Energy and Mines Australia Summit. Christian Clavería Energy Manager, BHP Minerals Americas Perth, 27 June 2018

Transcription

1 Christian Clavería Energy Manager, BHP Minerals Americas Perth,

2 Disclaimer Forward-looking statements This presentation contains forward looking statements, which may include statements regarding plans, strategies and objectives of management, future performance and future opportunities. These forward looking statements are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results to differ materially from those expressed in the statements contained in this presentation. BHP s Annual Report on Form 20-F filed with the US Securities and Exchange Commission identifies, under the heading Risk Factors, specific factors that may cause actual results to differ from the forward-looking statements in this presentation. BHP does not undertake any obligation to update or review any forward-looking statements. No offer of securities Nothing in this presentation should be construed as either an offer to sell or a solicitation of an offer to buy or sell BHP securities in any jurisdiction, or be treated or relied upon as a recommendation or advice by BHP. 2

3 About BHP We are a leading global resources company Our purpose is to create long-term shareholder value through the discovery, acquisition, development and marketing of natural resources. Our strategy is to own and operate large, long-life, low-cost, expandable, upstream assets diversified by commodity, geography and market. At BHP, we have a unique perspective on the extraordinary potential of natural resources and the role our products contribute to advance the essential building blocks of progress. We are among the world s top producers of major commodities, including iron ore, metallurgical coal and copper. We also have substantial interests in oil, gas and energy coal. We have a global footprint with 11 core operated assets. 3

4 Leading diversified global mining company Petroleum Minerals Americas Minerals Australia Operated Western Australia IO Queensland Coal NSW Energy Coal Escondida Pampa Norte Jansen Macedon Shenzi Angostura Non-operated Non-core Olympic Dam Pyrenees Nickel West Antamina Cerrejón Samarco Atlantis Mad Dog Bass Strait 4 North West Shelf Onshore US

5 BHP Minerals Americas Escondida is the largest copper open-cut pit in the world 1. Notes: Antamina: 33,75% BHP Share. Samarco: 50% BHP Share. Cerrejón: 33,3% BHP Share. 5

6 Chilean assets power consumption The largest non-regulated client of the Chilean market Cu Mt World s Copper Production Years 2035 Source: Wood Mackenzie Power Purchase Agreements (MW) Escondida Angamos (Coal) Pampa Norte Tamakaya (Gas + Spot) Peak Demand 820 MW % Escondida % Pampa Norte Rest of the World BHP Chilean Assets 6% Of World s Cu Production % Of Chilean Cu Production % Of Chilean Power Consumption 2017 Angamos: PPA based in a coal-fired generation. Tamakaya (100% owned by BHP): PPA based in a gasfired generation and Spot. 6

7 BHP transmission facilities A strategic asset to enable renewable power sources ³220 kv <220 kv Total (km) BHP Assets 1, ,532 Escondida ,197 Pampa Norte Kelti (*) (*) Transmission company 100% owned by Escondida. 7

8 Chilean grid overview One national electrical system Hydro 30% Peak demand 10 GW Annual consumption 72 TWh SEN (SIC + SING) Installed Capacity Solar 9% Wind 6% Fuel 15% Thermal, solar and wind Thermal, small-medium hydro, biomass and wind Potential large and small hydro developments Gas 19% Coal 21% 8

9 Power market overview The Chilean power market is deregulated The market considers three segments Generation: open and competitive. New capacity mainly is driven by long term contracts with discos or big users. Transmission: natural regulated monopoly. New capacity defined by the regulator periodically. New projects get auctioned by the regulator and remunerated by the demand as a result of it. Distribution: natural monopoly. Regulated tariffs. Wholesale power market for generators only Generators dispatch is performed centrally coordinated by the system operator (Coordinador Eléctrico Nacional former CDEC), in order of merit with the goal of minimising the system total cost. The marginal cost of the system or the spot price, is equal to the variable cost of the last unit required to provide one additional kwh of electricity to the system. The capacity is remunerated to generators at a regulated price. Capacity charge paid by users is equivalent to ~8.3 US$/kWmonth. Variable Cost [USD/MWh] Run-of river Energy Supply Generation Companies Generation Supply Demand New projects Existing capacity Supply and demand curves Biomass Solar+ Wind Demand Variations Coal Reservoir Natural Gas Available Capacity [MW] Market Private contracts Public auctions Diesel Turbines and Motors Fuel Oil/Diesel Energy Demand Industrial & Mining Companies > 500kW Residential Consumers 9

