Power Forum

Primer Session 2019

Thursday, 11 April | Big Picture Theatre, Capital Tower Access the web-app at asiapowerforum.app

Power Generation Case Study APF Primer Session 2019 Presented by • Stephanie Etourneau – JLT Asia • Matt Robinson – Integra Technical Services • Jon Sykes - Dr J H Burgoyne & Partners • Nicholas Sykes - Clyde & Co Clasis • Phillip Taylor - MDD Forensic Accountants

Stephanie Etourneau, Regional Claims Director, JLT Specialty Stephanie holds a Master of Laws from the University of Sussex and is a qualified solicitor in the UK. Stephanie started her career in insurance with AXA in 1998. After some time working in private law practices, she has worked in the UK, Australia, Canada and Jordan as a claims consultant handling power plant losses during the construction and operational phases. She joined JLT in Singapore at the end of 2017 to handle large and complex claims in the Region concentrating on helping JLT’s clients to present their claims in an optimal way to ensure fair and equitable outcomes.

Matt Robinson, Senior Adjuster, Integra Technical Services Matt joined Integra Technical Services in Singapore as a Senior Adjuster in September 2017 having had 19 years prior experience working for global Loss Adjusters. He has experience handling claims across various lines of business including Power, Oil & Gas, Renewable Energy, CAR/EAR, Machinery Breakdown, and Business Interruption/CBI.

Jon Sykes, Resident Director, Dr J H Burgoyne & Partners (International) Ltd, Singapore Jon Sykes is a materials engineer specialising in the investigation of losses involving materials failures. He joined Burgoynes’ Singapore office in 2001 and became a Partner in 2006. He is currently the Resident Director of the Singapore Office. Jon has carried out numerous investigations into the cause of failures of materials and mechanical equipment. Incidents investigated include corrosion, fracture, fatigue cracking, embrittlement and degradation of metallic, plastic and ceramic components. Jon is experienced in the investigation of both land-based and marine incidents. He has investigated land-based incidents that include corrosion failures in chemical process plants and paper mills, failures in gas and steam turbines and incidents involving cranes. Marine incidents he has investigated include corrosion in cargo and ballast tanks, failures of engines, rudders and propellers and paint coating failures. He has provided expert witness evidence both in court and at arbitration proceedings in the UK, Singapore, Malaysia and Thailand.

Nicholas Sykes, Partner (w.e.f. 1 May 2019), Clyde & Co Clasis Singapore Nicholas' practice focuses on large scale property and power / energy losses. Nicholas advises and acts for numerous [re]insurers across Asia Pacific, particularly those based in Singapore, Japan, South Korea, Indonesia, Malaysia, Vietnam and the Philippines. He also advises clients based in Europe.

Phillip Taylor, Managing Partner - Asia Pacific, MDD Forensic Accountants Phillip joined MDD Forensic Accountants’ London office in 1994 and relocated in 2003 to open and manage the firm’s Singapore office. Phillip is currently the Managing Partner for Asia Pacific. Phillip has specialized in the areas of lost profits, material damage, fidelity claims, fraud, concealment & misrepresentation, product liability and recall damages. His diverse industry experience includes most forms of power generation technology, oil and gas, petrochemicals and mining. Phillip has been engaged on numerous occasions to provide expert witness reports for arbitrations and courts around the world and has participated in several mediations.

Important Housekeeping • This case study is designed to walk you through a ‘realistic’ claim adjustment process from start to finish • It is not a real example – in order to present on as many issues as we can, there may be a few inconsistencies • We are trying to condense a process that would take several months with many participants into 1.5 hours • Chatham house rules apply – the opinions expressed are designed to stimulate thought and debate and may not represent the views of the companies that employ the speakers • Included in your bags is a Glossary of Terms that was prepared by the APF Committee – we hope it might be a helpful reference tool.

