Public/Private Partnerships:Public Sector Management Workshop 2009

“Climate Change” in the Public Sector Regina, Saskatchewan May 31 – June 2

Russ Hantho, Director Power GrowthTransCanada Corporation

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Gas Pipelines

• 59,000 km wholly owned

• 7,800 km partially owned

• 250 Bcf of regulated natural gas storage capacity

• Average volume of 15 Bcf/d

Energy• 19 power plants, 10,900 MW

• Diversified portfolio, primarily low-cost, base-load generation

• 120 Bcf of non-regulated natural gas storage capacity

Oil Pipelines

• Keystone 1.1 million Bbl/d

• Expandable to 1.5 million Bbl/d

TransCanada Corporation (TSX/NYSE: TRP)

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Trends in the Power Industry

• Canadian and U.S. power capital stock

needs replacing

• The opportunity to participate in

development, and the mechanics of

participation, will vary by region

• GHG policy may accelerate the

retirement of certain of the capital stock

By 2020 Canada will have to…….

•Replace 8,000 MW of coal generation•Replace 11,500 MW of old (relatively clean) generation•Meet demand growth of 30,000 MW by 2020•Attain adequate system reliability while doing this•Add more than 4,000 MW per year from now until 2020

•Plus inadequate transmission systems•Plus export opportunities

In the next 15 years the U.S. will have to……

•Spend $150 billion on new transmission infrastructure•Spend $350 billion on new generation capacity•Spend $50 billion on environmental retrofits on existing

generation•Retire 52,000 MW of existing capacity•Build 230,000 MW of new capacity•Attain adequate system reliability while doing this•Add more than 15,000 MW per year from now until 2020•Source: Cambridge Energy Research Associates.

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• No Emissions Compliance Costs

• Freely Emit CO2

• No R&D invested

in storage

• No investment ingasification/post combustion capturetechnology

• Self sustaining

• Projects with CCS market price for power pays for CCS

GHG Regulations are changing the Power business but not overnight…

Traditional Future

• Bridge the commercialgap with subsidies

• Enable implementation of First Generation CCS

20092009 2016…2016…201520152014201420132013201220122011201120102010……20082008

• Moving too fast will shock market• Flow-through CCS costs will cause consumer power prices to spike

Caution

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Transition Period

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Public Private Partnership (P3) Option

“A cooperative venture between the public and private sectors, built on the expertise of each

partner, that best meets clearly defined public needs through the appropriate allocation of resources,

risks and rewards.”

http://www.pppcouncil.ca/aboutPPP_definition.asp

“The key questions here are how to improve the efficiency of infrastructure investment, and how to finance that investment. There is evidence from

other countries that public-private partnerships can both increase the efficiency of investments and support their financing. Now is the right time

to encourage partnerships between the Government … and private providers, given the climate of low nominal interest rates and the presence

of large pension funds that are searching for these kinds of investment opportunities.”

(David Dodge, Governor of the Bank of Canada,)

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Summary of P3 Models

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Government

Crown Corporation/Agency

Design-Build

Operation/MaintenanceService/License

Finance Only

Design-Build-Operate

Lease-Develop-Operate

Build-Lease-Operate-Transfer

Build-Own-Operate-Transfer

Build-Own-Operate

Buy-Build-Operate

Privatization

Degree of Private Sector Involvement

Deg

ree

of

Pri

vate

Sec

tor

Ris

k

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TransCanada and Saskatchewan Collaboration

• Belle Plaine Polygeneration project Gasification with CO2 capture

Governments of Saskatchewan and Canada and TransCanada sharing in funding

• Western Transmission Grid

• Nuclear generation

• Wind

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Belle Plaine Polygeneration

• Utilization of low value feedstock for high grade products

• Power, steam, H2, N2

• Uses Carbon Capture & Storage (CCS)

• Approx. $5.0 Billion (2008$)

• Feasibility study initiated

• In-service potential was 2015; on hold pending GHG policy and improved economy

Belle Plaine, Saskatchewan

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Western Grid Study – Alberta to Manitoba

• SaskPower, AESO, Manitoba Hydro and Provincial Governments

• Enables large scale generation Wind, Gasification, Hydro, Nuclear

• Capital Cost: $3.0 B

• Converter Stations: Calgary, Regina and Winnipeg area

• HVDC technology – bi-directional

• 1050 km

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Nuclear

• Significant GHG benefits by using nuclear to replace coal or natural gas

• Bruce Power is currently evaluating nuclear sites in Saskatchewan and Alberta, or sites that could serve both Provinces

• Government of Saskatchewan’s Uranium Development Partnership’s mandate: ”assess opportunities for development of the province’s uranium industry, including nuclear power generation”

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Wind Generation

Renewable portfolio standards (RPS) have been a

catalyst for the rapid development of wind farms - many developments are currently unable to access financing.

12 Months Ago

• Wind energy in high demand• Numerous development

companies launched• IPO and liquidation upside

substantial• Strong project economics• Capital costs accelerating

Today

• Developers move into build phase

• Sale of companies and IPO’s have failed

• Demand for wind energy continues to be strong

• Turbine availability improves and cost declines are occurring

• Saskatchewan wind 4000 + MWs (not considering operability issues)

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Projects: Major Risks and Mitigations

MitigationRisk

• Development Costs

• Capital Costs

• Materials

• Labour

• Regulatory

• GHG & pollution

• Siting

• Fuel availability

• Counter-Party Credit

• Staged study work

• Pre-FEED

• FEED

• Risk sharing

• Counterparties

• Governments

• Seek clarity on policy and legislation

• Commitments and Timing

• Guarantees

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• Engage Federal government• Regulatory• Risk sharing

• Advance regulatory policy and legislation

• Public Private Partnership (P3)• Repayable Loan Agreement

• Significant risk sharing mechanism for development costs

Areas for Saskatchewan Government Involvement

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Looking to the future - Public Private participation

• Emerging climate change policy and technological advances presents opportunities for transmission and generation

• Saskatchewan government has a principle and potential role for facilitating private investment / joint ventures in energy infrastructure

• TransCanada’s financial strength and power growth objectives good fit with Saskatchewan’s government objectives

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Thank you.

Russ Hantho, Director Power GrowthTransCanada Corporation