Sargent & Lundy Experience with FGD

PROSPECTS FOR LIMEINFUTURE FGD MARKETSPrepared For:NATIONAL LIME ASSOCIATIONWilliam DePriestSargent & LundyLLC May 22, 2003

Sargent & Lundy Experience with FGD • 8 Wet FGD Units Since 1990 • 4,600 MWs of Capacity • All High Sulfur Coals • All Limestone Based • 8 Dry FGD Units in Progress • 2,300 MWs of Capacity • All Low Sulfur Coal • All Lime Based • My Personal Experience with Lime • Wet (Pleasants, East Bend, Zimmer) • Dry (Laramie River, Craig, Springerville)

S&L’s Assignment from NLA • Perform an FGD Technology Selection Process • Technology Issues • Fuel Issues • Lime vs. Limestone • Capital Requirement • O&M Requirements • Life Cycle Analysis • Provide Some Direction for NLA Members • Improve position of Lime based Technology in FGD Market • Market Focus

Basis of Study • Technologies: • Wet FGD Technologies • Limestone w/Forced Oxidation (LSFO) • Magnesium Enhanced Lime w/Forced Oxidation (MEL) • Dry FGD Technologies (Lime Based) • Spray Dryer Absorber (SDA) • Circulating Fluid Bed Absorber (CFB)

Basis of Study • Fuels: • Sulfur LevelCaO in Ash • %lb/MBtu% • Eastern High “S” Bituminous 3.0 4.72 3-5% • Eastern Low “S” Bituminous 1.3 2.00 3-5% • Western Low “S” 0.6 1.44 22-26% • sub-bituminous

Plant Design: Plant Rating – 500 Mwe • Technology Absorber/ %SO2 Byproduct/ • Reactor Reduction Waste • High “S” Bit. Coal LSFO 1 x 100% 98 Gypsum • MEL 1 x 100% 98 Gypsum • Low “S” Bit. Coal LSFO 1 x 100% 98 Gypsum • MEL 1 x 100% 98 Gypsum • SDA 2 x 50% 94 Landfill • Low “S” Sub-Bit. SDA 2 x 50% 93 Gypsum

Basis of Study • ECONOMIC PARAMETERS Base Value Load factor 80% FGD system life New: 30 years Retrofit: 20 years Capital cost leveling factor, New: 14.5 %/year Retrofit: 15.4 Discount rate 8.75% Inflation rate 2.5% O&M cost leveling factor New: 1.30 %/year Retrofit: 1.22

Basis of Study • Consumable Costs: • Base Value Lime (94% Purity) Wet Techs: $50/ton Dry Techs: $60/ton Limestone (95% purity) $15/ton Aux. Power Cost $30/MWh Water Cost $0.75/1000 gal Waste Disposal $12/ton By-product sale cost $0/ton Bag Cost $80/bag Bag Life 3 years

Capital Cost Development Low "S" High "S" Western Appalachian Low "S" Appalachian LSFO MEL LSFO MEL SDA SDA Subsystems M$ M$ M$ M$ M$ M$ Reagent Feed System 7.6 6.1 6.4 5.0 5.3 4.6 22.2 17.1 18.5 15.7 14.5 15.1 Removal System SO 2 Baghouse System (Retrofit) 0.0 0.0 0.0 0.0 17.0 19.0 15.4 15.3 15.4 15.3 8.4 8.7 Flue Gas System By-product Treatment and Handling 7.9 7.9 6.5 6.5 2.8 3.4 General Support Equipment 5.8 5.8 5.3 5.3 4.8 4.8 TOTAL PROCESS CAPITAL (TPC) 58.9 52.2 52.1 47.7 52.8 55.6

Capital Cost Development (Cont.) LSFO MEL LSFO MEL SDA SDA M$ M$ M$ M$ M$ M$ Subsystems TOTAL PROCESS CAPITAL (TPC) 58.8 52.2 52.1 47.7 52.8 55.6 General Facilities 2.9 2.6 2.6 2.4 2.6 2.8 Engineering and Construction Management 5.9 5.2 5.2 4.8 5.3 5.6 Project Contingency 10.1 9.0 9.0 8.2 9.1 9.6 TOTAL PLANT COST (TPLC) 77.8 69.0 68.9 63.1 69.8 73.6 Allowance for Funds 2.5 2.2 2.2 2.0 2.2 2.4 Owner's Cost 4.0 3.5 3.5 3.0 3.5 3.5 TOTAL PLANT INVESTMENT (TPI) 84.3 74.7 74.6 68.1 75.5 79.4 Inventory Capital (Spare parts etc.) 0.6 0.5 0.5 0.5 0.6 0.6 1.2 1.1 1.0 0.9 1.2 1.2 Initial Chemicals and Commissioning TOTAL CAPITAL REQUIREMENT (TCR) 86.1 76.3 76.2 69.5 77.3 81.3 TOTAL CAPITAL REQUIREMENT 172 153 152 139 155 163 (TCR), $/kW) Notes:

