Becoming the Right Site:

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Becoming the Right Site What Wind Component
Manufacturers Want from their Next Location
Norman, OK June 23, 2009 Ed McCallum, Senior
Principal
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Presentation Overview

• Introduction to McCallum Sweeney Consulting
• The Wind Industry
• The Components
• Why to Recruit
• How to Recruit
• How to win

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McCallum Sweeney Consulting
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MSC Overview

• Specializes in site selection and incentive
  negotiation services
• Established in July 2000 by Ed McCallum and Mark
  Sweeney
• Brings more than 50 years of combined location
  consulting experience to our clients worldwide
• Provides clients with uncompromised service,
  conducting site selection and incentive
  negotiations with the highest standards of
  integrity

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MSC C.I.R.C.L.E. of Values

• Integrity
• Emphasis on communication, with an open process
  allowing our clients to know what we are doing
  and why
• Redirection of any and all location bonuses
  from communities or developers to the benefit of
  our clients
• Policy not to pursue or accept economic
  development assignments in locations that are, or
  may be, under consideration by our siting clients

• Customer Service
• Unrestricted commitment to our clients
• Active involvement in every project by senior
  principals Ed McCallum and Mark Sweeney
• Independence, allowing sole focus on our clients
  projects (not a platform to sell other services)

• Respect
• For the values of our clients, and the
  responsibility we have in representing them
• For the stewardship role states, provinces, and
  communities have as part of their efforts in
  attracting and retaining investment and
  employment
• For each other here at MSC, creating a supportive
  and collegial environment that thrives on the
  unique strengths we each bring to the company,
  and striving to balance the demands of our
  profession with the rewards of a personal life

• Excellence
• Maintaining the goal of MSC, as a company, to be
  the best in our business
• Creating and maintaining an operating environment
  based on the principles of continuous performance
  improvement
• Conducting our business with an unrestrained
  passion for quality

• Creativity
• Maintaining a broad knowledge of successful
  location strategies
• Emphasizing the promotion of new ideas and
  finding value in them
• Committing to an operating environment that
  fosters innovation and nurtures its development

• Leading-Edge Technology
• Maintaining in-house expertise in geographic
  information systems (GIS) technologies
• Supporting integration of GIS into all our
  assignments, exploring new ways to leverage its
  value for our clients
• Managing the technology as a powerful tool and
  avoiding the temptation to let it serve as a
  substitute for a sound and comprehensive site
  selection process

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MSC Clients
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MSC Project Experience
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MSC Project Experience (continued)
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The Wind Industry
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Change in US Wind Energy
Installed Wind Energy Capacity
Source Global Wind Energy Council http//www.gw
ec.net/uploads/media/0702_PR_Global_Statistics_200
6.pdf
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Growth Before Stimulus
Source American Wind Energy Association Database
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Economics Make Sense
Cost of Wind Energy in Levelized
Cents/Kwh Assumptions levelized cost at
excellent wind sites, large project size, not
including Production Tax Credits (PTC)
Source American Wind Energy Association122 C
Street, N.W., Washington, D.C. 20001, (202)
383-2500, fax [phone], windmail_at_awea.org,
http//www.awea.org.
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Wind and Load Centers
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Takeaway

• Not a flash in the pan here to stay
• Economics steadily improving and competitive in
  certain regions
• Oklahoma is right in the middle of it all
• Components for the grid is next wave

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The Components
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Basic Components
Tower
Rotor Blade
Rotor Hub
Completed Nacelle
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Increasing Size
Source US Department of Energy 20 Wind Energy
by 2030, http//www.20percentwind.org/20percent_wi
nd_energy_report_revOct08.pdf
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Bigger Sizes Greater Opportunity
Size Doubled Output X 4.7 (5.0)
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Size Considerations
Towers Tower sections for the common 250-foot
(80-meter) wind turbine tower in the United
States can weigh more than 150,000 lbs (70 tons),
be 120 feet long (36 meters) and have a diameter
of 15 feet (4.5 meters). The next generation of
330foot (105-meter) towers will be 18 feet (5.4
meters) in diameter at the base. Nacelles Nacelle
s commonly weigh 50-70 tons and can weigh 90 tons
or more. Blades For commercial scale projects,
blades run from around 110 feet (33 meters) to
145 feet (44 meters). Blade lengths may continue
to grow in the future, particularly for offshore
wind projects. The largest blades are just over
200 feet long (60 meters-plus) for a 5-MW turbine
scenario.
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Takeaway

