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Read MoreW|EPC: LNG Canada – Q321 Timeline, Budget, & Progress Update
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Key Takeaways:
Mozambique LNG (MZLNG): After A Sluggish Start…The Next 6 Months Are Critical.
• Q320 & Q420 satellite images indications… (pgs. 15-18)
• 17-months after FID, meaningful piling, concrete, &/or structural steel erection [redacted]…
• Recent security issues (increasingly localized terrorism) could further hamper staffing levels and complicate the path forward (while also potentially creating the pretense for Force Majeure relief).
Schedule Analysis & Estimates: W|EPC Estimate MZLNG is…
• Our proprietary risk model implies a probability of the project meeting its original cost/schedule metrics is [redacted] (page 5)
• EPC Contract Exposure: ~$8B LSTK contract, via a consortium comprised of Saipem (74.95%, SAPMF), McDermott (24.98), MDR) & Chiyoda (0.07%,)
• Note: a successful project would boost Saipem’s reputation, while also certainly meaningful for a restructured MDR ($560MM Raise on Jan 5, 2021).
Mozambique vs. LNG Canada
• MZLNG & LNG Canada share similar characteristics, specifically: a remote area, greenfield, man-camp, etc. (page 4)
• Key differences: MZLNG’s has lower-cost construction wages, shorter project schedule, but 300% more peak labor (~11k craft workers).
• Should MZLNG require even more labor given the circumstances described in pages that follow, it would likely require an even more significant pull from local labor (on-site housing can support ~9.5k workers).
• MZLNG is located in one of the least developed areas of Mozambique, which creates unique risks around that heavy lean on local labor, even before considering the uptick in localized terrorism. (page 12)
Mozambique LNG: Baseline Report Q121
Mozambique LNG: Baseline Report Q121 (Page 15)
W|EPC: Mozambique LNG – Baseline Report & On-Site Satellite Image Analysis (Q121)
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Alternative Fuel Analysis…Will History Repeat Itself?
In 1992 & 2005, the Department of Energy (DOE) created & amended the Energy Policy Act (EPA) that addressed fuel research and tax benefits for vehicle manufacturing.
Battery Electric Vehicles (BEV), Hydrogen (H2), Hybrids, Biofuels, Ethanol and Methanol were analyzed in 2005, but vehicle manufacturers supported gasoline hybrid vehicles due to technology and production constraints.
Since then, fuel cell technology and global, federal, & state emission guidelines have accelerated innovation and the market is now actively deciding transportation alternatives.
Small Vehicle Applications
BEV have taken a leading role in the small vehicle category with minimal competition from Hydrogen.
Hydrogen’s price, lack of infrastructure, and safety concerns highlight the risk associated with new fuel applications; however, Methanol may have an opportunity to fill this role.
The Roland Gumpert Nathalie markets an impressive range and methanol costs are comparative to BEV, but the $450k price tag limits it’s applications until manufacturing scales up to reduce cost.
Mid-Sized Vehicles and Truck Applications
Fuel energy density becomes a larger role as the size of a vehicle increases.
Fuel storage capacity, energy density, and vehicle efficiency play a large role in the range and cost for a vehicle.
Semi-Truck Range Is A Gating Issue For Future Fuels
New Semi-Truck concepts are ranging from shorter applications (<300 miles) to the long-haul market (>600 mile/day).
Daimler eCascadia seems to make sense for shorter applications and Hyliion’s Compressed Natural Gas (CNG) hybrid semi will likely apply well to long haul trades, if the marketing is as good as advertised.
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Analyzing EPC Risk Avoidance: Comps & Techniques For Investors, Owners, & Contractors
W|EPC analyzed ~$20B of publicly available EPC lump sum turn-key (LSTK) contracts, focusing on sensitive or contentious terms used to allocate risk, manage performance expectations, & establish a framework for third-party indemnification and liquidated damages, etc. (Pages 3, 5-7, & 9-17). Specific points of emphasis:
Analyzing Notable Risks
Distributing Project Risk Amid A Ramp In Renewables
W|EPC: Analyzing Energy Project Contract Terms – Risks, Strategies & Comps
Table Of Contents:
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In mid-November the California Air Resources Board (CARB) published initial plans detailing the development and implementation of a light-duty hydrogen fueling station networks, including a focus on financial self-sufficiency.
Specifically, CARB’s initial draft highlights:
1. Estimates around required state-support and eventual self-sufficiency
2. A comparison of existing market solutions, ongoing government research, and the latest awards in the Energy Commission’s Grant Funding program.
3. The economic sensitivity around FCEV deployment and the pace of network development.
4. Opportunities for cost reductions
5. Potential price reductions at the pump
6. Regional economic differences
Within the context of CARB’s report, we evaluated the economics and risks for deployment of Hydrogen fueling station options based on the following:
• Public Safety
• Climate Change and Air Quality – Tank to Wheel (TTW) – Well to Wheel (WTW)
• Gas Station Infrastructure Costs
• Hydrogen Costs at Pump for Consumer
W|EPC Takeaway: As highlighted below, if the primary goal of CARB is to reduce tailpipe emissions, we believe electric vehicles and hydrogen vehicles are the most viable options today. However, if the goal is to reduce total emissions and to implement hydrogen fueling as quickly, safely, and cost-effectively as possible, it opens the door for a mix of other fuel considerations – including biofuels, e-fuels, and other energy mediums to expedite the Hydrogen Economy. We believe how California ultimately balances those priorities will determine what it’s future fueling network looks like.
Climate Change & Air Quality
Air quality and the need for sustainable future fuels to reduce GHG emissions is driving alternative fuel technology development. CARB’s Low Carbon Fuel Credits (LCFC) are based on Well to Wheel Carbon Intensity Scores (CI) that identify upstream pollution caused by fuels.