Capital Cost Comparison • LSFO vs. MEL on High “S” Bit. Coal • MEL ~11% Lower (or $9.8 million) • LSFO vs. MEL on Low “S” Bit. Coal • MEL ~9% Lower (or $6.7 million) • MEL ~30% higher than SDA without baghouse on low “S” coal • MEL ~10% lower than SDA with baghouse on low “S” coal • SDA ~5% higher for Western low “S” coal than Eastern low “S” coal

O&M Cost Development AUXILIARY POWER REQUIREMENTS ( W) K High Sulfur Low Sulfur LSFO MEL LSFO MEL Reagent Preparation 530 330 225 140 SO2 Absorption 3391 990 2010 742 Oxidation Air Compression 2235 2235 947 947 Flue Gas Handling 2420 1882 2042 1765 By - product Hand ling 420 420 178 178 General 60 60 60 60 Margin (0.2%) 191 118 109 77 Total 10050 6450 6900 4850 Total (%) 2.01 1.29 1.38 0.97

O&M Cost Development (Cont.) Low "S" Key Components Western High "S" Appalachian Low "S" Appalachian LSFO MEL LSFO MEL SDA SDA Number of Operators (40 hrs/wk) 12 12 12 12 8 8 Reagent Stoichiometry 1.03 1.02 1.03 1.02 1.4 1.1 Reagent Requirement, t/h 19.6 11.0 8.3 4.7 6.6 3.2 By-product Generated - dry, t/h Sale Sale Sale Sale Landfill Landfill Aux. Power Requirement, MW 10.0 7.0 6.5 5.0 6 5.5

O&M Cost Comparison: Fixed O&M Cost High "S" Low "S" Appalachian Low "S" Appalachian Western LSFO MEL LSFO MEL SDA SDA 1. Operating Labor Cost (M$/yr) 1.25 1.25 1.25 1.25 0.83 0.83 2. Maintenance Materials Cost (M$/yr) 1.53 1.34 1.30 1.28 1.00 1.02 3. Maintenance Labor Cost (M$/yr) 1.02 0.89 0.87 0.79 0.67 0.68 4. Administrative and Support Labor = 0.68 0.64 0.64 0.61 0.45 0.45 Total Yearly Fixed O&M Cost = 4.47 4.11 4.06 3.82 2.94 2.98

O&M Cost Comparison: Variable O&M Cost High "S" Low "S" Low "S" Appalachian Appalachian Western Variable Operating Costs (M$/yr) LSFO MEL LSFO MEL SDA SDA 1. Reagent Costs = 2.06 3.85 0.87 1.63 2.77 1.35 2. Waste Disposal Cost for FGD System = 0.00 0.00 0.00 0.00 1.07 0.59 3. Credit for Byproduct = 0.00 0.00 0.00 0.00 0.00 0.00 4. Bag replacement= 0.00 0.00 0.00 0.00 0.34 0.38 5. Cage replacement= 0.00 0.00 0.00 0.00 0.02 0.02 6. Water Cost= 0.21 0.21 0.21 0.21 0.10 0.13 7. Additional Power Costs* = 2.10 1.47 1.37 1.05 1.16 1.26 Total Yearly Variable O&M Cost = 4.37 5.53 2.45 2.89 5.46 3.73 TOTAL YEARLY FIXED AND VARIABLE 8.84 9.64 6.50 6.71 8.40 6.71 O&M COSTS

O&M Cost Comparison • LSFO vs. MEL on High “S” Bit. Coal • MEL ~9% Higher (or $ 0.98 million/year) • LSFO vs. MEL on low “S” Bit. coal • MEL ~3.3% Higher (or $0.26 million/year) • SDA with baghouse is equivalent to MEL on low “S” coal • MEL ~10% higher than SDA with a baghouse on low “S” coal • SDA ~25% lower for Western low “S” coal than Eastern low “S” coal

Life Cycle Cost • High “S” Appalachian Coal Base Case • (80% CF, retrofit, $15/ton limestone, $50/ton lime, $30/Mw-hr power) • LSFO MEL • M$/yearM$/year • Capital 13.26 11.77 • O&M 10.78 11.76 • Total 24.05 23.57 • cents/kWh 0.69 0.67

Life Cycle Cost • Low “S” Appalachian Coal Base Case • (80% CF, retrofit, $15/ton limestone, $50-60/ton lime, $30/Mw-hr power) • M$/year LSFO MEL SDA • Capital 11.74 10.75 11.93 • O&M 7.93 8.19 10.25 • Total 19.68 18.93 22.18 • cents/kWh 0.56 0.54 0.63

