HIDataReviewandEngineeringAnalysisUpdatePumpsNegotiationRulemakingWebinar5/13/20142On4/29/2014HIprovidedDOEandtheanalysisteamwiththeaggregatedresultsoftheHI/NEMA BIS surveyasrequested.AnanalysiswasperformedtocomparetheHI/NEMA BIS andNAV/LBNL C‐ValuesThefollowingslidespresenttheresultsandconclusionsfortheESCC,ESFM,IL,andVT‐Sequipmentclasses•RS‐VisaspecialcaseandwillbediscussedseparatelyHIDataReview3SummaryofSurveyResults:TotalModelsEquipmentTypeModelCountHI/NEMA BISSURVEYNAV/LBNLSURVEYDelta:([HI/NEMA]‐[NAV/LBNL])ESCC – 1800 32129625ESCC – 3600 26323528ESFM – 1800 36931950ESFM – 3600 22519629IL – 1800162213(51)IL – 360089102(13)RS‐V – 1800972RS‐V – 360023185VT‐S – 1800913(4)VT‐S – 36004957(8)HIDataReview4SummaryofSurveyResults:%ofIndustryShipmentsEquipmentTypeEstimatedTotalIndustryShipmentSurveyShipments Survey%ofIndustryHI/NEMA BISSURVEYNAV/LBNLSURVEYHI/NEMA BISSURVEYNAV/LBNLSURVEYESCC171,456 75,03569,960 44% 41%ESFM44,042 30,80929,381 70% 67%IL50,424 15,66921,399 31% 42%RS‐V104,406 19,1802,974 18% 3%VT‐S49,975 17,92815,518 36% 31%Total420,303 158,621 139,232 38% 33%HIDataReview5SummaryofSurveyResults:C‐Values[ALLEquipClasses]HIDataReview6Results:Forsomeequipmentclasses,theNAV/LBNL datasetcontainedmoremodels/shipments,forsometheHI/NEMA BIS surveycontainedmore•OverallmodelcountsandshipmentsweresimilarHI/NEMA BIS C‐ValuesweresimilarindistributiontoNAV/LBNLHI/NEMA BIS C‐Valueswereonaverage0.90pointslessefficientthantheNAV/LBNL Data•AverageofPER10,25,40,55,and70forallEquipmentClassesRecommendation:ProceedwithusingNAV/LBNL data•MergetheHI/NEMA BIS datawiththeNAV/LBNL dataandremoveduplicatevaluesHIDataReview7DataIssuesandLimitations8SummaryofKeyIssuesandLimitations:RS‐V•2‐and4‐PoleModelPerformanceDataisLimited-Totalofonly32modelsrepresented-Only18%ofindustryshipmentsarerepresented•Only3manufacturersrepresentedindatasampleVT‐S•4‐PoleModelPerformanceDataislimitedImplicationofDataLimitations:C‐ValuesandEfficiencyLevelsmaynotberepresentativefortheindustryasawholeDataIssuesandLimitations9SummaryofSurveyResults:TotalModelsEquipmentTypeModelCountHI/NEMA BISSURVEYNAV/LBNLSURVEYDelta:([HI/NEMA]‐[NAV/LBNL])ESCC – 1800 32129625ESCC – 3600 26323528ESFM – 1800 36931950ESFM – 3600 22519629IL – 1800162213(51)IL – 360089102(13)RS‐V – 1800972RS‐V – 360023185VT‐S – 1800913(4)VT‐S – 36004957(8)Very low model countsfor RS-V 1800/3600 andVT-S 180010SummaryofSurveyResults:%ofIndustryShipmentsEquipmentTypeEstimatedTotalIndustryShipmentSurveyShipments Survey%ofIndustryHI/NEMA BISSURVEYNAV/LBNLSURVEYHI/NEMA BISSURVEYNAV/LBNLSURVEYESCC171,456 75,03569,960 44% 41%ESFM44,042 30,80929,381 70% 67%IL50,424 15,66921,399 31% 42%RS‐V104,406 19,1802,974 18% 3%VT‐S49,975 17,92815,518 36% 31%Total420,303 158,621 139,232 38% 33%Very low % ofshipments for RS-V11SettingEfficiencyLevelsandStandardsOption1:UseEUC‐Values•TheEUrepresentsamaturemarketfortheRS‐Vpump-RS‐Vsareaglobalplatform,withnearlyallUSmodelsderivedfromEUhydraulics.•MEIC‐ValueswouldneedtobetranslatedtoPERC‐Values-Forthe25modelsinourdatabase,PERC‐Valuesareonaverage0.53pointslowerthantheMEIC‐Value.Option2:Setnostandardduetolackofdata•StillrequiretestingandcertificationRS‐V:OptionstoMoveForward12SettingEfficiencyLevelsandStandardsOption1:Combine2‐and4‐PoleData,andregulatewithonesetofC‐Values•OnesetofC‐ValuesforbothspeedsOption2:Use2‐PoleDataonlyandonlyregulate2‐Polemodels•SameasEU•4‐Poleshipmentsverylow– 0.4%ofShipments(NAV/LBNL)•Wearenotawareofanydedicated4‐Polehydraulicsinthemarketplace•Webelieveall4‐Polemodelswouldendupbeingcertifiedunderthe2‐Polespeed.VT‐S:OptionstoMoveForward13EngineeringAnalysisUpdates14Theupcomingslideswillcoverthefollowing:UpdatesmadetoEndSuctionandInlineanalysessincetheconclusionoftheApril30thmeetingResultsoftheVT‐SanalysisEngineeringAnalysisUpdates151.Percentofmodelseligibletobepolishedwasadjusted:-EndSuction:From6%to3.6%-Inline:From6.5%to3.9%•CommentsfromC.Cappellino (May4,2014)suggestedthatwewereover‐estimatingtheefficiencygainsavailablefrompolishingimpellers.