Download - HATCH ECRI Presentation June 2012ecrisponsor.org/Npresentations/aj12-1-3.pdf · HATCH ECRI PRESENTATION – JUNE 2012 Contents • An overview of HATCH – Principles, Global Operations,

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HATCH

ECRI Presentation June 2012

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05/2012

HATCH ECRI PRESENTATION – JUNE 2012

Contents

• An overview of HATCH – Principles, Global Operations, Industry

Sectors, BU’s, Clients, Projects and Awards

• Overview of Risk Management in HATCH – Why it is important,

Capital-Risk Relationship, Policy, System, PLP and FEL and Risk

Reviews, QRA and Value and Decision Analysis.

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ABOUT HATCH

Founded in the mid 50’s by Dr Gerald Hatch who was also the first President, Hatch has

built a reputation for delivering strong and differentiated engineering and project skills

in the global engineering and construction market.

• Employee-owned

• Serving mining & metals, energy and infrastructure for more than 80

years

• Projects in more than 150 countries

• More than 11,000 professionals worldwide

• More than US$35 billion of projects under management

• EPCM, integrated teams, project and construction management

• Consulting – process, technologies and business

• In-plant engineering services for operations

OUR BAND OF PRINCIPLES

Four key commitments we make to our clients and ourselves, when combined

make Hatch unique in our industry – we call this our Band of Principles.

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SAFETY QUALITY SUSTAINABILITY INNOVATION

Currently stands at 0.07 lost

time injuries (LTI’S) for every

200,000 manhours of project

work completed.

Our team working on

Barrick’s Pueblo Viejo

pressure leach gold plant in

the Dominican Republic

surpasses 2 million man-

hours without an LTI in 2011.

Our commitment to quality

was recognised by our

clients and our industry at

award ceremonies around

the world throughout 2011.

Examples include Project of

the Year and Project

Management excellence

awards for major coal port

developments at Abbott

Point and Newcastle

Projects are now often

located near sensitive

environments and can have

significant social impact on

communities.

Our current EIA for SMM

Solomon Ltd to develop a

Solomon Islands nickel mine

requires particular attention

to conservation areas, local

communities and the cultural

heritage of the region.

We look to our clients and

their needs to drive our own

innovation processes.

Hatch in partnership with

Suncor Energy, Enerbridge

and Nenniger Inc are

developing a pilot plant to

demonstrate BEST –

bitumen extraction solvent

technology. It will produce

85% less greenhouse gases

than SAGD processes.

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THE HATCH ADVANTAGE

By working closely with our clients throughout the project development lifecycle

we are acutely aware of the key success factors and the need to execute well as a

team.

work safely

work in teams

fight for lower costs and better quality

plan carefully for fast startups

design and build for smooth, reliable

performance

We

GLOBAL OPERATIONS

Hatch has grown steadily to increase our global operations in alignment with our

client’s needs and global growth.

11,000 staff – May 2012 CANADA

St. John’s, Newfoundland & Labrador

Sorel-Tracy, Québec

Sudbury, Ontario

Toronto, Ontario

Vancouver, British Columbia

Winnipeg, Manitoba

New York, New York

Pensacola, Florida

Phoenix, Arizona

Pittsburgh, Pennsylvania

Sacramento, California

San Diego, California

San Francisco, California

Seattle, Washington

Tampa, Florida Antofagasta, Chile

Belo Horizonte, Brazil

Lima, Peru

Rio de Janeiro, Brazil

Santiago, Chile

São Luís, Brazil

São Paulo, Brazil

Newcastle

Perth

Townsville

Wollongong

Adelaide

Brisbane

Gladstone

Mackay

Melbourne

AUSTRALIA

MIDDLE EAST

SOUTH

AMERICA SOUTH AFRICA

Amherst, New York

Baltimore, Maryland

Boston, Massachusetts

Buffalo, New York

Cleveland, Ohio

Denver, Colorado

Houston, Texas

Millburn, New Jersey

Calgary, Alberta

Halifax, Nova Scotia

Mississauga, Canada

Montréal, Québec

Niagara Falls, Ontario

Oakville, Ontario

Saskatoon, Saskatchewan

CHINA

NEW CALEDONIA

Johannesburg

Pretoria

Cape Town

London, England

Moscow, Russia

St. Petersburg, Russia

EUROPE

INDIA New Delhi

Beijing

Shenyang

Shanghai

USA

Abu Dhabi, UAE

Al Khobar, Saudi Arabia

Sohar, Oman

Nouméa

INDONESIA Jakarta

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OUR PROFESSIONAL SERVICES

Through initial consulting to management assignments to assist client senior management

teams, Hatch now provides a full suite of services covering Project Delivery, Consulting

and Operational Services.