Gas Station Infrastructure Costs
Future fuels (i.e. H2, Ammonia, Methanol) will require new infrastructure in almost all cases to meet federal and state emission guidelines. The Implementation cost of these can vary from storage retrofitting, to +$1 million infrastructure upgrades. The costs could further increase based on the engineering design and blast radius study results.
Hydrogen gas station equipment could include:
• Compressors – 350 bar pressure
• Above Ground Storage
250 bar pressure
250 kg storage
• H2 Dispenser Larger corporate gas stations may have the financial means to implement the costly infrastructure upgrades especially if supported by fuel tax credits. However, smaller gas stations may face challenges investing in the capital costs & the ~$2K/month electricity bill to own & operate the equipment.
Cost comparisons vs the low-cost alternative for Methanol:
• Hydrogen – See Figure 6. Multiple scenarios based on CARB capital cost estimates
• Methanol to Hydrogen in Vehicle – ~$50,000 per gas station to upgrade storage
• Methanol to Hydrogen at Pump – ~$1 million per gas station (250kg H2 storage)
Hydrogen Costs at Pump for Consumer: ~$16/kg and by 2030 as Low as $8/kg?
At the pump, the H2 price begins to stack up due to CAPEX, maintenance, safety, and production costs. We have provided a few options that have been considered for comparisons sake below that could further drive down the cost of hydrogen.
• Centralized Electrolysis: ~$8/kg
• Centralized Reformer (No Carbon Capture): ~$2.50/kg
• Methanol Reforming at Pump: ~$5/kg
Includes 250kg hydrogen storage and compression
• Methanol Reforming in Vehicle: ~$3.50/kg
Gas Station infrastructure cost are relatively minimal
For a methanol reforming at pump scenario, storage-related infrastructure costs could be lighter as Methanol is a potential mid-stream solution for hydrogen, and is generally easier to store in large quantities – potentially pushing the hydrogen cost at the pump level below $10/kg in a shorter timeframe.
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EPD PDH 2 – Project Delay Analysis. In Q220, EPD announced a 3-month schedule slip (from Q123 to Q223), potentially limiting future change orders (i.e. cost escalation) related to COVID impact (based on typical EPC contract FM concepts).To reduce the COVID delay to only 3 months, we believe EPD implemented a schedule recovery plan that accelerated/compressed back-end construction activities to meet a Q423 COD forecast. (pgs. 10 – 13). We’ve independently estimated PDH 2’s slippage based on Q420 aerial project site images, with details found within our note… (pages 4 – 7).
Enterprise’s First ESG Guidance… : On October 28, 2020, EPD released their approach to ESG. In the report, EPD touts they are the largest Midstream producer of Hydrogen. With the addition of PDH2, Enterprise would increase their Hydrogen production by 140k tons/year, and we estimate ~150MW of electricity by incorporating fuel cells in their Mont Belvieu, TX facility.
Companies like SK are working with fuel cell manufacturers to integrate high temperature Solid Oxide Fuel Cells (SOFC) into PDH units to use the hydrogen produced to reduce operating costs….this could help EPD’s ESG potential.
Project Timeline Catch Up – Risks & Benefits: A schedule recovery plan can be costly and is not guaranteed to succeed. PDH 2 schedule recovery risks/benefits include: Risks – An EPC lump sum contractor (S&B) compresses the schedule & may cause inefficient construction & cost escalation. Benefits – The COVID delay started before site prep and avoided a de-staffing of the project. Based on limited on-site progress, S&B likely hasn’t spent much of their field budget & may have available contingency to support acceleration costs/inefficiencies.
W|EPC’s estimated timeline shows site labor and progress can support pulling activities back to Q223 with a probability of success of…. (pgs. 10-13)
W|EPC: Enterprise (EPD) PDH-2 Q420 Project Monitor & Satellite Image Review
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BKR Buys Carbon Capture Platform: On 11/3 BKR announced it acquired Compact Carbon Capture (3C) for an undisclosed amount. BKR plans to accelerate development and commercialization of 3C’s carbon capture solution, which adds to its existing portfolio of carbon capture technology including turbomachinery, solvent-based capture processes, well construction, CO2 storage management, and digital monitoring solutions…
Dominion Proposes 9 New Solar Facilities For ~500MW: On 11/2, Dominion Energy (D) proposed a slate of 9 new solar projects with output of 498MW. Six of the facilities (416MW) are through PPAs, helping to fulfill the Virginia Clean Economy Act (VCEA) requirement of having 1/3 of new solar and onshore wind be procured through PPAs through 2035….
AMRC 2 New Contracts In Oregon: On 10/26 and 10/27 AMRC…..
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Please join us for the latest Webber Research Client Call on Monday, 10/26 at 12PM, when we’ll discuss our latest deep dive into Southern Company’s Vogtle Nuclear expansion.