Background • Baseload Combined Cycle Power Plant • 2 x GTs (100 MW each) 1 x ST (120 MW) total capacity 320 MW • Entered commercial operation on 1 January 2015

Gas Turbine Generators

Incident Damage was discovered on 1 October 2018 after GT1 tripped due to high vibrations and loss of compressor discharge pressure A borescope inspection identified extensive damage to the compressor section of GT1

Policy • Machinery Breakdown (MB) section: • Limit of USD 50m • Deductible of USD 500,000

• Business Interruption (BI) section: • • • •

Gross Profit 24-month maximum Indemnity Period BI Sum Insured of USD 119 million BI Deductible: “Time Excess: 30 days”

Claim Notification – Policy • Notification provision: “the Insured shall AS SOON AS PRACTICABLE after receipt by them of advice of a claim(s) under the Policy or upon knowledge of the possibility of any such claim(s), give written notice thereof to the Insurer” • Advice to the Insured: • • • •

Don’t destroy evidence Keep photographic records/documents Mitigate Expedite

Loss Adjuster Appointment • Nominated loss adjusters: “It is agreed that one of the following companies shall be appointed by the Insured as loss adjuster: A.N.Other Integra”

• Obtain lead agreement to appoint Matt • Email Matt details of the incident, pictures, any preliminary investigation reports, contact on site to arrange his visit, policy schedule and wording

Initial Instruction • Role of a Loss Adjuster

• Engaged by (re)insurers but required act impartially to investigate the circumstances of a potential claim and apply the terms of the Policy in relation to coverage and quantum

• Information received from the Broker

• Policy and slip • Claim notification – date and time of loss, basic circumstances, borescope report and images

• Appointment of Experts

• Given the extent of damage and potential exposure, Insurers agree to engage forensic engineers to investigate cause and a forensic accountants to assist with the assessment of any BI claim arising

• Initial contact with the Insured

• Introductions, clarify the circumstances of the incident, actions to date and current status at the plant • OEM has attended site to begin investigation. The upper casing is due to be removed on 4 October 2018 to access the compressor/turbine rotor • Arrange site survey for 5 October 2018 and confirm that I will be joined by forensic engineer, Jon Sykes, engaged by Insurers to provide an independent RCA • Provide agenda for site visit and request key personnel be present

Site Survey – 5 October 2018 • I attend site with Jon and find that the upper casing of GT1 has been removed and preparations are being made to lift the rotor on to a stand for further inspection • We confirm the circumstances leading up to the breakdown, trip / alarm codes recorded on DCS, operation of safety protection systems • Inspection shows extensive damage to all stages of rotor blades and stator vanes in the compressor section of GT1 • We also observe minor damage to the 1st stage of turbine buckets but these impact marks appear to pre-date the incident due to the presence of oxidation. Further investigation is required • We collect photographic evidence relevant to damage and cause

Site Survey Continued A meeting is convened in the plant office: • Establish plant configuration, main equipment, ownership, background and agree documentation required • Plant operating status - GT1 shutdown but GT2 operating normally and supplying steam to enable the ST to operate at ~50% load • The RCA process is agreed between Jon and OEM - scope of testing, collection of samples, which laboratory, joint or independent testing? • The Insured confirm they have an LTSA for GT1 with the OEM. Discounted rates for parts and equipment for ‘extra works’ outside of periodic maintenance • Establish basis of revenue – base load plant – power exported to the grid under Power Purchase Agreement (PPA) – potential daily loss of Capacity Payment and/or Energy Payment • A timeline for delivery of information, damage assessment and RCA is agreed with Insured

Remedial Works The Insured is reluctant to use non-OEM vendors due to concerns that the LTSA warranty would be void in the event of any future failure of these parts and a lack of previous experience Return to Service Options for GT1: • Option 1 (Repair): OEM to supply and install new compressor blades/stators and 1st/2nd stage turbine buckets from their Singapore workshop • Option 2 (Replacement): OEM to supply an exchange rotor and new stator vanes available from an overseas factory Oct-18

Option 1:

Procurement Phase

Option 2:

Procurement Phase

Nov-18

Parts Shipping

Dec-18

Workshop Repair

Exchange Rotor Supply/Delivery

Purchase Order place on 20 October 2018

Jan-19

Rotor Shipping

Installation/Commissioning

Installation/Commissioning

GT1 restarts on 1 Feb 2019 at 00:00

GT1 restarts on 1 Jan 2019 at 00:00

Cost Comparison Description

Procurement

Option 1 Repair (USD)

Option 2 Exchange Rotor (USD)

Comments

1,800,000

4,800,000 OEM Quotation (Option 1 & 2)

