Michael Moore Presentation

8/6/2019 Michael Moore Presentation

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BusinessPerspec,vesontheCCSIndustry

MichaelE.MooreExecu,veDirectorNACCSA

VPExternalAffairsandCCSBusinessDevelopment-BS

BirminghamJune6,2011

CCSAdvancing


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GlobalCCSProjects

EuropeanCCSProjects


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NorthAmericaCCSProjects

StateswithCCS&GSAc,onsCurrentor

Pending Texas Wyoming Kansas NewMexico Oklahoma Montana Pennsylvania Indiana Kentucky NewYork

Washington Louisiana Michigan Mississippi NorthDakota WestVirginia Illinois Ohio Alabama SouthCarolina


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NETL'sCarbonCaptureandStorage

DatabaseVersion3 NETL'sCarbonCaptureandStorageDatabaseVersion3

hp://www.netl.doe.gov/technologies/carbon_seq/global/database/index.html WelcometoNETL'sCarbonCaptureandStorage(CCS)Database.Thedatabaseincludes

ac]ve,proposed,canceled,andterminatedCCSprojectsworldwide.Informa]oninthedatabaseregardingtechnologiesbeingdevelopedforcapture,evalua]onofsitesforcarbondioxide(CO2)storage,es]ma]onofprojectcosts,andan]cipateddatesofcomple]onissourcedfrompublicallyavailableinforma]on.TheCCSDatabaseprovidesthepublicwithinforma]onregardingeffortsbyvariousindustries,publicgroups,andgovernmentstowardsdevelopmentandeventualdeploymentofCCStechnology.AsofApril2011,thedatabasecontained254CCSprojectsworldwide.The254projectsinclude65capture,61storage,and128forcaptureandstorageinmorethan27countriesacross6con]nents.Whilemostoftheprojectsares]llintheplanninganddevelopmentstage,orhaverecentlybeenproposed,20

areac]velycapturingandinjec]ngCO2.AccesstothedatabaserequiresuseofGoogleEarth.TheNETLCCSdatabaseisalayerinGoogleEarth.

CCSFunding


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ClimateGroup-EcofinCCSStudy

Outcomes1.Debtnotyet.Ampledebtmaybeavailablebutonlyifthreeprerequisitescanbeaddressed:

Anindicatorofperformanceacrossthewholecaptureandgenera]onchainmustbeprovidedbyawell-regardedequipmentsupplierorcontractor.

Majorsponsorswhohavesuccessfullymanagedsizeableandcomplicatedconstruc]onprojectsmustbeinvolved.

EconomicsofCCSmusthavearoutetobeingcompe]]vewithotherformsofgenera]on,withoutpublicfunding.

2.Notforspecialistequity.Specialistequity,suchasprivateequityorinfrastructurefunds,willnotbemobilisedtofinancedemonstra]onprojects.Privateequityseesdemonstra]onofCCS,liketechnologyfundingrequiringhighreturnsacrossaspreadofprojects.Infrastructurefundsdonttaketheconstruc]onandintegra]onriskinherentindemonstra]onCCSprojects.

3.Onthebalancesheetbutlimitedinscale.Bondholdersorequityholdersfrom

thebigpensionfundsorinsurancecompaniesarecomfortablewithcorporatesusingtheirbalancesheetstofinanceCCS,butonlyaslongasthescaleislimitedtojustacoupleofpercentofgroupassets.AcrosstheEuropeanu]li]es,though,thiswouldenableamaximumof5bnoffundstobeavailable,andeventhenitisques]onableifthoseu]li]eswouldbepreparedtoinvestthatmuchinCCSdemonstra]onswhilstbalancesheetsarebeingdeliveredandcapitalbudgetsarebeingcut.


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TwoHighLevelViews

MississippiPower-KemperCountyIGCCPowerPlant--RatebasegivestremendousuplicoupledwithDOEfundingandcapturedCO2sales.Powergenera]ononly.StateofMississippigivesstewardshipop]onviatrustfundalsovaluesCO2andtakesdirectrevenuefromsales.45Q/48A

SummitEnergysTexasCleanEnergyProject-mul]pleproductlinesnotjustpower,asynchronoussupply/demandpriceimpactorsonproducts,DOEfundingbigupli,capitalizesonCO2EORinthePermianBasin-TexasCO2ispurposefulproductnotawaste.StatevaluestheCO2doesnotseeitasawastebutavaluableresourceandtreatsitassuch.U]liza]onofTexasoffered

incen]ves(cleancoalandCO2forEORincen]vesbyHB469)aswellas45Q/48A

CO2-EOR


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RecentDevelopments&Catalystsfor