Life Cycle Comparisons • Reagent Cost Sensitivity • High Sulfur vs Low Sulfur • 1990 vs Current • Greenfield vs Retrofit Application • Auxiliary Power Value • New Capacity vs Retrofit • High Sulfur vs Low Sulfur

Life Cycle Comparisons (cont’d) • Capital Cost • Absolute • Differential • Plant Capacity Factor

Basis: Wet lime process favored 3% sulfur Retrofit 80% CF $ 30/Mwhr Life Cycle Cost • Reagent Cost Sensitivity 30 25 20 S&L 15 Limestone cost, $/ton 10 Wet limestone process favored 5 0 40 45 50 55 60 65 70 75 Lime Cost, $/ton

Basis: 1.3% sulfur Retrofit 80% CF $ 30/ Mwhr Life Cycle Cost • Reagent Cost Sensitivity (Low “S”) 20 15 Wet lime process favored Limestone cost, $/ton 10 Wet limestone process favored 5 0 45 50 55 60 65 70 75 Lime Cost, $/ton

Basis: 1.3% sulfur Retrofit 80% CF $ 30/Mwhr Life Cycle Cost • Reagent Cost Sensitivity (Low “S”) 20 15 Wet lime process favored 1990 Eval. Limestone cost, $/ton 10 Wet limestone process favored 5 0 45 50 55 60 65 70 75 Lime Cost, $/ton

Life Cycle Cost • Reagent Cost Sensitivity (Low “S”) 20 Current? Basis: 15 1.3% sulfur Wet lime process favored 1990 Eval. Retrofit Limestone cost, $/ton 80% CF 10 $ 30/Mwhr Wet limestone process favored 5 0 45 50 55 60 65 70 75 Lime Cost, $/ton

Basis: 3% sulfur 80% CF $ 30/Mwhr Life Cycle Cost • New vs. Retrofit 35 30 Wet lime process favored 25 20 New Units Ret. Units Limestone cost, $/ton 15 10 Wet limestone process favored 5 0 40 45 50 55 60 65 70 75 Lime Cost, $/ton

Life Cycle Cost • Power Cost Sensitivity: New, 3% Sulfur 30 25 20 Limestone, $/ton 15 $40/MW-hr 10 $30/MW-hr Base Case $20/MW-hr 5 0 40 45 50 55 60 65 70 Lime, $/ton

70% Load 80% Load - Base Case 90% Load Life Cycle Cost • Load Factor Sensitivity: New, 3% Sulfur 30 25 20 Limestone, $/ton 15 10 5 0 40 45 50 55 60 65 70 Lime, $/ton

$20/MW-hr $30/MW-hr Base Case $40/MW-hr Life Cycle Cost • Power Cost Sensitivity: Retrofit, 3% Sulfur 30 25 20 Limestone, $/ton 15 10 5 0 40 45 50 55 60 65 70 Lime, $/ton

70% Load 80% Load Base Case 90% Load Life Cycle Cost • Load Factor Sensitivity: Retrofit, 3% Sulfur 30 25 20 Limestone, $/ton 15 10 5 0 40 45 50 55 60 65 70 Lime, $/ton

$20/MW-hr $30/Mw-hr Base Case $40/MW-hr Life Cycle Cost • Power Cost Sensitivity: New, 1.3% Sulfur 25 20 15 Limestone, $/ton 10 5 0 40 45 50 55 60 65 70 Lime, $/ton

70% Load 80% Load - Base Case 90% Load Life Cycle Cost • Load Factor Sensitivity: New, 1.3% Sulfur 30 25 20 Limestone, $/ton 15 10 5 0 40 45 50 55 60 65 70 Lime, $/ton

$20/MW-hr $30/MW-hr Base Case $40/MW-hr Life Cycle Cost • Power Cost Sensitivity: Retrofit, 1.3% Sulfur 25 20 15 Limestone, $/ton 10 5 0 40 45 50 55 60 65 70 Lime, $/ton

70% Load 80% Load Base Case 90% Load Life Cycle Cost • Load Factor Sensitivity: Retrofit, 1.3% Sulfur 30 25 20 Limestone, $/ton 15 10 5 0 40 45 50 55 60 65 70 Lime, $/ton

CONCLUSIONS • Lime’s position as a candidate FGD reagent improves as the sulfur content of the fuel decreases. • Because of a generally higher capital cost for retrofit applications versus new unit applications, Lime’s position will be marginally better in retrofit applications of FGD technology. • Because the “cost” of auxiliary power on new units is generally higher than on existing units, the relative competitive position of lime will look better when the MEL process is applied on new units. This phenomenon becomes less important as the fuel sulfur content is reduced. • The absolute value of the capital cost is not nearly as important as the differential cost between LSFO and MEL technologies.

Sargent & Lundy Experience with FGD