Powering Resilience: Managing Transformer Risks and Overcoming Insurance Challenges

[00:00:09] Chris Davis: Hello, everyone, and welcome to today's webinar with Sovereign Insurance. Powering Resilience, managing transformer risks, and insurance challenges. I'm your host today, and we have an insightful session ahead exploring how transformer design, maintenance, and insurance intersect to drive business continuity and risk resilience. Transformers are vital to every power and production system, yet their complexity, from design and installation to long-term operation, brings unique challenges. Managing these risks effectively is critical for engineers, operators, brokers, and underwriters navigating today's evolving coverage landscape. Before we begin, a few quick housekeeping notes. If you need any technical support, please use the chat box. Our team is standing by to assist. We also encourage you to participate in our live polls, and remember, a recording of this session will be shared with all attendees. We'll wrap up with a Q&A, so feel free to submit questions at any time. Joining us is Richard Lesperance, a risk specialist with over 14 years of experience in the insurance industry, and a strong background in operations and manufacturing. His current role, he helps underwriters and clients make risk-informed decisions and develop proactive mitigation strategies across commercial, manufacturing, and energy sectors. Drawing on his technical expertise and certifications, including inspection, engineering, and infrared analysis, Richard will walk us through the full lifecycle of transformers, from design and manufacturing to maintenance and reliability. We'll also unpack key inspection methods, like infrared scanning and oil analysis, and explore the insurance implications of transformer failures. From deductibles, to contingency planning, to managing costs and lead time pressures in today's market. With that, let's get started. Richard, over to you.

[00:02:31] Richard Lesperance: Thank you, Chris, for this nice introduction. We have a tight schedule today, so I'll move on on my presentation. Let's walk through the presentation, what would be the topic on today's agenda. We will talk about the type of transformer we could see out there, their internal component. We're gonna start looking at how to read the nameplates, what are the important parts of a nameplate. We'll look at all the manufacturing aspect of a transformer. We'll move on after to maintenance, and all the aspects of maintenance, on the talking about after insurance, some case study, I think an idea of what we cover, what is the extension, and what we're looking for when we do inspection. First poll, how familiar are you with Transformer? The answer will pop up in the chat. Please feel free to answer the best one you think you are. Okay, so 15% are very familiar, somewhat familiar, 36, not familiar, 30, and not at all 18. So, let's see if we're really… if you know everything about it, you'll see at the end. The type of transformer we're be looking today are not these. Oops, sorry, wrong slide. These are dry transformer. We're not going to be looking at these transformer. These are a type, dry, use, install, they're… maximum capacity is about 32 MVA. Due to size limitation, if you have to build them bigger, you have to… to reduce the size and the amount of material needed, you will probably use an oil transformer as it gets bigger. So, we're not gonna see these, but we see them all the time. Easy, but self-maintained, no problem. Then sometimes you have this transformer. Transformer sitting in a nitrogen blanket. These transformers are really rare, you see them in specific application, and why nitrogen? Because nitrogen per… promote a resistance to… or prevent a resistance to arcing within the transformer. So in this type, you probably increase the voltage to a very high voltage just to fix the ink on paper. On today's topic, oil transformer. As you can see on this one, we got a seal-type transformer. We're gonna be talking about all aspects of this transformer. Around the transformer, if you see that. there's one thing that comes to mind. There's a lot of grass, a lot of ingress going close to the transformer. We don't like to see this. But just to remind you, this is the type of transformer we'll be talking today. Where we could find this transformer. They're everywhere on the distribution path of electricity. At the power station, you're gonna have some transformer to step up the voltage for transportation. During that step, you might have multiple steps of upping the voltage to a longer distribution line. Longer is the line to distribute the power, higher will be the voltage need, because over distance, you're gonna have loss in voltage. So, to prevent those loss, higher the voltage, less loss you have, or less percentage of that loss happen. Later in the distribution, you might have some transmission substation, where you reduce, you're getting closer to the mid, or the… closer to the big town, like… like GTA Toronto. You're gonna have some distribution all located around the town, then… You're gonna have smaller distribution substation, closer to where, like, the commercial