A REPORT TO

THE BOARD OF COMMISSIONERS OF PUBLIC UTILITIES

Electrical

Mechanical

Civil

Protection & Control

S1GNATLJL

2o Transmission & Distribution

4 "DAT

Telecontrol
-

System Planning

OVERHAUL DIESEL ENGINES

July 2011

rewfoundIand labrador

() hydro
a nakor energy company
 Overhaul Diesel Engines

Table of Contents

1 INTRODUCTION ................................................................................................................ 1
2 PROJECT DESCRIPTION..................................................................................................... 2
3 EXISTING SYSTEM ............................................................................................................. 3
3.1 Age of Equipment or System ............................................................................... 3
3.2 Major Work and/or Upgrades ............................................................................. 3
3.3 Anticipated Useful life.......................................................................................... 5
3.4 Maintenance History ........................................................................................... 5
3.5 Outage Statistics .................................................................................................. 6
3.6 Industry Experience ............................................................................................. 9
3.7 Maintenance or Support Arrangements.............................................................. 9
3.8 Vendor Recommendations .................................................................................. 9
3.9 Availability of Replacement Parts ........................................................................ 9
3.10 Safety Performance ........................................................................................... 10
3.11 Environmental Performance .............................................................................. 10
3.12 Operating Regime .............................................................................................. 10
4 JUSTIFICATION ............................................................................................................... 11
4.1 Net Present Value .............................................................................................. 11
4.2 Levelized Cost of Energy .................................................................................... 11
4.3 Cost Benefit Analysis .......................................................................................... 11
4.4 Legislative or Regulatory Requirements ............................................................ 11
4.5 Historical Information ........................................................................................ 12
4.6 Forecast Customer Growth ................................................................................ 12
4.7 Energy Efficiency Benefits .................................................................................. 12
4.8 Losses during Construction ................................................................................ 12
4.9 Status Quo.......................................................................................................... 13
4.10 Alternatives ........................................................................................................ 13
5 CONCLUSION .................................................................................................................. 14
5.1 Budget Estimate ................................................................................................. 14
5.2 Project Schedule ................................................................................................ 14
APPENDIX A ............................................................................................................................. A1

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1 INTRODUCTION
Newfoundland and Labrador Hydros (Hydro) Diesel Engine Overhaul Project has been
developed to ensure the reliability of diesel engines at isolated diesel generating stations.
Hydro has a total of 69 prime power diesel engines (including mobile units) at 21 isolated diesel
generating stations serving approximately 4000 customers. With the exception of one system
(Ramea), these generating stations are the sole source of electricity for their communities. The
failure of a unit at any of these stations could result in a load reduction and/or customer outage
in that community. This highlights the importance of the reliability of these diesel engines.

The prime power diesel engines are the primary power source for these communities and
require major overhauls to achieve their expected service lives.

Figure 1 below is a photo of Ramea Unit 2077 prior to its installation in the Ramea Diesel Plant.

Figure 1 Ramea Unit 2077

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2 PROJECT DESCRIPTION
This project is required to overhaul the diesel engines at diesel generating stations. The project
consists of overhauling 53 engines over the next five years (2012 to 2016). The overhaul
schedule, which can be found in Appendix A, is based on the engines being overhauled every
20,000 hours of operation. This is the criteria currently being used for diesel engine overhauls.
The overhaul schedule is a projection based on the estimate of when each engine will reach
20,000 operating hours since its last overhaul. 20,000 operating hours accumulates on average
in 7.5 years but depends on the usage of the engine. As such, this schedule is subject to change
and the year for which an engine is projected to become due for an overhaul can vary
depending on plant conditions and the actual hours accumulated.

An overhaul consists of either a rebuild or a long block replacement. A rebuild consists of the
replacement of pistons, liners, main bearings, connecting rod bearings, fuel injectors, oil cooler,
turbo charger, water pump, oil pump, cylinder heads and all necessary gaskets. Also included in
a rebuild is a bench overhaul of the fuel pump and an overhaul of the alternator typically at
40,000 hours or when the maintenance staff identifies this through their maintenance checks.
A long block replacement consists of replacement of the block of the engine minus the auxiliary
parts such as cooler, actuator, turbo chargers, manifolds, fuel lines etc. The main difference in
the long block involves the replacement of the crank shaft and the block.