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W|EPC: Southern Company (SO) – Q420 Vogtle Project Monitor – Key Decisions That Could Haunt Cost PrudencyRead More
Who Will Be Getting Stuck With +$2.1B In Cost Overruns? Once Vogtle Unit 4 reaches “fuel load”, Georgia Power/Southern Company (GP/SO) can request a cost prudency determination to push their portion of cost overruns (~$2.1B) into recoverable utility rates. (Page 4)
Regulators will determine cost prudency based on project data, testimony, and a simple question: What should a reasonable manager have done at the time of the decision? (Page 5)
We expect that process to be heavily scrutinized considering the scale of the overruns, and, in our opinion, some questionable GP/SO decisions. (Pages 4-5)
Decisions That Could Haunt GP/SO’s Prudency. We believe there’s a case to be made that multiple GP/SO management decisions ran contrary to industry standards, potentially contributing to ($) billions in cost overruns, including
Analyzing 12-Years Of GP & SO Testimony… (Pages 20 & 23)
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Table Of Contents:
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Highlights:
• CEC Releases Clean Transportation Plan (page 1)
• New York Set 70% Renewable Energy Mandate By 2030 (page 1)
• ENPH Partners With Natura Living In Thailand (page 1)
• ENS Partners With alpha-Encorp (page 2)
• Bifacial Tariff Exemptions Blocked (page 2)
• JKS Signs Module Supply Agreement (page 2)
• CSIQ Adding Storage To GS Solar Farm (page 2)
• Enel Begins Construction Of Azure Sky Solar Project (page 2)
• Siemens Sub Acquires AMS (page 2)
• Proterra Raises $200MM (page 2)
• GE Wins 327MW Wind Order In India (page 2)
• SGRE Edges Out Vestas In Q2 (page 3)
• NOVA Expands Solar + Storage Offering (page 3)
• Arrival Raises $118MM From BlackRock Investment (page 3)
• PNM Plans To Replace Coal Plant With 1GW Solar + Storage (page 3)
• US Net Electricity Generation (pages 4-5)
• Solar PV Pricing (page 5)
• LCOE Benchmarks & Timeseries (page 6)
• Global Wind Turbine Market Share (Page 7)
• Global Solar PV Inverter Market Share (page 7)
• US Wind & Solar Projects Announced Or In Early Development (page 8)
CEC Releases Clean Transportation Plan: Last week, the California Energy Commission (CEC) released its clean transportation plan with ~$384MM of investments scheduled over the next 3 years for electric vehicle (EV) and zero-emission vehicle (ZEV) infrastructure. The spending includes ~$133MM for light-duty EV charging systems, ~$130MM for medium- and heavy-duty ZEV infrastructure, and ~$70MM for hydrogen refueling infrastructure. California currently has ~26MM automobiles and ~6MM trucks registered in the state – ~726k of which are ZEVs (vs its goal of 1.5MM by 2025 and 3MM by 2030). It also currently has 57k Level 2 chargers and 4.9k DC fast chargers vs its 2025 goal of 240k Level 2 and 10k fast chargers.
New York Set 70% Renewable Energy Mandate By 2030: On 10/15 New York’s Public Service Commission (PSC) announced it would formally adopt a 70% renewable energy initiative by 2030 as part of its Clean Energy Standard. The announcement includes a directive for NYSERDA to enter into annual contracts for 4,500MWh for upstate renewables and 700-1,000MW of offshore wind.
ENPH Partners With Natura Living In Thailand: On 10/12 ENPH announced it partnered with Natura Living to develop commercial solar projects in Thailand for PepsiCo (PEP). Natura installed a 60kW solar array on PEP’s snack division building using ENPH’s IQ 7+ microinverters and is currently installing another 60kW array on PEP’s agronomy division building (expected completion in Q420).
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W|EPC: LNG Canada – Updated Satellite Image Analysis & Construction Progress – Q420 Project MonitorRead More
https://www.tradewindsnews.com/twplus/meet-30-people-who-will-shape-shippings-future/2-1-879760
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Table Of Contents:
Key Takeaways:
W|EPC: LNG Canada – Updated Satellite Image Analysis & Construction Progress – Q420 Project Monitor
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Table Of Contents:
Key Takeaways:
Upstream Sources Of Hydrogen – Blue & Green (Pages 4 – 9)
>95% of Hydrogen (H2) is produced using Steam Methane Reformer (SMR) technology that produces 7 units of CO2/unit of H2 (on average)
SMR w/ a carbon capture system (Blue H2) is the preferred option to environmentally manage excess CO2. (page 7)
Green H2 provides minimal CO2 but current technology limits Green H2’s cost competitiveness. (Page 6)
H2’s Sprint To Market Share… Current Leaders (Pages 17 – 21, 27 – 30)
We analyzed 13 Technology Companies spanning 12 Process industries, including ThyssenKrupp, Air Products, Air Liquide, & KBR/Johnson Matthey…the clear technology leaders include…
Frozen Industries – Marine, Automotive, & H2 Transport (Pages 22 – 26)
Outside factors (i.e. carbon neutral fuels, fuel cells, regulations, safety, & other downstream applications) will play a large role in selecting the midstream transportation choice for H2.
International Maritime Organization’s (IMO) mandates for reduced emissions has many ship builders looking at LNG, Ammonia, and/or Methanol; without a clear long-term winner (yet), many shipbuilders are frozen.
Fuel pumps (gas stations) must receive H2 from high-pressure storage vehicles, pipelines, or by converting Methanol or Ammonia to H2 at the fuel pump, with a number of implications.…(page 20)
Midstream For Hydrogen – H2 Transportation Options (Pages 10 – 16)
Ammonia, Methanol, and Cryogenic H2 are used to transport H2 long-distances.