Shipping

100,000

400,000 Shipping to workshop/delivery

Manpower

400,000

200,000 Installation/commissioning

Workshop Costs

100,000

0.00 Local workshop hire costs

Tools/Instruments/Consumables

100,000

100,000 Required for onsite work

Gross Total

2,600,000

5,500,000

Less Deductible

(500,000)

(500,000)

Net Total

2,100,000

5,000,000

Mitigation Measures • Alternative Vendors

• Potential use of non-OEM or repairers is viable. LTSA and other issues can hinder this option. However, competitive tendering can be a useful negotiation tool

• Expedited Delivery

• Air freight - critical path parts - is it economic? Is there AICoW cover?

• Lease Engine

• OEMs sometime have lease engine fleet available for hire. Usually an option for aero-derivative machines which are smaller and modular in design and can be air freighted

• Refurbished Rotor or Parts

• Potential consideration in the event of long-lead parts, or if depreciation is applicable to parts on the hot gas path

• Temporary Repair

• Potential to return GT to service with temporary repair or impaired rotor – subject to OEM guidance and approval

Meet Insured to Discuss Circumstances of Incident • Attendance at site to establish the background circumstances of the incident and to inspect the damaged components

• No history of operating problems that might have imposed abnormal stresses on the compressor blades • There had been several shutdowns and starts of the gas turbine generator. None of these were due to problems with GT1. The most recent shutdown occurred at 07:04hrs on 28 September 2018. The unit was restarted that same day. No personnel had entered the air intake chamber during shutdown. The unit was restarted as normal. (Records requested for operating parameters for the time of that trip and for the restart) • The unit had been maintained in accordance with manufacturers’ recommendations (records requested). Inspections conducted on the compressor had found no evidence of abnormalities associated with the compressor blades (e.g. pits, notches, cracks) • No unusual operation before loss. Vibration was normal until suddenly increasing and causing the unit to trip (operating records requested)

Attendance at Site – Inspection of Air Intake Assembly • No damage observed to air intake system or FOD screen • No components “missing” from within the air intake system

Attendance at Site – Inspection of Compressor

Attendance at Site – Inspection of Compressor

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Attendance at Site – Inspection of Buckets • Inspection of turbine buckets reveals damage to leading edges to blades in the first row (stage) only. Damaged areas appear heavily oxidised • Possible pre-existing damage unrelated to the incident • Laboratory examination and testing recommended

Preliminary Report to Loss Adjusters – 7 October 2018 • No evidence to indicate that the damage to the compressor was caused by FOD • Damage caused by the fracture of a single blade in the first stage of the compressor resulting in Domestic Object Damage (DOD) of other compressor components • Fracture of first stage blade probably occurred by a mechanism of fatigue

• Recommended that laboratory examination and testing be carried out on the failed blade to determine whether any material or manufacturing defects might have caused cyclic stresses to be increased. Suggest other interested parties be invited to participate in that testing • Recommended that testing be carried out on representative damaged turbine buckets to determine whether damage was consequential or pre-existing • Review of records will be necessary to establish whether there had been any abnormal operation of the unit that might have contributed to the cause of the incident. Requested list of documents attached to preliminary report

Request for Information – Loss Adjuster I prepare a Request for Information (RFI) including documents not obtained during the site survey. Examples: Background:

Damage/Remedial Works:

Incident:

Cause:

1. GT Equivalent Operating Hours (EOH) and number of starts 2. Technical drawings / specification for GT1 3. Maintenance history of GT1 • Incident report • DCS data log, photographs

• OEM or consultant’s inspection reports • OEM and alternative vendor quotations for both repair and rotor replacement options • Cost of expedited shipping or labour • Documents/information required by forensic engineers • RCA report from OEM (when available)

Preliminary Report – 8 October 2018 Having completed my initial site survey, I draft a Preliminary Report to Insurers. My report includes:

