Board of Directors Meeting. September 27, 2018

Transcription

1 Board of Directors Meeting September 27, 2018

2 2019 proposed budget work session September 27, 2018

3 Agenda Budget Schedule Trends Process Budget document 2019 overview Capital 5-year forecast

4 Budget schedule September October December Board work session Updates and budget discussion Model prices and resource updates (JDA, Silver Sage wind sale) Load forecast Wheeling and ancillary services rate adjustments Capital investments & depreciation (Windy Gap firming project, HQ campus) Financing update & removal of interest during construction Other changes (medical, Craig, etc.) Public hearing Board adoption File with the state of Colorado

5 Trends Low municipal load growth revenue impact Lower surplus sales market lower revenue supplement Infrastructure advancements increased capital requirements Resource diversification renewable additions Increased customer solutions and products energy efficiency, demand response, electric vehicles, smart thermostats Expanded communications and community outreach trusted energy partner Focus on managing controllable expenses

6 Budget process Project planning Review and refinement O&M expenses Strategic initiatives and core operations activities Production cost model 2019 Budget Reporting improvements 2019 budget process included enhancements to: 1. budget document 2. overall internal process

7 Budget document 2019 budget summary Three pillars Strategic initiatives Core operations List of activities for each area Financial review and budget schedules Summary of financial results Consolidated budget schedules Brief descriptions of revenues, operating expenses, capital additions and debt expenditures Comparison schedules Capital project descriptions and project amounts Budget process Budget development Budget contingency Management review Budget document Board review and adoption Budget schedule Financial governance Framework for financial activities and budget development

8 2019 budget focus Core pillars 1. System reliability 2. Environmental responsibility 3. Financial sustainability 1) Baseload and peaking generation, transmission 2) PPAs for existing renewable resources & hydropower Core operations: The primary area or activity that a company was founded on or focuses on in its business operations. Many market leaders aim to maintain a strong position in their core business areas, but they usually remain open to developing new areas of activity as perceived business opportunities arise. Core operations 73% Strategic initiatives 27% 4 initiatives Operating expenses & capital additions: $232.1 million

9 Strategic initiatives activities 27% of operating and capital: $232.1M Enhanced customer experience, $11.1 million, 5% Energy efficiency business & consumer product expansion Distributed energy resources electric vehicles & smart thermostats Demand response continuation Wholesale rate redesign implementation 2020 Communications and community outreach, $1.6 million, 1% Public engagement Effective communications electronic tools, public & stakeholder materials, outreach, internal communications, and employee activities & recognition Resource diversification and alignment, $2.5 million, 1% Resource planning IRP Renewable generation development of 150 MW wind and 20 MW solar projects Energy market continue to pursue broader market Infrastructure advancement and technology development, $46.6 million, 20% Windy Gap firming project increase water resource reliability Headquarters campus meet growing and changing needs of workforce, technologies and facilities Physical security, cyber security, fiber and transmission projects

10 Core operations activities 73% of operating and capital: $232.1M Rawhide Energy Station Bottom ash conveying system and containment project final costs (proactive environmental compliance) Monofill upgrades (proactive environmental compliance) Protective relays Grading and drainage projects Rotary car dumper variable frequency drives Operational flexibility testing Craig Station Craig Units 1 and 2 scheduled maintenance outages Transmission SONET equipment upgrade Oil breaker replacements Generator step up transformer project planning CIP requirements Other expenses Medical expenses 6 new positions IT investments (engineering & help desk) Centralized fleet management program Organic contract and power supply agreements renewals

11 Drivers of change 2018 budget to 2019 budget Ongoing operations & maintenance (IRP & IT) Capital investments Medical increase, new positions Debt financing, higher cash balances & interest rates Craig Units 1 & 2 outages Surplus sales energy increase DSM expansion 2019 budget 2% Tariff 1 rate increase, muni load reduction

12 Financial results Strategic financial plan indicators Net income ($ millions) Target minimums budget budget Increase (decrease) 3% of projected operating expenses $ 22.6 $ 21.6 (4.4%) Fixed obligation charge coverage ratio 1.50x 2.48x 2.60x 4.8% Debt ratio < 50% 38% 34% (10.5%) Unrestricted days cash on hand % Budget results budget budget Increase (decrease) Total revenues ($ millions) $ $ % Total expenditures ($ millions) $ $ (5.9%) Board contingency ($ millions) $ 23.0* $ % * Contingency transfer required for 2018 capital additions. Amount to be determined later in the year.

