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HomeMy WebLinkAboutMakushin Geothermal Project Update 199611&SANDELL,INC2UEPEARSALLFORENABOTTOM.CAHoe.aatiTOP,LLUSIKi-Power Walk An NEW METHOD OF GENERATING STEAM IS EXPECTED TO BOOST EFFICIENCY A NEW METHOD OF PRODUCING STEAM to drive turbine-generators more effi- ciently and at lower cost is entering the commercial market.Construction start- ed recently on a small plant in Japan using the system.A larger installation is planned in this country. STEAM GYGLE 0 0 100 200 300 400 500 600 Heat Transferred,MW The new steam supply cycle can be used with any fuel,geothermal source or industrial waste heat.The system involves using a mixed transfer fluid of water and ammonia rather than water alone to supply a heat recovery steam generator.The lower the temperature of the heat source,the greater the gains, says Alexander I.Kalina,chairman of Exergy Inc.,Hayward,Calif.,who devel-oped the cycle.Kalina expects an efficiency gain as 2 ig400S300=.5 200 great as 50%and a capital cost reductionof45%with a geothermal source,drop- ping to 20 and 16%respectively for a coal-fired plant.Operating cost is lower as well,he says. "The systems are extremely stable,” says Kalina."They are amenable to auto- KALINA CYCLE600.. 500 100 0 R 0 100 200 300 400 500 600 Heat Transferred,MW . matic operation.”A pilot plant complet- ed in 1991 near Canoga Park,Calif.,has been on automatic operation for the past two years.It is now operating as a 6- Mw combined-cycle plant. GE Power Systems,Schenectady,N.Y., has an agreement to commercialize com- bined-cycle applications worldwide."We are pursuing two opportunities in the 50 to 150-Mw range,”says Robert W.Bjorge, leader of system market development. He expects eventually to scale up to 500- Mw blocks,but says initial cost is still a question."We've been focusing on high- er cost and higher performance.” Bjorge says the two "commercial demonstration plants”are targeted for completion in 1999.In developing them, GE will seek to refine materials and heat transfer.Constructibility is no problem, savs Bjorge,although the Kalina concept is more like a process plant than a conven-{ tional powerplant. Tokyo-based Ebara Corp.is building a 5- Mw waste-to-energy plant,one of many it plans in Japan,and it has formed a venture with Exergy to market waste incineration plants in Europe. Switzerland's Asea Brown Boveri Ltd.and Italy's Ansaldo Energia also hold licenses. A custom steam generator is required for each type of heat source.Kalina has developed more than 20 different cycles. Exergy will provide conceptual design for various installations,while traditional firms will carry out detailed engineering. The conventional Rankine steam cycle is inherently inefficient because the tem- perature drop in the heat source does not match the heat absorption characteristics of the transfer fluid.Kalina,an immigrant from Russia where he earned a PhD in mechanical engineering,conceived of using a mixed working fluid and tailoring its composition at each point in the cycle. That makes the temperature profiles more nearly parallel and more efficient. Kalina says that while the Rankine cycle requires a lot of auxiliary control sys- tems,his method is simpler because "they are all programmed in.”a A.l.KALINA Development BOSTON WATERFRONT'S FACELIFT AFTER DEDICATING BILLIONS OF DOL- lars to clean up its harbor and eliminate downtown highway eyesores,the City of Boston is still looking to improve its aes- thetics.The city is now embarking on an $80-million effort to transform the Low- er Charles River Basin into a continuous waterfront esplanade.Planners want to reshape the area into an integrated pe- destrian link between downtown and neighboring communities and frame a new gateway vehicular bridge. The Metropolitan District Commis- sion has awarded the first phase of the project,the $4-million Revere Landing Park in Charlestown,to RHD Construc- tion Co.Inc.,Medford,Mass."The proj- ect calls for driving piles,creating a land- ing,building masonry walls and land- scaping in an area bigger than FenwayPark,”says Joseph R.Nogueira,RHD vicepresident. Later this vear,MDC intends to bid the $3-million Lovejoy Wharf project,fol- lowed next year PY the $16-million NorthPointproject."We'll be bidding one avearforfour'ears then have a five-veardelayforcompletionofthebridge,fol- lowed by major contracts to link both sides of the river,”savs Karl T.Haglund, MDC project manager.State and federal sources will provide funding. ON THE WATERFRONT Cable-stayed bridge would add to new Boston aesthetics. MDC envisions a waterfront "emerald necklace”comprising 40 acres of park- land,seven miles of bike trails and path- ways,and reshaped and sloped river- banks.The area extends from the Museum of Science to the harbor be- yond the Charlestown Bridge."We've been acquiring land for ten years in JANUARY 13,1997/ENR 13 "ah ALASKA INDUSTRIAL DEVELOPMENT EDyA|ShN AND EXPORT AUTHORITY =ALASKA 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /269-3000 FAX 907 /269-3044 MEMORANDUM TO:Board of Directors Alaska Industrial Development &Export Authority FROM:D.Randy Simmons Acting Executive Director DATE:December 16,1996 SUBJECT:=Makushin