• A description of the risk and insured • An overview of the circumstances of the breakdown event • Initial observations on the extent of damage to the GT - compressor rotor blades, stator vanes, and turbine buckets • Cause investigations are ongoing but no evidence of FOD. Potential manufacturing defect causing cracking which led to liberation of the 1st stage compressor blade. I outline the further planned RCA activities and suggest that Insurers may wish to seek legal opinion on coverage and potential subrogation • Summary of the options being explored for remedial works – scope of work, repair/replacement options, negotiation of OEM price, and potential expediting measures • Details of extent of interruption, potential daily loss, RTS plan and ICoWs being considered • Observations on policy coverage – applicable sections, limits, deductibles, potentially relevant clauses/exclusions - no comment on policy liability pending completion of the RCA • Details of relevant underlying contracts such as LTSAs or PPAs • MB Reserve – USD 2,200,000 (net of deductible and including USD 100,000 contingency)

BI – Key Policy Clauses to Examine • Indemnity Period

• Definition confirming when it starts (usually date of damage) • Maximum IP • Wording for Deductible

BI – Key Policy Clauses to Examine • Indemnity Period

• Definition confirming when it starts (usually date of damage) • Maximum IP • Wording for Deductible

• Is the basis of indemnity clear? • Capacity Payments • Gross Profit • Other

• Is there a Savings Clause? • Is there an Average Clause and are there other clauses that may impact the assessment of this?

BI – Key Policy Clauses to Examine • Indemnity Period

• Definition confirming when it starts (usually date of damage) • Maximum IP • Wording for Deductible

• Is the basis of indemnity clear? • Capacity Payments • Gross Profit • Other

• Is there a Savings Clause? • Is there an Average Clause and are there other clauses that may impact the assessment of this? • Output / Alternative Basis Clause – usual in power plant policies

BI – Key Policy Clauses to Examine • Indemnity Period

• Definition confirming when it starts (usually date of damage) • Maximum IP • Wording for Deductible

• Is the basis of indemnity clear? • Capacity Payments • Gross Profit • Other

• Is there a Savings Clause? • Is there an Average Clause and are there other clauses that may impact the assessment of this? • Output / Alternative Basis Clause – usual in power plant policies • Is there an Other Circumstances Clause?

Request for Information – BI Operational Documents

Accounting Documents

Daily (or hourly) operating data from 1 January 2017 to present: • Gross generation by unit • Internal usage • Net generation exported • Steam exported (if applicable) • Gas fired by unit

Contracts: • Power Purchase Agreement (PPA) • Gas supply agreement • Major O&M agreements

Schedule of planned maintenance – 2017 to 2019

Monthly electricity (and steam if applicable) sales invoices with detailed calculations – 2017 to present

Actual maintenance log – 2017 to present

Monthly invoices for gas purchased – 2017 to present

Grid calendars (if applicable) – defines holiday periods and peak / off-peak periods

Monthly Profit & Loss Statement – 2017 to present

Declared capacity statements (if applicable)

Audited financial statements – 2017 and 2018 Contracts, purchase orders or invoices for any ICW

BI – Projected Capacity / Generation • Project availability / capacity • • • •

Knowledge of planned maintenance before loss and any changes made since the loss Historic levels of forced outage – exceptional or recurring History of de-rating? Any fuel supply issues to consider?

• Project dispatch (NEO)

• All of the above are relevant • Is power demand seasonal? • Different dispatch levels between peak and off-peak (if not baseload)?

• Adjust for auxiliary or internal usage • Two options to project depending on whether i) unit is out of service or ii) running at reduced load due to the loss

BI – Valuing Loss • Verification of PPA pricing formulae • • • •

PPAs contain pages setting out complex formulae Important to reconcile P&L to invoices and to recreate invoice values from operating data Some parameters are constant every month or change once a year Other parameters change from month-to-month

• Fuel Savings

• Review agreements and invoices to understand pricing, volume commitments and if there are Take or Pay provisions • Assess how much fuel is typically burned per kWh • Work with calorific value of fuel burned – not volumes • More than one source of fuel – which is saved?

• Other Variable Cost Savings

• Examples include Chemicals, Water, Transmission Fees, Spare Parts, possibly some O&M

BI – Other Considerations • Potential for Fixed Cost Savings?

• Usual suspects include O&M cost and Depreciation (if asset replaced by insurers)

• Tax implications

• In countries such as Thailand, BOI offers tax privileges to new industrial plants but insurance proceeds may not attract tax privileges • Were they insured?

• PPA Penalties

• In several countries, Insured can pay off-taker if it is unavailable - negative gross profit • Was it insured?

