PTC 2013
January 22, 2013
January 22, 2013
Technical Overview
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Single cable system - Fibres pairs 1 & 2 Tokyo/London ~15,663 km
- Fibre pair 3 Tokyo/New York ~ 13,882 km via Montreal
- Fibre pair 4 serves Alaska, Nunavut and Nunavik
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Branch spurs serve 13-14 satellite-captive markets in Alaska, Nunavut, Nunavik
Theoretical capacity of 8 Tbps per fibre pair = 32 Tbps total @ 100G wavelengths
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Theoretical capacity of 8 Tbps per fibre pair = 32 Tbps total @ 100G wavelengths
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Southern spurs at Prudhoe Bay and Hudson’s Bay provide diverse routes for US
west coast traffic to Asia and east coast traffic to Europe bypassing NYC
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Ultra low latency (ULL) network creates fastest path from:
• NE Asia (HongKong, Taipei, Shanghai, Seoul, Tokyo) to Northern Europe (London, Amsterdam, Paris, Frankfurt) • NE Asia (HongKong, Taipei, Shanghai, Seoul, Tokyo) to Central Canada NE United States (NYC, Boston)
Technical Basis for Arctic Fibre Build
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Physically diverse 15,157 km subsea route from NE Asia to NW Europe
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Avoids subsea issues in Luzon Strait, South China Sea, Malacca Strait, Red
Sea, Suez Canal & Mediterranean Sea
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Eliminates politically risky terrestrial cable crossings - Egypt & Syria
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Express Tokyo-London fibres avoid U.S. landings
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Bandwidth growth - NE Asia-NW Europe >40% p.a.
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Provides lowest latency route for HFTN and cloud computing
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Provides lowest latency route for HFTN and cloud computing
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Displaces costly satellite between Northern Quebec, Nunavut and
Northwest Territories and rest of Canada
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Provides connectivity to research and defense stations in Alaska,
Cambridge Bay and potentially Alert and Thule
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Reduces network concentration at New York/New Jersey cable stations
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Provides direct routes from Central Canada to Europe and Asia
A Good Alternative to West & East Coast CLS
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Hurricane Sandy and 9/11 highlighted concentration issues in NYC
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Arctic Fibre provides physical route diversity around eastern seaboard through Montreal
POP = NYC to London <90ms; Chicago to London <100ms
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Arctic Fibre/Quintillion Networks create clean low latency path from US west coast
through Alaska to NE Asia = Seattle to Tokyo <104 ms; Seattle to London <114ms.
through Alaska to NE Asia = Seattle to Tokyo <104 ms; Seattle to London <114ms.
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Latency differential of 20-25 ms to ULL routes from Eastern Seaboard to U.S. West Coast
imperceptible for most users
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Direct route to Central Canada reduces dependency upon sole Nova Scotia gateway –
eliminates Canadian transit through New York &New Jersey CLS
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Direct route to Central Canada reduces Asia-bound transit from Vancouver through
Seattle>Oregon>California
Latency Advantage
Acrctic Fibre Latency Advantage (Disadvantage)
Tokyo Seoul Shanghai HongKong Singapore Seattle Toronto Montreal Boston New York London Frankfurt Paris
GFC Ranking T5th 16th T5th 3rd 4th n.a T10th 26th 12th 2nd 1st 14th 20th Tokyo CBD 0 0 0 0 0 -18 -1 18 12 4 31 31 31 Seoul 0 0 0 0 0 -19 -2 17 11 3 30 30 30 Shanghai 0 0 0 0 0 -18 -1 18 12 4 31 31 31 Shanghai 0 0 0 0 0 -18 -1 18 12 4 31 31 31 HongKong 0 0 0 0 0 -18 3 22 15 7 15 13 13 Singapore 0 0 0 0 0 -18 -1 18 12 4 -49 -51 -49 Seattle -18 -19 -18 -18 -18 0 -59 -40 -46 -54 1 2 1 Toronto -1 -2 -1 3 -1 -59 0 0 0 0 -11 -11 -11 Montreal 18 17 18 22 18 -40 0 0 0 0 -12 -12 -12 Boston 12 11 12 15 12 -46 0 0 0 0 -30 -31 -30 New York 4 3 4 7 4 -54 0 0 0 0 -27 -28 -27 London 31 30 31 15 -49 1 -11 -12 -30 -27 0 0 0
Economic Drivers
Canadian Rate Base
• Unregulated, but subject to utility cost-recovery