USIncen,ves Crudeoilnear/over$100onlongdatedforwardcurve 45Q/48Aamendmentsthatallowbothtobeusedsimultaneously 45Qproposedamendments---$50/50%$96/90%both-$10ifforEOR,

transferabilityandreservingfuturecredits10yrsout,100mmtonslimit

EPAgeologicsequestra]onguidanceonClassIIoptinandClassVIgivesdefini]onfor45Q

FourCO2off-takeagreementssigned-allindustrialsourcedCO2withconsidera]onoflongtermliabilityandstewardshipissues-alldes]nedtoEOR

Mississippi,Illinois,Kentucky,IndianaandTexas.eminentdomainforCO2pipelines,uni]za]onandstatestewardshipinplaceorinplay

Natgasasfuelforpowergenera]onaswellasGTLadvancingsowilltheirneedtomanagetheCCSandrelatedissuesbringsmoreinterestedpar]estothetableatbothStateandFederallevels

Mexicoopensupmoreforeigninvestmentinoilfields,likelytoseemarkedincreaseininteresttobringUSCO2totheirmaturefields EPAsRCRA-CERCLAlimitedexemp]onwouldremoveanotheruncertainty Na]onalCoalCouncilStudyseesCO2-EORasaneededcomponentofCCS GasprocessingtoremoveCO2inshaleplaysputsthemintotheCCSmix

ForwardCrudeOilSwapCurveSource:BarclayDailyCommodityReport6-3-11


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SizeandScopeofDemandisRising

Top10ProducingUSCO2-EOR

Operators2010(kbbl/dNo.Projects)

Source:Oil&GasJournal2010,BloombergNewEnergyFinance.

ConocoPhillips

ExxonMobil

Anadarko

Merit Energy

Whiting Petroleum

Hess

Chevron

Kinder Morgan

Denbury

Occidental

Texas

Wyoming

Mississippi

Colorado

New Mexico

Other states

85 (30)

43 (15)

31 (4)

24 (7)

20 (4)

20 (5)

14 (7)

13 (6)

12 (2)

6 (2)

Note:DenburyacquiredEncoreon1November2009,doublingtheirpoten]alCO2-EOR

recoverablereserveswithEncoresassetsinthemountainstates,notshowninthisfigure


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Life-cycleofaProducingField

CO2Valua,ons


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CurrentCO2

PipelineNetwork

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DenburysView


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LikelyCO2-EORScenarioSource:MIT-BEG2010Study

PointstoConsiderforCO2-EOR HighestdemandfornewCO2onfrontendofproject-peaksthentapersoff

duetorecyclingandlowerrecoverablereserves

Importanttounderstandthesearewellknownproducingfieldswithknownreservesandcharacteris]cs

Produc]onlifeislong-lowerriskthantypicalBAUfielddevelopment Highfrontendcapitalcosts,8-18monthlagoncashflow,thatinturn

peaksthentapersoverlifeoffield

Fielddevelopmenttypicallystaggered CommodityCO2pricing/supplycanbetailoredtomatchabove Needtoconsiderhighrecyclingcapitalcosts Incen]vesmostneededtosupportini]a]onofproject,recycling

investmentandcoverthelagbetweenfrontendcostsandcashflow

Howtosupportthevalueoffurtheringfieldvalueperstorage


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PointstoConsiderforCO2

-EOR

MatureareaslikethePermianBasinhavemanyoftheCO2-EORcomponentsinplace

Newareasrequiredeveloper/operatorstoini]ateasfirstmoverintoarea

Infrastructureneedstobeencouragedtodevelopintonewareas--CO2,wastewater,NGLs,powersupplyandcrudeoildeliveryto

marketcenters--allcouldbeacceleratedbyincen]ves

Carbon


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EUCarbonMarketValuesEuros/TonSource:www.pointcarbon.com

CarbonMarketsRecentDevelopments

ClimateDisclosureProjectstepsuppressureonpublicallyheldcompaniesontheirplanstomi]gateGHGemissions

SofarEPAintacttocon]nueGHGregula]ons CCSMethodologiesbasedocumentreleasedinMay CCSrecognizedasaCDMmechanismnowworkingoutthedetails Seeingincreasedinterna]onalinterestinUSoffsetsasKyoto

Protocolsslipawayin2012USsaysbindingagreementunworkable-wantsmorecountrybasedprograms

Overallcarbonmarketmovingupinvalue,primarilyondamagetopublicacceptance/percep]onofnucleardeploymentduetoFukushimaandnotaslikelyabigofplayerincarbonreduc]ons

UKplacescarbonfloorofstar]ngin2013~$25/tonthenescalates WCItostartcapandtradein2012 AB32stalledbutexpectedtoadvanceCCSlikelytohaveafuture

roll

EUlookingatlinkingtoCaliforniascapandtradeprogram Chinaindiscussionstocreateownna]onaltradingprogram