Project Status The following is a brief synopsis of the Makushin Project and its current activities: ANEX,an Ansaldo/Exergy joint venture,has recently acquired the exclusive lease rights to develop the Makushin Geothermal project.An ANEX-led consortium has reviewed the project's specifications,objectives and information that were prepared by previous project developers.A new project plan has been developed that includes a new thermal cycle technology.Through the incorporation of this new technology coupled with the elimination of various leasehold costs,the ANEX has been able to reduce the project's capital and operating costs.Currently the primary focus is securing a Power Sales Agreement with the city and local fish processors.Recognizing escalating electrical costs and air quality issues,the city of Unalaska is looking for alternate ways to meet Unalaska's growing energy demands. The total construction and field development costs are approximately $108 million.AIDEA's proposed financing role is being evaluated at this time.Proposed funding sources,including grant requirements,are being examined by the developer and could become part of the finance plan.The proposed project includes a 14 megawatt geothermal power plant, associated well field,an access road,and a transmission line. Unalaska's energy requirements are expected to grow substantially,due primarily to economic growth resulting from expansions in the on-shore fish processing industry.The geothermal energy project would provide Unalaska and Dutch Harbor a clean,renewable source of electricity;reduce the dependence on diesel generation;provide long term protection from fluctuating fuel costs;and help overcome air quality problems associated with current emissions. ANEX controls the rights to geothermal leases near Unalaska (2,000 acres under lease from Kiiguusi Suuluta Land Co.LLC)and is proposing that the Authority finance and own the project.Under the proposal,wholesale power would be sold to the city of Unalaska on a requirements basis,and would be distributed to the fish processors in Unalaska and Dutch Harbor,that currently provide most of their own power.On August 2,1996,the AIDEA Board of Directors authorized the Authority to advance up to $70,000,subject to a reimbursement Board of Directors December 16,1996 Page Two obligation by Exergy,for a feasibility analysis and finance plan,which is part of the project's pre-development work.Preliminary financial and technical feasibility of the project,although initially fairly sound,may be benefited by contributed capital as well as equity participation and will require Power Sales Agreements to be secured with the city and major industrial users.As such,the parties next task,now scheduled for January 1997,is to meet with the city and processors to determine their interest and concerns associated with the required terms of a Power Sales Agreement. From 1982 through 1987,AEA conducted a phased exploration and feasibility program in the Makushin Valley,about 12 miles from Unalaska.Exploration wells indicated the existence of a highly productive liquid-dominated resource at economic depths.Following considerable preliminary engineering,financial planning,permitting and technical feasibility work prior project developer,OESI,terminated its interest in the project due to unrelated financial problems.Still unchanged,potential contract customers with the city include the land-based fish processors of UniSea,Alyeska Seafoods and Westward Seafoods.' DEG:bif h:\all\dgermer\makushin\status.doc v 12/43/96 2:12 PM LeResche Co 907 586-8339 P.001 LeResche &Co. From:Sent:12/13/96 2:12 PM Bob LeResche Number of pages,including cover sheet:4.Voice number:907 586-8338 Please Deliver to: Dave Germer cece ie ee)OOF +ee rr a -bene ee te eee we L.Se cee ate manent atte Message: David --Here's the latest from Hank.I gather we had no reason to be concerned.(Bob Lawrenceis Exergy's other DC lobbyist)Best regards,RL 1 2/18/96 2:12 PM LeResche Co 907 586-8339 P,002 DEC-13-96 FRI 02:48 PM EXERGY INC,FAX NO,5105376134 P,02 Exergy,Inc.TAWE =4reTy ci ae A act aintcteb ovate"Bob Lawrence December 12,1996 PACSIMILE TRANSMITTAL FAX message for:Page 1 of 2 Larry Markley _ FAX #703-836-6086 we 202/342-2066FROM:Hank Leibowita hl” RE:DOE/Makushin/Steamboat Please plan on being present at a meeting with DOE on January 9th.I assume the meeting will be held somewhere at Forrestal headquarters.The date was requested by the DOE/Golden,Colorado contract officer. This is in anticipation of SMUD's formal announcement,before Christmas, that Exergy did not make the short list of winners of SMUD's RenewablesSolicitationlastsummer.I was informed that DOE would immediatelythereafterissuea"Noticeto Cure"to Exergy.This allows 60 days beforeofficialtermination.As I see it,the main objective of the meeting from our standpoint,is to attempt to enlist DOE's support in moving the program to Makushin.I will be prepared to show how Makushin is fullycompliantwiththeintentoftheoriginallegislationandsubsequentCRADA language.Further,we know that DOE has recently permitted a project to be moved to another site in order to allow the project to go forward; Biphase (Douglas Energy). I believe it is important,in fact necessary,that we be able to convince DOEthatmovingthe$7.2M to Makushin is also justified on the basis that theprojecthasaveryhighlikelihoodofsuccess.