Ammonia is the clear favorite to…
Methanol is the best option for…
Cryogenic H2 technology/costs…
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Plug Power (PLUG)
Company Overview – Page 5
Plug Symposium (Raw Notes) – Page 10
Investment Rationale / Key Points – Page 12
Primary Risks – Page 14
Valuation – Page 15
Ballard Power Systems (BLDP)
Company Overview – Page 22
Analyst Day (Raw Notes) – Page 28
Investment Rationale / Key Points – Page 35
Primary Risks – Page 36
Valuation – Page 37
SolarEdge Technologies (SEDG)
Company Overview – Page 45
Investment Rationale / Key Points – Page 48
Primary Risks – Page 49
Valuation – Page 50
Industry Overviews
Hydrogen & Fuel Cells – Page 55
Solar / Inverters – Page 67
Expanding Our Hydrogen & Inverter Coverage. We are initiating coverage of PLUG (Outperform, PT: $19), BLDP (Outperform, PT: $26), and SEDG (Market Perform, PT: $200). Since launching our first wave of coverage in April (REGI – OP, ENPH – MP, TPIC – MP, and ENS – MP) renewables have continued to aggressively take both mind-share and market-share – positioning the sector for unprecedented investment as governments, counterparties, and end-users move toward carbon neutrality over the next 15-40 years. Benchmark renewable levelized cost of energy (LCOE) figures have declined nearly 75% over the past-10 years, increasing the viability of alternative energy sources. We believe the extension of that process toward low- and zero-carbon hydrogen could create a generational growth engine across Energy, Industrials, and Technology over the next several decades.
The Push For Hydrogen: Major markets worldwide continue to adopt integrated hydrogen strategies and roadmaps, with Europe and China at the forefront. The EU is expected to invest €183-€490B by 2050 to effectively develop a continental hydrogen economy, with green hydrogen (i.e. hydrogen created using renewable sources) at its center. China recently announced its National Hydrogen Fuel Cell Strategy and pledged to reach carbon neutrality by 2060 despite currently deriving two-thirds of its power from coal. We think the increasingly widespread support for carbon-reducing policy creates a deliberate and sturdy foundation for renewables, and particularly hydrogen.
Figure 58. California Advanced Clean Truck Regulations
Figure 50. Hydrogen Production Costs From Renewables & Fossil Fuels
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Read More We’re very pleased to share our most recent Webber Research Technical & Commercial Project Consulting Overview – detailing our expertise across a wide variety capabilities, services and experience. If you’re a project stakeholder, developer, creditor, or operator, we’re here to add value and minimize risk for your process.
Webber Research: Technical & Commercial Project Consulting Overview
Our Focus: LNG, Biofuels, Renewables, Petrochemicals, and broader Energy Infrastructure
Key Experience, Capabilities & Services:
• Proprietary Project Database: Includes schedules, satellite & drone images, & benchmarks
• Lenders/Stakeholder’s Independent Engineer: $50B+ of global project’s executed
• Commercial & Contracts Negotiations: Negotiated ~$30B in EPC proposals/contracts
• Government/Regulatory Liaison: FERC, U.S. Army Corps of Engineers, etc.
• Project Due Diligence: ~$1.5B investment that grew to ~$7B in ~8 years
• Validate Schedule/Progress Reporting: Helping independent stakeholders can avoid surprises
• Litigation Consulting/Claims: Supporting more than $1B in litigation, depositions, and expert witness
Unmatched Process. Industry Changing Results.
Read More https://www.freightwaves.com/news/chinese-container-factories-sold-out-until-february
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Key Takeaways:
W|EPC: Renewable Biofuel Analysis Refinery Conversions, Crack Spreads, & Risks Q420
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Recent News (page 1)
M&A Tracker (page 3)
Valuation Summaries (page 3)
Hydrogen Production Costs (page 4)
Industry/Background (page 6)
LH2 Carrier Progress (page 7)
• GM Forms Strategic Alliance With Nikola: On 9/8, GM announced it took an 11% ownership stake in Nikola (NKLA) worth ~$2B as well as the right to elect one director to NKLA’s Board, in exchange for in-kind services. GM will engineer and manufacture the Nikola Badger (both the BCEV and FCEV models), and will be the exclusive supplier of fuel cells globally (except in Europe) for NKLA’s Class 7/8 trucks (heavy-duty trucks, including the Nikola Badger, Nikola Tre, Nikola One, Nikola Two and the NZT), utilizing its Ultium battery system and Hydrotec fuel cell technology. NKLA said it expects to save more than $4B in battery and powertrain costs over 10 years and $1B+ in engineering and validation costs, while GM expects to receive in excess of $4B of benefits from the equity value of NKLA shares, contract manufacturing of the Badger, supply contracts for batteries and fuel cells, and EV credits retained over the life of the contract. GM will be subject to a staged lock-up period (beginning in 1 year and ends in June 2025). The Badger will make its public debut 12/3-12/5 at Nikola World 2020
• Ballard Markets First Fuel Cell Designed For Marine Vessel Propulsion
• Siemens Announces Green Hydrogen Systems As Electrolysis Partner
• California Regulators Funds 36 More Hydrogen Stations
• Australia’s First Green Hydrogen Plant
• Germany Eyes Hydrogen Project In Democratic Republic Of Congo
• Freudenberg Sealing Technologies To Develop Special Fuel Cell System For HeavyDuty Trucks
• SunHydrogen Expands Partnership With University Of Iowa
• Wystrach Reveals Its Mobile Hydrogen Refueling Station
M&A Tracker
• 6/23/20 PLUG Acquires United Hydrogen & Giner ELX:
• Total consideration of ~$123MM (~$65MM for United Hydrogen and ~$58MM for Giner ELX).
• United Hydrogen is a merchant hydrogen producer in North America with production capacity of 6.4t/d with plans to expand to 10t/d.
• PLUG previously announced it held a convertible bond in United Hydrogen which could represent over 30% equity ownership on a converted basis.
• Giner ELX provides PEM hydrogen generators, grid-level renewable energy storage solutions, and onsite generation systems for fuel cell vehicle refueling stations.
• PLUG increased its 2024 financial targets to $1.2B in revenue (from $1.0B), $210MM in operating income (from $170MM), and $250MM in adjusted EBITDA (from $200MM).