area, like, the residential, you're gonna have some substation around there, so you further reduce the voltage, and at some point, you might have some pole-mounted transformer for residential, you might have some base-mount Transformer for commercial, or pod mount, or sometimes internal mount. And as you can see on one of the… on the image, the distribution substation, you see one feed coming in and two feed out, so sometimes you have what they call high voltage and low, secondary voltage and a tertiary voltage. So some transformer have more output than input. Let's move on to the next slide. We have the major component of the Transformer. From this image, the difference from the first image, the green one I've shown, this is an open-type transformer, so it means that this transformer breathed to the atmosphere, it's not sealed, it's not contained, it's not pressurized, say, open to atmosphere. So you have the conservator tank on top with a level of oil you could see from the oil gauge at the top there. This prevent air to mix with the oil, and you got at where you could see the silica gel breeder. to prevent humidity to move through the transformer, so this will cap all the humidity in the air, so the transformer will breathe in and out constantly, depending on the pressure inside. You don't want to build pressure, so if pressure starts to rise, it will breathe out. If pressure lowers, it will breathe in. You got on top of the transformer, you got the… where it's HV and LV, These are the bushing, HV stands for the high voltage bushing, LV stands for the lower voltage bushing. Then, move on, you have the Tap Changer. Tap Changer, we'll talk about it later on, what its needs for. It's… it's really important in… this type of industry, the transformer, tap changer, there's different position. There's a required for this For, for our transformer. Then there's a control cabinet, and what we can't see from the back of the transformer is the cooling fin. Cooling fin is very important. We'll see later why cooling has a direct impact on the transformer. What are bushing? Bushing is the point of connection in between the outside to the inside components. So, bushing are a point of failure at point point. They're very subject to heat from the transformer, they're subject to cold or heat from the outside. They're subject to UV rays. And at the same point, they're the weakest point on your transformer, so we try to align, most of the time, our deductible on this piece of equipment for insurance purposes. From this image, we could see a ground transformer. Ground transformer is… one purpose is to protect the main transformer. So if we get hit by lightning. We need to distribute all that energy somewhere, so that transformer will Send it to the ground. And on the left, we got a reactor. At the same time, this Reactor plays… one role is to limit the peaks and the reactive load within the transformer. Circuit breaker. This is the point where you energize your transformer, or you de-energize your transformer. And it serves as a breaker at the same time to protect the transformer in case of short or any problem you could see, During the life of a transformer. These type of transformer are frequently used with SF6 gas inside. SF6 stands for sulfur exafluoride gas. These gases have a high potential of green gases, So… we try to limit it to this application. They're very efficient, but at the same time, they've got a high potential of damaging the ozone. So. industries are looking at the moment of vacuum or dry, circuit breaker, but they're not as efficient. You'll see, like, 99% are SF6 breaker when you get to the bigger disconnect. So now we'll move to the internal component of the transformer. In the next slide, I'm not going to talk about, right away, about the core and the coil, because we'll see these during the manufacturing process, but we're focused more on the oil and the type of paper. As you can see from the oil, we see 3 types of oil that fill transformer. There's a fourth type called PCBs that should be phased out at the moment. We still see some at some point. It's pretty rare. But if you see them. you need to advise the person that this has been phased out, shouldn't be used. It's environmentally not friendly. It's… it's… a ban, so… take in consideration. Oil serves one… a multiple purpose. One of them is e-dissipation, or e-transfer. So it takes or captures the… Eat from the core of the transformer and the coil, and bring it to a medium, or to your Cooling fin and distributed that heat. It prevents interfacial tension within the transformer. It's a barrier to acidity in case you have moisture or water inside the transformer. You don't want the acidity to get close to the coil or the varnish on the copper. It serves as a dielectric property and is a power factor important to the transformer. Mineral oil is mostly Made from petroleum base. And ester oil, we see natural, it means that it's made most of the time by soil, or canola, or sunflower corn. And ester synthetic is more of an algae type, so it's made in laboratory, and it's pretty rare we see it. If we move to the paper, paper is important, and it serves a purpose, it's insulating the