• ICW

• Claims can be mitigated by: Open Cycle Operation, Buying Electricity from 3rd Parties, Expediting Repairs, Lease Engines etc. • Are they economic – rare to see AICW cover in power generation policies?

BI Preliminary Assessment Description

Unit

Daily Loss Estim ate

Loss of Capacity Payment (Excl Penalty) Loss of Energy Payment (Savings) / Increase in Gas Cost (Savings) / Increase in Other Variable Cost

USD USD USD USD

58,072 217,905 (191,147) (4,365)

Loss of Gross Profit

USD

80,465

Description End of Indemnity Period

Replacem ent Repair Option Option USD USD 31-Dec-18 31-Jan-19

Loss of Gross Profit (net of 30-day deductible) MB Cost

4,988,822 5,000,000

7,483,233 2,100,000

Total Estim ated Cost

9,988,822

9,583,233

Daily Capacity Penalty is appx USD 12,000 – to be discussed later!

Laboratory Examination & Testing – Compressor Blade Fracture surfaces examined using a Scanning Electron Microscope (SEM)

• Confirms fracture by a mechanism of fatigue • Fatigue crack had propagated intermittently during start up and shut down

Laboratory Examination & Testing – Compressor Blade Fracture surfaces examined using a Scanning Electron Microscope (SEM)

• Fatigue crack had initiated at a non metallic inclusion in the blade material • The non-metallic inclusion had caused stresses to be locally increased • The blade material had an excessively high volume fraction of such inclusions

Laboratory Examination & Testing – Turbine Bucket Cross- sections prepared and examined using a Scanning Electron Microscope (SEM)

• Heavy oxidation at damage locations indicates that it has been exposed to combustion gases for a prolonged period of time • No evidence of material transferred from fractured compressor blade due to impact

Final RCA Report Issued – 20 October 2018 • Loss caused by fracture of a 1st stage compressor blade • Blade confirmed to have fractured by a mechanism of fatigue, a gradual cracking mechanism • The fatigue crack had developed over the life of the unit, growing intermittently during start-ups and shut downs • The fatigue crack had been initiated by an inclusion within the blade material that had increased stresses locally • The inclusion in the blade material was a manufacturing defect • The damage to the first row buckets was pre-existing and not caused by the incident • No evidence of any abnormal operation of GT1 before the incident occurred • The unit had been maintained in accordance with the manufacturer’s recommendations

What is the extent of the damage? 1. Damage to the turbine buckets. Pre-existing and unrelated to the incident 2. Fracture of a compressor blade. Gradual / intermittent in nature 3. Resultant damage to other compressor components. Instantaneous occurrence

Is the damage insured? Insuring clause “… sudden physical loss or damage…which occurs…during the period of insurance…” Arguments: damage to the turbine buckets and, separately, the compressor blade is not (1) “sudden” and (2) could have occurred prior to the “period of insurance” Why? The RCA confirms: (1) Re. turbine buckets – “Heavy oxidation at damage locations indicates that it has been exposed to combustion gases for a prolonged period of time”; (2) Re. compressor blade – “fatigue crack had developed over the life of the unit, growing intermittently during start-ups and shut downs” (which is longer than the “period of insurance”) Also, neither damage should be considered to have occurred “sudden[ly]” Resultant damage to other compressor components likely satisfies the insuring clause

Is the damage excluded? Excludes loss or damage caused by: • Gradually operating causes (e.g. wear and tear, and gradual deterioration) • Defective design / materials / workmanship • Above expressly limited to items immediately affected (i.e. resultant damage is covered) • Damage to turbine buckets might be excluded – timeframe unclear • Damage to compressor blade is excluded – defect (initiation) and gradual cause (propagation of fracture) • Damage to other compressor components is insured – not defective property and damage caused instantaneously

Any other defences? • Underinsurance / Average? • Betterment?

Policy Coverage • Only the resultant damage to the compressor components is insured • Deduct costs / expenses for reinstatement to turbine buckets and defective blade • Any BI in consequence of (uninsured) damage to the blades is not covered • Possibility of subrogation against OEM?

Update from Broker – 25 October 2018 Matt, Insured has advised it has placed a PO for the repair work on 20 October.