The long block replacement program is relatively new to Hydro and comes with the advantage
of warranty and a manufacturer overhauled engine that can be delivered to site. Hydro is in the
process of evaluating the effectiveness of this approach and has targeted specific engines in the
Labrador Region to have long block replacement.

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3 EXISTING SYSTEM
The existing system of isolated diesel generating stations consists of a total of 69 prime power
diesel engines at 21 diesel generating stations. The number of units at a generating station
ranges from three to five and the rated output of the units range from 30kW to 1375kW.

3.1 Age of Equipment or System

The diesel engines range in age from less than one year to 31 years and currently range in
operating hours from less than 1,000 hours to over 119,000 hours (as of the end of 2010).

3.2 Major Work and/or Upgrades

Please refer to Table 1 below for details concerning the major work and upgrades to each diesel
engine during the previous five years.

Table 1: Major Work or Upgrades

Year Major Work/Upgrade
2011* Rebuild of Grey River Unit# 2062
2011* Rebuild of McCallum Unit# 2063
2011* Rebuild of Ramea Unit# 2077
2011* Rebuild of St. Brendans Unit# 2056
2011* Rebuild of St. Lewis Unit# 2039
2011* Rebuild of Williams Harbour Unit# 2057
2011* Rebuild of Port Hope Simpson Unit# 2043
2011* Rebuild of Natuashish Unit# 2069
2011* Rebuild of Cartwright Unit# 2052
2011* Rebuild of Rigolet Unit# 2081
2011* Rebuild of Rigolet Unit# 2051
2011* Rebuild of Postville Unit# 577
2011* Rebuild of Hopedale Unit# 2053
2010 Rebuild of St. Brendans Unit# 578
2010 Rebuild of Ramea Unit# 2045

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Year Major Work/Upgrade

2010 Rebuild of Spare Unit# 2072
2010 Rebuild of Charlottetown Unit# 2079
2010 Rebuild of Marys Harbour Unit# 2038
2010 Rebuild of Cartwright Unit# 2045
2010 Rebuild of Nain Unit# 574
2010 Rebuild of Cartwright Unit# 2036
2009 Rebuild of St. Brendans Unit# 2055
2009 Rebuild of Port Hope Simpson Unit# 2073
2009 Rebuild of Paradise River Unit# 254
2009 Rebuild of Rigolet Unit# 2065
2009 Long block replacement of Postville Unit# 573
2009 Rebuild of Makkovik Unit# 2059
2009 Long block replacement of Makkovik Unit# 2029
2009 Rebuild of Hopedale Unit# 2054
2009 Rebuild of Hopedale Unit# 2074
2009 Rebuild of Nain Unit# 576
2009 Rebuild of Natuashish Unit# 2068
2009 Rebuild of Natuashish Unit# 2070
2009 Rebuild of Natuashish Unit# 2076
2009 Replacement of Cartwright Unit# 567 with Unit# 2086
2008 Rebuild of Grey River Unit# 2067
2008 Rebuild of Ramea Unit# 2045
2008 Long block replacement of Marys Harbour Unit# 2037
2008 Rebuild of Norman Bay Unit# 561
2008 Installation of Norman Bay Unit# 562
2008 Long block replacement of Port Hope Simpson Unit# 2042
2008 Rebuild of Cartwright Unit# 2052
2008 Rebuild of Black Tickle Unit# 2066
2008 Rebuild of Paradise River Unit# 324
2008 Rebuild of Postville Unit# 577
2008 Long block replacement of Makkovik Unit# 3033
2007 Rebuild of Francois Unit# 570
2007 Rebuild of Little Bay Islands Unit# 2058

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Year Major Work/Upgrade

2007 Rebuild of St. Brendans Unit# 2056
2007 Long block replacement of Charlottetown Unit# 2034
2007 Rebuild of Charlottetown Unit# 2061
2007 Rebuild of Black Tickle Unit# 287
2007 Rebuild of Nain Unit# 575
2007 Rebuild of Natuashish Unit# 2069
2006 Rebuild of Norman Bay Unit# 563
2006 Rebuild of Port Hope Simpson Unit# 2043
2006 Rebuild of St. Lewis Unit# 2015
2006 Long block replacement of Cartwright Unit# 2036
2006 Rebuild of Postville Unit# 573
2006 Replacement of Rigolet Unit# 2049 with Davis Inlet Unit# 2027
2006 Long block replacement of Makkovik Unit# 2029
2006 Long block replacement of Hopedale Unit# 2053
2006 Rebuild of Nain Unit# 574
2006 Rebuild of Nain Unit# 576
2006 Long block replacement of Marys Harbour Unit# 2038
* = planned

3.3 Anticipated Useful life

The diesel engines have an estimated service life of 30 years. Actual life depends primarily on
the operating hours of the unit.