10 Law to promote NCRE Initial regulation was not enough to trigger massive developments 2004 Tolling exemption Power plant < 20 MW have exempted to pay partial or total trunk transmission tolls. Initially focused on run-of-river hydro generation. Today used by small PV solar generation Distribution auction new rules Annual blocks pre-defined (24 hours supply), the term of the contract: 15 years, maximum price and 2013 % of consumption supplied by NCRE An annual percentage of energy sales must be produced by Renewable Energy sources like small hydropower, Geothermal, Solar, Biomass or Wind. % of final consumption supplied by NCRE 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Law Law 20/25 10

11 Law to promote NCRE Main changes occurred after Distribution Auctions opened hourly blocks to bid 2014 Modifications to distribution auctions: Extend the term of the contracts to 20 years. Adapt contract conditions to allow Project Financing. Design hourly blocks to compete in technologies: Block A: 23:00 07:59 hours; Block B: 08:00-17:59 hours; Block C: 18:00 22:59 hours Emission taxes Charge emission of CO2 and PM, SO2 and NOx in emitter plants over 50 MW thermal. 5 US$/ton of CO2 emission. 11

12 Market prices evolution Price driven by the development technology Energy plus Capacity component in (US$/MWh) Distribution companies auctions Since Argentinian NG Diesel Coal/LNG Renewables Since 2021 Since 2024 NG outages Energy component represents ~50% of end power cost. Other 50% of power cost is composed of: Capacity charge, tolls, ancillary services, emission taxes. 12

13 Electrical grid require to become in a more flexible grid The system will face a challenge due to accelerating renewable capacity coming to the grid Increasing flexible capacity appears as a key issue due to: 4000 NCRE Capacity Growth (MW) 3728 Plants ramp-up and ramp-down overstress Reduce unsteadiness of the system. Deal with system costs increases such as overruns. Ancillary services needs are increasing, e.g. regulation of voltage and frequency, rotation reserve, etc. Storage systems must be studied à batteries and pumping/reservoir are required. Addition of new products appears as a solution: Flexible ramping to the real-time energy market. Ensure that resources are available and can rapidly change their output to respond to changes in forecasted net load. Ramping capability to meet the forecasted net load ramp (forecasted movement). An additional amount of ramping capability to cover uncertainty in forecasted net load (uncertainty requirement) Solar + Wind + Biomass + Mini Hydro 13

14 Kelar/Tamakaya businessmodel Providing flexibility to purchase power and reliability to the grid Tamakaya: a generation company 100% owned by BHP Kelar is a Combined Cycle Gas Turbine with 517 MW located in Mejillones. Kelar provides a price cap for BHP Assets, allowing to have a higher exposure to the wholesale market through Tamakaya. Kelar provides flexibility and reliability to the grid reducing power supply interruptions to the operations. Tamakaya participates in the wholesale market selling and purchasing power at marginal cost of system production. Tamakaya has visibility of all charges that are part of the final power bill, as ancillary services, tolls, public services charges. Through the BOOM contract with Kelar, Tamakaya buys power and capacity to supply BHP assets. Kelar daily operation 12 MW/min 14

15 Kelar operation results in GHG emissions reduction Choosing gas over coal saves ~57% of GHG emissions per generated unit GHG emissions [tco2/mwh] Kelar measured CO2 emission rate has resulted in 0.40 tco2/mwh since the start of the operation. In comparison with Kelar s original alternative that was coal, the emissions in 2017 were 554 kton CO2 fewer (considering coal emissions rate of 1 tco2/mwh). This represents ~ MUS$ 2,8 per year less of emission taxes cost. 1.0 Coal 0.5 Gas The above calculation does not include the CO2 equivalent emissions that have been avoided as a result of the higher renewable penetration due to Kelar operation. 554 kton 15

