Power generator’s impressive growth demands an ambitious risk management program
The serene countryside north of Toronto, where Northland Power sites a handful of its facilities, exists in sharp contrast to the gritty and congested downtown area of Toronto itself, where the progressive energy company is headquartered. The rolling hills, large tracts of farmland and vast green expanses feel unspoiled and natural, barely touched by industrialisation. No wonder why Northland and its focus – on developing and managing clean, efficient natural gas projects and renewable energy sources – suit Canada, and many other
parts of the world, so perfectly.
There’s no doubt about it, Northland is on a roll. The company’s current clean and green energy projects across Canada and in Europe total approximately US$6 billion in sustainable energy stalwart areas like wind and solar, as well as thermal. And the bottom-line results speak for themselves: Shareholder returns are impressive. But along with growth comes inherent risk, a fact that is not lost on Northland Vice President and Treasurer Darryl Bergman.
Dealing with risk
To keep up with the company’s pace of growth, Bergman, who oversees the risk management function, knows his risk management program must be on the cutting edge. “I don’t want any surprises,” he says. “I’m looking three to four years out to determine what we can do strategically to keep our risk management program proactive. What do I need to change? How do I structure our risk programs? How can I avoid surprises?”
And FM Global knows how to avoid them. Having bound the account back in 2011, FM Global realized very early on that Northland was a strong, engineering-led organization, wholly committed to the safety and reliability of its facilities.
The fit? Perfect. “We felt that we could augment their approach by bringing value to the engineering side of the business,” says Bob Najdovski, FM Global assistant vice president, senior account manager. “We visited some of their facilities and we were able to demonstrate that, with relatively inexpensive changes, they could eliminate a significant number of risks and exposures to their business that might ultimately affect their reliability and the Northland brand.”
Manpreet Gill, account engineer, started out as an FM Global field engineer on the Northland account. “A great example of a low-cost risk improvement strategy we implemented,” says Gill, “would be the installation of flange shields on all high-pressure lube oil flanges. Flange guards can help by reducing the oil spray to a pool, which can be more easily controlled by automatic sprinklers. Since implementation, we’ve reduced more than US$1 billion in physical exposures at Northland plants.”
With power generation a high-hazard specialty, FM Global brought deep expertise to the partnership. Overall, FM Global insures more than 2,000 power-generating plants and employs more than 180 engineers to service the power generation occupancy. All good numbers from Northland’s perspective. And with mechanical break-down – turbines, generators, boilers and transformers – responsible for many losses in the power generation industry, that expertise is most welcome.
Solar power currently represents about 15 percent of Northland’s power portfolio. While solar arrays pose a risk in terms of natural hazards – earthquake and hail – they also need significant electrical maintenance, locally, as well as where the facility interfaces with the grid. “There are 43,000 independent modules, all of which have potential issues with electrical interconnection,” says Calvin MacCormack, general manager of Northland’s solar operations. “These require a high degree of power generation expertise and technical knowledge to troubleshoot when issues arise.”
“Their reputation is as a reliable power producer,” says Gill. “They’ve done a really good job with all of their projects, especially the new ones, incorporating our recommendations, and we work closely with them to ensure we can provide the lowest-cost advice at the earliest stages.”
Team: Northland, FM Global and Aon
FM Global’s power generation specialty became apparent quickly, in areas of service as well as equipment and technical knowledge. This expertise was not lost on Aon, the brokerage firm on the Northland account and an important member of the team.
“Recently, we got to the point wherewe needed some equipment expertise,” says Maurice Audet, an account manager with Aon and a regional director of risk, research and solutions. “We were especially dealing with frame 7 turbines. So that’s when we called FM Global.”
Audet’s appreciation of FM Global’s technical expertise runs deep. “One of the great things about FM Global is that they have a tremendous base of information and they’ve got a good relationship with most of the turbine manufacturers. So they have an understanding of what these turbines can do. From a deductible perspective, we’ve been very competitive compared to what we’ve seen with a lot of other players and we also look at deductible levels that make sense for Northland. They don’t want to be trading dollars, and they don’t want to be fluffing off risk management, as if to say, ‘It’s insured, so why do I care?’ FM Global believes that it’s more like, ‘Let’s do this right.’”