(Larry,can we get some 22320 Foothill Boulevard ¢Suite 540 *Hayward,California ©94541 Telephone 510/537-5881 ¢Fax 510/537-8621 "4,12/13/96 2:12 PM LeResche Co 907 586-8339 DEC-13- een (eee enn petewaneware er cee 96 FRI 02:49 PM EXERGY INC,FAX NO.5105376134 strong letters of support from R.Simmons and/or the Alaska delegation in Washington or Juneau to this end?). Larry,Bob please confirm that Jan.9th is okay for you. Bob,I assume the meeting will be in Jelacic's office.Please confinn. Assuming,Jan.9th is okay for both of you,I think the three of us shouldmeetonthe8thtodiscussstrategy.Does this work for you? |will be in the office through Tuesday Dec.24th.The office will be closed from Christmas through New Years.I look forward to hearing from yoy cos ees em cc:R.LeResche P.03 cok s Makushin Geothermal ProjectProjectUpdate Exergy,Inc. Presented to AIDEA December 5,1996 Basic Assumptions e Requirements Contract,Not Take or Pay e 90 -95 MWh/Year Energy Sales e Makushin Sell Price <Diesel Generation -Preferably =diesel fuel portion e Power Delivery to Processors Not Compromised Project Risks e Requirements Contract >>>>AIDEA -Stable load (0 -3%growth) e Project Completion >>>>ANEX -EPC +Schedule +Cost +Performance Exergy (ANEX)has already incurred $250K of project expense (not including R.W.Beck Study) Highlights /Milestones e Capacity and O&M Cost Significantly Improved From Previous Contractor -Capacity $14 million lower -O&M $1 -1.5 million/yr.lower e Lease Negotiations Completed Between ANEX and KSLC -AIDEA O.K.pending final review e R.W.Beck 'Fatal Flaw Analysis'Complete -O.K.w/minor suggestions -Technology non-issue Highlights /Milestones (cont'd.) e Interconnect Design Study Complete -System reliability/availability upgrade-Transmission to each generator -Purchase Makushin power without loss of reliability +No financial consequence e New Financial Proforma Complete -Basis for power sale negotiations with processors -Equivalent to fuel-only portion of power cost(approximately $.10/kWh) -Favorable returns to AIDEA Team Players e Exergy -Kalina Cycle Technology -System Design -Developer e Ansaldo Energia -Turbine Supply -Co-Developer ¢Walsh Construction -EPC e Power Engineers -Engineer -Power Plant -Transmission Line -Road ¢GeothermEx -Reservoir Engineer Energy Conversion Technology ¢Kalina Cycle -Ammonia/water mixture -High recuperation -30%more output/ton of brine input e Less Capacity Cost,$/kW e Less Resource Required e Perfect for Arctic Operation -No Freeze-Up,No Vacuum Interconnect Study ¢Power Distributed Among City and Processors -Reduces capacity/peak demand ratio -Improves system reliability e Loss of Makushin Availability Inconsequential -Eliminates major processor concern e $1.5 Million to Implement -Part of Makushin Project -<2%additional cost Project Feasibility Established e $14 Million Reduction in Capacity Cost e $1 -1.5 Million/Yr.Reduction in O&M ¢Fuel Oil Escalation to $1.10/Gallon ($.10/kWh) e Grid Interconnect -Makushin transparent to processors °Strategy -Install grid interconnect -Start power sale at $.10/kWH -Increase to $.12/kWh after Makushin reliability established Critical Milestones Ahead Primary e Power Sale Agreement -Processors'previous concern: +Makushin reliability >>>>Interconnect +City reliability >>>>Interconnect +Cost >>>>oil escalation,Makushin generation cost reduction Secondary e Reservoir;Production well -Slim well successfully drilled e AIDEA/Legislative approval NUV-20-13936 US 22 UNISEA EXECU!1VE 861 D5 P.UL .UniSea 20 November 1996 Mr,HM,Leibowitz |-.---- Exergy,Inc. 22320 Foothill Boulevard Suite 540 Hayward,California 94541 Dear Hank: I am glad to hear that you are continuing to move forward with the planning for the Makushin Geothermal project.We continue to believe that with affordable and reliable geothcrmal power this project would benefit the community and the processors. This letter serves to give you UniSea's permission to present our powcrhouse/generation data in the Unalaska Interconnect Study.We realize that this Study is an integral part of the project and must be completed in order to continue forward. We look forward to your continued progress and appreciate you keeping us informed. Regards, UNISEA,INC President UniSea,Inc. 15400 Northeast 90th Street,P.O.Box 97019,Redmond,Washington 98073-9719 (206)881-8181 FAX (206)882-1660 TOTAL P.@1 WHEREAS,studies have shown that Makushin Voicano contains a significant geothermal Freoource capable of p toing oloetrioal anorgy:and WHEREAS,studies have been performed on the feasibility of the project that indicate that the project is technically feasible,but marginally economically feasible;and WHEREAS,more efficient geothermal technology and a new project management approach appear to have increased the economic feasibility of the project;and WHEREAS,the Alaska Industrial Development and Export Authority has expressed an interest in financing the project;and WHEREAS,power sales agreements between the City and major self-generators will be necessary to insure the economic feasibility of the project. NOW THEREFORE BE IT RESOLVED that the Unalaska City Council supports the Makushin geothermal project,subject to the establishment of acceptable agreements with the City and major self-generators. PASSED AND ADOPTED BY A DULY CONSTITUTED QUORUM OF THE UNALASKA CITYCOUNCILTHIS4%DAY OF whtrhey ,1996.