13 Budget contingency (reserved to the board) Unforeseen expenses (forced outages, gas usage, changes in capital additions, business opportunities, etc.) Requires board approval prior to use No impact on rates in budget Allowable under state budget law and reduces need for amendments $23 million contingency Based on approximately 10% of operating expenses and capital additions

14 Revenues and expenditures $ millions $207 $216 $224 $227 $ actual 2017 actual 2018 budget 2018 estimate 2019 budget Operating expenses Debt expenses Capital additions Revenues Expenditures in excess of revenues: $24.5M

15 2019 revenues Owner communities Variance ($0.9M) Sales for resale $2.2M Interest & other $1.3M Sales for resale and wheeling 11% Interest and other income 2% Owner communities sales Sales for resale Loads developed on 10-year load forecast and energy changes from EE 2% Tariff 1 rate increase Energy deliveries decrease 2.3% Billing demand decrease 2% Tariff 7 no rate change Energy and prices hourly model 2019 variance due to reduced owner communities loads Owner communities sales 87% Interest & other income Interest income and other miscellaneous revenue 2019 variance due to higher projected interest rates and cash balances, no fiber revenues $226.2 million Variance from 2018 budget: $2.6M

16 2019 expenditures Variance Operating $5.8M Capital ($19.2M) Debt ($2.2M) Debt expense 7% Purchased power Operating expenses Long-term contracts Other purchases (price/qty) hourly model Capital additions 22% Fuel Production Transmission Administrative & general Generation hourly model Prices based on long-term contracts O&M Rawhide, Craig, CTs, power ops Planned maintenance outages O&M lines, substations, SCADA, fiber, telecom Support groups O&M HQ facilities Operating expenses 71% Demand side management Energy efficiency Distributed energy resources Demand response $250.7 million Variance from 2018 budget: ($15.6M)

17 Salaries and benefits Salaries Benefits New positions Regular wages increase $1.1M Six new positions $0.7M 3.1% salary adjustment $0.9M Step increases/other $0.3M Other adjustments ($0.8M) Increase of $2.5M from: Medical/dental $2.2M Defined benefit $0.1M Defined contribution $0.1M Staff attorney * Accounting supervisor IT desktop support supervisor IT systems engineer System planning engineer Facilities electrician Overtime decrease $0.7M Outage in 2018 * Accelerated to 2018 by board concurrence.

18 Operating expenses & capital additions DSM 4% Market purchases 1% General business 9% Generation 28% Transmission 9% Contract renewables and hydropower 13% Facilities 15% Fuel 21% $232.1 million Variance from 2018 budget: ($13.4M)

19 Operating expenses $ millions Prices (RH & natural gas) No replacement power for outages (2018 RH outage) Medical, six positions, salary adj. 3.1%, partially offset by 2018 outage OT Core generation and transmission expenses have been controlled through continued preventative and predictive maintenance strategies and proactive capital investments IRP, IT investments, cyber security insurance 2018 outage, 2019 screen outage CU 1 & outages EE program expansion, electric vehicles, smart thermostats 0 Fuel Purchased power Salaries and benefits O&M Outages - Rawhide Outage accrual Craig Units 1 & 2 DSM Wheeling budget 2019 budget $177.7 million Variance from 2018 budget: $5.8M