16 Enabling higherrenewable penetration Kelar provides higher flexibility to the system operation Before Kelar In CY12 the Coordinator estimated a range between MW as the penetration limit of intermittent renewable. With Kelar In CY15 the same Coordinator estimated the range of renewable penetration would be up to 900-1,500 MW as Kelar entered into operation. So far this penetration has reached 888 MW. Northern grid installed capacity (MW) Conventional 3,859 4,995 5,318 5,318 Renewable ,102 1,212 Total 4,090 5,888 6,421 6,531 Renewable/Total 6% 18% 21% 23% SING-SIC link evacuates northern SIC renewable surplus into the SING (currently up to 300 MW). Total penetration of renewable in the SING is expected to reach ~1,400 MW by the end of first semester CY18. Higher renewable penetration will result in much lower spot prices and less CO2 emissions. 16

17 Solar penetration impacts on grid reliability Kelar has greatly contributed to mitigate increased system cycling effects Higher solar penetration Drives increased cycling operation by conventional plants Drives increased failure rate of conventional plants Results in increased power costs and outage rate Renewable penetration has increased dramatically over the last two years and is expected to continue increasing. Kelar flexibility has been helping its fast growth. Current daily rampdown and ramp-up needs are ~800 MW. By the end of CY18 is expected it will go up to ~1,400 MW. Kelar contributes to the system stability with one of the faster thermal ramp. The number of coal-fired power plant failures has increased in last two years. One of the main causes of Kelar operation is the coal-fired power plant failures. Out of merit costs decreased due to Kelar. The number of MEL power outages in CY17 have been reduced. Kelar has replaced diesel generation and contributed to reduce outages by frequency. Solar effect on conventionalgeneration COAL power capacity interruptions [MW] 17

18 Tamakaya model allows purchase of renewable energy ~ 10% of BHP Chilean assets consumption comes from renewable sources 2017 Tamakaya spot purchases Tamakaya sources 50% of total Assets power consumption 18% 47% 35% Spot Other Conventional Kelar (gas) Spot Renewable [GWh] % 16% 19% 32% 28% 49% 44% 45% 60% 50% 40% 30% 20% 10% Tamakaya purchase ~ 53% of BHP Chile power consumption from the spot market. ~18% of Tamakaya power purchases come from renewable power sources. 0 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec MONTH (A) TMKY renewable spot purchases (B) TMKY spot purchases (A) / (B) 18

19 GHG BHP future goals Electricity represents > 70% of total Minerals Americas GHG emissions and are the key focus in the short term to reduce that total footprint BHP GHG emissions FY17 Long term goals GHG Maintain FY22 GHG emissions at or below FY17 levels. 31% 18% FY Mt CO 2 -e BHP aims to achieve net-zero operational GHG emissions in the second half of this century. Levers: 1. cleaner power sources (PPAs); 2. fuel replacement; 13% 38% 3. energy efficiency, and 4. offsets. Petroleum and Potash Copper Iron Ore Coal 19

20 Cost of new-build capacity Renewables are already cost competitive Wind and solar are the cheapest sources of new power new coal plants have a high risk premium The cost advantage of renewables will be further increased through any implementation of a low-carbon mechanism such as a Clean Energy Target. Current market conditions indicate that an actual levelised cost are already higher than renewables and above A$80/MWh. Assuming that the coal plant will run less than expected at 60% capacity factor in order to accommodate renewables. Equipping coal or gas plants with CCS, either through a new plant or via retrofitting, pushes the levelised cost above $100/MWh making them unlikely without much tighter carbon regulations (even then, they may be outcompeted by batteries or other energy storage). Development of batteries seems to be the most likely solution to complement renewables intermittency. In the meantime, flexible power plants like Kelar are required to increase the renewable generation maintaining system reliability/security. 20

21 Cross-learnings: Chile and Australia Power Supply Strategy for Minerals Australia Address trilemma of cost, emissions and reliability/security. Renewables are now the cheapest form of new power generation. Growth in solar will depress daytime prices but leave shoulder prices higher this could make firming solar more expensive in the future. As in Chile, the role of gas in the electricity market important and changing. Learning from Chile for Australia Demonstrated experience in the role of gas in stabilizing the grid and allowing greater renewables penetration. The importance of business model decisions to ensure price competitiveness and emissions reductions. How a grid-connected mining company can accelerate a decarbonizing grid. How fast the market landscape can change. Purchasing renewable energy could have a material impact on GHG emissions, however much more is required to meet our targets. 21

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