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PRIVILEGED & CONFIDENTIAL
OPPORTUNITY FOR 2016 -2017
PRIVILEGED & CONFIDENTIAL
Discussion Topics
Section
Executive Summary I
Overview II
Tres Amigas Buildout III
Storage IV
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I: Executive Summary
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Executive Summary
• In Dec – 2015, Tres Amigas closed a transaction with Pattern Energy which provides it with the following:
• Fixed, guaranteed annual revenue for 25 years
• Transmission rights from Tres Amigas all the way to California
• Upgrades on the PNM system to unlock its full thermal capacity
• A guaranteed path to construction of Tres Amigas’ WECC Interconnection
• Tres Amigas at this stage represents a unique opportunity for new partners to come into
3
Tres Amigas is at an exciting phase of its journey and is inviting new partners to participate
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Joint Venture Opportunity
• Tres Amigas would like to invite qualified advocates to participate in the development of this next phase under the following construct:
• An earnest money contribution to finalize the development of Tres Amigas’ next phase and demonstrate financial viability of advocates
• In exchange, advocates will receive the following:
• The right to provide the equipment for construction of Tres Amigas
• The right to provide capital for the construction of future phase of Tres Amigas
• Joint rights to all the technology being developed by Tres Amigas
4
Tres Amigas is at an exciting phase of its journey and is inviting new partners to participate
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II: Overview
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The Tres Amigas ProjectThe Tres Amigas (TA) Transmission Superstation will utilize high voltage direct current (HVDC) technology to link the Eastern, Western, and Texas U.S. Interconnections at a single location in New Mexico via a multi node, multi terminal interconnection.
WesternInterconnection(“WECC”)166 GWPeak Load
TexasInterconnection (“ERCOT”)64 GWPeak Load
585 GWPeak Load
EasternInterconnection (“SPP”)
Clovis,NM
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TA will utilize its expertise to deploy proven technology in an innovative way to create a template for the industry
Implementation: Innovation Using Proven Technologies
Voltage Source Converter Controls and Trading Platform
• Utilize expertise from building PJM
• Integrate off-the-shelf solutions to create a state-of-the-art platform
Proven Hardware Software Solution
345kV AC Transmission Lines Under ConstructionContainerized Battery Systems
The world’s first dynamic multi node VSC three-way interconnection of AC grids over HVDC systems
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$531.8
$309.7
$98.7
$86.6
$36.8
$0.0
$100.0
$200.0
$300.0
$400.0
$500.0
$600.0
2012 Gross ArbitrageOpportunity (1)
(A)
Third-PartyTransmission Costs
(B)
Customer's Share:20% of Net Opportunity
(C)=20%*(A)-(B)
Tres Amigas'O&M(2)
(D)
Free Cash Flowto Tres Amigas(A)-(B)-(C)-(D)
($ in
milli
ons)
8
If Tres Amigas Existed in 2012 – A Demonstration of Economic Vitality
Notes: 1) 2012 annual arbitrage opportunity based on TA’s Throughput of 750MW between WECC-SPP and WECC-ERCOT, and 1,500MW between ERCOT-SPP2) O&M figures based on 2018 revenue pro-rata calculations, inclusive of lease payments
Sum of the Price Differences Across All Hours in 2012
Customer Share 20% (TA Share 80%)
No fuel cost or significant variable
costs
TA would have generated $310mmof free cash flow in 2012, on a $1.2bn
investment
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The Economic Case for Tres Amigas Continues to be Strong
9
The Economic Opportunity Unlocked by Tres Amigas is Large, Stable and Sustainable
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The Interconnect Line to WECC
10
Tres Amigas’ WECC Interconnection will link the
wind farms to PNM’s Blackwater Substation
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Schematic (Tres Amigas to CAISO)
11
Tres Amigas’ WECC Interconnection Plus Downstream Transmission Rights Provide Pathway to California
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Wind Pattern Leaves Plenty of Unused Capacity for Tres Amigas
12
Wind Farms Leave Plenty of Unused Capacity for Tres Amigas
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
138
376
51,
147
1,52
91,
911
2,29
32,
675
3,05
73,
439
3,82
14,
203
4,58
54,
967
5,34
95,
731
6,11
36,
495
6,87
77,
259
7,64
18,
023
8,40
5
% o
f Tot
al T
rans
mis
sion
Cap
acit
y
Hours in the Year
Capacity Used by Wind TA Capacity
Capacity Used by Wind Never Exceeds 86.6%
Capacity Used by Wind is Below 47.35% for Half the Year
Capacity Used by Wind is Below 22.43% for a Third of the Year
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III: Tres Amigas Buildout
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Tres Amigas Build Out Strategy
• Identify the “right-size” VSC to link SPP to CAISO utilizing Tres Amigas’ WECC Interconnection and the Downstream Transmission Rights
• The size of the VSC will be based on the following considerations:
• Amount & tenor of contracted revenue that can be obtained between SPP & CAISO