@ MAYOR __ ATTEST: CITY CLERK =deRerchaR Ca 907 SABRI 2:27 PM 2/11Pns/aaia6 "\LeResche &Co./CONSULTANTS ad 211 FOURTH STRERT,SUITE 300 ¢JUNFAU ALASKA e TELEPHONE (907)586-8338 ¢TEIECOPIER (907)586-3494270CLACIERHICHWAY«JUNEAU,ALASKA 99801 ¢USA «TELEPHONE (907)780 4079 ©MOBILE (9°7)724 2137 May 29,1996 To:Mr.Mark Earnest,Manager Gty of Unalaska Irom:Bob LeResche Re:Overview of New Makushin Project and Proposal You have asked me to provide an overview of the meetings re:the Makuchin project,arranged for next week between Unalaska city officials and ae City Council Members,the ANEX Joint Venture,and a representative of AIDEA. Those attending on behalf of the ANEX joint venture corporation will include:Mr.Hank Leibowitz,Exergy,Inc.,and ANEX Manager;Mr.Larry Goldfarb,President of Exergy,Inc.,Mr.Ron Simms,Vice President of Walsh Construction Company,a member of the ANEX joint venture,and myself,a consullaru lo Exergy,Ine.Also alteriditig will be Mr.Tack Wood,Managinty Partner of KSLC,Lic,the owner of the 7,000 acres containing the Makushin geothermal reservoir. The purpose of the meetings is to advise the city of significant improvements in the economics and developer of the proposed Makushin geothermal generation project and of ANEX's willingness to assist the city with electric capacity during Makushin project construction;and,to seek the city's commitment to discuss purchase of project power on a requirements basis. The project and proposal ANEX will present bears little economic resemblance to previous proposals.As presently structured,the project is to be developed by an organization with huge capital resources and a very long history of developments of this kind.As presently designed,the project a) requircs no grants or other government subsidics,and b)provides power to the city and the fish processors at or below avoided cost,as represented in the RW Beck "integrated diesel"case prepared for the city. ANEX have redesigned and re-costed the Makushin project as a result of our intensive analysis.This redesign and re-costing has been possible through use of the new Kalina lechuwlogy,through rethinking arid elimdriation of various fees and costs proposed by previous leaseholders,and through detailed contact with Alaska engineers and constructors,which have allowed them to sharpen their detailed cost estimates. The project as now proposed differs from previous proposals in several significant ways,which together reduce project cost by nearly 70%,and reduce operating casts by clase to 40%: tteReacheR Go *gpan7 Sa6AaIa "Ins0aie6 =AT PM ¢ANEX will construct the project on an "EPC"basis;that is,ona turnkey basis for a fixed price,fully bonded. ¢The corporations making up the ANEX Joint Venture are ail substantial corporations,with billions of dollars of assets,and capable ofexecutingtheprojectonanEPCbasiswithfullbonding. ¢'lhe present detailed cost estimate totals $90,681,UUU.'lhis compares to the previous estimate of about $109,000,000. «ANEX presently hold a valid lease option tor the geothermal resourceatMakuchin.The new landowner has offered leace rates cignificantly below thoce available previously,especially during the firet 20 years of project operation.The presently contemplated lease royalty rates are 2.5%of gross sales for the first ten years,5.0%for the next ten years,and 5.0%thereafter -- significantly lower than royalty payments under the previous lease. ¢The ANEX proposal does not include a "fluid fee”component to the developer,as was the case with the previous proposal.Thus the only direct cost for fluids lo the project will be the above reduced royally. ¢ANEX's ceview and updating of project operating costs concludes that (hte project cart be vperaled for $2.5 uullion per year (escalated for irulatior), which is nearly $1.4 million lower than proposed by the previous developer. These savings (about 1.5¢per kWh)flow directly to the City and processors as lower rates.This figure inchices all necessary allowances for well field maintenance and new wells. ¢The present project will require less than 1,000,000 pounds/minute of 325°m/1 brine for a net electrical output of 14mW,compared ta theapproximately1,,400,000 pounds/minute required tor net 14mW operation of thepreviousdesign.Thisimprovement is significant for two reasons.First,itsignificantlylowerstheriskthattheficld:might require extra wells to allowproductionofl4mW.(Note that results of the small-bore exploration well test by the Alaska Power Authority suggested that a single full sized well would = produce 1,400,000 pourtds /utizmte.)Secorid,thisreduced Urougtiput for the Sdltle Tel energy production decreases future utdirilertarice costs anid well replacement costs. ANEX believe the project as now desigtied cart provide energy lo Unalaska at a unit cost significantly below the present and projected avoided costs of the City of Unalaska and the processors,and allows the City and the industrial users to prudently consider committing ta requirements contracts at rates that will minimize future load risk to AIDEA. ANEX will also discuss the possibility of providing interim generating capacity during construction of the geothermal project,with a view toward eliminating any need the city may have to invest in new generation tacilities over the long term. Ov11 907586-8339.