COST BENEFIT ANALYSIS

Rewinding of Engine 4 Alternator Main Rotor and Stator (16CM32)

Downtime hours due to failure of DG4 Alternator PMS projected to increase by more than 2,160 hours
until restoration of DG4 expected on October 2019 resulting to negative effect on plant availability
and reliability.

Additionally, the opportunity loss from the downtime hours is projected to exceed Php 39.3M considering average
losses when generating power to ASPA and WESM.

Relevant Cost Status Quo Total Rewinding

Cost of New Unit None 1 Lot
Cost of Total rewinding is amounting Based on projected generation losses Recovery of projected generation losses
to 18.7M as per supplier quotation amounting to Php 39.3M (6 months) and improvement in plant availability
and reliability factor.

WITH REWINDING
Cost of Rewinding Alternator Main Rotor & Stator Php 18,705,000 c/o Jannsen
Opportunity Losses
ASPA Php 19,656,000 [1][3][4]
Total Php 38,361,000 [7]

WITH OUT REWINDING

Total Opportunity Losses if not rewind until Dec 2019
ASPA+WESM Php 39,312,000 [2][3][4][5][6]
Total Php 39,312,000

BENEFIT OF REWINDING Php 951,000

Note:
[1] Assumption for computation is only 2019
[2] Supplier will takes three (3) mos to rewind including pull out and installation of main rotor (min).
[3] Average ASPA priced used is Php 0.35 per kWhr
[4] Average WESM priced used is Php 8 per kWhr
[5] Average Operation Hours of CIPII Power Corp (ASPA) is 12 hours per day.
[6] Average Operation Hours of CIPII Power Corp (WESM) is 2.4 hours per day or 10% of 24hrs.
[7] Cost of total rewinding as per supplier quote 18.7M
[8] Loss of Opportunity if will not rewind until dec.2019 is 6mos
[9] Computation is not included if DG4 downtime will extend until 2020.
[10] Capacity fee is not included due to the cause of downtime is not related to NGCP.
[11] The probability of domino effect on the adjacent engine equipment is not included in this analysis.

Prepared By: Checked By: Approved By:

Kris Ian V. Catcatan Jaime T. Hiquiana Jr. Apolo N. Castillo

Sr.Specialist - Logistics Supervisor-Electrical Plant Manager
 Total Rewinding
1 Lot
Recovery of projected generation losses
and improvement in plant availability

Approved By:

Apolo N. Castillo
Plant Manager
PURCHASE OF NEW UNIT vs NO REPLACEMENT (Status Quo)
YEAR
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Rewinding of Alternator Rotor and Stator
Equipment Cost (18,705,000) - - - - - - - - - (18,705,000)
Opportunity Loss (Cost of Downtime) (19,656,000) - - - - - - - - - (19,656,000)
Net CashFlow (38,361,000) - - - - - - - - - (38,361,000)
NPV (Php48,318,933)

No Replacement (Status Quo)

Opportunity Loss (Cost of Downtime) (39,312,000) (78,624,000) (78,624,000) (78,624,000) (78,624,000) (78,624,000) (78,624,000) (78,624,000) (78,624,000) (78,624,000) (78,624,000)
Net CashFlow (39,312,000) (78,624,000) (78,624,000) (78,624,000) (78,624,000) (78,624,000) (78,624,000) (78,624,000) (78,624,000) (78,624,000) (78,624,000)
NPV (Php474,929,495)

CAPEX (18,705,000)
OPEX Savings 78,624,000 78,624,000 78,624,000 78,624,000 78,624,000 78,624,000 78,624,000 78,624,000 78,624,000 58,968,000
Savings Cashflow (18,705,000) 78,624,000 78,624,000 78,624,000 78,624,000 78,624,000 78,624,000 78,624,000 78,624,000 78,624,000 58,968,000
IRR 420%
NPV at 10% 456,827,205

Assumptions/Given:
Net Present Value Rate 10%

Equipment Cost
Total Cost of Generator Alternator rewinding 18,705,000 - - - - - - - - - 18,705,000
Cost of rewinding alternator rotor and stator, Php 18,705,000 - - - - - - - - - 18,705,000
Number of Generator Alternator to rewind 1 1
Life of rewinded alternator rotor and stator, years 10
ASPA Rate, Php/Hr 0.35
Ave. ASPA Operation, Hr/Day 12
WESM Rate, Php/Hr 8
Ave. WESM Operation, Hr/ Day 2.4
Estimated completion of rewinding, Months 3

Prepared by: Checked by: Approved by:

Kris Ian V. Catcatan Joel L. Niez Apolo N. Castillo

Sr. Specialist - Logistics/ Safety Officer Supervisor - Mechanical Plant Manager
Things to consider

a) What will happen if the rewinding was delayed beyond the target 3 months?
Will you have no AS contract for a year?
Will you be able to have AS test next year that the contract is good for the next year, too?
b) What will happen if the service for rewinding increases?
What will be our assurance that the Generator 4 will be more reliable compared to other engine generators?
c) What will happen if the WESM and ASPA price increases?
d) What will happen if the WESM and ASPA price decreases?
e) What will happen if we seek for the OEM insight?
other engine generators?