Entergy Corporation · NYSE:ETR
Entergy — Technical Presentation (August 2012)
62 slides from Entergy's technical presentation, Aug 9, 2012
Slide 1: 2012 Request for Proposals for Long-Term, Supply-Side Baseload Resources
2012 Request for Proposals for Long-Term, Supply-Side Baseload Resources Bidders’ and Technical Conference ENTERGY SERVICES, INC. AUGUST 9, 2012 1
Slide 2: Conference Introduction
Conference Introduction Purpose of the Conference – To give participants a high level overview of the 2012 Baseload Request for Proposals (RFP) and related processes Questions – For Bidders attending in person, questions should be submitted in writing using the paper provided at your tables – For Bi
Slide 3: Agenda Items
Agenda Items Introductions LPSC Technical Conference Independent Monitor Comments – Energy Associates Overview of RFP – Representative RFP Schedule – Key Objectives and Elements of RFP – Product Solicitation Overview – Bidder Registration and Proposal Submission Processes – RFP Process Safeguards Pr
Slide 4: Introduction
Introduction ESI Presenters – Dakin DuBroc Project Manager – Rachelle Johnson Analyst, Supply Procurement – April Phelps RFP Administrator – Charles DeGeorge Manager, Supply Planning & Analysis – Kenisha Webber Engineer, Power Delivery & Technical Services – Rae Ann Dodds Manager, Market and Credit
Slide 5: LPSC Technical Conference
2012 Request for Proposals for Long-Term, Supply-Side Baseload Resources LPSC Technical Conference AUGUST 9, 2012 5
Slide 6: Independent Monitor Comments
Independent Monitor Comments Energy Associates 6
Slide 7: Overview of 2012 Baseload RFP
Overview of 2012 Baseload RFP 7
Slide 8: Representative RFP Schedule
Representative RFP Schedule (Dakin DuBroc) 8
Slide 9: Representative Schedule
Representative Schedule Target RFP Schedule* Milestone Date Issue Draft RFP July 25, 2012 Bidders’ Conference August 9, 2012 Final RFP Issued August 29, 2012 ESI Responds to Bidder Questions & Posts Answers to RFP Website Through August 31, 2012 Bidder Registration August 28 – 31, 2012 Proposal Fees
Slide 10: Key Objectives and Elements of RFP
Key Objectives and Elements of RFP (Dakin DuBroc) 10
Slide 11: Key Objectives and Elements of RFP
Key Objectives and Elements of RFP Market-test cost-based purchase of the 59 MW Grand Gulf Nuclear Station Retained Share offered by Entergy Arkansas, Inc. to the other Entergy Operating Companies Primary objectives – Solicit competitive proposals » 50 -150 MW of long-term (10 or more years), reliab
Slide 12: Baseload Resource Needs
Key Objectives and Elements of RFP Baseload Resource Needs (MW) 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2013* 2014** 2015** 2016*** Assumptions: -Need based on summer 2012 ratings and long-term baseload resources * 2013 – System-look, including EAI resources; limited term “WBL” r
Slide 13: Key Objectives and Elements of RFP: Other Basic Elements
Key Objectives and Elements of RFP Other Basic Elements Solicitation open to resources located inside or outside the Entergy System – Resource proposed must be existing (commercial operation by August 1, 2012) – Resources not directly interconnected to the Entergy transmission system will be respons
Slide 14: Other Basic Elements (Continued)
Key Objectives and Elements of RFP Other Basic Elements (Continued) Entergy Competitive Affiliates are ineligible to participate in RFP RFP affords ESI latitude to accommodate a potential move to MISO, the pending transaction with ITC Holdings and other developments, and addresses developments relat
Slide 15: Resource Eligibility
Key Objectives and Elements of RFP Resource Eligibility Each generation resource proposed must be a single resource (or portion thereof) – Generation resources located at separate facilities are not single resources Eligible technologies include those that can operate in a baseload role – Gas-fired
Slide 16: RFP Proposal Requirements
Key Objectives and Elements of RFP RFP Proposal Requirements Only proposals submitted in accordance with and meeting the requirements of the RFP can be assured full consideration Threshold requirements for proposals – Deliverability, viability, and credit threshold requirements as determined by the
Slide 17: Product Solicitation Overview
Product Solicitation Overview (Rachelle Johnson) 17
Slide 18: Product Description and Pricing
Product Solicitation Overview Product Description and Pricing Soliciting a Long-Term Baseload Product – Generally, 7x24, round-the-clock Capacity, Capacity-Related Benefits, Energy, Environmental Attributes and Other Electric Products – Unit-contingent Purchase Power Agreement Pricing for the Baselo