*LeResche&Co.FAXNO.02fo4\03MAY-29-96WED13:28Project Summary 14 MWe,Net -Closed Loop,Clean,Emission Free *Kalina Cycle Technology -30%Better Than Standard (Previous)Design -Lower Cost of Generation *Reservoir,Roads,Transmission,Infrastructure Revisited *Lease Rights Secured *EPC Turn-Key Estimate Submitted to AIDEA O11P.0202:38PMMusi2siog=FAXNO.02°°.9907586-83392030°HAY-29-96WED13:28*LeResche&Co.Who is ANEX? +t ¢Ansaldo,Exergy Joint Venture -Ansaldo Energia;Genova,Italy *70 Years of Geothermal Power Experience*2000 MW of Geothermal Capacity -Exergy;Hayward,CaliforniaKalinaCycleTechnology Developer/Licenser ¢Project Contractors-Walsh Construction;Sacramento,California*Turnkey Power Projects*Alaska Experience;Prudhoe Bay,Adak (WWII) -Power Engineers;Hailey,Idaho Plant Engineer,Transmission -GeothermEx;Richmond,California Reservoir Engmeer LeResche&Co.r-_DentP,032:39PMIm8/29/96907586-8339}FAXNO.0203MAY-28-96WED13:29Progress Since We Last Met (11/95) *Assembled "First Class"Project Team *Redesigned Project;Significantly More Cost Effective * Elimmated Project-killing Developer Charges,Margins &Fluid Fees e Negotiated More Favorable Lease With New Landowner *Developed Close Working Relationship With AIDEA to ProvideFinancialModels&Updated Information to Rekindle Interest 907586-8339|me03.LeResche&Co.MAY-29-96WED13:29Project Cost Sayings;ANEX vs.Previous FAXNO.02{°One Time °Total Installed Cost;$20M less Annual Year| °O&M;$910K less *Fluid Fees;$310K less °-Royalties;$160K less Total $1,380K less $1,380,000 +93 MWh =1.5¢/kWh Makushin Costs of Power I ' 1 Ly 4 tT Year O€:€13H 96-62-A¥H i ' | D)i<=t 2 T 2 &3 7 Sp) wy»© on) amy T O $32 5 - eee ] Ssee w =°874 fo RESae, + oO€d 4 °*<J : t : } } caaaenel Q N ca) = 4 S Fas] c Cc c UN /S}UIO IaMmog jo1soz_ G0'd "20'ON Xd 0 bLeQ Wd OP:270 96/6crsia 6EC8-98S L06& - "og Bayeeda7 . ad pontP.062:40PM=9/96ffFAXNO.022907586-6339MAY-28-96WED13:30aLeResche&Co.-ANEX/AIDEA Interaction *Project Implementation -AIDEA Owned | -ANEX Builds and Operates Makushin on Fixed Price Basis ©ANEX/AIDEA Create Reimbursable Services AgreementtoFundAIDEADueDiligence -Contingent on City's Willingness to Move Forward -Services Agreement Will: *Review Project Costs - *Financial Projections *Capabilities of ANEX and Partners *Power Purchase on Requirements Basis -Not Take or Pay -Makushin Price Lower Than Diesel All-in-Cost -Insulates Against Oil Price Escalation and Environmental Regulation 02:41PMmaPn8129196\FAXNO.02(|907586-833903(HAY-29-96WED13:31LeResche&Co.aTa nen | ANEX Offers System Solution *Implementing Makushin Project Includes:,|-Solving Near Term Capacity Need *Interim Generator | *Avoid Long Term Investment | -Long Term Capacity | *14 MW,net From Makushin : -Utility Grid &Central Dispatch |*Connect City,Processors and Makushin Together |*Best Heat Rate First : *Maximum System Efficiency ...Lowest Emissions *ANEX is Eager to Assist in Solving All of Unalaska's Power |Problems 11/11P.0802:41PMMei2g/9gFAXNO.02¢ -€907586-8339"+LeReache&Co.03¢|,MAY-28-86WED13:3]Look Ahead 1996 -Makushin/Unalaska Integrated Plan Power Sale Agreement Final Project Cost AIDEA Approval 1997 -Alaska Legislature Approval Development Well Drilling &Testing Engineering 1998 -ProcurementStartConstruction;Roads,Transmission,PlantUtilityInterconnectionInterimGeneratorInstallation,if Necessary 1999 -Construction;Continued 2000 -Start-up Utility Operation MAY-28-96 TUE 16:27 EXEF**'FAX NO.5105 321 P.O1 'Exergy,Inc.{OsilMay 28,1996 FACSIMILE TRANSMITTAL FAR mesenge fore Dennis McCrohan AIDEA Page 1 of 10 FAX #907/269-3044 FROM:Hank Leibowitz Please find the presentation enclosed for Makushin.Would you prefer that AIDEA's name not be on the cover? 22320 Foothill Boulevard «Suite 540 «Hayward,California ¢94541 Telephone 510/537-5881 *Fax 510/537-8621 [5/28/96 _3:36p| P,02FAXNO.5105321EXE}MAY-28-86TUE16:275/28/96_3:36p|Makushin Geothermal Project,Revisited ANEX,L.L.C. -ATDEX Presented to the City of Unalaska June 4,1996 P.03lFAXNO,5105"2EXERMAY-28-96TUE16:285/28/96_3:36p|Who is ANEX? e Ansaldo,Exergy Joint Venture -Ansaldo Energia;Genova,Italy *7Q Years of Geothermal Power Experience *2000 MW of Geothermal Capacity -Exergy;Hayward,California Kalina Cycle Technology Developer/Licenser ¢Project Contractors -Walsh Construction;Sacramento,California *Turnkey Power Projects *Alaska Experience;Prudhoe Bay,Adak (WWII) -Power Engineers;Hailey,Idaho Plant Engineer,Transmission -GeothermEx;Richmond,California Reservoir Engineer P.04FAXNO.5105777324EXEF" MAY-28-96TUE16:28Project Summary [5/28/963:36p|¢14MWe,Net -Closed Loop,Clean,Emission Free ¢«Kalina Cycle Technology -30%Better Than Standard (Previous)Design -Lower Cost of Generation ¢Reservoir,Roads,Transmission,Infrastructure Revisited e Lease Rights Secured ¢EPC Turn-Key Estimate Submitted to AIDEA P.05321FAXNO.5105"EXE}MAY-28-96TUE16:29Progress Since