• Large structures getting bigger
• Transportation infrastructure is critical
• Rail
• Highways
• Possibly even barge
• Weather can be a factor
• OEM and Supplier scenario exists
• There will be lots of companies in this space

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Why to Recruit
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MSC Clients - Wind Energy
Completed/Engaged
Discussions/Negotiations

• Nacelle Assembler 1
• Nacelle Assembler 2
• Tower Manufacturer
• Gears/Shafts Manufacturer
• Blade Manufacturer 1
• Blade Manufacturer 2
• Electronics

Confidential 1 Confidential 2
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Major Component Supply Chain
Source Emerging Energy Research, Strategy White
Paper, Wind at a Crossroads Supply Shortages
Spark Industry Restructuring, November 14, 2006
ID GW 905-061114. www.emerging-energy.com
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Nacelle Units the Green OEM
Nacelle Component Parts There are over 8,000
individual parts that make up a completed Nacelle
unit much of which is shipped in and assembled
however, critical mass has been reached where it
makes sense for the sub-component manufacturers
to start considering additional locations on a
regional basis particularly for very large
pieces. This scenario is not too much different
than the automotive OEM scenario where a supplier
base within close proximity is the desire of the
OEM.
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Jobs Throughout the Value Chain
U.S. construction-related economic impacts from
20 wind
Source 20 Wind Energy by 2030 - Increasing
Wind Energys Contribution to U.S. Electricity
Supply. DOE/GO-102008-2567 July
2008 http//www1.eere.energy.gov/windandhydro/pdf
s/41869.pdf
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How to Recruit
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Shovel Ready Site

• Under control in some fashion
• Preferably owned or optioned
• Developable (due diligence done)
• Phase I complete if not in an existing park
• Infrastructure Served
• Transportation (Rail, Road, Barge)
• Water, Sewer, Telecom, Energy
• Schedule known for
• Title transfer or property possession
• Improvement schedule known
• Permit timeline evident

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Understand the Needle Movers
Example Blade Manufacturing Facility
Example Nacelle Assembly Facility
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Typical Training Model

• Identification or required resources to train the
  workforce and gaps in achieving the required
  workforce development. 
• Development of course curriculum, delivery
  mechanisms, and achievement of specific skill
  sets by function. 
• Advertising, job fairs, employment service
  queries, and other means of mobilizing a
  candidate pool of prospective new hires. 
• Testing for various skills to identify basic and
  advanced skill sets. Could include background
  checks and drug screening. 
• Company orientation and training for fundamental
  skills and concepts along with a chance to
  observe the interaction of employees as well as
  problem resolution. 
• Once hired, an extension of the previous step to
  train in specific critical skill sets necessary
  to the success of the operation. 
• Ongoing training on a recurring basis, to
  gradually upgrade skills and improve performance.
  Includes both hard and soft skills training. 
• Training based on the previous three steps that
  includes normal training regimen as well as
  problem (needs) based program development.

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Training Approach (Existing versus New Industry)
New Industry
Existing Industry

• New industries may or may not have an existing
  facility to refer to when benchmarking the
  production process. Also, the staffing is
  usually limited and the curriculum/methodology
  that happens to be successful in one location may
  not work in the new location for a variety of
  reasons. The training program usually requires
  several different types of training. Both
  production methods and soft skills training are
  required as well. The program may or may not be
  defined and the resources are uncertain.

