60 July 720 0,63 267,00 August 744 0,69 227,00 September 744 0,85 111,60 October 720 0,85 108,00 November 744 0,85 111,60 December 720 0,85 108,00 No influence on availability per contract No influence on availability per contract From operation anormalities and maintainence 18

19 Decrease in Availability (3) Normal availability with 85% factor Year Invoicing Period Normal Hours/Month H Base Availability (Theoretic without loss) Availability per month Force Majeure Classification of Hours Maintenance H Maximum Forced Shutdown h 2015 January 744 0,85 111,60 February 744 0,85 111,60 March 672 0,85 100,80 April 744 0,85 111,60 May 720 0,85 108,00 June 744 0,85 111,60 July 720 0,85 108,00 August 744 0,85 111,60 September 744 0,85 111,60 October 720 0,85 108,00 November 744 0,85 111,60 December 720 0,85 108,00 19

20 Decrease in availability (4) REAL HOURS EXTENDED TO 12 MONTHS Calculation of decrease in availability, not resulting from the loss Actual availability = (h forced shutdown) / h Year Invoicing Period Theoretic Loss from Availability without Loss Hours h Force Majeure Maintenance h Forced Shutdown h Availability for invoicing Based on the History of 12 Months Loss from availability under 85% % USD January , ,80 0, , ,00 February , ,00 0, , ,00 March , ,00 0, , ,00 April , ,30 0, , ,00 May ,40 0, , ,00 June ,40 0, , , July ,40 0, , ,00 August ,40 0, , ,00 September ,00 0, , October ,00 0, , November ,00 0, , December ,00 0, , Loss of availability (USD) = Loss% * 19,68 USD/Kw * w Total ,

21 Decrease in Availability (5) Estimate of theoretic loss from the occurrence Year Invoicing Period Theoretic availability with Loss Normal Hours Calendar month Monthly Availability Force Majeure Classification of Hours Maintenance H Max Forced Shutdown H January 228 0,94 2,90 0,00 14, February 744 0,85 15,00 0,00 107,30 March 696 0,87 13,90 0,00 90,80 April 744 0,76 6,50 138,00 143,20 May 720 0,00 720,00 June 744 0,00 744,00 July 720 0,58 300,00 August 744 0,85 111,60 September 744 0,85 111,60 October 720 0,85 108,00 November 744 0,85 111,60 December 720 0,85 108,00 21

22 Decrease in Availability (6) Estimate of theoretic loss, from occurrence Theoretic Availability with Loss Classification of Hours Year 2015 Invoicing Period Normal Hours H Monthly Availability Force Majeure Maintainence h Forced Shutdown h January 744 0,85 111,60 February 744 0,85 111,60 March 672 0,85 101,00 April 744 0,85 111,60 May 720 0,85 108,00 June 744 0,85 111,60 July 720 0,85 108,00 August 744 0,85 111,60 September 744 0,85 111,60 October 720 0,85 108,00 November 744 0,85 111,60 December 720 0,85 108,00 22

23 Decrease in availability (7) Recalculation of Loss, following the occurrence REAL HOURS EXTENDED TO 12 MONTHS Actual availability = (h forced shutdown) / h Theoretic loss of Availability with Loss Loss of Availability Lower than 85% Year Invoicing Period Hours h Force Majeure Maintenance h Forced Shutdown h Availability for Invoicing based on 12 month Record % USD January , ,67 February , ,68 March , ,68 April , ,68 May ,69 June ,76 July ,83 0, ,08 0, ,74 0, ,75 0, ,01 0, ,62 0, ,12 0, ,01 August September October Total ,34 Loss of Availability (USD) = Loss% * 19,68 USD/Kw * w 23

24 2. Loss Adjustment for Business Interruption Decrease in Availability (8) Adjustment of the claim for loss resulting in the decrease of availability of the generation was then accepted by the Insured. Insured s Claim USD Re calculation of the decrease in availability USD Less: normal unavailability not related to the loss USD Decrease of Availability acknowledged and accepted finally by the Insured USD