We Last Met (11/95)[5/28/963:36p|¢Assembled "First Class"Project Team ¢Redesigned Project;Significantly More Cost Effective°Eliminated'prdicet killing Developer Charges,Margins &Fluid Fees «Negotiated More Favorable Lease With New Landowner fr J |wena'Developed:Closé_WeWorking Relationship-wit AIDEA +o.ProvideFinancialModels&Updated Information to Rekindle Interest P.O6321FAXNO.5105EXE}MAY-28-86TUE16:29Project Cost Savings;ANEX vs.Previous [5/28/96_3:36p|One Time A\nnual * Total Installed Cost;$20M less O&M; Fluid Fees; Royalties; Total Year 1 $910K less $310K less $_160K less $1,380K less $1,380,000 +93 MWh =1.5¢/kWh {d9g:¢ 96/92/s|Makushin Costs of Power LO'd (Case 4 rev.) le Contract Wholesale Rate Integrated Diesel Rate City Cost of Power + xX A 7 $20¢2808T S20: + Seog T P02 T 6202 T 2202 "" 1208 + 0202 T slide T BLoz T 21023103TF S102 T POs + S02 - Zoe T TE0% T 0102 T 8002 TF g0Cz T 2002 T 9003 T S002 T $002 + 8002 " o00¢ y {oe T O00set Year 29 -- 0,24 + {tayrscr) O14 + UAA/S}Ua0 IAMJo3s07) GOIS 'ON X¥4 AXA TbaR n,0906:81 3NL 96-82-AWH P.082]FAXNO.5105EXERMAY-28-96TUE16:30ANEX/AIDEA Interaction \Quon¢Project Implementation -AIDEA Owned -ANEX Builds and Operates Makushin on Fixed Price Basis e ANEX/AIDEA Create Reimbursable Services Agreement to Fund AIDEA Due Diligence -Contingent on City's Willingness to Move Forward -Services Agreement Will: *Review Project Costs. *Financial Projections *Capabilities of ANEX and Partners coe.dM.Horadwiun on Coty'he goer of albe alte Save b>ok /70wePowerPurchaseonRequirementsBasis+Cady +Frees ors-Not Take or Pay Makushin Price Lower Than Diesel All-in-Cost -Insulates Against Oil Price Escalation and EnvironmentalRegulation/De5 «*boas - a sO iva) » oO a © N Fa) P.09FAXNO.510527°°?1EXERT”MAY-28-96TUE16:31ANEX Offers System Solution ©Implementing Makushin Project Includes:-Solving Near Term Capacity Need *Jnterim Generator *Avoid Long Term Investment -Long Term Capacity *14 MW,net From Makushin -Utility Grid &Central Dispatch *Connect City,Processors and Makushin Together *Best Heat Rate First *Maximum System Efficiency ...Lowest Emissions «ANEX is Eager to Assist in Solving All of Unalaska's Power Problems [57287963336p| P.10FAXNO.510537°°?1EXERC”MAY-28-96TUE16:31Look Ahead [5/28/96_3:36p|1996 -Makushin/Unalaska Integrated Plan Power Sale Agreement Final Project Cost AIDEA Approval 1997 -Alaska Legislature Approval Development Well Drilling &Testing Engineering 1998 -Procurement Start Construction;Roads,Transmission,Plant Utility Interconnection Interim Generator Installation,if Necessary 1999 -Construction;Continued 2000 -Start-up Utility Operation HH BIO see projet MAUS pa Draused si lL.ayo te ("Sey MAKUSHIN /UNALASKA GEOTHERMAL PROJECT BOUND REPORTS #of Copies Makushin Geothermal Project (6) Review of OESI Development Plan AIDEA May 1994 Unalaska Geothermal Project (3) Financial Update R.W.Beck and Associates October 1992 Makushin Geothermal Electric Generation Project (3) Development Plan Prepared for:AIDEA Prepared by:OESI Power Corporation August 18,1993 Makushin Geothermal Project (3) Unalaska Island For:Alaska Energy Authority By:GeothermEx,Inc. Richmond,California February 19,1992 Proposal for Joint Venture for Makushin/Unalaska Geothermal (2) Project Development By:GEOlectric Power Company September 11,1992 Presentation on the Viability of the Makushin Geothermal Electrical Generation Project Juneau,Alaska Prepared By:DCED -Juneau Prepared For:GEOlectric Power Company June 24,1993 Alaska Energy Authority -Unalaska Power Production July 1992 Final Draft Report Unalaska Geothermal Project Review of OESI Development Proposal October 1993 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. Consulting Engineer's Contract Project Report Unalaska Geothermal Project R.W.Beck and Associates August 4,1992 Final Report -Comparative Power Cost Analysis of the Makushin Geothermal Project Prepared For.AIDEA Prepared By:R.W.Beck and Associates February 28,1995 Makushin Geothermal Project -Project Description Prepared By:Makushin Geothermal Company April 1995 Makushin Geothermal Project -Overview Prepared By:Makushin Geothermal Company April 1995 Unalaska Geothermal Project -Report on Three Possible Financing Methods By:R.W.Beck and Associates March 19,1993 Summary of Financing Scenarios for the Unalaska Geothermal Project By:GEOlectric Power Company January 20,1993 U.S.Department of Energy Geothermal Program Review XIl Geothermal Energy and the President's Climate Change Action Plan San Francisco,California April 25-28,1994 Analysis of the Unalaska Geothermal Project By:OESI Power Corporation August 15,1991 U.S.Department of Energy Geothermal Energy Research and Development Program Project Summaries March 1994 Alaska Power Authority -Unalaska Geothermal Project Proposal APA-86-R-015 By:Power Engineers,Inc. July 1986 The Unalaska Geothermal Exploration Project Phase II Final Report -DRAFT Prepared By:Republic Geothermal,Inc.for the Alaska Energy Authority March 1984 (2) (5) (2) 20. 21. 22. 23. 24. 25. 26. 27. 