Slide 19: General Terms and Conditions
Product Solicitation Overview General Terms and Conditions General Contract Terms and Conditions (see Section 2.2 of Main Body) – ESI will not post model contracts – Term Sheet (Appendix C) Terms and Conditions are basis for Bidders’ proposals – Bidders may propose special exceptions to discrete Ter
Slide 20: Basic Commercial Terms
Product Solicitation Overview Basic Commercial Terms* Delivery Term – Minimum – 10 consecutive years – Maximum – Not more than the resource’s remaining useful life or 30 consecutive years, whichever is less Fuel – Seller will be solely responsible for providing all fuel and fuel transportation requi
Slide 21: Basic Commercial Terms (Continued)
Product Solicitation Overview Basic Commercial Terms (Continued) Seller may (but is not required to) offer to provide Replacement products to Buyer during periods of resource unavailability; Buyer may accept/reject the offer in its sole discretion Regulatory approvals and other conditions precedent
Slide 22: Basic Commercial Terms (Continued)
Product Solicitation Overview Basic Commercial Terms (Continued) Change In Law – In item 29 of Appendix C of the RFP, the potential Buyers have indicated a willingness to entertain proposals (other than with respect to renewable resources) for Buyer to share in certain costs and savings resulting fr
Slide 23: Bidder Registration & Proposal Submission Process
Bidder Registration & Proposal Submission Process (April Phelps) 23
Slide 24: Bidder Registration & Proposal Submission Process
Bidder Registration & Proposal Submission Process Registration and Submission will utilize forms and templates posted to the RFP Website, including: – Bidder Registration Form – Proposal Package » Product Proposal template » Due diligence questionnaire – Proposal Submission Agreement All proposal-re
Slide 25: Proposal Submission Fees
Bidder Registration & Proposal Submission Process Proposal Submission Fees – $5,000 for each registered proposal – Bidder invoiced within three business days after ESI’s receipt of executed Bidder Registration Form – ESI must receive the Proposal Submission Fee for each registered proposal no later
Slide 26: RFP Process Safeguards
RFP Process Safeguards (April Phelps) 26
Slide 27: Independent Monitor
RFP Process Safeguards Independent Monitor Energy Associates (Elizabeth Benson) is the Independent Monitor – Experienced, independent third party – Working with ESI in development of the RFP solicitation, evaluation and selection processes – Helping ESI ensure that the RFP and its evaluation process
Slide 28: Codes of Conduct, Protocols, Design
RFP Process Safeguards Codes of Conduct, Protocols, Design Codes of conduct – Employees of ESI, any Entergy Operating Company, or any Entergy Competitive Affiliate must abide by applicable Affiliate Rules and Codes of Conduct – Links provided on the 2012 Baseload RFP Website Additional protocols – I
Slide 29: Proposal Evaluation Process
Proposal Evaluation Process 29
Slide 30: Evaluation Overview
Evaluation Overview (April Phelps) 30
Slide 31: Evaluation Overview
Evaluation Overview Primary Objective – Identify proposals that meet the RFP needs and requirements at the lowest reasonable cost, taking into account reliability, risk mitigation and other relevant factors Process designed to be fair, impartial and consistently applied Four RFP Proposal Evaluation
Slide 32: Primary and Secondary Selection Lists
Evaluation Overview Primary and Secondary Selection Lists Primary selection list – Bidder with a proposal on primary selection list may be required to enter into a letter of intent (LOI) to proceed to a definitive agreement – Due diligence/finalization and execution of definitive agreement would fol
Slide 33: Evaluation Process Flow
Evaluation Overview Evaluation Process Flow ILLUSTRATIVE All Conforming Proposals Resource Location Analysis Fundamental Economic (DAT) Phase I Analysis ($/MWh) Resource Fatal Flaw Analysis (EET) (VAT) Preliminary Ranking Preliminary Due Diligence Deliverability Analysis (DAT) Additional Evaluation
Slide 34: Economic Evaluation
Economic Evaluation (Charles DeGeorge) 34
Slide 35: Economic Evaluation
Economic Evaluation Objective – Identify proposals that meet the RFP needs and requirements at the lowest reasonable cost, taking into account reliability, risk mitigation and other relevant factors EET’s ranking of proposals will be based on the economic evaluation results of a fundamental economic
Slide 36: Methodologies – Fundamental Economic Analysis