20 2019 capital additions $54.3 million Core operations, 16% Strategic initiatives, 84% Strategic projects: Windy Gap firming project HQ campus CT controls LED lighting Circuit switchers Revenue meters Airflow spoilers Solar interconnection Hydrogen gas detectors Trans line vault upgrades Real time tools Integrated tools for ops Security Loveland subs

21 2019 capital additions Railcar moving equip, fire engine 12, vehicles Oil breakers, circuit switchers, relay upgrades, vault upgrades, revenue meters, airflow spoilers, solar interconnection SONET equip, real time tools, IT General 4% Transmission & substations 5% Craig Units 1 & 2 2% Purchases 2% Rawhide outage (final costs) 1% Rawhide 13% CTs controls upgrades, CTs protective relays, LED lighting, monofill upgrades, grading & drainage Headquarters campus 54% Windy Gap firming project 19% $54.3 million Variance from 2018 budget: $19.2 Excludes estimated 2018 capital carryovers of $2.6 million

22 Capital 5-year forecast Years $230.3 million Rawhide outages $8.6 Craig Units 1 & 2 $16.1 General $5.1 Communications $1.2 Transmission and substations $25.4 Windy Gap firming project $99.4 Headquarters campus $34.4 Rawhide $40.1 Includes estimated 2018 capital carryovers of $2.6 million

23 Capital 5-year forecast Production additions = $164.2 million $ millions Monofill upgrade, $6.6M Rotary car dumper to VFD, $2.5M Windy Gap firming project, , $109M Craig Units 1 and 2 projects, $16.1M Fire protection system upgrades CTs, $1.2M CAT equipment replacements, $1.6M Soldier Canyon 10 ductile replacement, $13.6M Grading & drainage, $2.1M Controls conversion CTs, $4.8M Protective relays CTs (outage), $1.5M Chilled water system, $0.4M Rawhide outage, $6.9M Dust collection system replacement crusher building, $1.4M Amounts represent total project cost. May have had costs prior to 2019 or extend past 2023.

24 Capital 5-year forecast Transmission additions = $25.4 million $ millions 100% reimbursable projects GSU transformer replacements, $8.5M Circuit switchers, breakers, relays, $2.8M Airflow spoilers, $1.8M Wind Bay Rawhide Sub, $1.7M Transformer T1 & switchgear Horseshoe Sub, $1.3M Switchgear & transformer replacement Loveland East, $1.2M Oil breaker replacements, $1.1M Transmission line vault upgrades, $0.9M Revenue meter replacements, $0.6M Solar interconnection RH Sub, $0.3M Walls Loveland Substations, $3.2M Transformer T3 replacement Timberline Sub, $3.1M Substation & Transmission Loveland Southeast, , $18.4M Aux and station service transformers, breaker, metering unit Rawhide, $7.2M Transformer T1 & switchgear replacement Airport Sub, $1.1M Transformer replacement Valley Sub, $0.7M, net of reimbursement Fort Collins NE Substation, , $3.0M net of reimbursement Amounts represent total project cost. May have had costs prior to 2019 or extend past 2023.

25 $ millions Capital 5-year forecast General additions = $40.7 million General additions include: Facilities upgrades Computer upgrades Communication equipment Vehicles SONET communication system replacement, $1.2M Headquarters campus, , $51.6M Real time tools, $0.6M IT software and equipment, $1.6M Vehicle replacements, $1.5M SCADA equipment, $0.4M Security Loveland substations walls, $0.3M, net of 50% reimbursement Financial info & payroll system replacement, $0.6M Amounts represent total project cost. May have had costs prior to 2019 or extend past 2023.