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Lower-Cost Hydrogen Will Produce Cost Competitive Renewable Methanol: Pipe Dream or Reality? Global methanol demand sits near ~75 MTPA; with demand expected to ramp amid new EU and U.S. environmental mandates. Renewable Methanol (RM) is produced using Hydrogen (H2) from solar/wind and carbon dioxide (CO2) as compared to traditional methanol produced from fossil fuels (i.e. coal & natural gas). (Page 4)
Cost-competitive RM would open the door to green plastics and support various marine, fuel, & vehicle clean energy mandates but, costs are not competitive based on current technology. (Pages 4 – 5) Limited project economics hasn’t stopped ~10 commercial scale renewable methanol facilities in various stages of development around the world. As these projects develop, lower costs and improved technology would be a game changer for the methanol industry while providing H2 more downstream applications. (Page 6)
Tracking the 800 lbs. Methanol Gorilla…Methanex (MEOH). (Pages 8 – 9)
Geismar Unit 3 – Positioning vs. Competition. (Pages 10 – 13)
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Key Takeaways:
• Chiyoda’s Engineering Delays Continue. We believe engineering delays have eroded a significant portion of the EPC risk, contingency, and profit, with the likelihood of ramping balance sheet exposure. (Pages 4 & 11)
• Our updated project timeline (delay) and contingency fund estimates are now material, sitting at….(continued)
• Our estimates point to Golden Pass project progress sitting closer to ~10% vs Chyioda’s report figure of 16% (Q2) based on both our satellite image review and….(continued)
• Sabine Pass Comparison. 18-Months after FID Sabine Pass LNG Trains 1 & 2 were 57.1% complete, vs our estimated range for Golden Pass LNG (~10-16%). (Page 8)
Table Of Contents
Golden Pass LNG Satellite Image Overview (page 13)
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W|EPC: Golden Pass LNG – Delay & Contingency Fund Estimates Continue To Ramp – Updated Project & Satellite Image ReviewRead More
Marco & Laura Impact Could Last 7 to 14 Days…Depending on Damage & Craft Labor Retention
EPC contractors receive schedule relief for Force Majeure (FM) events (i.e. named storms such as Marco & Laura) in industry standard EPC contracts, which typically provides EPC contractors schedule relief but not cost relief.
EPC contractor FM claims on Calcasieu Pass, Golden Pass, and Sabine Pass LNG likely started yesterday August 24th, 2020 (due to mandatory evacuations & closures).
Something to watch…construction workers tend to scatter and chase higher paying (wages & per-diem) jobs post hurricanes/natural disasters, which creates headaches for on-going/planned projects and complicates FM claims.
Based on current Marco & Laura forecasts and expected rain/storm surge, we are forecasting a 7 to 14-day construction schedule delay on Calcasieu Pass LNG (CPLNG), Golden Pass LNG, & Sabine Pass LNG Train #6 (SPLNG6).
Impact & Timeline Implications
Often, impacts due to hurricanes occur well beyond the actual storm itself due to lost productivity and challenges restarting/staffing the project.
Flooding – enough drainage pumps installed and site drainage working sufficient to mitigate additional rain fall.
Storm Surge – levees/walls high enough to protect rising levels and all equipment moved to the highest elevation on the site (if practical).
Wind – cranes must be placed horizontally and structures secured to reduce/prevent damage.
Temporary Construction Facilities – if levees and/or drainage are not in place at temporary construction facilities, equipment and material stored in laydown yards/facilities could be damaged by water and cause unplanned long-term issues.
EPC contractors have a reputation for trying to use FM impacts to absorb existing self-inflicted schedule delays. Based on the current/expected forecast, we believe the following FM timeline is realistic.
Prep time for storms – 1 to 3 days
Marco & Laura storm duration – 2 to 4 days
Restart & productivity losses – 4 to 7 days
Our specific estimates and thoughts on individual projects in the pages that follow:
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Key Takeaways:
Pump The Brakes: While potential fabrication errors have been the primary narrative around the Propane Kettle cracks that shut down Gorgon LNG, it’s feasible that operational issues (and one in particular) may have contributed or even partially caused the cracks on Train-2’s kettles, which could have significant and more complex implications.
Timeline Implications
According to recent press reports, Chevron has suggested an early September restart for Train 2 and provided train 1 & 3 inspection time-frames.
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Key Points:
Q2 Progress: Pre-Treatment Unit Module Fabrication – ICA Fluor & the Tampico, Mexico fabrication yard. As previously noted, we believe ICA Fluor is fabricating the CPLNG Pre-Treatment Unit (PTU) Modules in their Tampico, Mexico fab yard. Satellite images show
Pre-FID Feedstock Specs Or Assumptions May Have Changed…
Calcasieu Pass LNG August Update – Key Takeaways.- Page 2
More Engineering Adjustments – Page 4
Changes To Feedstock Assumptions?- Page 4
Satellite Image Analysis – ICA Fluor (Tampico, Mexico) – Page 5
Pre-Treatment Unit Module Overview – Page 6
March vs. July 2020 – ICA Fluor Satellite Image Comparison – Page 7
Closer Look – March 2020 – Page 8
Closer Look – July 2020 – Page 9
Disclosures – Page 10
Previous ICA Fluor Satellite Image
W|EPC: Venture Global LNG: August 2020 Update
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Shell • Petrochina • Mitsubishi • Kogas • Petronas
1) Union Craft Avg. Wage Rate Escalators & Impact On JGC/Fluor, and broader project cost…
What’s Happened/Changed: Part of our current focus is on LNG Canada’s wage rate escalation and union labor agreements post-2023.
Why Does That Matter: EPC lump sum proposals generally include labor escalation between 1-3% per annum (rates vary based on geography/availability). Labor agreements supporting LNG Canada and other B.C. projects expire in 2023 and have a relatively advantageous average labor escalation rate of…..continued.
