RE: Letter From Site C Joint Review Panel Counsel dated December 23, 2013 Questions New Information

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1 Site C Joint Review Panel Secretariat Courtney Trevis, Panel Co-Manager 160 Elgin Street, 22 nd Floor Ottawa, ON K!A OH3 Brian Murphy Panel Co-Manager 4 th Floor, 836 Yates Street PO Box 9426 Victoria, B.C. V8W 9V1 Dear Sirs and Mesdames: RE: Letter From Site C Joint Review Panel Counsel dated December 23, 2013 Questions New Information Set out below are the questions that the Clean Energy Association of B.C. ( CEABC ) would like the Joint Review Panel or its legal counsel to ask BC Hydro and have answered. A. Reference: BC Hydro Rebuttal Evidence 1 With Respect to the Submission of the Clean Energy Association of B.C. and CEABC Response to Undertaking #12 ( Rebuttal Evidence ) Pages 4 and 6 2 : 1. How did BC Hydro project a real WACC of 5% for itself on an economic outlook of available financing over the next years when the amortization period for Site C debt will be 70 years, and BC Hydro s cost of equity will float throughout this 70 year period? 2. The terms of the attached 3 fully executed Government of Canada arm s length guarantee of the debt for the Muskrat Falls hydro-electric project in Newfoundland 4 include an amortization period of 35 years, a debt to equity ratio 1 Document # The reference on page 6 is to: For BC Hydro, a 70/30 debt to equity ratio is assumed to be in-line with other similar utilities. 3 Appendix A, Agreement Providing Key Terms and Conditions For the Federal Loan Guarantee by Her Majesty the Queen in Right of Canada for the Debt Financing of the Lower Churchill River Projects 4 The Muskrat Falls project as described in Report of the Joint Review Panel, Lower Churchill Hydroelectric Project, Nalcor Energy, Newfoundland and Labrador, CEAA Reference No , Department of Environment and Conservation Registration No.: 1305 and can be found at:

2 - 2 - of 65/35, return on 100% equity funding prior to construction and 35% equity during construction and a debt service coverage ratio of 1.4. Why did BC Hydro use a 70 year amortization period for the debt of Site C and not a period that is consistent with the economic outlook described in Question A-1. and this guarantee? Please identify Site C s equity costing prior to construction and during construction. 3. What is BC Hydro s 70 year cost of debt and equity forecast? 4. What is the B.C. Ministry of Finance s 70 year cost of debt forecast? 5. What is the difference between the cost of 40 year Government of Canada debt and 70 year Government of Canada debt? 6. What is the interest rate spread between the Province of B.C. s 40 year debt as compared to Government of Canada 40 year debt? 7. What is the interest rate spread between the Province of B.C. s 70 year debt and Government of Canada s 70 year debt? 8. What is the difference in the net present value of the Site C portfolio and the Clean + Thermal Portfolio when BC Hydro s WACC is 5.0%, IPP 7.0% and the Site C debt amortization period is 35 year? 40 years? What are the differences if BC Hydro s WACC is 6.0% and IPP s is 7.0%? What are these figures if a common WACC of 6.0% is used? 9. What is the difference in the net present value of the Site C portfolio and the Clean + Thermal Portfolio when BC Hydro s WACC is 5.0%, IPP 7.0% and the Site C portfolio debt to equity ratio 65/35? 60/40? 10. What is the difference in the net present value of the Site C portfolio and the Clean + Thermal Portfolio when BC Hydro s WACC is 5.0%, IPP 6.0% and the Site C portfolio debt to equity ratio 65/35? 60/40? 11. What is the difference in the net present value of the Site C portfolio and the Clean + Thermal Portfolio when BC Hydro s and the IPP s WACC is 6.0% and the Site C portfolio debt to equity ratio 65/35? 60/40? B. Reference: Rebuttal Evidence Page 5 BCUC, Navigant work : 1. Did the BCUC formally accept the 12-15% after-tax ROE? Were IPPs or the CEABC ever provided with the opportunity to sign off on the Navigant Study? 2. Were IPPs or the CEABC ever given an opportunity to provide direct instructions to the representatives of Navigant Consultants?