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CarbonPrograms

EU-ETS&mul]pletradingplaorms Na]onalregistries CDM/JIPost2012Kyoto? CCSeligibleforCDMDec2010COP-16Cancun* Na]onaltradingprograms-UK,NZ,Japan,China? UKcarbonpricefloor Norwayoffshorecarbontax Albertacarbontax CarbonTaxAustralia? USRGGIcurrent,CAandWCIin2012? USandinterna]onalvoluntarymarkets *CCSCERSfromCDMsindevelopingcountries?(SeeCatoIns]tutes:

Poten&alimpactsofCCSontheCDMCATO-2DeliverableWP2.3-D01andD02)

USRPSandAEPSSource:hp://www.pewclimate.org/sites/default/modules/usmap/pdf.php?file=5907


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Ques,ons&ThankYou!MichaelE.Moore

VPExternalAffairsandBusinessDevelopmentCCS BlueStrategiesLLC WWW.BLUESOURCE.COM Execu,veDirectorandFoundingBoardofDirectorsMember NorthAmericanCarbonCaptureStorageAssocia,on WWW.NACCSA.Org VPandFoundingBoardofDirectorsMember TexasCarbonCaptureStorageAssocia,on WWW.TXCCSA.Org [email protected] Tel:281-668-8475

Resources CSLFTechnologyRoadmap:hp://www.cslforum.org/publica]ons/

documents/CSLF_Technology_Roadmap_2010.pdf

DOE/NETLCarbonDioxideCaptureandStorageRD&DRoadmap:hp://www.netl.doe.gov/technologies/carbon_seq/refshelf/CCSRoadmap.pdf

GCCSIStrategicAnalysisoftheGlobalStatusofCarbonCaptureandStorage:hp://www.globalccsins]tute.com/sites/default/files/Report%201-Status%20of%20Carbon%20Capture%20and%20Storage%20Projects%20Globally_2.pdf


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TexasCleanEnergyProject

Eric(Ric)Redman,President

SummitPowerGroup

Workshop:ChallengesOpportuni&esintheCCSIndustry

Houston,Texas

May5,2011

Summary&Overview

TCEP:a400MWIGCCplantw/90%CO2capture Designedfromoutsettobeprojectfinanced Thisprovidesusefuldiscipline(evenwithDOEfunding!) Financing:$1.4Bdebt(bankdebt&projectbonds);

DOEaward$450MM;remainder=equityinvestment

RoyalBankofScotland(RBS):leadlender,debtarranger Equitysyndicate:4-6majorequityinvestorsexpected TotalcoststobeknownaerFEEDstudy(mid-summer)


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Background:Incep]on

Summitmaxim:Dontplanprojectsenvironmentalistswilloppose In2002,weaskedCleanAirTaskForceWhatsanOKcoalplant?

Mathema]cally,U.S.andworldcouldnotdowithoutcoal CATFrecommendedIGCC&CCSandlater,Sustectechnology

Goal:Tohelpchangeourindustrybyusingcoalcleanly&acceptably SummitbeganworkingwithSiemens,Linde&FluoronIGCC

Triedmanytechnologies,configura]ons,by-products,&sites CametoTexasatinvita]onofEnvironmentalDefenseFund

(EDF)

LearnedTexasprovidesbestcurrentsitesforCCSbecauseofEOR

PickedPenwellsitewhenFutureGenAlliancechoseIllinois Environmentalsupportconsistent,outspoken&gra]fying

Commercialconcept

TCEPtobeprojectfinancedinprivatecapitalmarkets Configuredanddesignedforbestavailability Availabilitymaersmorethanthermalefficiency Plantcontainsnounproven,non-warrantedtechnology Integra]onriskisenoughriskforWallStreet Technologicalheart:Siemensgasifiers+high-H2turbine

Financingheart:long-termavailability&performance 90%carboncaptureemergedfrompre-FEEDwork Ureaproduc]on(couldhavebeenotherproducts)result

ofsizingmismatch(gasifiersvs.CT)+marketanalysis


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Projectfinancing

Revenuesmustbeenoughtoservicedebt+yieldarac]veROE Keyconstraint:debtservicecoveragera]o(DSCR)

Firstlayerofprotec]onforprojectlenders(revenuesexceedprojectcosts) DSCRlevel+assuredrevenuesdeterminethemaximumamountofdebt

TCEPfinancialmodelusesmarket-requiredDSCR Revenuesfrompower,urea,andCO2/EORsales95%oftotal Dura]on&qualityofcontractsaffectra]ng&lendersevalua]on