3.4 Maintenance History

The five-year maintenance history for the diesel engines is shown in Table 2 below.

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Table 2: Five-Year Maintenance History

Preventive Corrective Total
Maintenance Maintenance Maintenance
Year ($000) ($000) ($ 000)
2006 23.0 1,281.0 1,304.0
2007 24.2 983.6 1,007.8
2008 27.4 872.4 899.8
2009 39.9 1,371.8 1,411.7
2010 77.5 1,290.0 1,367.5

3.5 Outage Statistics

Newfoundland and Labrador Hydro tracks all distribution system outages using industry
standard indexes, SAIDI and SAIFI which are explained as follows:

SAIDI- indicates the System Average Interruption Duration Index for customers served per
year, or the average length of time a customer is without power in the respective
distribution system per year.

SAIFI - (System Average Interruption Frequency Index) indicates the average of sustained
interruptions per customer served per year or the average number of power outages a
customer has experienced in the respective distribution system per year.

Loss of Supply is defined by the CEA as:

Customer interruptions due to problems in the bulk electricity supply system such as
underfrequency load shedding, transmission system transients, or system frequency excursions.
During a rotating load shedding cycle, the duration is the total outage time until normal
operating conditions resume, while the number of customers affected is the average number of
customers interrupted per rotating cycle. In this case it applies to the loss of the diesel plant.

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Table 3 below lists the SAIDI Loss of Supply outage statistics for the diesel generating stations
for the previous five years. Table 4 below lists the SAIFI Loss of Supply outage statistics for the
diesel generating stations for the previous five years.

Table 3 2005 to 2009 Outage Statistics (SAIDI Loss of Supply)

SAIDI (Loss of Supply)
System 2005 2006 2007 2008 2009
TRO Central
Francois (FRS) 0.900 0.117 0.550 2.583 0.481
Grey River (GYR) 0.167 0.086 0.083 0.000 0.000
Little Bay Islands (LBI) 1.217 1.633 0.167 3.333 1.084
McCallum (MCC) 1.000 0.083 0.000 0.000 1.500
Ramea (RAM) 0.415 2.158 2.183 1.518 0.167
St. Brendan's (SBN) 0.683 0.083 0.000 0.083 0.000
TRO Northern
Charlottetown (CHT) 2.102 3.350 0.682 2.233 3.667
L'Anse au Loup 2.573 0.867 0.000 1.655 0.576
Mary's Harbour (MSH) 1.915 3.883 3.925 1.205 7.284
Norman Bay (NOB) 3.017 1.450 3.553 4.129 1.250
Port Hope Simpson (PHS) 2.516 6.000 6.282 0.783 0.000
St. Lewis (SLE) 1.500 1.634 0.450 0.455 0.566
William's Harbour (WHR) 0.333 1.404 1.000 1.083 0.450
TRO Labrador
Black Tickle (BKT) 1.599 2.233 0.483 18.900 2.078
Cartwright (CTW) 1.179 1.233 1.433 6.400 0.417
Hopedale (HPD) 5.005 2.391 8.241 5.100 3.302
Makkovik (MAK) 0.967 3.745 0.500 2.717 2.933
Nain (NAN) 3.657 6.778 0.533 11.265 4.651
Paradise River (PDR) 0.717 0.383 0.267 0.269 0.383
Postville (POV) 1.250 13.068 0.617 4.400 4.500
Rigolet (RIG) 1.861 3.683 0.850 1.967 4.312

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Table 4 2005 to 2009 Outage Statistics (SAIFI Loss of Supply)