Existing industry training usually involves an
expansion or a specific problem identified by the
employer who seeks out assistance from the
appropriate organization. Typically, the company
has the staff and the commitment of resources to
address the problem but, it is not uncommon for
the firm to lack the expertise necessary to
correct the issue in a timely manner. The cost
is typically easy to estimate, and the
availability of training equipment is usually
situated in the companys facility or at the
local technical/community college already for
the most part.
Functional Characteristics
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Acreage Needs Rotor Facility

• Estimated Acreage Requirements for Rotor
  Manufacturing (Wind Blades)
• Additional Blade Storage acreage 25.0 35.0
  45.0 55.0
• Nacelle, Gear-box, Rotor Hub Assembly 15.0
  15.0 25.0 30.0
• Estimated Total acres 71.0
  92.0 123.0 151.0

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Typical Rotor Blade Facility
TPI- Newton, IA (US)
Vestas Portland, Victoria (AU)
Siemens Ft. Madison, IA (US)
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Typical Nacelle Mfg. Facility

• Other Physical Requirements
• Acreage 25 75
• Facility 60 125,000 Sq. ft
• Rail preferably dual
• Good Highway Accessibility
• Within 1-1.5 hours of airport
• FTZ an advantage

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Support

• Proactive, not reactive legislation
  (Federal, State and Local)
• Continued tax support
• Training development
• Comprehensive infrastructure Strategy
• - Transmission
• - Highways
• - Rail
• Supplier identification and qualification

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2007 vs. 2008 PTC Vote
House of Representatives
Senate
2007
2008
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PTC Renewed for 3 Years
Source American Wind Energy Association122 C
Street, N.W., Washington, D.C. 20001, (202)
383-2500, fax [phone], windmail_at_awea.org,
http//www.awea.org.
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How to Win
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Comprehensive Analysis/Emphasis Drivers
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Understand the Needle Movers
Example Blade Manufacturing Facility
Example Nacelle Assembly Facility
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Example of Cost Analysis - Phase III
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Example of Cost Analysis - Phase III
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Example of Cost Analysis - Phase III
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Skills vs. Training Assistance/Resources
Relationship
Professional Engineering and Design Project
Management Logistics Etc.   Skilled Nacelle
Assembly and Testing Electronics
Troubleshooting/Testing Mechanical
Troubleshooting/Testing Machining (Gears and
Shafts) Bearings Gear Box Assembly Semi-skill
ed Rotor Blade Technicians Nacelle
Covering Control Box Assembly Towers Castings  
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The Case for Rail
Truck Transport Costs Due to the length and
weights of the towers and blades, customized
trailers and heavy haul tractors are required.
Each trailer is customized requiring a
significant amount of investment from the
carriers. The cost of each combined trailer and
heavy haul tractor unit can reach 500,000 to
750,000. Escort vehicles are also required for
the trucks. Depending upon the state, the number
of escort vehicles varies but typically range
from one to three escort cars per truck for the
blades or towers.
Rail Transport Cost Curves
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Oklahoma and Offshore Wind
Source 20 Wind Energy by 2030 - Increasing
Wind Energys Contribution to U.S. Electricity
Supply. DOE/GO-102008-2567 July
2008 http//www1.eere.energy.gov/windandhydro/pdf
s/41869.pdf
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Important Considerations

• Ready to Go opportunities
• Site is but one part of this equation
• Includes deal making capabilities
• Expedited permitting
• De-bottlenecking of entire schedule
• Workforce Development Training
• Includes K-12, Vocational, Technical, College
  Post Grad
• Logistics Considerations
• Rail is becoming part of the equation
• Trucking no less important
• Navigable Waterway increases opportunity to
  recruit
• Legislative support for industries Federal,
  State
• Industry support to promote and assist innovation
• Tailored to assist in recruitment

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How to Get on the Radar Screen

• KNOW the players in this industry (Wind)
• This is still a people business reach out
• Keep prospects informed relevant information,
  not fluff
• Respond appropriately (7 points of contact for a
  project)
• 1. Consultant /Company calls
• 2. Confirmation of RFP Receipt
• 3. Questions about the RFP
• 4. Notification of response being sent
• 5. Confirmation of delivery follow-up
• 6. Candidacy Update/Is the RFP Clear?
• 7. Post-Decision Debrief
• Respond to the inquiry first (qualification)
  sell later (qualification)
• Project execution makes the biggest impression

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MSC Contact Information

• Ed McCallum
• Senior Principal
• 864-553-7031
• emccallum_at_mccallumsweeney.com
• McCallum Sweeney Consulting
• 550 South Main Street, Suite 550
• Greenville, SC 29601
• 864-672-1600 (main)
• 864-672-1610 (fax)
• www.mccallumsweeney.com