Long Term Outage Portfolio Protection

Long duration outages are one of the largest risks associated with generating units. Generation owners should limit their exposure to significant negative earnings that result from long duration outages. Power must be purchased, and salaries, banks, and contract workers must be paid even though the unit is not providing any sales. And, with deregulation these costs can no longer be placed into the rate base.

PowerBacker LTO^SM is designed to meet this risk. A clear, stand alone policy form indemnifies against unplanned outages. If you have an unplanned outage, you have protection.

PowerBacker LTO, through the use of a self insured retention or a flexible waiting period, can be structured to meet any budget. Likewise, LTO can provide coverage for a single unit or a system of units. Moreover, it is possible to vary the waiting periods for each unit or the daily indemnities by unit by month.

Customers have used our protection to cover their generating portfolios across the United States. They can specify the value of each generating asset in light of the current market conditions at the time of binding the policy. For example, the expected replacement power cost for coal unit in the Eastern U.S. versus the Western U.S. differs dramatically based on the underlying commodity market as well as differences in the marginal cost of product. Once a specified waiting period is exceeded, payout under the provided payment schedule begins.

This solution has been particularly successful in deregulated states such as Pennsylvania and Michigan.

Payment Determination Example

Month	Assumed East Coast Forward Market ($/MWh)	Assumed West Coast Forward Market ($/MWh)		Assumed East Coast Marginal Cost of Production ($/MWh)	Assumed West Coast Marginal Cost of Production ($/MWh)		RPC East Coast Unit Per Day *	RPL West Coast Unit Per Day*
January	$40	$30		$12	$8		$336,000	$264,000
February	$40	$30		$12	$8		$336,000	$264,000
March	$30	$27		$12	$8		$216,000	$228,000
April	$30	$25		$12	$8		$216,000	$204,000
May	$30	$25		$12	$8		$216,000	$204,000
June	$40	$30		$12	$8		$336,000	$264,000
July	$47	$38		$12	$8		$420,000	$360,000
August	$47	$44		$12	$8		$420,000	$432,000
September	$38	$44		$12	$8		$312,000	$432,000
October	$30	$38		$12	$8		$216,000	$360,000
November	$30	$30		$12	$8		$216,000	$264,000
December	$32	$30		$12	$8		$240,000	$264,000

* Calculated by Multiplying 500 MW * 24 hours * (Forward Market Less Marginal Cost to Produce)