Bergman knows that he and Northland need to look no further than their partners to shoulder some of that burden. The Aon and FM Global teams band together in force as Northland’s backstop. Audet and Sarah Irwin, account executive, comprising the Aon team, have been working with Northland since nearly day one, at least in Audet’s case, who started working with Northland almost three decades ago. Back then, the company had just one small plant with a wood burner and a gas turbine. Since that time, it’s been a steady process of building, from a humble beginning to a strong portfolio of thermal, solar and wind facilities.
Najdovski recalls the time the two companies, along with Aon, began considering collaboration. “We spent a great deal of time getting to know Northland Power as an organization and speaking to their senior management and engineering people,” he says, walking slowly through an array of solar panels. “We realized very early on that, as an organization, they were a strong engineering-led company that was very much interested in the safety and reliability of their facilities. We felt that we could bring value to that side of the business.” So the FM Global team visited a handful of Northland facilities to demonstrate that value.
Today, Northland’s operating portfolio comprises more than 25 facilities, including 13 solar farms, four Canadian wind farms and a robust development pipeline. Aon’s Irwin, on the Northland account for 16 years, has seen the company’s appetite for risk grow, morph and change. “Right now, they’re growing so quickly, it’s important to understand what their total cost of doing business is against what their risk is,”she says. “Northland is very good at understanding what they want to achieve and having the right people at the table to talk about how they can constructively deal with their various risks.”
Whether it’s deductibles, claims, service, strategy or frame 7 turbines, Aon, Northland and FM Global tackle issues together. This pleases Bergman immensely. “The relationship among Aon, Northland and FM Global is fantastic, quite frankly. Over time, the companies have come to work together as partners and they have checks and balances with one another.”
Kingston Generating Station
Today, Manpreet Gill is standing along the perimeter of Northland’s Kingston Generating Station. “Five years ago,” says Gill over the din of industrial noise, “we visited this facility and we pointed out a lot of loss prevention programs that could benefit Northland. Since then, we’ve worked very closely implementing a lot of those programs to identify their critical assets and improve their overall resilience.”
Steve Collings is the manager of the Kingston plant. He and Gill work closely on site visits and he respects the advice he gets. “My father always told me that it’s better to learn from other people’s mistakes than your own,” says Collings. “FM Global brings a broad range of experience to the table, having dealt with so many other clients. They’ll see things that maybe we wouldn’t and we’ll consider making changes based on what they’ve seen in the past.”
While continuing to develop projects in Canada, Northland recognizes that future opportunities lie globally, which falls into the wheelhouse of FM Global and its ability to serve its multinational clients. “We know we’re going to be right there beside them,” says Najdovski. “If they’re looking at a facility in Mexico, for example, we have local engineers who can work with them to ensure those locations are also built to the same level and standards that they’re used to here in Canada. We have a consistent approach to engineering.”
Knowing that growth can mean coverage challenges, Northland banks on FM Global’s ability to stay stride for stride with its power generation clients. Now, with a set of guardrails, Northland can take its chances pursuing new opportunities with both feet without having to worry about things back home. “We join our forces together and try to create more opportunities for ourselves than we would otherwise obtain,” says John Brace, Northland’s chief executive officer.
Down the hall, Bergman is doing some blue-sky thinking of his own, thanks to the peace of mind he’s gained from his partner-
ships with Aon and FM Global. “There are alternative energy markets that are coming to fruition right now,” he says. “We certainly wouldn’t want to miss an opportunity. But you don’t want to jump in too quickly before you understand the risks involved.”
This article originally appeared in Reason magazine Issue 1, 2017, which you can read here. You can also watch the Working Together video with Northland Power, FM Global and Aon on fmglobal.com/riskessentials.