26 2019 budget focus Operating and capital: $232.1M Strategic initiatives, 27% Enhanced customer experience $11.1 million, 5% Energy efficiency business & consumer product expansion Distributed energy resources electric vehicles & smart thermostats Demand response continuation Wholesale rate redesign implementation 2020 Communications and community outreach $1.6 million, 1% Public engagement Effective communications electronic tools, public & stakeholder materials, outreach, internal communications & employee activities & recognition Resource diversification and alignment $2.5 million, 1% Resource planning IRP Renewable generation development of 150 MW wind and 20 MW solar projects Energy market continue to pursue broader market Infrastructure advancement and technology development $46.6 million, 20% Windy Gap firming project increase water resource reliability Headquarters campus meet growing and changing needs of workforce, technologies and facilities Physical security, cyber security, fiber and transmission projects Core operations, 73% Rawhide Energy Station Bottom ash conveying system and containment project final costs (proactive environmental compliance) Monofill upgrades (proactive environmental compliance) Protective relays Grading and drainage projects Rotary car dumper variable frequency drives Operational flexibility testing Craig Station Craig Units 1 and 2 scheduled maintenance outages Transmission SONET equipment upgrade Oil breaker replacements Generator step up transformer project planning CIP requirements Other expenses Medical expenses 6 new positions IT investments (engineering & help desk) Centralized fleet management program Organic contract and power supply agreements renewals

27 Key variances 2018 budget to 2019 budget DSM expansion $1.3M increase $10M total 6 new positions $0.7M Ongoing operations & maintenance $0.7M increase IRP & IT Capital investments $19.2M overall decrease $53.8M w/o Craig outage Debt financing $100M financed Interest income $1.5M increase Medical expenses increase $2.2M Surplus sales energy & wheeling $2.2M increase Craig outage $2.1M Maintenance & capital 2019 budget $273.7M 2% Tariff 1 rate increase $3.9M increase Owner communities load reduction $4.8M decrease Positioned to meet Platte River s strategic direction.

28 Questions

29 Budget details for your information (not presented) Small differences may exist in the following tables compared to the budget document due to rounding.

30 Owner communities sales ($ millions) Increase budget budget (decrease) Explanation Owner communities revenues Tariff 1 average rate increase 2%, load reduction estimate 2.3% Demand $ 58.5 $ 58.2 $ (0.3) Energy (0.6) Renewable energy premium Tariff 7 $26/MWh, no rate change Total $ $ $ (0.9) MW 700 Peak Load Budget 646 Budget 659 Actual actual 2017 actual 2018 budget 2018 estimate 2019 budget

31 Sales for resale and wheeling ($ millions) Sales for resale and wheeling budget budget Increase (decrease) Short-term $ 18.9 $ 20.3 $ 1.4 Energy increase 8% due to lower generation (owner communities load decrease), price decrease 0.5% due to market data Wheeling Increase in third party customer loads and Tariff 4 rate increase Total $ 23.5 $ 25.7 $ 2.2 Explanation $ millions $20.1 $23.7 $23.5 $26.2 $ actual 2017 actual 2018 budget 2018 estimate 2019 budget Short-term sales Wheeling revenues

32 Sales for resale prices $/MWh 30 Average short-term wholesale price $21.35 $21.66 $26.10 $23.38 budget budget $23.12 $23.38 $23.00 $24.05 YTD 2018 * actual 2017 actual 2018 budget 2018 estimate 2019 budget Excludes sales from the combustion turbines and JDA transactions. * Pricing was strong during the summer of 2018 due to higher temperatures and high natural gas prices in California leading to higher than anticipated prices in the region.

33 Other revenues ($ millions) Other revenues budget budget Increase (decrease) Explanation Interest income $ 2.8 $ 4.3 $ 1.5 Projected increase in interest rates and cash balances Other income (0.2) Total $ 3.1 $ 4.4 $ 1.3 Includes miscellaneous leases and Trapper Mine refund; no fiber revenue due to transfer of fiber assets $ millions 5 $ $1.9 $2.4 $3.1 $ actual 2017 actual 2018 budget 2018 estimate 2019 budget Interest income Other income