Project Delivery Engineering

Project management

Procurement

Construction management

Consulting Management consulting

Technologies

Environmental

Systems & Process Control

Operational Services In-plant engineering services for operations

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HATCH SERVICES AND SECTORS

Hatch Capital Projects and Execution, Consulting and Operational Services are provided to

our clients in the Metals, Infrastructure and Energy industry sectors.

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THERMAL

COAL

WATER

INFRASTRUCTURE SERVICES

PORTS AND MARINE TERMINALS

RAIL & TRANSPORTATION SYSTEMS

OUR BUSINESS UNITS

Our Business Units are structured to provide global services to the key markets within each

of the metals, energy and infrastructure industry sectors.

NUCLEAR

NON-FERROUS

LIGHT METALS

MINING & MINERAL PROCESSING

INDUSTRIAL MINERALS

IRON & STEEL RENEWABLE POWER

TRANSMISSION & DISTRIBUTION

OIL & GAS

en

erg

y

infra

stru

ctu

re

meta

ls

IRON ORE

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MAJOR CLIENT PROJECTS

Hatch is currently managing over US$35b worth of projects around the world for our clients.

We foster long standing relationships and Anglo recently selected Hatch to deliver EPCM

services for over 20 of their major projects over the next 7 years – totaling about US$17b in

capital expenditure.

Client Project Location

Estimated

Capital Cost

(US millions)

Chevron/Exxon/Shell Gorgon LNG Facility Australia 43,000

Transnet Port and Rail Infrastructure South Africa 12,000

Anglo American Anglo Coal Program Australia 12,000

Santa Clara Valley Bay Area Rapid Transit Program USA 9,100

Baffinland Iron Mines Corporation Mary River Iron Ore Project Canada 4,000

Bruce Power Bruce A Nuclear Units 1&2 Restart Canada 4,000

Xstrata Koniambo Ferronickel Project New Caledonia 3,800

Alcoa/BHP Billiton/ Rio Tinto Alcan Alumar Refinery Brazil 3,000

Qinghai Salt Lake Industry QSLIC Industrial Complex China 3,000

Peter Kiewit Sons Co and Flatiron

Constructors Port Mann/Highway 1 Project Canada 2,460

Vale Onça Puma Nickel Brazil 2,300

Codelco Mina Ministro Hales Project Chile 2,000

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MAJOR CLIENT PROJECTS (CONTINUED)

Hatch is also delivering capital coal port project programmes for NCIG, Rio Tinto

and Dalrymple Bay with capital expenditure of about US$10B.

Client Project Location

Estimated

Capital Cost

(US millions)

Ontario Power Generation Niagara Tunnel Canada 1,600

Greater Toronto Airports Authority Pearson Terminal Redevelopment Canada 1,500

Babcock & Brown Infrastructure Dalrymple Bay Coal Terminal Australia 1,300

Wuskwatim Power Partnership Wuskwatim Generation Station Canada 1,300

Newcastle Coal Infrastructure Group NCIG Coal Export Terminal Australia 1,100

Rio Tinto (QMM) Madagascar Minerals Madagascar 940

Xstrata Nickel Rim South Canada 900

Rio Tinto Alcan Jonquière Smelter Canada 900

Bruce Power Bruce A Units 3 & 4 Restart Canada 650

Barrick Gold Pueblo Viejo Autoclave Dominican Republic 650

Codelco Chuquicamata Mine Project Chile 83

METALS CLIENTS

Our key clients are leading companies in their industry and market sectors with needs to

develop some of the most challenging and complex projects to deliver shareholder value.

ENERGY CLIENTS



INFRASTRUCTURE CLIENTS



OUR RECENT MAJOR AWARDS

For us, rewards acknowledge and symbolise our daily focus on working alongside clients

to deliver positive outcomes for their company and all of their stakeholders.