They also would like a payment on account for the repairs and the estimated BI exposure to assist with cash flow.

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Payment on Account What needs to be considered:

• POA is an admission of liability – are there any potential policy exclusions or limits • Repair option is confirmed and PO has been submitted • Costs associated with failed compressor blade may be excluded • Question over whether damage to turbine buckets is covered • Any maintenance work? • Is there scope to negotiation on OEM price? • Is there any salvage value? • What is the payment schedule to which the Insured are committed?

Response to the Broker (26 October 2018): propose POA of USD 1.5m on an unallocated basis. This provides sufficient margin for future MB or BI adjustment

Update from Broker – 10 November 2018 My client has two concerns: • Bringing forward some planned maintenance work that would have taken place in July 2019 to begin in early December – it will last 2 weeks. • They have a significant Take or Pay exposure under their gas supply agreement

BI Further Input – Planned Maintenance • Bringing forward planned maintenance from July 2019 to December 2018 mitigates the loss • Maximum IP is 24 months and the IP continues while the results of the business are impacted in consequence of the loss • Does not refer to positively or negatively • Insurers would normally benefit from this as it prevents downtime in the future and is being brought forwards due to the loss

BI Further Input – Take or Pay Penalties • Issue often raised early in a claim but rarely results in loss for insurers • First question – was this intended to be insured – specific provision / included in calculation of sum insured? • If it is a potentially insured loss:

• What does the fuel supply agreement say? • Often the volume commitment is much less than expected demand (say 60-75%) with the right to buy up to 100% • Often there are roll-back or roll-forward clauses that allow the buyer to offset shortfall in one year with surplus in other years • Sometime pure goodwill comes into play as these are long-term relationships

BI Further Input – Capacity Penalties • If actual capacity less than contracted capacity, seller must pay 20% of the shortfall as a penalty • Does the policy indicate this was specifically insured? • Is there a clause that indicates it may be specific excluded? • If silent, does it seem like it was provided for in sum insured?

Unit

Total Oct-18 to Sep-19

No. of Days in Month No. of Planned Maintenance Days No. of Operating Days

Days Days Days

365 14 351

Projected Capacity Payment Projected Energy Payment Projected Gas Cost Projected Other Variable Costs

USD USD USD USD

40,898,618 180,781,714 (158,582,357) (3,621,429)

Projected Gross Profit

USD

59,476,546

Sum At Risk - Uplifted for 24 m onths

USD

118,953,092

Sum Insured

USD

119,000,000

Description

Adequacy of Sum Insured

%

Capacity Penalty Sum at Risk Including Penalty

USD USD

8,179,724 67,656,270

Sum At Risk - Uplifted for 24 m onths

USD

135,312,539

Adequacy of Sum Insured

%

100.00%

87.94%

BI Further Input – Deductible Application • Wording states “Time Excess: 30 days” • Option 1 – first 30 days excluded from the indemnity • Option 2 – 30 days of average daily loss are excluded • Common to find lack of specific wording on this point • Could have material impact if loss accrues at differing degrees of severity over time:

• Temporary repairs performed and final repairs are much later – reduces ADV deductible • Outage allowances mean there is no loss in first x days – reduces WP deductible • Planned maintenance moved but within MIP – could extend IP / reduce ADV deductible

• Planned maintenance is being brought forwards so IP extends to July 2019 when gain will be experienced – would impact ADV deductible

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Advice on BI Policy Coverage - 24 November 2018 • Arguments on whether deductible should be read as an ADV deduction or waiting period • Generally, contractual penalties / liquidated damages are not insured because they are not a “loss of gross profit” (neither loss of turnover or ICW). Usually expressly excluded too

Update to Broker • Cause investigations conclude a manufacturing defect initiated cracking and blade failure – potential subrogation • Coverage position – defective blade excluded but liability engages for resultant damage • Metallurgical testing has proven that damage to turbine buckets predates the breakdown event under consideration and replacement cost will be excluded • Other opportune maintenance works have been identified • Has repair period been extended by uninsured works?