-Availablegainsfrompolishingwereeffectivelycutinhalf,becausewewillnotbepolishingvolutes.EUstudyonpolishingwasusedasguidance.2.Additionalcapitalconversioncostrequiredtochangetoadvancedcastingreducedbyapproximatelyhalf•Correctsaninvalidassumptionintheoriginalmethod-Theoriginalmethodscaledupthetotalpatternandtoolingcosts,whenonlytheimpellerpatternandtoolingcostsshouldbescaledup.EndSuctionandInlineUpdates163.HydraulicRedesigncostdecreasedby15%•OriginalHIsurveyincluded“CostofCapital”category-20%ofthetotalcost-25%oftheRedesign,Tooling,Testing,andMarketingCost.•Definedas"Costofmoneytofinanceupgrades,andInventory(Cost,ReworkTransition,Inventoryforlegacysupport.)"•CostofmoneyiscoveredbytheWACC discountrate.-BecausethisiscoveredintheWACCalready,anyfinancingcostsmustbebackedout.-Weproposeleavingin25%oftheprovided“CostofCapital”dollarvalue,andattributingthistoInventorycosts,whichwouldlikelyimpactCGS.-Weproposedbacking‐out75%oftheprovided“CostofCapital”dollarvalue,whichworksoutto15%ofthetotalHydraulicRedesignCost–Thatputthecostoffinancingat18.75%oftheupfrontcosts.»Between3and4yearsworthoffinancingcostswithaWACC of11.8%EndSuctionandInlineUpdates174.UpdatednumberofEndSuctionandInlinepumpmodelsintheindustry,basedonHISurveydata•EndSuctionChangedfrom2050to2398•ILchangedfrom739to8085.Costofredesignper‐unitadjustedtodecreaselinearlyfromPER40toPER10•Previouslymodeledthemanufacturers’planstoredesigntoPER40foranystandardlessthanorequaltoPER40•ChangedtomodeltheactualcostofredesigningtoPER10or25inordertofairlyexamineeconomicjustificationforthoseefficiencylevelsEndSuctionandInlineUpdates18SummaryofResults:IndustryCostofRedesignEndSuctionandInlineUpdatesESCC/ESFMEfficiencyLevelPER 10($MM)PER25($MM)PER40($MM)PER55($MM)PER70($MM)PER85($MM)April30,2014$24.4$65.1$110.7$213.1$348.8$423.6May14,2014$12.3 $49.0 $111.1 $213.9 $350.0 $425.0PercentDifference‐50%‐25% 0% 0% 0% 0%ILEfficiencyLevelPER 10($MM)PER25($MM)PER40($MM)PER55($MM)PER70($MM)PER85($MM)April30,2014$10.60$28.20$47.90$92.20$150.90$183.30May14,2014$5.0 $19.8 $45.0 $86.5 $141.6 $172.0PercentDifference‐53%‐30%‐6%‐6%‐6%‐6%Pleasenote:Theoriginalresults,releasedon5/2/14,andlistedinthepresentation“Final_Eng_Analysis_Slides_2014‐04‐30_w‐revisions.pptx”containedatypographicalerrorthatshiftedthecolumnsofsomeoftheresults.Theaboverow,titledApril30,2014presentstheproper,correctresultsforthatdate.19SummaryofResults:IndustryCostofRedesignas%ofRevenuesEndSuctionandInlineUpdatesESCC/ESFMEfficiencyLevelPER 10($MM)PER25($MM)PER40($MM)PER55($MM)PER70($MM)PER85($MM)April30,201418% 47% 80% 155% 253% 308%May14,20149% 36% 81% 155% 254% 309%PercentDifference‐50%‐25% 0% 0% 0% 0%ILEfficiencyLevelPER 10($MM)PER25($MM)PER40($MM)PER55($MM)PER70($MM)PER85($MM)April30,201422% 58% 98% 189% 309% 375%May14,201410% 41% 92% 177% 290% 352%PercentDifference‐53%‐30%‐6%‐6%‐6%‐6%Pleasenote:Theoriginalresults,releasedon5/2/14,andlistedinthepresentation“Final_Eng_Analysis_Slides_2014‐04‐30_w‐revisions.pptx”containedatypographicalerrorthatshiftedthecolumnsofsomeoftheresults.Theaboverow,titledApril30,2014presentstheproper,correctresultsforthatdate.20Additionalconsiderationsfortheworkinggroup:Simplifythecostofredesignmodel:•Removepolishingasadesignoption-<2%ofpopulationiscurrentlypolishedinthemodel•Ignoretheeffectsofchangingtoadvancedcasting-Thiswouldreducetotalcostbyapproximately0.3%EndSuctionandInlineUpdates21VT‐SResults22KeyAssumptionsOnly2‐PolemodelsanalyzedNomodelsdroppedAllfailingmodelshydraulicallyredesigned40%oftotalMSP attributedtomotorprice70%shipmentssoldwithmotorCosttoredesignamodelreducedlinearlybelowPER40EndSuction/InlinePrice‐EfficiencyrelationshipappliedtoVT‐SResults:VT‐SResultsVT‐SEfficiencyLevelPER 10($MM)PER25($MM)PER40($MM)PER55($MM)PER70($MM)PER85($MM)IndustryCostofRedesign2.5 9.3 19.8 38.1 62.3 75.6PercentofRevenues7% 28% 59% 114% 187% 227%23Results:VT‐SResults