For context, union labor strikes, renegotiated agreements, and significant wage rate escalation supported Gorgon LNG coming in $20B+ over budget.
What’s The Impact:…..continued (Page 3)
2) Taking A Look At JFJV’s Longer-Term Labor Inflation Risk (Page 5)
3) JFJV’s Construction Activity – What does it tell us about the project timeline? (Page 8)
4) Satellite Image Analysis Baseline – Benchmarks for Remainder of the Project…. (Pages 9-17)
W|EPC: LNG Canada Q320 Monitor – Labor Dynamics & Baseline Satellite Image Review
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Overview:
On July 23, 2020, Reuters reported Australia’s Department of Mines, Industry Regulation & Safety (DMIRS) said “it plans to inspect Chevron’s Gorgon LNG plant as soon as possible following calls by a trade union to shut the plant.”
1. During routine maintenance, Chevron Australia discovered issues with the propane kettles on Train #2.
2. “The Australian Manufacturing Workers’ Union (AMWU) has called for Chevron to shut down the Gorgon plant for immediate safety inspections by a gov. regulator and for a report to be made public.”
3. Specifically, cracks up to 1 meter long and 30 millimeters deep were discovered by the non-destructive testing team (per AMWU). On July 28, 2020, a Chevron company spokesman said, “Chevron expected to restart Train #2 of its Gorgon LNG plant in early September after completing repairs.” Chevron said during routine maintenance that began on May 23rd and was scheduled to be completed by July 11, 2020, weld quality issues were discovered on 8 propane heat exchangers. Gorgon LNG Trains 1 & 3 are producing. On 07/29/20, inspectors from DMIRS were due on site to inspect the cracks after AMWUraised issues about the conditions of the South Korean-made kettles.
Key Takeaways:
• Inspectors from Western Australia’s “safety watchdog” were scheduled to inspect propane kettle cracks on Chevron’s Gorgon LNG Train-2 on 7/29
• Labor unions continue pushing back, requesting a full shut down of all three LNG trains for inspection.
• Publicly available technical details are limited, even for the folks who built Gorgon LNG (who we spoke with); however, we believe the 3-month estimated down time for repairs is….continued
• Primary rationale for a Train-1 and Train-3 inspection shut down would be…continued
W|EPC Thoughts & Observations
The publicly available technical details are limited, even for our contacts involved in building Gorgon LNG. However, we are watching the following:…continued
Concluding Thoughts…
Key Questions…
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W|EPC: Venture Global – Nexus Approaching Drone &Satellite Image Analysis, Engineering Changes Q320
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• Calcasieu Pass Update – Key Takeaways (slide 2)
• Calcasieu Pass LNG Module Overview (slide 3)
• Importance Of Notification Window (slide 4)
• Engineering Changes: Pre-Treatment Modules (slide 5)
• Engineering Changes: Liquefaction Modules (slide 7)
• Technical Analysis: Changes & Impact? (slide 9)
• Satellite Image Analysis – Baker Hughes Module Yard (slide 13)
• Drone Image Analysis – Site Prep Update (slide 18)
• Remaining Questions (slide 23)
• Scenario Analysis & Predictions – Rubber Starting To Meet The Road? (slide 25)
• Disclosures (slide 27)
Key Highlights:
• Venture Global: The Looming EPC Nexus…
• Drone Image Analysis:
• Calcasieu Pass Outlook
• Consequential Damages, Predictions & Conclusions
Copyright: PLEIADES © CNES (2020), Distribution Airbus DS & W|EPC Analysis
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Yesterday we launched our Hydrogen Tracker – a weekly research product dedicated to the build out of Hydrogen production, technologies, and associated markets. For information about access to our Hydrogen Research, Renewables, or our Utility, Energy, & LNG Infrastructure Project coverage, please email us at [email protected]
Highlights:
• Recent News (page 1)
• LH2 Carrier Progress (page 3)
• M&A Tracker (page 4)
• Valuation Details (page 4)
• Hydrogen Production Costs (page 5)
• Demand Trends (Page 7)
• Electrolyzer Market Share & Technology Growth (page 8)
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Key Highlights:
• Offshore Wind… An Awesome Opportunity for Dominion, Right?
• Phase #1 Demonstrator Costs Ballooned By ~73%…
• Phase #2 (2.6GW) Is The Real Prize – But Definitely Worth Keeping An Eye On Costs…
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Wild Week For ENPH: Last week ENPH traded down 26% on the back of a short report alleging various accounting violations and more serious fraudulent activity, before recovering most of the lost ground in the days that immediately followed (-4% on the week). From our perspective, the report highlights a number of red flags, however…..
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2020 ESG Scorecard – Updated Model, Same Idea. Before we delve into our updated rankings, framework, and company specific changes, we want to reiterate the idea that underpins this entire endeavor, which is that we believe there is no longer a place in the public shipping markets for companies that do not prioritize strong corporate governance and capital stewardship. We believe that risk premiums associated with poor governance and capital discipline should continue to widen, eventually pricing-out conflicted players and antiquated structures from public markets.
New Carbon Factor. Our 2020 ESG Scorecard includes a broadened methodology that incorporates the public disclosure of relevant of carbon data, which becomes the 9th factor within our proprietary multi-factor ESG model and increases the total number of subfactors to 20 (from 18). The carbon disclosure metrics we’ve chosen to initially include (AER & EEOI – see Page 15) are aimed at aligning our ESG framework with the Poseidon Principles, and intended to help facilitate the consistency and disclosure of carbon data to investors. We will also continue to display each company’s ESG Scorecard Quartile, as well as a Carbon Disclosure Indicator on the front page of our company-specific research notes – as we’ve done since we launched Webber Research in Q419.
