Hubco - GE Strategic Alliance Rev01

The Hub Power Company Ltd.

HUBCO Introduction


Corporate History and Geographical Presence

19

85 Government of

Pakistan and World Bank developed strategy for Private Investment in Pakistan Power Sector

19

88 Completion of

feasibility study of 1292 MW Oil Fired Power Project in area near the Hub River Estuary

19

91 Hub Power

Company Limited (HUBCO) incorporated in Pakistan as a limited liability company to undertake the Project

19

95 Financial Close

19

97 Construction

Completion of 1292 MW Oil Fired IPP – 1st in the History of Pakistan

THE HUB POWER COMPANY LIMITED


Capacity 1292MWFuel RFOBoilers IHISt. Turbine AnsaldoGenerator AnsaldoAvailability 80%Contract Type Full O&M

Capacity 330MWFuel Indigenous CoalBoilers GE-AlstomSt. Turbine GE-AlstomGenerator GE-AlstomAvailability 85%Contract Type Full O&M

Capacity 225MWFuel RFO Turbines MAN DieselGenerator Dresser RandAvailability 88%Contract Type Full O&M

Capacity 84MWType Run-of-the-RiverTurbines Andritz HydroGenerator Andritz HydroAvailability 98%Contract Type Full O&M (take-over in progress)

Capacity 1320MWFuel Imported CoalBoilers GE-AlstomSt. Turbine GE-AlstomGenerator GE-AlstomAvailability 85%Contract Type Partial O&M

3250 MW Generation Capacity

by 2019

NAROWAL-2011

HUB-1997

LARAIB-2013

CPHG-2019

TEL-2019

POWER GENERATION SYNOPSIS – HUBCO GROUP


HUB PLANT INSURANCE PROGRAMME

OVERVIEW


TYPES OF INSURANCE POLICIES

All Risk

MB & BI

All Risks of Physical Loss or Damage including Machinery Breakdown and Business Interruption Insurance.

Terrorism Insurance including Strike, Riots, Civil Commotion, Malicious Damage, Political Violence and Business Interruption Insurance.

Comprehensive General Liability Insurance including Employer’s Liability Insurance.

Terrorism

SRCC

MD, PV, BI

PPL

TPL


TYPES OF INSURANCE POLICIES

All Risk, MB & BI Policies

SECTION I: ALL RISKS OF PHYSICAL LOSS & DAMAGE

SECTION II: MACHINERY BREAKDOWN

SECTION III: BUSINESS INTERRUPTION


SECTION I – ALL RISKS OF PHYSICAL LOSS & DAMAGE

SECTION II – MACHINERY BREAKDOWN

Perils Covered: All Risks except stated Exclusions

This insurance provides a very wide cover and is subject to only few standard

exclusions.

Interest Insured:

The 1292 MW (4 x 323 MW) oil-fired Power Station at the mouth of the Hub

River Pakistan and all associated and ancillary works connected wherewith, all

other property, consumables, stores and the like including township and

contents, the property of the Insured at the site.

Section I – All Risks of Physical Loss & Damage:

1- Building, Machinery, Facilities, Contents, Spares and other property of

whatsoever nature except as excluded hereinafter.

2- Fuel & Consumables of all kind except as excluded hereinafter.

POLICY STRUCTURE


SECTION I – ALL RISKS OF PHYSICAL LOSS & DAMAGE

SECTION II – MACHINERY BREAKDOWN

Major Extensions

> Capital Additions

> Property in course of construction

> Property Temporary Removed and In Transit

> Expediting Expenses – Including Air freight

> Debris Removal

> Professional Fee

> Automatic Increase

> Off-Site Storage

> Riots, Strikes and Civil Commotion

> Plans Documents and Computer records

> Public/Local Authority Requirements

> Claims Preparation Clause

> Fire Fighting Expenditure

POLICY STRUCTURE


Sum Insured

The sum insured shall be

i) Capacity Purchase Price.

ii) Energy Purchase Price. (TBC)

iii) Supplemental charges.

Indemnity Period 30 Months

Based upon longest ‘Lead Time’ of

critical equipment(s) ….. 30 months

Deductible / Time Excess

Machinery Breakdown 55 Days for EEL

All Other Losses 45 Days for EEL

POLICY STRUCTURE

Section III: “Business Interruption”

Major Extensions

> Increased Cost of Working

> Denial of Access

> Suppliers & Customers

> Property Away from the Premises

> Public Utilities

> Alternative Premises

> Material Damage Waiver

> Claim Preparation Costs

Section III – “Business Interruption”

Reduction in Revenue including any continuing contractual obligations and Increased

Cost of working:


LOSS INTIMATION:

Forced Outage Allowance in PPA of 960,000 Mwh in event of major outage insurance claim occurring early in the Generating year.

1. Forced outage claim cannot be finalized until end of the relevant Generating Year, as that is when LDs are calculated and paid to WAPDA.

2. 960,000 Mwh allowance per Generating Year is Hubco’s allowance, not for the Insurers – Insurers can only avail any unused surplus remaining from other forced outages whether uninsured or unclaimed by Hubco from Insurers for whatever reason.

