Gaining Management Commitment to Asset Maintenance @ LYP

Colin Young - Engineering Manager, Loy Yang Power

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2

Loy Yang Power Key Statistics • One of Australia’s top 25 companies • Privately owned by AGL(33%), Tepco(33%), and CBA(33%) • Revenue exceeding $500M/ Annum. • Largest brown coal mine in Australia (30MT /yr)

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Loy Yang Power Key Statistics • • • • •

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Largest Brown Coal Generator in Australia Supplies > 35% of Victoria’s energy (2200MW) Australia’s lowest cost energy producer Spans 600 Hectares Directly employs > 520 people

Ash Pond

Loy Yang B

Raw Coal Bunker

TS5

D16 D15

Loy Yang A Power Station Rising Conveyors

Overburden Dump D14

TS4

D27

O/B run-off Treatment Settling Pond

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Loy Yang Power Background • • • • •

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First Unit Commissioned 1984 Design Life = 30 Years Design Availability = 78% Design Reliability : 88% Privatised 1997

Loy Yang Power Background Post Privatisation : • Dynamic Market
Losses > $5M / Day • Extended Life (30 Years => 50 Years) • Increased Performance / Efficiency Expectations • Maintenance Outsourced • Fewer Employees • Ageing Workforce Slide 7

Loy Yang Power Asset Management @ LYP Philosophy :

“ To deliver world class plant performance at optimum levels of safety, quality, cost, and risk” Slide 8

Loy Yang Power Asset Management @ LYP Another important philosophy……

“What’s important to your boss should be important to you !! ”

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Loy Yang Power Asset Management @ LYP

So what’s important to Asset Owners ???….

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Loy Yang Power Asset Management @ LYP

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Loy Yang Power Asset Management @ LYP

Takeaway No. 1 : “In one form or another your project(s) will be related to Management of Risk…..this should be important to your management….and hence you !” Slide 12

Loy Yang Power Asset Risk Management @ LYP is part of an overall Risk Management Plan…..

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Loy Yang Power LYP Strategic Objectives

Risk Mgmt Policy

Business Risk Register

Commercial

Financial Marketing Info Tech

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Operational

Asset Mgmt OH&S Human Resource Inventory

External

Political Regulatory Natural Disasters

Loy Yang Power Asset Management @ LYP Whole of Life Plan

Business Plan

Analysis

Asset Management Strategies

History Recording

Maintenance Planning and Execution

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Loy Yang Power Asset / Risk Management @ LYP

So what’s the secret to gaining Management Commitment to Asset Management…….

5 Key Steps !

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Loy Yang Power Asset / Risk Management @ LYP STEP 1: Identify Key Stakeholder Expectations • Owners • Financiers • Insurers • Government / Agencies (NemCo, EPA, OHSHA, etc) • Employees / Trade Unions • Community Slide 17

Loy Yang Power Asset / Risk Management @ LYP STEP 2: Determine Risk Appetite • Risk Management Committee • Insurance Audits • Lenders Technical Audits • Agency Audits (EPA, NemCo, OHSHA) • Employees (Team Briefs, H&S Committee’s) • Community Forums

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Loy Yang Power Asset / Risk Management @ LYP

STEP 3: Review Performance Gaps • Examine Industry Best-Practice => Benchmarking • OEM Recommendations • Process Improvement Teams (PIT) • Root Cause Analysis (RCA) • Plant Condition Indices (PCI’s)

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Loy Yang Power Asset / Risk Management @ LYP STEP 4 : Determine Strategies for Closing Gaps & Managing Risk Features of Loy Yang’s Asset Strategy system include :

• System Based => Linked to Overall Business Goals

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Loy Yang Power Asset / Risk Management @ LYP LYP Plant Asset Strategies : System Based PRESSURE PARTS

TURBINE VALVES TURBINE CYLINDERS

REFRACTORY

MANAGEMENT TEAM

DRAFT PLANT

BOILER GENERAL CONDENSATE & FEEDWATER

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ASH HOPPER ELECTRICAL

Loy Yang Power Asset / Risk Management @ LYP STEP 4 (Cont’d) : Closing Gaps & Managing Risk LYP Asset Strategies are also : • PCI Driven (ie. Uses facts not perceptions)