Final Proposed Adjustment (MB) Description OEM repair quotation

Claim 1,800,000

Adjustment

Comments

1,390,000 Exclude defective blade, turbine buckets

Shipping

200,000

190,000 Excluding shipping cost for turbine buckets

Manpower

400,000

350,000 Excluding labour for turbine buckets and opportune maintenance

Workshop Inspection

100,000

100,000

Tools/Instruments/Consumables

100,000

Sub-Total Less Deductible Total

80,000 Pro-rata of insured works

3,600,000

2,110,000

(500,000)

(500,000)

2,100,000

1,610,000

BI Adjustment – Loss of Revenue Description No. of Days in Month No. of Planned Maintenance Days Net No. of Loss Days Indemnity Period - Moving Planned Maintenance

Unit Days Days Days Days

Oct-18

Nov-18

Dec-18

31

30

31

Jan-19

30

31 14 17

31 31

Total Up to Jan-19 123 14 109 287

Capacity Payment Projected Billing Capacity Actual Capacity Billing Capacity Penalty Loss of Billing Capacity Projected Capacity Payment Rate

kW kW kW kW USD / kW

300,000 150,000 (30,000) 180,000 11.90

300,000 150,000 (30,000) 180,000 11.90

300,000 217,742 (16,452) 98,710 11.90

300,000 150,000 (30,000) 180,000 11.90

Loss of Capacity Paym ent

USD'000

1,786

1,786

979

1,786

6,336

Capacity Paym ent Penalty

USD'000

357

357

196

357

1,267

193,440 111,600 81,840

187,200 108,000 79,200

106,080 61,200 44,880

193,440 111,600 81,840

USD / M Wh

82.54

82.54

82.54

82.54

0.08

Loss of Energy Paym ent

USD'000

6,755

6,537

3,704

6,755

23,752

Total Loss of Revenue (Exc. Penalty)

USD'000

8,541

8,323

4,684

8,541

30,088

Energy Payment Projected Net Generation Actual / Forecast Net Generation Loss of Net Generation Projected Energy Payment Rate

M Wh M Wh M Wh

Com m ents

Assumed 50% loss 20% shortfall of contracted capacity Potential loss appx 60% incl penalty

680,160 392,400 > 50% due to off-peak dispatch 287,760

BI Adjustment – Variable & Fixed Cost Savings Description Savings in Gas Cost Loss of Gross Generation

Unit

Oct-18

Nov-18

Dec-18

Jan-19

Total Up to Jan-19

Com m ents

85,250

82,500

46,750

85,250

7.55 (9)

7.55 (9)

7.55 (9)

7.55 (9)

7.55 (9)

USD'000

(5,926)

(5,734)

(3,249)

(5,926)

(20,835)

USD / M Wh

(1.59)

(1.59)

(1.59)

(1.59)

(1.59) Incl raw w ater, chemical, oil & grease etc.

(Savings) in Other Variable Cost

USD'000

(135)

(131)

(74)

(135)

(476)

Total Variable Cost Savings

USD'000

(6,061)

(5,865)

(3,324)

(6,061)

(21,311)

Loss of Gross Profit

USD'000

2,480

2,458

1,360

2,480

8,777

Fixed Cost Savings

USD'000

Loss of Gross Profit after Savings

USD'000

Projected Heat Rate - Per Gross MWh Actual Gas Price (Savings) in Gas Cost Other Variable Cost Savings Other Variable Cost per MWh of Gross Generation

M Wh M M BTU / M Wh USD / M M BTU

299,750 Based on gross generation, not net generation

0 Immaterial savings of maintenance & depreciation 2,480

2,458

1,360

2,480

8,777

BI Adjustment – Total Loss of Gross Profit

Description

Unit

Waiting Period Deductible

ADV Deductible (Not Moving Planned Maintenance) 8,777 9,897

ADV Deductible (Moving Planned Maintenance)

Loss of Gross Profit after Savings

USD'000

8,777

Deductible

USD'000

(2,400)

(917)

(2,414)

Loss of Gross Profit after Deductible

USD'000

6,377

7,860

7,483

Settlement • Matt submits proposed adjustment of USD 1.6m for MB and USD 6.4m for BI • Meeting between Matt and Stephanie to review adjustment and seek preliminary agreement • Final recommended amounts submitted to Insurers for their consideration and payment • Matt drafts Proof of Loss • Stephanie seeks Insured’s sign-off and helps collect the cash

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