28. The Unalaska Geothermal Exploration Project Phase II Final Report Library Copy Prepared By:Republic Geothermal,Inc.for the Alaska Energy Authority Contract CC-08-2334 June 1984 Unalaska Geothermal Project (5) Phase 1B Final Report Volume 1 For:Alaska Power Authority By:Republic Geothermal,Inc. April 1983 Technical Planning Meeting Proceedings (2) Unalaska Geothermal Project February 1,1982 Unalaska Geothermal Project Phase III Final Report For:Alaska Power Authority By:Republic Geothermal,Inc. April 1985 Final Small Hydropower Interim Feasibility Report and Environmental Impact Statement By:U.S.Army Corps of Engineers -Alaska District June 1984 Makushin Volcano Geothermal Resources Informal Report for Alaska Power Authority By:John W.Reeder,Ph.D. Roman Motyka Mitch Henning Clay Nichols,Ph.D. State of Alaska -Department of Natural Resources Division of Geological and Geophysical Surveys November 30,1982 Unalaska Geothermal Feasibility Study -Draft Report Volume II By:Dames &Moore June 22,1987 Reconnaissance Study of Energy Requirements and Alternatives Appendix:Unalaska (Draft Copy) By:ACRES April 1984 Unalaska Geothermal Project -Financial Analysis April 25,1988 29. 30. 31. 32. 33. 34. 35. 36. 37. The Unalaska Geothermal Exploration Project Electrical Power Generation Analysis -Final Report Prepared By:Republic Geothermal,Inc. April 1984 Alaska Power Authority Unalaska Geothermal Project Phase 1B Final Report Volume 1-A By:Republic Geothermal,Inc. For:Alaska Power Authority April 1983 Alaska Power Authority Unalaska Geothermal Project Phase 1B Final Report Volume 2 By:Republic Geothermal,Inc. For:Alaska Power Authority April 1983 Alaska Power Authority Unalaska Geothermal Project Phase 1B Final Report Volume 2-A By:Republic Geothermal,Inc. For:Alaska Power Authority April 1983 Alaska Power Authority The Unalaska Geothermal Exploration Project Phase II Final Report By:Republic Geothermal,Inc. For:Alaska Power Authority June 1984 Alaska Power Authority The Unalaska Geothermal Exploration Project Phase IA Final Report By:Republic Geothermal,Inc. For:Alaska Power Authority Alaska Power Authority Invitation to Bid No.APA-88-R-037 Unalaska Geothermal Well Plugging &Abandonment Alaska Power Authority Invitation to Bid No.APA-88-R-042 Unalaska Geothermal Well Plugging &Abandonment Re-Issue Alaska Power Authority RFP No.APA-86-R-015 Unalaska Geothermal Feasibility Study June 25,1986 (4) (4) (5) (3) (2) (2) 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. Electric Rate Study for City of Unalaska DRAFT R.W.Beck and Associates September 1985 City of Unalaska Electric Rate and Load Projection Study By:Arthur Young November 1984 The Unalaska Geothermal Exploration Project Executive Final Report By:Republic Geothermal,Inc. Alaska Power Authority Unalaska Geothermal Project Final Report Draft November 6,1987 State of Alaska Dept.of Natural Resources,Div.of Geological &Geophysical Surveys Called:Fluid Geochemistry and Fluid-Mineral Equilibria in Test Wells and Thermal Gradient Holes at the Makushin Geothermal Area,Unalaska Island,Alaska Overview Pyramid Creek Hydroelectric Project By:Energy Stream Inc. Alaska Power Authority Unalaska/Dutch Harbor Reconnaissance Study Findings &Recommendations April 1985 Unalaska Geothermal Feasibility Study Final Report Volume 1 By:Dames &Moore June 22,1987 Unalaska Geothermal Feasibility Study Volume Il By:Dames &Moore June 22,1987 City of Unalaska Load Forecast &Power Market Analysis By:R.W.Beck and Associates November 1986 Alaska Energy Authority -Unalaska Geothermal Project Power Sales Agreement By:Wohlforth,Argetsinger,Johnson &Brecht October 21,1991 (2) 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. Load Forecast &Power Market Analysis (2) City of Unalaska,Alaska For:Alaska Power Authority By:R.W.Beck and Associates January 1987 Mt.Pinatubo -Resource Assessment Review Report -Final For:Philippine National Oil Company -Energy Development Corp.Geothermal Div. By:Mesquite Group,Inc. Harding Lawson Associates The Ben Holt Company Dames &Moore September 1990 Unalaska Geothermal Project Proposal RFP No.APA-86-R-015 By:Dames &Moore July 28,1986 State of Alaska Dept.of Natural Resources,Div.of Geological &Geophysical Surveys Re:Petrology and Geochemistry of Quaternary Volcanic Rocks from Makushin Volcano,Central Aleutian ARC. Alaska Power Authority Unalaska Geothermal Feasibility Study Final Report Volume | By:Dames &Moore June 22,1987 Alaska Power Authority (5) Unalaska/Dutch Harbor Reconnaissance Study Findings and Recommendations April 1985 Data From Stratigraphic Test Wells No.1 Makushin Volcano,Unalaska Island UAF Petroleum Engineering By:Don A.Campbell and Michael J.Economides February 1984 Geothermal Potential in the Aleutians -Unalaska Submitted to:Alaska Division of Energy and Power Development *Morrison Knudsen Engineering Geology Technical Feasibility Study Makushin Geothermal Power Project Unalaska,Alaska Volume |:Technical Papers September 1986 Electric Rate Study for the City of Unalaska By:R.W.Beck and Associates October 1985 59. 