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Loy Yang Power Asset / Risk Management @ LYP Plant Asset Strategies : PCI Driven Plant Condition Indices (PCI’s) are : • Linked to Business Asset Performance KPI’s

• Condition Based • Forward Focussed • Periodically Updated / Reported • Annually Reviewed…=> producing information that can be understood by anyone…including management! Slide 23

Loy Yang Power Asset / Risk Management @ LYP PCI Example : Boiler Cleaning System

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Loy Yang Power Asset / Risk Management @ LYP Boiler Cleaning Performance Targets include:

• Availability (30% weighting) • Reliability (30% weighting) • Boiler Run Length between cleans (40%)

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Loy Yang Power Asset / Risk Management @ LYP The Boiler Cleaning PCI includes measures on ….. •

System Availability (30%)

•

Number of Faults (10%)

•

Mean Time to repair faults (10%)

•

Number of Routines Completed (10%)

•

Mean Time to complete routines (10%)

•

Mean Time between failures (10%)

•

Housekeeping (20%)

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Loy Yang Power Asset / Risk Management @ LYP Boiler Cleaning PCI Trend : 1.40

1.17

1.20

1.12

1.09

1.06 0.96

0.96

1.00

1.02

1.00

0.96

0.90 0.80

0.80

0.84

0.87

0.84

0.82

0.82 0.76

0.70

0.67

0.60

0.40

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3rd Quarter

Year 2004

Quarter

Year 2004

1st

3rd Quarter

Year 2003

Quarter

Year 2003

1st

3rd Quarter

Quarter

Year 2002

Quarter

Year 2002

1st

3rd Quarter

Year 2001

1st Quarter

Year 2001

Quarter

Year 2000

1st Quarter

Year 2000

0.00

3rd

0.20

Loy Yang Power Asset / Risk Management @ LYP STEP 4 (Cont’d) : Closing Gaps & Managing Risk LYP Asset Strategies are also :

• Risk Ranked…..

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Loy Yang Power Asset / Risk Management @ LYP Risks are Rated & Ranked according to : • Hazard / Issue / Consequence • Causes • Existing / Proposed Controls • Risk Score (per HSP 015)

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Strategic Business Risks Ranking Table

LIKELIHOOD E Rare

D Unlikely

C Possible

B Likely

A Almost Certain

CONSEQUENCE

PEOPLE

ENVIRONMENT

FINANCIAL IMPACT

REPUTATION

LEGAL or REGULATORY

Once every 100 years

Once every 30 years

Once every 10 years

Once every 3 years

Once a year or more frequently

5

Fatality or injury resulting in permanent disability

Deliberate and potentially significant environmental damage. Definite prosecution.

Catastrophic Impact on Revenue/Costs (>$10M)

Long term w idespread adverse public opinion and days of national media coverage.

Inquiry by Regulator with potential loss of contract or substantial fines or major litigation

Medium

High

Extreme

Extreme

Extreme

4

Serious Injury (LTI)

Probable prosecution or investigation and major fine from regulator

Medium

Medium

High

Extreme

Extreme

3

Injury requires medical treatment

Adverse public opinion and some State media coverage

Possible Prosecution or moderate fine or regulator investigation

Low

Medium

Medium

High

Extreme

2

First Aid Injury

Adverse opinions managed locally, some publicity in local media

On the spot fine or non-compliance from regulator

Low

Low

Medium

Medium

High

1

No Injury

Minimal impact on Public opinion.

Prosecution Unlikely

Low

Low

Low

Medium

Medium

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Accidental but Widespread adverse potentially significant Major impact on opinions and some environmental Revenue/Costs National media damage. Risk of ($5M-$10M) coverage. prosecution/ large fines

Accidental but potentially moderate environmental damage. Potential for EPA action.