Model Adjustments. We’ve given our new Carbon Factor a 20% weighting within our model, positioning it among the most dominant variables within our framework, while re-weighting other aspects of our model in order to accommodate the addition. Our revised factor weightings and methodology can be found on Pages 10-15. We also narrowed our 2020 ESG Scorecard universe to 52 companies from 56 (Page 5).
Carbon Disclosure: Who’s Participating? We’ve included a summary of our work around carbon disclosures on Pages 2-3. In total, 42% of the companies in our scorecard (22/52) met carbon disclosure requirements within our model. While we’re encouraged by the level of initial participation, there’s clearly room improvement. To that point, we’re aware of several companies still the process of aggregating, auditing, and (eventually) disclosing relevant carbon data to investors, which should continue to improve the participation level in subsequent scorecards.
Superior Governance Translates To Outperformance:
• Companies with the strongest ESG scores (EGLE, INSW, ASC, TRTN, GNK, EURN, OSG, MATX, GRIN, GLOG, INT, GLNG, and KEX) outperformed the group by 16% on a 5-year basis and 41% since inception.
• Companies with the weakest ESG scores (CMRE, KNOP, TGP, CPLP, NMM, NNA, DSX, DLNG, GSL, DAC, TNP, GASS, and SB) underperformed the group by (24%) on a 3-year basis and (25%) since inception.
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• Key Takeaways (pages 1, 5)
• Estimated LNG Canada Schedule Shifts (page 2-3)
• Satellite Image Review: COOEC Fluor Module Yard Layout (May 17, 2020) (page 4)
• Satellite Image Review: Module Layout Descriptions (page 5)
• Satellite Image Review: CFHI Module Yard Pre-Assembly Areas (page 6)
• Long-Term Thoughts & Key Questions (page 7)
Key Highlights:
• Still Moving At A Crawl. As of May, module fabrication was ~2% complete, well behind our ~11% estimate in W|EPC’s February 2020 (pre-COVID 19) schedule…
• Satellite Image Review: The COOEC-Fluor Heavy Industries (CFHI) module yard pre-assembly areas look…
• Playing Catch Up Won’t Be Cheap. The schedule slip should put even more pressure on the back-end of LNG Canada’s timeline…continued…
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Key Takeaways:
• An engineering design change at Calcasieu Pass (CPLNG) required additional piling and out of sequence construction activities.
• Meaningful engineering changes during construction & fabrication can undermine the benefits of modularization, by creating cost overruns and delays.
• No Related Delays Are Visible Yet. However, we should get a better view of the actual impact as Calcasieu enters the mechanical phases of fabrication and construction – where the ramification of errors or changes becomes more evident.
Keeping An Eye Out For Material Quantity Growth. On May 22nd, 2020, CPLNG requested FERC approve eight (8) additional piles in the Pre-Treatment Common Pipe Rack 27X (PTC27X) area due to changes in the pipe stress data. Pipe stress calculations are developed to ensure the piping design and layout can support the expansions and contractions caused by processing hydrocarbons. Pipe stress data is one of the most important elementsin determining the piping layout, structural steel design, material quantities needed for the CPLNG modules, and pile layout.
The PTC27X pile construction design was previously submitted to FERC on December 30, 2019 and approved for construction on January 31, 2020. PTC27X piling submittal timeline:
• Original Submittal to FERC: 12/30/19
• FERC Approved: 1/31/20
• Revised Submittal to FERC: 5/22/20
• FERC Approved: 6/4/20
Was Module Engineering For PTC27X Finally Completed Last Month? On May 22, 2020 CPLNG requested FERC approve the PTC27X pipe rack foundations and steel construction. We believe the final PTC27X pipe rack module engineering is now complete, subject to FERC Approval. The PTC27X modules were designed per….continued
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Key Takeaways:
1. Does ET’s Frac 8 Have a Cost Advantage over EPD’s Frac 12?
2. Energy Transfer’s NGL BPD Frac Costs Keep Falling
3. Budget Cuts, COVID-19 Impact, & Schedule Delays
4. Lake Charles LNG – Fighting Yesterday’s War?
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• Vogtle Expansion: 6-Years Late…And ~$13-$16 Billion Over Budget? (Slides 2-5)
• How Much Will SO Be On The Hook For? (Slides 3-6)
• Something’s Gotta Give: Key Commissioning Milestones Appear Crammed Together To Avoid ROE Reductions (Slides 6-8)
• Cost Projections Were Already Ramping…Before COVID-19 (Slides 9-12)
• Cost Prudency Reviews – A Make Or Break For Stakeholders?…. (Slides 13-19)
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Regulatory Background: Vogtle is regulated by the Georgia Public Service Commission (GPSC). GPSC’s primary role is to protect rate payers & determine if project costs can be justifiably passed-through via utility rates. In the quarters that follow we’ll venture to aggregate, analyze, and interpret cost overruns through the lens of GPSC, to put together a thoughtful estimate of what cost overruns will eventually land with SO shareholders.
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Highlights:
Orsted JV To Develop Large-Scale Clean Hydrogen In Copenhagen: On 5/26 Orsted announced it entered into a JV with Copenhagen Airports, Maersk (marine), DSV Panalpina (logistics), DFDS (ferry), and SAS (aviation) to develop a hydrogen and e-fuel production facility. The project will be developed in three phases with the ultimate goal of providing renewable fuel sources for multiple transportation methods in the Greater Copenhagen Area. Phase 1 includes a 10MW electrolyser to generate renewable hydrogen fuel for buses and trucks – potentially operational as early as 2023. Phase 2 considers a 250MW electrolyser which would have the capacity to produce renewable methanol for maritime transport and renewable jet fuel for aviation – potentially operational by 2027 when the first offshore wind power is available from Ronne Banke off the island of Bornholm. Phase 3 would upgrade the electrolyser capacity to 1.3GW with the potential to displace 30% of fossil fuels used at Copenhagen Airports by 2030. Orsted said the project could reach FID as early as 2021 after receiving required regulatory approvals as well as a full feasibility study.