Canada’s 50 Best Managed Companies—National

Post, Deloitte, CIBC Commercial Banking, and

Queen’s School of Business Recognition for sustaining a standard of excellence and

leadership in all areas of business practices,

2007-2012

Project of the Year Award—2011 Consult Australia

Awards for Excellence Abbot Point Coal Terminal X50 Expansion (APCT X50)*

Australia, 2011

Gold Award for Excellence in Project Management —

2011 Consult Australia Awards for Excellence Newcastle Coal Export Terminal (NCIG) – Stage 1,* Australia,

2011

WateReuse International Award—WateReuse

Association Luggage Point Advanced Water Treatment Plant* Australia,

2011

Bulk Handling Facility of the Year Award—Australian

Bulk Handling Review Newcastle Coal Infrastructure Group (NCIG) Project*, 2010

* Joint venture projects

Award of Excellence —Canadian Consulting Engineer

and Association of Consulting Engineering

Companies—Canada GO Transit Rail Infrastructure Improvement Program*, Ontario,

Canada, 2011

50 Best Employers in Canada of 2012—Aon Hewitt Recognition for the best companies to work for — as rated by

their employees, Canada, 2011

National Award—South African Institute of Civil

Engineering (SAICE) Transnet Ngqura Container Terminal Project*, 2010

Grand Award—American Council of Engineering

Companies Sea-to-Sky Highway Improvement Project, Canada, 2010

Products and Manufacturing Facilities Excellence

Award—Engineers Australia Dalrymple Bay Coal Terminal 7X Project*, Australia, 2009

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PROJECT RISK MANAGEMENT – WHY IS IT IMPORTANT AT HATCH?

Risk management at Hatch is important as we are an employee owned company. Our reputation

and financial success is dependent on our ability to win and execute successful projects whilst

managing risks within client agreed risk profiles

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Projects create change and are a major source of uncertainty, threat and opportunity for a

company to achieve its objectives – the Board wants to know about project risks and

needs to report on them to their stakeholders

“With the possible exception of strategy development, the topic most discussed at the

board level today is risk. Boards want to know where risk exists, and what is being done

about it.”

The 1st and last sentences of BHPBilliton’s Risk Management Policy are a guide.

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PROJECT RISK MANAGEMENT – TO PROVIDE CONFIDENCE THAT VALUE WILL NOT BE DESTROYED

Capital investment success is acutely sensitive to the execution risk profile – most

investments, especially resource projects have a finite life to return profits to shareholders.

Significant value can be destroyed during project execution if the risk profile is not well

established and managed..

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The Capital – Risk Relationship

FEL1

0

FEL2

FEL3

FEL4 - Implementation

NP

V

0

Cash

Flows

Major risks to cash flows are

technology and project design,

construction & schedule risks, ramp

up & country risks

Major risks to cash flows

are technology, market

forecasts, operations and

country risks

Shareholders want to see

the project reach this point

in the shortest possible

timeframe

NPV + v

e

- ve

Cash

Flo

ws

Time

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PROJECT RISK MANAGEMENT – SUPPORTS THE CLIENT’S GOVERNANCE PROCESS

Corporate Governance is defined “ The system by which organisations are directed and controlled to exercise accountability to shareholders and responsibility to stakeholders” Our risk management process applied across the project lifecycle is integral to our client’s governance processes.

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How Much?

How much do we spend on capital

expenditure?

Financial Structuring

Where?

On what projects do we spend our capital

Capital Allocation

How ?

How do we spend our capital?

Capital Spending

Why?

Our communications about our capital

spending

Reporting

Corporate

Level

Client

Concept Definition

Implementation

Strategy Budgeting

Performance Specification

Implementation & Post

Implementation

Project Level

Hatch

Cost/ Benefit Analysis

Due Diligence – risk profile &

treatments confirmed Approval - Risk profile accepted

Monitoring – risk profile and risk treatments

How Much?


expenditure?

Where?


Capital Allocation

How ?


Capital Spending

Why?


spending

Reporting

Corporate

Level

Client

Concept Definition

Implementation

Strategy Budgeting



Implementation

Project Level

Hatch

Risk Based Decisions

& Cost/ Benefit Analysis

Due Diligence – risk profile & treatments confirmed Approval - Risk

profile accepted

Monitoring – risk profile and risk treatments

How Much?


expenditure?

How Much?


expenditure?

Financial Structuring

Where?


Capital Allocation

Where?


Capital Allocation

How ?


Capital Spending

How ?


Capital Spending

Why?


spending

Reporting

Why?


spending

Reporting

Corporate

Level

Client

Concept Definition

Implementation

Strategy Budgeting



Implementation

Project Level

Hatch

–

- –

FEL1, 2 and 3 FEL4

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HATCH RISK MANAGEMENT POLICY

Our policy outlines the “way we do things” in Hatch and provides guidance if in doubt.

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Hatch

Project Risk Triangle

Hatch Business Risk

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HATCH RISK MANAGEMENT SYSTEM

Our risk management system applies the principles and process outlined in ISO 31000.

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HATCH RISK MANAGEMENT LIFECYCLE

Risk management is tailored and “embedded” in our systems throughout the project life

cycle.