• Construction Time
• Minimizing it is important to receive the most value from trading firms that will be the counter-parties for the contracted revenue
• Build modularly and expand over time to preserve economics and allow efficient project financing
14
Tres Amigas will Expand Modularly Leveraging the Assets That are Currently Being Built
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Backup Center
Tres Amigas Site
Next Expansion: Add the SPP LinkageTres Amigas can build on the WECC Interconnection and add a SPP linkage by installing a Voltage Source Converter at its site
Connection into NRS Wind Farm
Connection into PNM Blackwater
345KV line(4.5 mile )
CLOVIS 345KV Station
PNM Ownership
NRS Ownership
345 KV Line(25.5 miles)
Admin BidgWarehouse
VSC
230 KV Line to Tolk Station
SPS Ownership
Legend:AC LineCommunicationsAC-DC-AC System
SPPWECC
ABQ HeadquartersMain Control Center
15
Tres Amigas WECC Interconnection
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Tres Amigas will Interconnect Opportunistically to SPP & to ERCOT
Tres Amigas Buildout
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IV: Storage Park
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The Near Term Opportunity for Storage
• Tres Amigas has the opportunity to build a 20MW or more storage park at its interconnection with PNM and WECC
• Storage capabilities in an interconnected Bulk power system is a highly desired product Worldwide
• With the transmission rights Tres Amigas currently has to the WECC, the opportunity now exists for TresAmigas to develop a “Storage Park” with a fleet of storage technologies.
• The economic opportunities of this are:
• Energy arbitrage on the price differentials between least cost storage and maximum price delivery
• Wind Firming
• Regulation
• Spinning Reserve
• Black Start
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The Current Advantage
• With the WECC construction complete, Tres Amigas needs only to:
• Construct the Storage Park
• Implement the software to provide the economic services.
• Next step would be to connect with the SPP grid, hugely multiplying the opportunity
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The Tres Amigas Advantage
• Tres Amigas provides an opportunity that is currently not present:
• Tres Amigas is a public utility
• Tres Amigas is only regulated at Wholesale
• Tres Amigas can provide a storage tariff
• Tres Amigas can approve the storage Interconnect
• Tres Amigas can provide the billing and settlement function
• Tres Amigas is ready to Interconnect
• Tres Amigas provides the first mover advantage to those participating in this development
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TA Energy Storage
Rationale in operating energy storage
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TA Energy Storage
Battery technology has progressed allowing good performance over long life time.
One of the vendors: Xtreme Power PowerCell Warranty Curve [1]
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TA Energy Storage
Battery arrays
Modules Installed at Duke Notrees Wind Storage Project(batteries at left, PCSs at right)
Modular design
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TA Energy Storage
Connected at the transmission system voltage level; Simple and straight forward modular design; Rely on Standard Equipment for connection and switching Designed to segregate different technologies; Designed to keep different functionality in isolated operation; Accommodates all storage solutions such as different battery
designs, supercaps and flywheel; Uses robust and standard MV designs for maximum reliability, Communication and control requirements are conventional, Emergency and restoration through auxiliary generation and
independent utilities. Early estimated Construction cost 30 MUSD for 15 MW and 45
MUSD for 25 MW
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TA Energy Storage
Standard power converters up to 10 MW are in the market today
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TA Energy Storage
Standard Power Distribution Transformers
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TA Energy Storage
Battery technology has progressed allowing good performance
Plant can be built in stages due to highly modular arrangement
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Artist Rendering
Duke Energy Notrees 24 MW Energy Storage
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Pricing for storage based on the
market.Each transaction is
done based on physical energy buying/selling
conditions taking into account what was prevailing a
the time of storage and at the time of
the energy release.Premium would
apply for ancillary services.
How to treat losses?
PricingEnergybought
EnergyLost
EnergyStored
EnergyReleased
Balancing capability;
Grid connection
Own and third party Physical storage assets
+
Metering points for “bought” or “released” energy must be at the 230 / 345 kV TA AC Busses
TA Energy Storage
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What can it do?
Illustration of BESS Arresting Extreme Frequency Deviation (Source:Xtreme Power) @Notrees Storage station Duke Energy Texas
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