transformer and the component from itself. So sometime in between the winding, you don't… you have Row of paper, just to prevent arcing in between the copper of different roll. And it has a resistance to eat to a certain limit. We got two types of paper, craft and aramid paper. Kraft, you'll see it in 99% of the transformer, because it's cheap, it's been used for 100 years, it's been created by Mr. Kraft himself, so… Normally, it resists to a temperature to about 110 degrees Celsius, versus the new synthetic one-ironed paper will resist to a little bit of higher temperature in the 120. But you have to understand that bulk paper will degrade over time. They're not… gonna last forever. They both degrade to different type of degradation, and there's a different type of assessment of the degradation of that paper. Sorry. That's my bad. Reading a nameplate. we'll… See a bit in the next slide.  what's important when you see a nameplate? What to get from there. You get the rating, or the capacity of your transformer. You get the high voltage, low voltage, and sometimes tertiary voltage. You're gonna get the cooling type. Of transformer, because you will see in the couple next slides why cooling is really important. We'll see the type of tap changer. There's two types of tap changer, and this one, we'll review them a little bit later. The type of fluid, because it's important. If you have to… remove or extract some oil from the transformer, or if there's a leak and you need to refill that transformer, you can't mix different type of oil. You have to be sure to push the exact same type of oil inside. the year manufacturer, the manufacturer, then you have vacuum pressure. You need to know, is it a seal type of transformer, or from a nameplate, is it an open type of transformer, or open to atmosphere? And… From a nameplate, you could see it. If you look at the transformer, you're gonna see it, but sometimes just with a nameplate. Then you know exactly what type of transformer. We have on… at our risk. We're moving to the cooling method. I'm telling you, this is one of the most important things to understand. Cooling as high effect on the transformer. So. We have… the first two types we'll see are the most common one, that you're gonna see them in probably 95% to 98% of the time. They're everywhere. Onan transformer means oil, natural, air natural. So it means that the oil inside the transformer will move according that the hot oil will go up, the cool oil will go back down. It's a convection, it's natural, it happened within the transformer, so these transformers are for regular baseload stuff, they're not meant for peak, high peak, or stuff like that. When you move on to ONAF, it means Oil Natural Air Force. So it means it implies that you have fan at some point that will go on as in stage, or sometimes no fan when the oil is cool. As the oil gets warmer, you get the fan that kicks in to cool the transformer. You might have different type of stage sometimes, so you got ONF1, ONF2, so there's two stages of cooling. When you move to the OFAF, you got Oil Force, Air Force. So, this has an implication that you have a pump to circulate The oil within the transformer, so you get a better cooling effect. As an inspector, when you look at these, you have to make sure that the client is aware that he's asked to look for a problem, maybe a mortar on the pump could fail, fan could fail, so they have to look at their transformer for a maintenance point of things. The ODAF is Oil Direct. and air force. So it means that when they build the transformer, they make… or they design the transformer to have channel within the transformer to direct the oil in a certain path of the core of the transformer to have a better cooling effect on the transformer. This tool has a pump and fan at the same time, so you got the next step. And the last one is the OFWF, so Oil Force. water force. So, you mean that your cooling doesn't rely on air, air to a coil, it's water to oil. So you got a heat exchanger that's water to oil. Very rare transformer. You see them in specific applications. I've seen them on electric arc furnace for melting. They're really rare. And precise when you have water and… Oil at the same time, mixing close to each other, very careful on the condition of this exchanger, because you could have water going inside your oil, so… It's important to have proper maintenance on these. I've been talking about the cooling effect, and what is the cooling effect on the longevity of the transformer. As you can see, the two first lines at 100%. The one with 120 degrees Celsius, meaning that we're using aramid paper and ester oil inside the temperature that has a higher resistance than the regular one. The second line, 100%, meaning that we're using aramid, Craft paper with any other type of oil. Any type of oil will… be in that line. So, if you run your transformer at 100% of its capacity for 20.5 year. that your transformer has done everything that as in his life expectancy. So… As you… Go down in capacity, you can see that it's totally related to the life expectancy of the transformer. This is in perfect condition. Doesn't mean that you got surge in the system, you might have