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PLP PHASES

Project Proposal

Project Approved

FEL PHASE EXECUTION

PLP EXECUTION

FEL PHASE RISK

· Project Risk Management Plan

· Gate Reviews and Risk Reviews

· Project Monthly Reports (PMR’s)

Projects with unacceptable risk profiles from

PMR’s or failure to achieve a compliant Gate

Review are identified for management support

Hatch Business Risk Review

Project Set-up Risk Review

· Project Team selected

· Project Set-up assistance

· Initial Project Risk Reviews

· Bid / No Bid Assessment

· Business Risk Reviews

· Global and Regional Risk Committee

Reviews and sign-off

LESSONS

LEARNED

Hatch

Global Project Risk

Reports

Risk Review

Committee

Global

Managing

Directors

Client

Project

ManagerRisk Manager

Supported by Regional

Risk Managers and Global

Risk ManagerArea Managers

Project

Sponsor

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05/2012

HATCH PROJECT LIFECYCLE PROCESS – CAPITAL EFFECTIVENESS AND FEL

In line with industry best practice Hatch has developed a “Gated” project lifecycle

process to achieve capital effectiveness through FEL. It facilitates risk based decision

making and development of tolerable risk profiles for project execution.

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Capital Effectiveness Diagram

Client Engagement and Communication

Execution

Execution

FEL 1, 2, & 3

Develop Scope ofWork to Meet

Business Objective

Project ExecutionPlanning

Owner/HatchAlignment

OptimalScope of

BusinessNeeds

FEL-4 Implementation

UtilizeChange

MgmtProcess

Outcomes

Excellent Operability

Faster ProjectCycle Times

Better ROI

Enhanced Safety

Capital Effectiveness

Improved QualityEmploy Value-Added Tools

Timely Involvement of Vendors and Contractors

TechnologyStrategy/Selection

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HATCH PROJECT LIFECYCLE PROCESS – RISK MANAGEMENT PROCESSES AT EACH FEL PHASE

At each stage the project risk, estimate and schedule are considered jointly to assess

risk profiles. Project targets and contingency levels for cost and time are developed,

reviewed and agreed.

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FEL1 STUDY

Risk:

- Fatal flaws identified

- Key risks identified

- Are controls practical

- Are risk treatments

practical

Estimate - High level, factored

- benchmarked

Schedule: - High level only

FEL 2 STUDY

Risk:

- Risk register & profiles for options

- Technical risk – hazard studies

- QRA for options

- Risk based decision to select best option

- Risk Treatment Plans for selected option

- QRA to assess contingency / accuracy

practical

Estimate - Option estimates

- Detail, factored and database

- Contingency/accuracy from QRA

Schedule: - Semi detailed for options

FEL 3 STUDY

Risk:

- Detail project risk register & profile

- Technical risk - HAZOP’s etc

- Detailed Risk Treatment Plans

- QRA to assess contingency / accuracy

- Risk Plan for Execution

Estimate - Detail Estimate

- Contingency/accuracy from QRA

Schedule: - Detailed schedule

- QRA to assess profile and time

contingency

FEL 4 EXECUTION

Risk:

- Project Risk Mgt Plan

- Technical risk – final HAZOP’s

- Detailed Risk Treatment Plans

- QRA reviews to assess profiles

- Execution risk assessments/change mgt

Estimate - Reviews and updates

- change mgt

- Reporting

Schedule: - Reviews and updates

- change mgt

- Reporting

Plans developed for next phase for review at the Gate, communication, consultation, monitoring and review throughout

KEY INTEGRATED RISK, COST and SCHEDULE ACTIVITIES

FEL - 1 FEL - 2 FEL - 3

Front End Loading Phases

ProjectExecution

PlanningStudy

FeasibilityStudy

Conceptual/Pre-Feasibility

Study

Gate

1P

roje

ct O

ptio

ns

Gate

2V

iab

le (Y

es/N

o)

Gate

3P

roje

ct E

xec P

lan

FEL-4

Pro

ject

Imple

menta

tion

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HATCH INTEGRATED SCHEDULE-COST RISK PROFILE

Integrated schedule – cost risk analysis produces the schedule and cost risk profiles for

the project. These are updated on a regular basis and are an essential element for risk

based decision making.

Integrated

Schedule

Cost

Risk

Model

CAPEX RISK DRIVERS

Project Mgt

Telecoms

Escalation

Schedule Risk

Protection

Signalling

Alliance1 Civil Works

Project Risk Events

Alliance 2 Civil Works1

Track Upgrades

Schedule Risk Analysis - Minimum and Plausible Low Scenarios

- Most Likely

- Maximum and Plausible High Scenarios

- Probability of achieving the Deterministic duration

Cost Risk Analysis - Minimum and Plausible Low Scenarios

- Most Likely

- Maximum and Plausible High Scenarios

- Probability of achieving the estimate

Schedule and Cost Risk Events

(Prob x Consequence)

EPCM Owned CLIENT Owned

Organisational Risk Analysis

Is this a missing piece in the jigsaw for large

and complex projects to capture management

performance risk?