34 Purchased power $ millions ($ millions) Purchased power budget budget Western Area Power Admin $ 16.9 $ 16.9 $ - Other purchases (3.1) Wind and RECs Contract rate escalations Market: 2018 included replacement power for Rawhide Unit 1 maintenance outage also lower reserves. Solar (0.1) Contract, slight decrease in generation Solar - owner communities programs Increase (decrease) Contract Outage accrual (2.1) Total $ 34.5 $ 34.2 $ (0.3) Explanation 2018 Rawhide Unit 1 outage accrual reversal 100% of estimated expenses accrual for 2021 outage $33.3 $35.4 $34.5 net $36.6 net $ $(2.1) $(2.1) 2016 actual 2017 actual 2018 budget 2018 estimate 2019 budget Western Other purchases Wind & REC Solar Solar - owner communities Outage accrual

35 Fuel expense Fuel expense ($ millions) budget budget Increase (decrease) Rawhide Unit 1 $ 29.3 $ 31.9 $ 2.6 Craig Units 1 and (3.7) Combustion turbines Total $ 49.7 $ 49.1 $ (0.6) Explanation Capacity factor of 95.5% due to generation increase of 13% (no outage), average delivered coal cost decrease of 3% (price based on market) Capacity factor of 57.6% due to generation decrease of 20% (2019 both units have outages) partially offset by an average delivered coal cost increase of 2% Generation increase 297% (model projections & more in line with actual) partially offset by a natural gas price decrease of 23% $ millions $46.4 $47.7 $49.7 $47.5 $ actual 2017 actual 2018 budget 2018 estimate 2019 budget Rawhide Unit 1 Craig Units 1&2 Combustion turbines

36 Fuel expense $ per MBtu 5 4 Fuel unit cost per million Btu 2019 $/MBtu Rawhide $1.33 Craig $2.00 CTs $ $3.31/MBtu YTD actual 2017 actual 2018 budget 2018 estimate 2019 budget Rawhide Unit 1 Craig Units 1&2 Combustion turbines

37 Production expenses ($ millions) Production expenses budget budget Increase (decrease) Explanation Rawhide $ 31.8 $ 32.1 $ 0.3 Increases in personnel expenses (medical), chemicals (off outage), screen outage, offset by decreases in routine expenses and closure of ash ponds Craig Units 1 and Both unit maintenance outages in 2019 vs. no maintenance outages in 2018 Combustion turbines Power operations Personnel expenses (medical) and tuning and machine testing after controls system upgrade Total $ 45.2 $ 47.4 $ 2.2 $ millions $44.6 $49.6 $45.2 net $44.9 net $47.4 $(7.0) $(7.0) 2016 actual 2017 actual 2018 budget 2018 estimate 2019 budget Rawhide Unit 1 Rawhide Unit 1 outage Outage accrual Craig Units 1&2 Combustion turbines Power operations

38 Transmission expenses New position: Engineering ($ millions) Increase budget budget (decrease) Explanation Transmission expenses Decrease in Craig transmission line maintenance and the NW water line repair Transmission $ 12.8 $ 12.6 $ (0.2) project, increases in personnel expenses (medical). Personnel expenses fluctuate with capital projects. Wheeling Total $ 17.2 $ 17.0 $ (0.2) $ millions $17.2 $16.2 $17.0 $12.8 $ actual 2017 actual 2018 budget 2018 estimate 2019 budget Transmission O&M Wheeling expense

39 A&G expenses ($ millions) Administrative and general budget budget Increase (decrease) Operations $ 14.8 $ 17.4 $ 2.6 New positions in areas of: Information technology (2) General counsel Accounting Facilities Personnel expenses for new positions and increased medical expenses. IRP contracted services. Maintenance IT investments and cyber security insurance Total $ 16.7 $ 20.0 $ 3.3 Explanation $ millions $13.4 $15.4 $16.7 $16.8 $ actual 2017 actual 2018 budget 2018 estimate 2019 budget A&G Operations A&G Maintenance