US Extends Safe Harbor Deadlines: continued…
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*REGI (Outperform) – Virtual NDR Weds 5/27 To participate email us directly or at [email protected]
Renewables – Weekly Highlights:
• GE To Add 193MW Onshore Wind In Turkey – Blades Built In-House (page 1)
• SPWR Sells O&M Business, Clears Maxeon Regulatory Hurdle (page 1)
• ENPH Expands Commercial Presence (page 1)
• IEA Updates Renewable Energy 2020 & 2021 Outlook (page 2)
• BNEF EV Outlook (page 2)
• AMRC Begins Commercial Operations In Ireland (page 2)
• SGRE Launches 14MW Direct Drive Offshore Turbine (page 2)
• Ginlong Solis To Double Manufacturing Capacity (page 3)
• Jinko & LONGi Launch New Modules (page 3)
• Sungrow To Provide Inverters For Ibri II Project In Oman (page 3)
• Suzlon Restructuring Update (page 3)
• PLUG Prices 2025 Convertible Notes (page 3)
• NJ Clean Energy Equity Act (page 3)
• US Net Electricity Generation (pages 4-5)
• Solar PV Pricing Dynamics (page 5)
• LCOE Benchmarks & Timeseries (page 6)
• Global Wind Turbine Market Share (page 7)
• Solar PV Inverter Market Share (page 7)
…continued
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Continued….
Click here to buy this report
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ENPH Partners With 5B In Australia: On 4/22 ENPH announced it would collaborate with Australian solar innovator, 5B in its role in the Resilient Energy Collective (REC) – aimed at providing solar power solutions to Australians disconnected by bushfires and floods. 5B selected ENPH’s IQ 7+ microinverters to pair with its portable Maverick solar array systems, which will also be outfitted with Enphase Envoy with (communication gateway) which connects the system to Enphase Enlighten for easy monitoring & maintenance. ENPH also announced a partnership with Sunlogics in Belgium on 4/29 as its exclusive microinverter supplier using IQ 7 and 7+ microinverters (also outfitted with Envoy). Separately, after the close on 4/27 ENPH was announced to replace Core Laboratories (CLB) in the S&P MidCap 400 index effective before the market open on 5/1. ENPH traded up 16% on 4/28 as a result.
GE Renewable Energy Q1 Earnings: On 4/29 GE reported a $302MM Q1 loss in its Renewable Energy segment, down from a $187MM loss in Q119. Orders declined 13% y/y to $3.1B, which GE attributed mostly to poor execution and only partly to COVIDrelated supply chain disruptions and delays. GE highlighted LM Wind’s sites closures in India and the US and capacity reductions at 3 other sites in its Onshore Wind business (previously disclosed). In its Offshore Wind business, GE remains on track for certification of its Haliade-X turbine and plans to start production after delivering its 80- unit 6MW commitments to EDF (expected completion 2021). In Grid & Hydro, GE is operating 15 factories at full utilization, 10 factories at less than 80% utilization, and 8 factories at less than 50% utilization. Its facilities located in China are operating at preCOVID levels, including Wuhan which was shut down for 6 weeks. Overall GE said COVID-19 has had a limited effect on its Renewables business but that it’s monitoring supply chain constraints and implementing cost-out and restructuring initiatives.
Sunpower COVID Updates: On 4/20 SPWR announced further actions to address the financial and operational impacts of the COVID-19 pandemic including reducing base salaries of executive management another 35-50% (after cutting 25-30% and withdrawing 2020 financial guidance a month earlier), idling factories in France, Malaysia, Mexico, the Philippines, and the US (with expectations to bring them back online in the coming few weeks), and temporarily transitioning a portion of its employees to 4-day work weeks in response to reduced demand and workload (affecting ~3,000 workers according to GTM), but it said it’s still on track to spin-off its manufacturing arm, Maxeon Solar Technologies by the end of Q2.
Safe Harbor Deadline Extension Brought To Treasury: Last week senators from the Energy and Natural Resources Committee wrote a letter to the Department of Treasury advocating a 1yr deadline extensions for the Investment Tax Credit (ITC) and Production Tax Credit (PTC) due to setbacks related to the COVID-19 outbreak. …continued
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Contango, COVID, & Floating Storage To Dominate Q1 Earnings: As with our Barge Preview from last week, we expect the majority of this earnings season to revolve around the simultaneous COVID+OPEC supply & demand shocks to global energy markets, which have driven down global oil demand by ~15-30mbd, introduced negative crude pricing for certain landlocked geographies, and reinforced the notion of systemic, structural and economically driven floating storage. The result: our tanker rate charts look more like seismograph readings (page 5) and our tanker group is poised to throw off record cash flow in Q2 & Q3 (and potentially longer). We believe the long tanker trade is gradually transitioning from a shorter-term OPEC trade, into a longer-term COVID-19 global relapse hedge. We believe tanker dynamics from the remainder of 2020 and 2021 will be defined by the depth and duration of the floating storage dynamics – which we believe will be increasingly driven by the shape and pace of a global economic reopening vs any remaining OPEC/policy maneuvers. Now that crisis level production levels are now more defined, we believe tanker rates and equities will have a strong negative correlation to the success of any semi-synchronized economic reopening. Hence, Long Tankers = Long An Extended And Asymmetrical Global Reopening.
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