SAIFI (Loss of Supply)
System 2005 2006 2007 2008 2009
TRO Central
Francois (FRS) 4.000 1.000 5.000 2.000 5.961
Grey River (GYR) 1.000 1.029 1.000 0.000 0.000
Little Bay Islands (LBI) 8.000 11.000 1.000 5.993 6.000
McCallum (MCC) 2.000 1.000 0.000 0.000 1.000
Ramea (RAM) 4.362 6.283 2.000 5.266 1.000
St. Brendan's (SBN) 3.000 1.000 0.000 1.000 0.000
TRO Northern
Charlottetown (CHT) 9.010 10.000 5.990 5.000 6.000
L'Anse au Loup 5.999 3.001 0.000 0.999 1.394
Mary's Harbour (MSH) 17.008 9.996 15.032 9.762 12.004
Norman Bay (NOB) 12.000 6.000 17.003 17.158 6.000
Port Hope Simpson (PHS) 12.000 8.000 13.987 4.000 0.000
St. Lewis (SLE) 8.000 8.000 5.000 2.015 2.992
William's Harbour (WHR) 1.000 11.026 5.000 13.000 6.000
TRO Labrador
Black Tickle (BKT) 7.990 8.000 4.000 17.000 10.981
Cartwright (CTW) 4.988 5.003 7.000 10.000 6.000
Hopedale (HPD) 5.918 2.992 9.009 7.000 11.000
Makkovik (MAK) 6.000 5.978 1.000 7.000 4.000
Nain (NAN) 7.018 10.002 1.000 17.998 10.951
Paradise River (PDR) 8.000 6.000 3.000 5.000 4.000
Postville (POV) 6.000 11.000 2.000 17.000 8.000
Rigolet (RIG) 3.947 10.000 7.000 4.000 8.975

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3.6 Industry Experience

Manufacturers of diesel engines will provide recommended overhaul frequencies which

typically are in the 15,000 hour range. Hydro completed a review of its maintenance tactics in
2003 and extended the overhaul period to 20,000 hours.

3.7 Maintenance or Support Arrangements

For the most part, routine maintenance is performed by internal resources. Routine
maintenance consists of an annual inspection. The inspection checks the fuel, coolant, and
exhaust systems as well as the engine structure. Problems identified during the inspection are
typically corrected during the inspection. If an engine fails prematurely, the manufacturer is
typically consulted to help with a failure analysis.

Also to help manage the service of the parts for diesel engine, blanket orders have been set up
for Caterpillar and Detroit Diesel engines. Such arrangements are necessary to ensure lead
times on parts are acceptable and Hydro does not have to incur the cost of stocking diesel parts
in inventory.

3.8 Vendor Recommendations

The diesel engine manufacturers generally recommend an overhaul interval of 15,000 hours but
as a result of a review of maintenance tactics and failure history it was decided to extend
Hydros overhauls to 20,000 hours.

3.9 Availability of Replacement Parts

Hydro history has shown that parts are readily available for Toromont and Detroit Diesel
engines, while the Mitsubishi engine parts have larger lead times and can present operational

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problems at times.

3.10 Safety Performance

This is a reliability-based project. However, if this project is not executed, there is a higher risk
of diesel engine failure and diesel engine failure can result in extended customer outages which
can negatively impact public safety.

As well diesel engines can fail catastrophically with pieces of the engine becoming projectiles
presenting possible flying object hazards for the employees in the vicinity. The risk of this
occurring increases if overhauls are not completed.

3.11 Environmental Performance

This project is being justified from a reliability perspective but if overhauls are not completed,
failures could result in oil and glycol being released into the environment.

3.12 Operating Regime

Isolated diesel generation operates continuously since it provides the primary source of
electricity to communities isolated from the provinces electrical grid. A given unit is not in
service continually since the number of units in service varies based on the demand. In
automated plants the engine mix is automatically controlled by a control system to maximize
fuel efficiency, while in a manual plant this control is completed by the operator.

In any of the plants the operator has the flexibility to shut down engines for maintenance
provided there is another engine available to take the load for that time. As a result outages to
engines can occur without outages to customers.

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4 JUSTIFICATION
Hydros current maintenance philosophy is to complete an engine overhaul on all diesel engines
every 20,000 hrs. This philosophy was established as a result of a review of the maintenance
tactics and failure history in 2003. Performing overhauls too frequently results in additional
expenditure for negligible improvement in reliability. An overhaul interval of 20,000 hours is
considered to be the optimum interval for providing least-cost, reliable electrical service.

4.1 Net Present Value

A net present value calculation was not performed for this project as the justification is
reliability-based and there is no option but to overhaul the engines.

4.2 Levelized Cost of Energy

The capital expenditures for this project will not affect the levelized cost of energy for the
system.

4.3 Cost Benefit Analysis

A cost benefit analysis is not required for this project proposal, as the project is required for
reliability reasons and there is no option but to overhaul the engines.