40 Demand side management ($ millions) Demand side management budget budget Increase (decrease) Personnel expenses $ 0.8 $ 0.9 $ 0.1 Salary adjustments and increase in medical expenses Energy efficiency Expansion of business and consumer product offerings Distributed energy resources (0.3) Total $ 8.7 $ 10.0 $ 1.3 Explanation Decrease in demand response, increases in electric vehicles and smart thermostat programs $ millions $4.0 $6.1 $8.7 $8.6 $ actual 2017 actual 2018 budget 2018 estimate 2019 budget Energy efficiency Personnel expenses Distributed energy resources

41 Capital additions ($ millions) Capital additions budget budget Increase (decrease) Windy Gap firming project, Rawhide CT controls upgrades, monofill updgrades, Production $ 45.2 $ 19.9 $ (25.3) protective relays, grading & drainage, chilled water system upgrade, finalize outage projects, Craig Unit 1 and 2 projects (outage) Transmission (3.3) General Total $ 73.5 $ 54.3 $ (19.2) Projects Circuit switchers, revenue meter replacements, airflow spoilers, solar interconnection, oil breaker replacements Headquarters campus, SONET equipment replacement, IT projects, real time tools, vehicle and equipment replacements $ millions $73.5 $ $ $38.4 $ actual 2017 actual 2018 budget 2018 estimate 2019 budget Production Transmission General

42 Debt service expenditures ($ millions) Debt service expenditures budget budget Increase (decrease) Principal $ 12.2 $ 10.4 $ (1.8) Interest (0.5) Explanation Series KK debt issuance planned for $100 million to fund the Windy Gap firming and the headquarters campus projects Allowance for funds used during construction (2.3) (2.2) 0.1 Interest on bond funds allocated to capital assets Total $ 20.8 $ 18.6 Based on scheduled debt service payments, Series HH paid off, and Series KK $ (2.2) (new) included for $2.4M $ millions $29.6 $27.9 $23.1 $20.8 $ actual 2017 actual 2018 budget 2018 estimate 2019 budget Principal Interest

43 Board of Directors Meeting September 27, 2018

44 Update on the 75 MW wind option September 27, 2018

45 Background Platte River Roundhouse Wind Power Purchase Agreement (PPA) includes an option to purchase up to an additional 75 MW Option must be exercised prior to December 31, 2018 Resource Planning has been evaluating the risks associated with adding additional wind Operations has been analyzing various options to accommodate additional intermittent resources on the Platte River system

46 Resource planning analysis Base assumptions: Carbon costs start at about $4/ton in 2025, escalating to about $16/ton in 2035 Rawhide operates with a 140 MW minimum capacity Craig 2 retires in 12/29 Many different price / volatility cases were evaluated to develop range for option value: Various market depth amounts SPP-based market price shapes / volatility SPP-based market price shapes / volatility (with curtailments) 2018 market prices escalating at two percent Carbon / no carbon (Craig 2 retires earlier or later)

47 Resource planning - risk analysis Key assumptions Coal plants at minimum output levels Craig 2 retires in 12/29 No long-term forward energy sales Key risk considerations Forward sales amounts and prices less predictable as surplus energy is driven by high wind output Cycling is expected to add another $1-2/MWh in maintenance costs (Burns McDonnell study underway) Incremental wind increases required sales

48 Resource planning - risk analysis 100% Amount of wind that must be sold to market 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Value of wind being sold is dependent on actual market prices New MW of wind

49 Potential operational improvements POTENTIAL IMPROVEMENT Sell 12 MW of Silver Sage wind to Black Hills Power and replace with a purchase of a similar amount of additional Roundhouse wind Sell up to 50 MW of Craig Output for five years, starting in 2019 Review options to the reduce Rawhide operating minimum from 140 MW to 90 MW Develop options for future renewable resources Discuss sales with potential buyers of Platte River s surplus energy Complete STATUS Evaluating responses to our Reverse Request for Proposals Planning to perform testing at lower minimums in April 2019 Submitted interconnection requests for 150 MW of injection of solar at Rawhide and Ault substations Meetings 9/18 and 9/25