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. Feasibility Study &Report Makushin Geothermal Project By:Stone and Webster Engineering Corporation June 21,1985 Unalaska Geothermal Feasibility Study Draft Report Volume | By:Dames &Moore March 17,1987 Unalaska Geothermal Feasibility Study Draft Report Volume II By:Dames &Moore June 22,1987 Unalaska Geothermal Feasibility Study Draft Report Volume It! By:Dames &Moore January 30,1987 Dames &Moore -Proposal RFP No.APA-86-R-015 Unalaska Geothermal Feasibility Study July 28,1986 Alaska Open-File Report 163 Hydrothermal Resources of the Northern Part of Unalaska Island,Alaska By:J.W.Reeder October 1982 Preliminary Evaluation of Generation Equip.and Underground Distribution Line Design By:Robert W.Retheford Associates January 26,1983 State of Alaska Dept.of Natural Resources,Div.of Geological &Geophysical Surveys Preliminary Assessment of the Geothermal Resources of the Northern Part of Unalaska Island,Alaska By:John W.Reeder February 1981 Data From Stratigraphic Test Well No.1 Makushin Volcano,Unalaska Island By:Republic Geothermal,Inc. Environmental Analysis of the Unalaska Geothermal Power Project By:Kimbal A.Sundberg,Brad L.Hahn,Len J.Viking &C.Wayne Dolezal State of Alaska -Fish and Game April 1987 Preliminary Environmental Analysis of the Unalaska Geothermal Power Project By:Kimbal A.Sundberg,Brad L.Hahn,Len J.Viking &C.Wayne Dolezal December 1986 Application to the Mount Makushin Reservoir Unalaska Island,Alaska By:Geotherma 71, 72. 73. 74, 75. 76. 77. 78. 79. 80. 81. Unalaska Geothermal Feasibility Study Draft Report Volume II By:Dames &Moore January 30,1987 1982 Environmental Baseline Data Collection Program Final Report By:Dames &Moore February 1,1983 Proposal to Perform a Load Forecast and Power Market Analysis for the City of Unalaska/Dutch Harbor By:Dames &Moore July 28,1986 Final Report -Geothermal Drilling Studies Near Unalaska,Alaska By:Dames &Moore November 20,1980 Unalaska Power Production July 1992 Reconnaissance Study of Energy Requirements and Alternatives Appendix:Unalaska DRAFT By:ACRES April 1984 Unalaska Geothermal Feasibility Study Draft Report Volume | By:Dames &Moore January 30,1987 The Alaska Power Authority Unalaska Geothermal Project Final Report (2) By:Power Engineers,Inc. December 15,1987 A Proposal to Perform an Independent Cost Estimate of the Unalaska Geothermal Project for the Alaska Power Authority RFP No.APA-87-R-034 By:Power Engineers,Inc. August 1987 Final Small Hydropower Interim Feasibility Report and Environmental Impact Statement Preliminary Draft U.S.Army Corps of Engineers July 1984 Draft Small Hydropower Interim Feasibility Report and Environmental Impact Statement Preliminary Draft U.S.Army Corps of Engineers November 1983 82. 83. 84. Alaska Energy Authority/AIDEA Unalaska Geothermal Project Bond Sizing Analysis By:OESI September 1,1993 Makushin Geothermal Electric Generation Project Project Description By:OESI March 17,1984 Public Notice of Application for Permit Makushin River 1 By:U.S.Army Corps of Engineers -Alaska District December 21,1994 LEMeasuit a wy.W YU/B46-84a9 Mi S/6/96 ©10'54 AM B12 From the Teleport of:LeResche &Co. Date:Monday,May 6,1996 Number of Pages:2 To:MR.DAVE GERMER,AIDEA/Anchorage Fax Number:907 249-3020 Memo: Dave &Dennis -- I talked to Hank and suggested to him it probably isn't in the cards for AIDEA to provide a bond type to get in the middle of their geothermal leasenegotiations,even though it is essential that the lease give AIDEAa financibleprojectifitgetsthatfar. I sent him the attached at his request,just so you know. Best regards,RL LEMcouUiG a VY.@ oui 000°00509 (73/6/96 O10:54 AM G2/2 :LeResche &&Co.CONSULTANTS 211 FOURTH STREET,SUITE 300 ¢JUNEAU,ALASKA »TELEPHONE (907)586-8338 ©TELECOPIER (907)386-83394270GLACIERHIGHWAY*JUNEAU,ALASKA 99801 ©USA *TELEPHONE (907)780-4079 »®MOBILE (907)321-2137 May 6,1996 To:Hank Leibowitz Exergy,Inc./ANEX J-V From:Bob LeResche Re:Makushin Lease Negotiations/AIDEA Financing Concerns T have discussed with you,with AIDEA,and with Jack Wood the necessity that any geothermal lease for the Makushin resource entered into between ExergyandKSLCcontaintermssufficienttoallowAIDEAtoprovidesufficientsecurity for any eventual financing of the project. The most efficient way to accomplish this would be for AIDEA to provide a bond attorney or underwriting banker to participate in negotiations,or to at least provide ongoing "real time"critique of lease terms as negotiations proceed. Presumably,AIDEA would finance such participation on a reimbursable basis under the Exergy /AIDEA agreement. I believe,however,that AIDEA will be reluctant to become so intimately involved with Exergy and KSLC at this early stage of project review and due diligence.Rather,I believe they will instead agree to review the final lease agreement for sufficiency,as part of their overall due diligence program. I think I have a good understanding of the lease terms necessary to provide sufficient security for an eventual AIDEA financing of the project.I therefore sugvest that,if AIDEA chooses to review the lease after the fact,I could be of assistance to both Exergy and KSLC in advising the parties during lease negotiations regarding whether I believe lease terms will be sufficient to pass muster with AIDEA's underwriter and bond counsel. Certainly,I could provide absolutely no assurances that AIDEA will or will not accept any given lease terms.Nevertheless,I do believe my involvement could help Exergy and KSLC avoid obvious pitfalls,making the negotiations more efficient and less speculative. RELsjr / -