4.4 Legislative or Regulatory Requirements

This project does not involve any legislative or regulatory requirements.

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4.5 Historical Information

Currently, diesel engine overhauls are being performed at 20,000 hour intervals under
operating projects. Between 2006 and 2010, an average of 10.8 engines (54 over 5 years) have
been overhauled annually. Up to the present, these overhauls have been done as operating
projects. However, in 2012, Nalcor Energy is adopting International Financial Reporting
Standards (IFRS). Under the IFRS, major overhauls are capitalized. As a result, beginning in
2012, diesel engine overhauls are required to be performed under capital projects.

4.6 Forecast Customer Growth

This project is not required due to forecasted customer growth but required to maintain
reliability.

4.7 Energy Efficiency Benefits

There are no energy efficiency benefits (or losses) associated with this project.

4.8 Losses during Construction

The overhaul of each diesel unit will be performed during a scheduled outage. These outages
are designed around the system load requirements and do not require any customer outages.
Therefore, there are no production or revenue losses resulting from this project.

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4.9 Status Quo

The consequence of not completing this project is an increase in the frequency and duration of
customer outages as a result of an increase in diesel unit failures. Unlike with the provinces
interconnected system (in which the loss of a generating unit can be compensated for with
another generating unit elsewhere on the system), an isolated diesel plant has no other
generation on which to rely which means there is a higher probability that the loss of a diesel
unit will result in a load reduction and/or customer outage.

4.10 Alternatives

There are no alternatives to overhauling the engine as it is a requirement to attain the service
life of the unit. However for overhauls Hydro is using two approaches, rebuild the engine with
internal resources or purchase a rebuilt long block from the manufacturer as is stated earlier in
this report.

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5 CONCLUSION
This project is necessary in order to provide least-cost, reliable electrical service to the
customers served by isolated diesel generation. Overhauling diesel engines is a necessity in
operating this type of equipment.

5.1 Budget Estimate

Table 5 Budget Estimate

Project Cost:($ x1,000) 2012 2013 Beyond Total
Material Supply 585.4 585.4 1,756.2 2,927.0
Labour 132.0 132.0 396.0 660.0
Consultant 0.0 0.0 0.0 0.0
Contract Work 16.6 16.6 49.8 83.0
Other Direct Costs 73.4 73.3 219.8 366.3
Interest and Escalation 88.8 109.4 474.7 672.9
Contingency 77.9 77.9 233.7 389.5
TOTAL 974.1 994.6 3,130.2 5,098.7

5.2 Project Schedule

Table 6 Annual Project Schedule

Activity Milestone
Initial Planning and Equipment Ordering Tendering February July
Equipment Delivery March August
Equipment Installations and Commissioning March October
Project In Service March October
Project Completion and Close Out December

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Appendix A

APPENDIX A

Newfoundland and Labrador Hydro A1

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Appendix A

Projected Year of
Overhaul Schedule Unit
Overhaul
LBI 2058 2012
RAM 2047 2012
CHT 2079 2012
PHS 2042 2012
PHS 2073 2012
SLE 2080 2012
BKT 579 2012
HPD 2054 2012
MAK 2059 2012
NAT 2076 2012
POV 573 2012
FRS 570 2013
GYR 2067 2013
CHT 2034 2013
WHR 2075 2013
HPD 2074 2013
NAN 576 2013
NAN 2085 2013
NAT 2068 2013
PDR 324 2013
POV 2084 2013
MCC 2064 2014
SBN 2055 2014
CHT 2061 2014
MSH 2038 2014
BKT 582 2014
CTW 2052 2014
MAK 2029 2014
NAN 574 2014
NAT 2070 2014
POV 577 2014

Newfoundland and Labrador Hydro A2

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Appendix A

Projected Year of
Overhaul Schedule Unit
Overhaul
RIG 2081 2014
FRS 566 2015
GYR 2062 2015
NOB 581 2015
Mobile 2044 2015
CTW 2036 2015
CTW 2086 2015
HPD 2054 2015
HPD 2053 2015
HPD 2074 2015
PDR 585 2015
POV 2084 2015
RAM 2045 2016
SBN 2056 2016
MSH 2037 2016
WHR 580 2016
BKT 579 2016
MAK 3033 2016
NAN 576 2016
NAN 2085 2016
NAT 2069 2016
RIG 2065 2016

Newfoundland and Labrador Hydro A3