From: Robert Berman [mailto:bermaneconomics@gmail.com]

Sent: Friday, November 04, 2011 7:05 PM

To: Greg Coulter

Cc: Richard Parker; Alex Hofmann; Andrew Delaski; Aris Marantan; Art Rosenfeld; Bob Saint; Bob Smith;

Brian Coffey; Caitlin Johnson; Carlos Gaytan; Caskey, John; charlie drexler; Charlie Stevens; Chris Bolduc;

Chris Brown; Clark Silcox; Creevy, Jim; Dan Cohen; Da niel Young; David Flaten; Eric Peterson; Freeman,

Jeremiah; Gary Fernstrom; Greg Rosenquist; Hirsch, Bruce R; James Lass; Jennifer Tiedeman; Jerry

Corkran; Jerry Hodge; Jerry Schoen; Jim Raba; Joanna Mauer; John Cymbalsky; John Rossetti; Katie

Coughlin; Ken Winder; Mahesh P. Sampat; Matthew Nardotti; Maxine Savitz; Meg Waltner; Meyers,

Aaron; Michael Hyland; Michael Rivest; Millure, Dave; Phil Harter; Phil Hopki nson; Polinski, Raymond;

Puesh Kumar; Rick Anderson; Rob Greeson; Robert Berman; Robert van Buskirk; Robin Roy; Ryan, Paul;

Scott Beck; Simmons, Chuck; Steve Nadel; Steve Rosenstock; Thomas Petrosino; Tim Ballo; Tom Eckman;

Wes Patterson; Zhimei Luo

Subject: Re: MV Transformers Material Price Sensitivity Analysis

Seems li ke we're engaging in some pretty extreme speculation, given that nothing like the pricing

behavior being suggested has ever occured. What impacts are we assuming on relative prices? What are

the assumptions about competition between steel and amorphous?

Green Mountain Power, buying on TOC with an A factor of $13.50 (whi ch results in extremely high

efficiency requirements) has purchased both M3/M2 transformers as well as amorphous. These are

both pole and pad mount trasnformers. The pole mounts have not resulted in pole changeout.

At higher efficiency levels, what's to prevent mechanical scribing of MOH to ZDMH? My understanding is

that there is no R&D re quired, and that it is simply an investment decision.

Regards,

Robert A. Berman, Principal

Berman Economics

www.BermanEconomics.com

1915 Grand Court

Vienna, VA 22182

703

‐ 281

‐ 0490

703

‐ 655

‐ 8398 (cell)

BermanEconomics@gmail.com

On Nov 4, 2011, at 6:17 PM, Greg Coulter wrote:

Richard,

I have talked to many of the representatives, while not a complete survey, we are of the opinion that

the sensitivity analysis for the core materials could be simplified. Presently, the plan as I understand it is

to run sensiti vity analysis at both +25% of 2008 prices and

‐ 25% of 2006 prices. Our concern is not with

the low side on these prices as due to the severe market depression over the last many years for theseproducts, we feel we have seen the low side. Our concern is more on the high side, where we are more

concerned about the effect a major technology swing could have on existing core materials.

Therefore, we suggest that the sensitivity analysis only be run on the high side and that only 2 levels be

run. We suggest tha t +25% and +50% of 2008 prices would satisfy our needs. Therefore, the price levels

used for the sensitivity analysis for amorphous metal would be:

$2.91 x 1.25 = $3.64

$2.91 x 1.50 = $4.37

This range should provide enough insight. These should only be run for the l iquid filled design lines

(DL1, DL2, DL3, DL5). The rationale for using the 1.5 times 2008 levels is the concern that if Efficiency

Levels are chosen that are high enough to eliminate silicon steel from competing and amorphous

becomes the prime core material, all (the) a morphous metal producers would have upward price

leverage even above the value we are proposing to use for this analysis.

For the dry type lines, it appears your proposal on price sensitivity is fine.

If anyone has comments or opposition, please advise. I apologize for not talking to everyone.

Greg

On Fri, Nov 4, 2011 at 11:20 AM, Richard Parker < richardparkerdc@gmail.com > wrote:

Colleagues,

There have been a number of requests for additional LCC runs with various material prices reflecting

concerns with possible shortages of supply under various standards scenarios.

Attached is a sheet that summarizes the price sensitivity analysis that is currently in the pipeline: ranging

from 2006 minus 25% on the low side to 2008 plus 25 % on the high side.

For amorphous that yields a range from $1.72/lb to $3.64/lb, with a base case (2010) of 2.38/lb.

For ZDMH, the range is from $1.41 to $3.22 with a base of 2.05. (A sensitivity is already being run with

ZDMH scre ened entirely out of the analysis, reflecting concerns that this material may not be available

due to a reluctance to supply the North American market allegedly due to fear of dumping duties.)

As we discussed, each run takes several hours per design line so we obviously cannot accommodate all

requests, nor would it be i nstructive to do so absent some credible price scenario that is not currently

being modeled and that lies outside these boundaries.

So what I would propose is this: Could industry participants in the MV Group please communicate with

each other today, examine the attached sheet and

(a) try to arrive at a collective de termination of whether there is reason to believe that proposed range

of prices is really to narrow such that additional run is warranted; and(b) if so, propose the set of prices that you would like to see run, and a short explanation/justification

for your request.

Greg Coulter has kindly agreed to serve as the coordinator for this effort so please work with him. If for

any reason, issues of confidentiality prevent you from communicating with Gr eg and others in open

forum please let me know and I will discuss with you how to proceed.

You also will need to choose a couple of design lines to focus on. I understand that DL 1 and 2 are the

lines with the most shipments in the li quid immersed category. If you have preferences for MVDT

please convey them with your request (perhaps DL 12?). I would expect that we could manage runs for

3 design lines.

Again, the consultants are swamped with work accommodating the input they've gotten from the group

so far, so please do not mak e work for them by requesting additional runs unless there really is good

cause for doing so.

Please let us know by cob today what your preferences are.

All best,

Richard

‐‐

Greg Coulter