Economic Evaluation Methodologies – Fundamental Economic Analysis Compares the cost of each proposal based on a prescribed set of operating assumptions Estimates full-in economic cost for each proposal Utilizes an Excel-based spreadsheet model Estimates based on all relevant cost components, includi
Slide 37: Methodologies – Net Benefits Analysis
Economic Evaluation Methodologies – Net Benefits Analysis Utilizes a production cost model to produce a forecast of locational marginal pricing (LMP) for each resource Estimates the energy value of each proposal based on the LMP and generation of the resource Determines the net benefits of the propo
Slide 38: Phase I and Phase II
Economic Evaluation Phase I and Phase II Phase I: Preliminary Analysis – With input from DAT and VAT, EET will identify proposals that meet the Preliminary Shortlist Requirements – EET will also develop a preliminary economic ranking of the proposals – EET will prepare a Preliminary Shortlist at the
Slide 39: Deliverability Evaluation
Deliverability Evaluation (Kenisha Webber) 39
Slide 40: Transmission Risk Allocation
Deliverability Evaluation Transmission Risk Allocation – Bidder/Seller assumes certain transmission risk to specified point of delivery on Entergy transmission system (EPOD) » Resource must be capable of serving as an Entergy network resource » Costs of transmission upgrades to EPOD (distinct from i
Slide 41: Deliverability Evaluation
Deliverability Evaluation DAT is responsible for assessing the issues and costs resulting from delivery of a product offered by Bidder Phase I – DAT will work with the VAT to determine the preliminary viability of proposals – Review focused on identifying failures to satisfy the delivery assessment
Slide 42: High Level Process
Deliverability Evaluation High Level Process Each Step 1: Determine Location Resource •Off ETR Transmission System •On ETR Transmission System Step 1a: Define Interface (If Applicable) •Determine appropriate interface to the ETR system Step 2: Determine Applicable Transfer Studies •Point-to-Point (o
Slide 43: Viability Assessment
Viability Assessment (Rachelle Johnson) 43
Slide 44: Viability Assessment
Viability Assessment Review of technical, environmental, fuel supply/transportation, deliverability and commercial merits of resources/proposals submitted in response to RFP VAT will consist of Subject Matter Experts (SME) primarily from the following focus areas – Commercial – Plant & Equipment/Ope
Slide 45: Viability Assessment: Phase I
Viability Assessment Phase I – VAT will review proposals for compliance with the viability elements of the Preliminary Shortlist Requirements » The Facility must be an Eligible Resource » Bidder must be an eligible Participant » The Delivery Term for the proposed Definitive Agreement must be at leas
Slide 46: Viability Assessment: Phase II
Viability Assessment Phase II – VAT will conduct a detailed assessment to develop an overall risk/viability profile on each proposal included on the Preliminary Shortlist – Risk and viability evaluations will include assessments of: » Resource capabilities and performance history » Fuel procurement
Slide 47: Viability Assessment - Additional Considerations
Viability Assessment - Additional Considerations Fuel Supply and Transportation ESI prefers proposals that offer fuel supply flexibility and energy price stability – Fuel supply flexibility considerations in the evaluation of proposals will include: » Supply liquidity » Sourcing and fungibility of s
Slide 48: Credit Review/Collateral Requirement
Credit Review/Collateral Requirement (Rae Anne Dodds) 48
Slide 49: Credit Review/Collateral Requirements
Credit Review/Collateral Requirements Generally, no Bidder will be excluded or prohibited from participating on the basis of credit No credit postings required of Bidders prior to LOI execution $2 million letter of credit (L/C) will be required with any LOI signed between Buyer and Bidder/Seller CET
Slide 50: Credit Review/Collateral Requirements
Credit Review/Collateral Requirements The CET will assign a Bidder credit rating (or Bidder’s credit support provider’s credit rating) for all proposals, based on, among other things – S&P and Moody’s ratings – 10K/10Q/8K evaluation – If SEC reports unavailable, two years of audited financial statem
Slide 51: MISO Overview
MISO Overview (Mike Goin and Todd Hillman) 51
Slide 52: Moving to Tomorrow
Moving to Tomorrow Role of a Regional Transmission Organization (RTO): Manages the dispatch of generation and transmission of electricity Manages supply, demand and cost of production while maintaining reliability Allows access to a vast network of electricity buyers and sellers Not all RTOs have al
Slide 53: What are “Day 2” Markets?