SignificanceofDOEawardinthiscontext:reducesproductsalesrevenuerequiredtomeetDSCR&providearacIveROEs,allowingoutputtobesoldatmarketpricesratherthanproducIoncost

Projectfinancingrisks

Keyconcepts:(1)lendersdonttakeANYrisks;(2)allrisksmustbetakenbyothers;and(3)theothersmusthavedeepenoughpockets

Comple]oncosts&mechanical:useEPCcontracts,warran]es,mustfix&liquidateddamages(LDs),reservesforcon]ngencies

Opera]ons&maintenance:needlong-termwarran]es,LDs,somesignificantpor]onofcostsfixed,somemustfixprovisions

Projectrevenuesvs.costs:Needbankableoff-takecontracts&securesupplycontracts;ideallytheseshouldtrackeachother;

dura]onofcontractsmaersalot(longtermisbeerthanshort) Financialcapitalcostrisks:thingsturnsourquicklyifcostsexceed

revenuesforlong;notlikerunningacompanyquarter-to-quarter;trapdooropensunderprojectsifDSCrequirementsnotmet


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Tax&CCPI-3benefits

TCEPenjoysaCCPI-3award($450M),aSec.48AITC($313M),accelerateddeprecia]on&Sec.45Qsequestra]oncredits

Combina]onisapparentlyunique&requiresop]miza]on

Addi]onalfinancinghelpDOEhasprovided: 80/20reimbursementratefor$211MofDOEfunds Willingtoletloanproceeds&DOEfundsbeusedfirstineachphase

Incompletelyop]mizedTCEPfinancialmodelshowsadequateDSCRs+ROEsates]matedprojectcostsandrevenues

But:(1)Projectcostsarenotfinal,and(2)taxabilityofCCPawardwouldcostTCEP$157MMupfront.

Costques]ons-1

OldIGCCfear:nowarrantedavailability.TCEPtriestofixthat. NewIGCCfear:riskofhugecapitalcostsincreases&overruns

SupposedlessonofEdwardsport,Taylorville,Eastman,etc. Ourneedtodis]nguishTCEPisconstant Theoutofcontrolcostfearcanbecomeself-fulfilling DOEwillhavelimitedabilitytoprovideaddi]onalfunding

Whatwearedoingaboutit: Havetriedtolearnfromotherprojects Costreduc]onteam(CRT)effortwithFEEDcontractors Contract&financialarrangementswithvendors Topengineers,consultants,andlawyersassis]ngtheSummitteam Workingtoop]mizefinancing,innovatewithoff-takeagreements


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Ownership&lenders-1

Summitini]atedTCEPitself,intendinganeventualnewowner Largecompanybecameprospec]veownerinearly2008butfailedin

late2008;Summithadnevertransferredownership

Jan-June2009:SummitsuccessfullysoughtTexasincen]velegisla]on December2009:DOEselectedTCEPfor$350MCCPI-3award Summer2010:DOEboostsCCCPI-3awardto$450M Mid-2010:SummitretainsWellfordCapitaltocommence

nego]a]onswithpoten]allong-termequityinvestors

Currently:RBStolead3-bankteam;Capstarleadstaxequitywork

Financingschedule Permingtobecompletebymid-2011

Airpermitinhand;NEPA(EIS)RODscheduledformid-summer FEEDStudyscheduledtobecompletebymid-2011 Off-takeagreementsscheduledtobecompletebymid-2011 Vendorcontracts(water,coal,etc.)tobecompletebymid-2011 EPCcontract(s)tobereadyforFEEDStudyresultsatsame]me

SignedEPCcontract(s)shouldbefinalstepbeforeclosing Lenderstobelinedupinadvance;loanagreementsprepared Membersofequitysyndicatetobechoseninadvance FinancialClosingtooccurassoonaspossibleaerEPCsigning


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BigIssues

Knownbigissues: TaxabilityofCCPIawardwhenrecipientisnotacorpora]on Impactofelec]ngcorporatetaxtreatmenttoavoid

taxability

Marketpercep]onofinevitabilityofprojectcostcreep Poten]albigissues(possiblebutnotexpectedtomaterialize):

Actualprojectcosts,ifnotkeptin]ghtcontrol EPCcontractstructure,ifnotsa]sfactorytofinanciers Long-termwarran]esofavailability&performance(dio)

Inherentadvantages:PermianBasinloca]onforCO2/EOR,Siemensgasifiers&high-H2combus]onturbine;revenue

contribu]onofurea;DOEsupport;environmentalsupport

Moreinforma]on www.texascleanenergyproject.com=projectwebsite www.summitpower.com=Summitwebsite Eric(Ric)Redman,[email protected]

Thankyou!


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Michael Moore Presentation