3 Was BC Hydro completely responsible for selecting, engaging, directing and paying Navigant Consultants? C. Reference: Rebuttal Evidence Page Clean Power Call : 1. Please confirm that the bids including price information for this 2009 Clean Power Call which commenced in 2008 were received by BC Hydro on November 25, Please confirm that BC Hydro has not used actual IPP bid data for its portfolio analysis. D. Reference: Rebuttal Evidence Page 8 attrition : 1. Please confirm that it is BC Hydro that sets the quality control rules for its IPP bidding process and these rules determine the attrition rate. E. Reference: Rebuttal Evidence Pages7, 8 and 9 wind 20 years : 1. Please confirm that the last time BC Hydro had a competitive procurement process for the output of IPP wind generating projects was 2008 with bids due by November 25, Please confirm that in this process BC Hydro received bids for wind generating projects with contract terms of 40 years which was the maximum allowable contract term. 3. Please confirm that wind generating sites have substantial residual value after the expiration of the corresponding electricity purchase agreement term e. g. roads, transmission infrastructure, turbine towers etc. How is this residual value captured in BC Hydro s Clean + Thermal portfolio analysis? Couldn t BC Hydro extend the term of these contracts to capture this residual value like it has with respect to the McMahon cogeneration facility? 4. Does a mature technology mean there won t be significant price decreases in mature technology in the future? 5. Is it in the best interest of wind turbine manufacturers to tell BC Hydro that the prices for their product are going to drop because of improved efficiencies in the manufacturing processes, continued technical advancements and potential competition from Chinese turbine manufacturers? If the manufacturer s say their prices are going to drop, why wouldn t buyers wait until they drop to place a new order? F. Reference: Rebuttal Evidence page 12 - McMahon Cogeneration Plant - ICG please:

4 Provide the date to which the McMahon plant EPA was extended beyond Confirm that the McMahon plant, which is baseload, has been run at reduced load for significant periods of time (one turbine) in the past. 3. Provide the actual dispatch rates for ICG for the last three years. G. Reference: Rebuttal Evidence pages 13 and 14 - firm vs average energy : 1. Please confirm that BC Hydro has used average energy when evaluating the Site C project and firm energy when evaluating IPP run of river projects. H. Reference: Rebuttal Evidence pages 14 and 15 - Monte Carlo analysis KPMG please: 1. Provide the name and a brief description of the past projects upon which the Monte Carlo analysis was presumably based and a brief description of the Monte Carlo procedure and how it was applied. 2. Confirm that the contingency was applied to project escalation as well as constant dollar costs. 3. Provide a summary of KPMG s credentials to review an engineering undertaking such as capital costs and explain why a credible independent engineer was not utilized rather than an accounting firm. 4. Provide a listing and brief description, including contracting methodology for the 774 capital projects reviewed by BC Hydro and an rational for assuming they are comparable to Site C. I. Reference: Appendix A, Page 5 of In the last 5 years, how many project financings has BC Hydro done? Please provide the details. 2. Does BC Hydro have direct access to documentation that sets out the cost of project financing for independent power projects that supply electricity to BC Hydro? 3. What is the total value of long term project financings in the Canadian markets in each of the last 5 years? 4. Is long term project financing for Canadian projects available outside of Canada? 5. In objective terms what does relatively thin mean? J. Reference: Rebuttal Evidence Appendix A, page 7 of 22.

5 In objective terms what do the words largely and less so in the last bullet mean? K. Reference: Rebuttal Evidence Appendix A, page 10 of 22. Sincerely, Signature Removed 1. Was the term of European and Japanese bank financing always restricted to 18 years? 2. Are foreign banks including Chinese and Japanese banks willing to provide project financing that is linked in part to the supply of electrical equipment by their nationals? Paul Kariya Executive Director Clean Energy Association of BC

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