What are “Day 2” Markets? FERC made the distinction between RTOs/ISOs that have a “Day 1” market for Energy Imbalance Service (EIS), but still relied on members to make commitment decisions, and “Day 2” markets that included full centralized commitment and dispatch (Order 2000) MISO Runs a “Day 2” m
Slide 54: A Day Market Transfers Responsibilities from the Utility to the RTO
A Day 2 Market Transfers Responsibilities from the Utility to the RTO ICT Day 1 RTO Day 2 RTO (Current) (e.g., SPP) (e.g., MISO) Utility • T planning • T planning • T planning • T operations • T operations • T operations • Control area / bal • Control area / bal • Offer generation or self • Gen comm
Slide 55: MISO Directs Commitment and Dispatch Process for Its Entire Region
MISO Directs Commitment and Dispatch Process for Its Entire Region One Entity Optimizing for Region All generators bid or schedule in day ahead market; MISO evaluates against expected demand and determines economic, reliable commitment and dispatch Hourly market provides ability to check and adjust
Slide 56: Locational Marginal Pricing in Day 2 Markets
Locational Marginal Pricing in Day 2 Markets GEN A West Price = $30/MWh East Price = $40 GEN C 1000 MW 1000 MW 300 MW 250 MW 500 MW 500 MW Rated Bid = $30 Interface Bid = $40 GEN B 800 MW 750 MW 1000 MW Congestion = $10 1,000 MW Load 1 Load 2 Bid = $25 Congestion occurs when transmission constraints
Slide 57: Locational Marginal Prices
Locational Marginal Prices Congestion and marginal loss pricing will result in price differentials throughout the system. These are average Day Ahead prices from 2008. Real-time pricing can be viewed on MISO’s Web site at https://www.misoenergy.org/ MarketsOperations/RealTime MarketData/Pages/LMPCon
Slide 58: MISO Resource Adequacy Process
MISO Resource Adequacy Process Enhancements Conditionally Approved by FERC: – Load Serving Entities (LSE) required to demonstrate Resource Adequacy based on their peak demand forecast and MISO Planning Reserve Margin – Capacity Resources must be deliverable to load to qualify to provide capacity – C
Slide 59: For Additional Information on MISO
For Additional Information on MISO MISO Website - https://www.midwestiso.org/Pages/Home.aspx MISO Markets and Operations Website - https://www.midwestiso.org/MarketsOperations/Pages/MarketsOperations.aspx Becoming a Market Participant Website - https://www.midwestiso.org/StakeholderCenter/MarketPart
Slide 60: Break
energy Break 60
Slide 61: Q&A Session
Q&A Session ESI requests that Bidders attending remotely submit all questions in writing to the RFP Administrator at esirfp1@entergy.com 61
Slide 62: Q&A Session
Q&A Session Participant Questions and/or Feedback Questions received during today’s conference will be posted to the RFP Website: https://spofossil.entergy.com/ENTRFP/SEND/2012Rfp/Index.htm ESI will accept written questions/feedback about the RFP from market participants and other interested parties