Significant impact on Revenue/Costs ($2M-$5M)

External environmental Moderate impact incident report. on Potential for off-site Revenue/Costs impacts. ($100k-$2M)

Internal environmental incident report. No offsite impact

Very minor Impact on Revenue/costs (<$100k)

Risk Assessment Template Risk Assessment Ref No Hazard Description Responsible General Mgr Accountable Mgr Consequences identified Risk rating Basis of Risk Rating – Frequency Basis of Risk Rating – Consequences Date of Rating

xxx

Current Control Systems Policies Management Strategies Procedures Other Control Processes Regulation Assets Deployed Reporting Requirements Audit Processes Other Risk Reduction Costs Risk Reduction Benefits

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.

Loy Yang Power Asset / Risk Management @ LYP STEP 4 : Closing Gaps and Managing Risk

LYP Asset Strategies are also : • Regularly Reviewed….

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Loy Yang Power Asset / Risk Management @ LYP

Reviewed by … • Asset Strategy presentations to LYP CEO / Board • 6 -Monthly Lenders Audit (ie.Finance Stakeholders involved) • 6 -Monthly Insurers Audit (ie. Risk Stakeholders involved) • Weekly Project reporting (ie. Senior Management involved) • On-line PCI monitoring linked to CM System (informed) Slide 33

Loy Yang Power Asset Management @ LYP

Takeaway No. 2 : “If your out of sight your out of mind so….Communicate, Communicate , Communicate and use the KISS Principle ” (Keep It Simple Stupid !) Slide 34

Loy Yang Power STEP 5 :

Asset / Risk Management @ LYP Report Progress & Review Effectiveness

Update and regularly review the…. • Whole of Life Plan • Maintenance Plan • Budget

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Loy Yang Power Asset Management @ LYP Whole of Life Plan

Business Plan

Analysis

Asset Management Strategies

History Recording

Maintenance Planning and Execution

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Loy Yang Power Asset / Risk Management @ LYP

Other LYP Communication tools include ….. • 5 Year Business Plan… • 12 Month Maintenance Plan (Linked to Maintenance Contract) • 3 Month detailed Maintenance Plan… • Monthly Performance Reports… • Live Minor Outage Plans… • Detailed Major Outage Plans….. Slide 37

Loy Yang Power Asset / Risk Management @ LYP Some words on LYP Major Outage Mgt…

• Planned 2 years in advance…. • Linked to LYP Business Planning Process…. • All work risk ranked, prioritised, and linked to Business Risk Committee…. • Performance driven via Incentive based Contracts… • Involves key stakeholders (LYP Board , Insurers, etc) Slide 38

Loy Yang Power Concept \ Design

Major Outage Planning Strategic Plans Pre Outage Inspections Scope & Spares List Production Spares Procurement Contracts Schedule Mobilise

24 (m)

12 (m)

2 (m)

Overhaul

Report

2(m)

6 (m)

Refurbish Spares Slide 39

Loy Yang Power Asset / Risk Management @ LYP

So what’s been delivered……...

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LYP Asset Management Results : Major Outages... Manhours vs. Outage Days ------ Unit 1 (1996)

------ Unit 3 (2001)

------ Unit 1 (2003)

Manhours x 1000

250 220

200 150

145 120

100 50 0

29

0

10

20

30

Outage Days Slide 41

32

42

40

50

Availability (ACF / CF)

98 96 94 92 90 88 86 84 82 80

ACF CF

2003

2004

2005

2006

2007

2008

2009

2010

CF

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2011

2012

ACF

LYP Asset Management Results : Boiler Run Length (Hours) Average Boiler Run Duration when the major factor for an outage was Boiler fouling.

12,000

Hours

10,000 8,000 6,000 4,000 2,000 0 1995

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1996

1997

1998

1999

2001

2002

2003

2004

2005

2006

Loy Yang Power Asset / Risk Management @ LYP

Summary • Identify Key Stakeholders Expectations... • Determine Stakeholder Risk Appetites... • Review Performance Gaps... • Determine Strategies for Closing Gaps and Managing Risk…. • Regularly Report Progress & Review Effectiveness & • Communicate, Communicate, and Communicate with a view to ……………….. Slide 44

Loy Yang Power VISION “EXCELLENCE TOGETHER”

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