mechanism based upon specific 65%-35% debt-equity capital structure and 12% a.t. ROE
• Throughput increases results in lower per Mbps
unit pricing
• Fibre pricing <10% of satellite rates
International Network
• Operates in competitive commodity pricing
environment (transPacific/US/transAtlantic) on long-term, price-protected capacity leases
• Operates in captive Alaskan market on utility
cost-recovery basis
• Threshold return comparable to Canadian base • Fibre pricing <10% of satellite rates • Utility structure facilitates government
contribution toward secondary spurs
• Capacity nomination process resulted in strong
buy-in from Canadian carriers and govt
• Canadian COS revenue requirement 100%
attained
• Backbone investment ~ $245 million – deemed
equity $86 million
• Threshold return comparable to Canadian base • Premium pricing for ultra low latency (21% revs) • Volume (23%) growth p.a. exceeds price
deflation (13%) during first five years
Designed for the Arctic
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Ice-free window Aug 20 – Oct 15
thfor installation
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Global warming has shrunk polar ice cap to point by 40% from 1968-2010
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Ice thickness along marine routing reaches maximum 2.6m vs. 3.2m in 1971
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Iceberg count actually diminishing as glaciers have retreated
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Iceberg count actually diminishing as glaciers have retreated
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Tyco built 2,800 km (Norway >
Svalbard
Islands (78 N) without incident (2003)
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Offshore pipelines buried off Alaska North Slope for decades without incident
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New remote ROVs can bury cable to 3m depth
Arctic Challenges and Risk Mitigation
Challenge Scope Risk Mitigation
Icebergs Greenland icebergs 80-170m deep Routing is 600-3500 m deep in Davis Strait Ice Scour study integral part of marine survey
Burial to 3m where required Deepwater approach to Milton CLS
Satellite monitoring of bergs
Bergy Bits Smaller icebergs (depth to 20M) can scour Choose deepest routing > 50m depth seabed to 1.0-1.5 m Burial in all prone waters <40m depth
Avoid nearshore ridges, shoulders Double-armored fibre in ice-prone waters Double-armored fibre in ice-prone waters
Rock armour where appropriate
Ridge Ice Scouring Ice ridges to 18 m deep, scour depth 1.2m Select deepest routing > 50m depth
(bummocks) Burial in all prone waters <40m depth
Choose wind-protected shore approaches Rock armour where appropriate
Ice Covering Approx 37% route ice-covered >5 months Enlist icebreaker support with ROV capability
Risk Mitigation (continued)
Remote Spur Breaks Between 11-14 Arctic community spurs Utilize deepwater Bus and spurs Distinct fibre pair from express routes
Horozontal drilling to 40 m depth No service to vulnerable communities
Electrical Supply Lacklustre, spikey supply in remote hamlets End feed from Tokyo, Cambridge Bay, Bude DND multiple backups at Cambridge Bay
Insulate festoon system from express
Amplifier Failure 34 %subsea plant inaccesible 7 months p.a. Ensure amplifer spacing is adequate Minimize spur amplifiers Employ flexible OADM design
Utilize proven technology Utilize proven technology
Maintenance Interval 34 %subsea plant inaccesible 7 months p.a. Over design and over build
Join Pacific and Atlantic mtce associations Enlist icebreaker support with ROV capability
Adapt local shallow-hulled vessel for repairs
Other Physical Threats Trawling Little trawling in ice prone Arctic
Anchorages Proactive charting and communications Establish "No Anchor" zones
Proactive Canadian Coast Guard program Seismic Install BU offshore Japan for China link
Risk Mitigation (continued)
Ice Scour Risk and Mitigation
Region Length Seabed Depth Ice Ridge Maximum Margin Scour Risk Ice
km Shallow Deep Average bergs Ice Keel (Shallow- Depth Level Bound
(m) (m) (m) (m) Keel) (m) (m) (weeks)
NORTH PACIFIC/BERING SEA 5,803 n.a n.a n.a No No 0 n.a. 0.0 Low 0
BERING STRAIT/CHUKCHI SEA 982 42 65 45 No Yes 12 30 1.0 Low 20
ALASKA NORTH SLOPE 879 200 1850 500 No Yes 27 173 0.8 Low 32
BEAUFORT SEA (CANADA) 213 221 1830 340 No Yes 30 191 1.0 Low 31
ADMUNSEN SEA/CORONATION GULF 1,052 120 567 310 No Yes 16 104 0.3 Low 32
SPENCE BAY/CAMBRIDGE BAY 627 24 100 50 No Yes 10 14 0.3 High 38
BOOTHIA GULF 592 41 260 70 No Yes 8 33 0.5 Moderate 44
Maintenance – A Little Ice is Nice!