Graphically, the following is just an example:

Notes:

Insured loss outage claimed Un-insured and unclaimed outages occurring

- Say 1,000,000 Mwh subsequently - totaling, say 600,000 Mwh

a) Hubco has “used up” 600,000 Mwh of allowance.

b) Insurers are entitled to balance of 960,000 – 600,000 = 360,000 Mwh.

c) Therefore claim is payable in respect of 1,000,000 – 360,000 = 640,000 Mwh.

FORCED OUTAGE ALLOWANCE


Basis of Indemnity (where you were before the Loss)

• Indemnity on New Replacement / Reinstatement Value Basis (NRV).

• Allows employment of ‘current’ technology – provided insurers’

liability is not thereby increased.

• Allows replacement of undamaged portion of insured property (as it

is necessary to adapt).

• Average condition/ Under Insurance DOES NOT apply.

• Design Defect Exclusion – As per LEG 2/ 96.

• Indemnify the Business Interruption Loss irrespective of Property

Damage loss occurred under deductible and/or under warranty.

POLICY WORDING – THE WORDING INTO PLAY


LOSS INTIMATION: POLICY WORDINGS

Study has been done to ascertain whether the current wordings of our insurance policies are up to date and meet accepted standards for similar insurances elsewhere in the world, whether they are generally suitable for the risks being insured

Key Action

• To continually review risk classes and insurability and ensure where possible that all of Hubco’s material insurable risks, and those risks that can be market insured are assessed and where appropriate underwritten in the market.

• Utilise external risk management advise to ensure that global best practice is available to Hubco.

• To concentrate risk engineering analytical expertise drawn from insurers and brokers towards reducing the cost of risk.

• To actively plan for and implement processes for loss and claims management in advance of claims.


LOSS INTIMATION:SELECTION CRITERIA – INSURANCE BROKER / ADVISOR

There are ways of carrying out competitive market tenders, even when you have a large, complicated placement but the option might be to base the tender on service and fee.

Marsh, Aon, Willis etc all have capable broking teams who can ‘do the deal’, and most will charge similar fees.

The real differentiator is“who are your service team” & “how accessible they are”

It’s not much use having a low price if it can’t be backed up with the required service.

Long term relationships provide greater value than short term pricing differentials, but that assumes that we, the client, is not neglected and taken for granted!

• Your broker is your strength• Assistance in processing claim and communication• Support in discussion with underwriters and loss adjustors• Expert opinions and expertise at all times• 24/7 availability to support during renewal and claims


LOSS INTIMATION:SELECTION CRITERIA FOR LEAD INSURERS

Selection Criteria - ‘lead’ insurer for a power risk

- Track record

- Knowledge of the power sector

- Risk engineering ability

- Willingness to pay claims

- Intelligent underwriting (not just ‘by the book’)

Credible Lead Insurers (Power, Pakistan):

ACE – difficulty with primary layers, prefer to go ‘xs’ lately

AIG – Problem with Earthquake (deductible & sub-limits)

Allianz – Only for xs layers (not ‘ground-up’)

Munich Re – full ground-up commitment but they are expensive

SCOR – prefer primary layer to quota share

Swiss Re – xs layers preferred

XL – won’t cover the territory

Zurich – prefer primary layers to quota share


Claim Closed

Date of Loss

Loss Notification

Loss Adjuster Visit

RCAPreliminary Report issued

Initial Coverage Analysis

Interim Report issued

Partial Claim Submission

Settlement Negotiations

Final Report

Final Claim SubmissionFinal Coverage Analysis

Sign Proof of Loss

Collect and transfer funds

Insurers Agreement

INSURANCE CLAIM TIMELINES: INSURANCE CLAIM TIMELINE


LOSS INTIMATION:

• Take the Loss Adjustor as your ally

• Nominated Loss Adjustor helps select the best

• Prudent loss adjusting measures helped settle claim on time

• Foreign expertise were deployed to assist local teams

• Broker-underwriter-loss adjustor triangle is important

LOSS ADJUSTERS


LOSS INTIMATION:

It is a requirement of Insurers that they be advised by the Company IMMEDIATELY of any incident LIKELY to give a rise to a claim under the policy

Failure to do so may invalidate cover provided by that Policy.

Such notification should include:

• Date and time occurrence of loss.

• Nature of loss.

• Brief description relating to the circumstances of loss including comments as to how and why it occurred - proximate cause.

• Extent of loss, damage or injury including advice of any likely outage period together with a preliminary initial (rough) cost estimate.

CLAIM NOTIFICATION


LOSS INTIMATION:

“Fault leading to damage”

should be notified to insurer, even if the corrective actions are planned or being planned appropriately.

FAULT NOTIFICATION


LOSS INTIMATION:

• Adopt a manuscript wording – it pays

• Learn your insurances

• Trust your broker and their skills – they are number one for a reason

• Be open, discuss your concerns and your wording

LESSONS LEARNED


THANK YOU

Insurances Is Good For Goods

Not To Earn Profit

Consider Your Plant As It Is Un-Insured