50 Key takeaways All reasonable possibilities are being considered in an attempt to accommodate more wind Unless forward sales can be accomplished, a significant share of the incremental wind will need to be sold into market During times of high wind output, market prices could be extremely low or potentially no opportunity to sell output Must ensure additional wind meets Platte River s three pillars i. system reliability ii. environmental responsibility iii. financial sustainability

51 Schedule September 2018 November 2018 December 2018 December 2018 SCHEDULE Complete the financial analysis Evaluate and complete, if appropriate, the sales of surplus energy for the years 2020 through 2025 Develop a recommendation for Platte River s Board of Directors meeting Send Enyo / NextEra a notice specifying the additional amount of wind that Platte River will purchase

52 Questions

53 Board of Directors Meeting September 27, 2018

54 2018 Rawhide outage September 27, 2018

55 Everything starts with safety Our goal is for no one to get hurt during the outage. This is for all Platte River employees and contractors. There were no injuries during the 2015 outage. Thank you There was one first aid and one near miss incident. This is an achievable goal but it takes a lot of planning.

56 Schedule and budget Outage schedule Off-line date: 9/24/18 On-line date: 11/12/18 Seven weeks: critical path - generator and bottom ash Thank you Outage budget allocation 8% 26% 66% Regulatory compliance Reliability Efficiency

57 Major projects Generator Bottom ash system Air preheater baskets Feedwater heater Thank you Large number of Operations and Maintenance (O&M) work orders

58 Generator The generator has two internal shorted turns that were initially discovered in Shorted turns occur when there is a breakdown in the insulation between the turns on the rotor. Pole imbalance testing of the shorted turns has shown that this issue has worsened each time that they have been inspected and tested. Tests were conducted in 2005, 2008 and Thank you The turbine manufacturer recommends addressing this issue, as the tested value increases towards ten percent. A third party consulted states that, from their experience, when the shorted turns increase to over five percent, the rotor can begin to experience problems.

59 Generator Pole imbalance trends 14% 12% 10% Thank you 8% 6% 4% 2% 0% ;.87%/yr increase ;.24%/yr increase Avg;.20%/yr increase

60 Generator The original generator rotor will be removed and replaced with the new rotor. All stator windings will be removed an replaced with new components. Thank you The recent iso-phase repairs will also be inspected. Relay testing, as required for NERC compliance, will be performed.

61 Bottom ash system The original bottom ash system will be removed and replaced with the new conveyor system. This project is being done to comply with Coal Combustion Residuals (CCR) regulation. Thank you The bottom ash will be conveyed out of the boiler building and trucked to the monofill.

62 Bottom ash system Thank you

63 Air preheater The APH baskets and seals will be replaced during the outage. This will improve the thermal performance, returning it back to its original specifications Thank you

64 Feedwater heater The LP Feedwater heater 102 will be replaced during the outage. Thank you

65 Questions

66 Board of Directors Meeting September 27, 2018

67 August operational results Category August variance YTD variance Municipal demand (6.8%) 2.0% Municipal energy (3.7%) (0.9%) Baseload generation (13.5%) (10.4%) Wind generation (7.5%) (4.3%) Solar generation 7.8% (0.7%) Surplus sales volume 33.0% 1.2% Surplus Sales Price 69.0% 14.7% Dispatch cost (1.7%) (1.1%) Variance key: Favorable: >2% Near budget: +/- 2% Unfavorable: <-2%

68 Board of Directors Meeting September 27, 2018

69 Financial summary Category August Variance from Budget ($ in millions) Year to Date Variance from Budget ($ in millions) Net Income $1.5 $9.0 Debt Coverage 1.0x.58x Revenues $1.3 $3.1 Operating Expenses ($0.4) $4.4 Capital Additions $1.5 $16.7 > 2% Favorable 2% to -2% At or Near Budget < -2% Unfavorable

70 Board of Directors Meeting September 27, 2018