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HATCH PROJECT LIFECYCLE PROCESS RISK AND GOVERNANCE – GATE REVIEWS

The Hatch Gate Reviews near the completion of each FEL phase provides both Hatch and

the Client with an assessment of the quality of the deliverables and the risk with proceeding

to the next phase

Review

Outcome

Criteria

All Key Deliverables meet or exceed the required project phase

deliverables quality standard

No further action is required before proceeding with the next Project

Phase

Not all Key Deliverables meet the required project phase deliverables

quality standard

A detailed review of plans for the next Project Phase with the Owner is

needed to verify their suitability before proceeding

Insufficient Deliverables meet the required project phase deliverables

quality standard

Further work is needed to satisfy minimum requirements to support a

client decision to proceed to the next Project Phase

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HATCH PROJECT MONTHLY REPORTS (PMR’s) – ESSENTIAL RISK AND GOVERNANCE PROCESS

Global and Regional Hub PMR’s summarise the project risk profile and triggers

management control actions.

PMR

Outcome

Criteria

Compliant

PM believes he can manage to

success

PM needs external assistance

PMR’S are applicable to all FEL

phases

Hub and Global management

reviews are conducted based on

the importance of the project and

the fee level

The CEO chairs the monthly

global meeting

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05/2012

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RISK MANAGEMENT, VALUE AND DECISION ANALYSIS DURING THE PROJECT LIFECYCLE

Value management and risk management are “2 cousins” and must be considered

together to make sound value decisions. Change through value analysis is a source of

project risk and must be linked to objectives.

• Risk Mgt and Value Engineering during the FEL 2

and FEL 3:

– Right time (first 1/3 of Eng Phase)

– Right group dynamics – especially for Alliances with Industry

sponsorship and backing

– Proven processes

– Integration will optimise the risk profile

NPV optimised

VE Opportunities

GAP PROJECT CAPEX RISK PROFILES COMPARED

0

0.1

0.2

0.3

0.4

0.5

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0.7

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0.9

1

800 850 900 950 1000 1050 1100 1150 1200 1250 1300 1350 1400 1450 1500 1550

Millions

Capex ($M)

Pro

bab

ilit

y o

f U

nd

err

un

May-09 Jul-09 Nov-09


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Capex ($M)

Pro

bab

ilit

y o

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err

un


CAPEX RISK DRIVERS

GAP Project Mgt

Telecoms

Escalation

Schedule Risk

Protection

Signalling

CoalStream Civil Works

Project Risk Events

CoalConnect Civil Works1

Track Upgrades

CAPEX RISK DRIVERS

GAP Project Mgt

Telecoms

Escalation

Schedule Risk

Protection

Signalling


Project Risk Events


Track Upgrades

Schedule Model

CAPEX RISK DRIVERS

GAP Project Mgt

Telecoms

Escalation

Schedule Risk

Protection

Signalling


Project Risk Events


Track Upgrades

Capital Model Tariff Model

Value Map – Key drivers established


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Capex ($M)

Pro

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y o

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err

un


CAPEX RISK DRIVERS

GAP Project Mgt

Telecoms

Escalation

Schedule Risk

Protection

Signalling


Project Risk Events


Track Upgrades

CAPEX RISK DRIVERS

GAP Project Mgt

Telecoms

Escalation

Schedule Risk

Protection

Signalling


Project Risk Events


Track Upgrades

Schedule Model

CAPEX RISK DRIVERS

GAP Project Mgt

Telecoms

Escalation

Schedule Risk

Protection

Signalling


Project Risk Events


Track Upgrades

Capital Model Tariff Model

Value Map – Key drivers established

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05/2012

HATCH RISK MANAGEMENT SUMMARY

Our risk management system is basically structured to ensure we can positively deliver on

the cardinal risk management questions.

In summary risk management on our projects must answer the Cardinal Risk Management Questions throughout the FEL phases from the perspective of both the Client and Hatch to ensure we both succeed: What are the major risks on this project?

How big are they?

What are they ‘sensitive to’ and how can we change them?

What level of risk can the business and stakeholders tolerate?

Therefore, what should we do – and when?

If we can answer these questions in the positive we can be certain we are delivering on our risk management process and risk policy

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For more information, please

visit www.hatch.ca