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Nearly 90% of cable breaks attributable to: human activities
– subsea trawling, ship anchorages, seismic faults or abrasion
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Arctic Fibre route and ice coverage obviates most of these risks
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Amplifier (MTBF > 30 years) design can accommodate failure of single amplifier
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OADM architecture permits routing around any problematic areas
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Mesh network created through Hudson’s Bay and Alaskan links from Arctic Circle
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Membership in maintenance consortium or private agreements in North Pacific and
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Membership in maintenance consortium or private agreements in North Pacific and
North Atlantic with repair vessels at Yokohama, Portland and Halifax.
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For repair in Canadian Arctic waters or Alaskan North Slope, company will either:
1. Modify Class-1C or Polar Class ice-rated shallow draft vessel to serve as repair ship with ROVsubmarine retrieval vessel;
2. Lease supply vessel from a private Arctic operator;
3. Negotiate agreement with Canadian Coast Guard to accommodate grappling equipment, spare cable and ROV;
4. Combination of above arrangements.
Progress – Technical & Permitting
• Decision made to utilize 100G technology over four fibre pairs = 32 Terabits system capacity • Formal request for turnkey proposal issued August 2012 to TE Subcom and Alcatel/Lucent • Negotiations underway with various entities on terrestrial fibre builds, swaps and dark fibre
leases in Ontario and Quebec
• Marine surveys will commence in 2013Q3 and continue through October 2013
• Terrestrial civil works to be undertaken in 2013Q3 prior to marine operations in 2014 • Nearshore landing alternatives identified in DTS
• Nearshore landing alternatives identified in DTS
• Colocation with existing telcos in most Arctic communities eliminates CLS construction • Canadian permitting – licence subject to completion of environmental assessment • Alaska permitting – Quintillion applying to FTC in near term
• UK permitting – will utilize existing corridor, BMH and conduit at Bude
• Japan permitting – final CLS arrangements and permitting to be completed in near term • RFS date of 2014Q4
Progress - Marketing
• Canadian Open Season Capacity Nomination Process concluded successfully with seven
entities participating – Canadian COS revenue requirement met
• Three other entities still in negotiations based upon specific technical requirements • Tuktoyaktuk spur dropped due to lack of demand > potential terrestrial fibre
• Canadian carriers enthusiastic about prospect of second network connection to Europe and
primary (non-US) connection to Asia
• European carriers and HFTNs enthusiastic about Europe-Asia low latency improvement • European carriers and HFTNs enthusiastic about Europe-Asia low latency improvement • American carriers and HFTNs enthusiastic about Asia-NYC low latency improvement • MOU with Quintillion Networks for Alaska landings
• Alaska linkage through Seattle creates clean route for west coast video and data transmission
to both Asia and Europe
Progress – Financial Timetable
• Financial models revised to reflect route changes > increased demand > lower costs
• Strong investor interest from financial institutions and foreign carriers – ownership likely a hybrid
carrier consortium + institutional investor model
• Equity negotiations underway Canadian institutional investors and several carriers
• Debt discussions underway with Export Credit Authorities in United States and France
• Canadian and Alaskan revenue thresholds 100% achieved for Canadian utility model
• Indications from international carriers exceed 80% of threshold revenue requirement
• Key Dates:
January 22, 2013 International carrier meeting at PTC Honolulu
February 2013 Execution of Canadian carrier contracts
March 2013 Execution of international carrier contracts
April 15, 2013 Shareholders Agreement Completion
May 1, 2013 Execution of equity and debt agreements