peaks anywhere, you might have lightning strike during the entire life of the transformer. Might be a lightning down the road will affect your transformer. There's a bunch of other factors that will affect the age of the transformer. This chart, it's only in best optimal condition. But there's other factors that will take into account and will affect the age of the transformer. Changer. As the name on this one says, De-energize tap changer. De-energize means It's… it needs to be de-energized to move the tap. Tap position is… is a key thing. Like, you see on this one, there's 5 taps on the image, you see there's 5 tap, 1, 2, 3, 4, 5. Mill one, the third one is your neutral one, two positions above, two positions below. We use this because, depending where you are in that distribution line, if you're closer to the distribution, distributor, you will have higher voltage. Further away you are from the distribution, you… your voltage will reduce. We say that over a long distance, the voltage reduces. So if you're further away from the… your main distribution, you need to change the tab to make sure that Your lower voltage, the one that you require for your equipment to work properly, needs to be always 415V. On this case, it's a 415 volt low voltage, so the tap has to be addressed To maintain that voltage to the specific needs for your equipment to work. But every time you need to switch a change, it means that you have to de-energize, you have to call your utility, put the transformer offline, remove the padlock from that tap changer, move the tap manually. Lock it back, call utility, put Energize back. As from the unload tap changer, in this case, we got… the majority, you got… you're gonna see about 8 to 16 tap above your neutral. This one has 2 neutral, one at 7200, and the other one at 12470. depending on the way you connect the transformer in delta or delta Y, it has an impact on what's the voltage. You could have two voltage incoming and one voltage out. The position of the tap is the same as the other one, more choice, but everything's gonna be relying on the motor to make those changes. So you're gonna have a panel, a control panel, monitoring the voltage coming in. And, at the same time, move the tap according to the needs at the low voltage. These top changer Normally, after 60,000 to 80,000 operation, you need to do some maintenance on, and after 300,000 operation, tax changes need to be replaced. They have a tendency of arcing a little bit inside the tank. Back in the old days, we saw the image of the component of the transformer. The tap changer was outside the tank. Back in… before the 1980s, tap changers were installed inside. The main tank, and they gonked the oil, and they realized that it was better to move them out in a separate tank by themselves, isolated from The main tank to don't dirty the oil, and don't affect the main oil transformer. We're gonna start working on the manufacturing. First, the design. We'll talk a little bit about the design at this step, because Design is not part of the manufacturing, but it implies that before you go in manufacturing, you need to identify the right vendor. Some location, if you have a 750 MVA or a bigger transformer. Not every manufacturer can produce these. then you have to decide what you want. What's your needs? What's the voltage I need? where I'm gonna put that transformer. It has an impact on the design, the paint that's gonna be put on, and the application you're gonna do. So, all this is done before the production. Then we'll move to production, assembly, vapor phase, testing, transportation, and installation. We'll review all these. The production assembly. As you can see, all the production is manual work. There's no computer, there's no robot, there's nothing to built a transformer. It has to be done by man labor. And it doesn't… it doesn't lie. You… you look, man labor, work, it takes time. Most of the transformer out there taking between 20 to 80 days to manufacture. Because everything has to be… manually done. So… Let's move to the next one. Here it is, your core on the image on the left is mostly complete. We need to slide the coil that's on the image on the right over. As you can see, there's tree prone coming in. So that means your transformer will be a three-phase transformer, phase A, B, and C. and it's not complete. After you install the coil on top, you're not done. You need to close that loop on the core, like you see on the image in the back, you see that piece of metal going right across the tree section, you need to close the front as well, so it needs to be done manually after you insert the coil over the transformer. We move to the vapor phase. Vapor phase is one of the most important steps during production. Vapor phase means you have to vaporize the water inside the transformer. So there's two different types. Smaller transformer, you put them in the vacuum changer, is the image on the right, so you put them in the vacuum changer… chamber, you add heat and vacuum. So, you… the heat will help the water to evaporate, and the vacuum will suck the water out of the chamber. And the larger one, you'll put them in the kil, raise the temperature, and… try to make the… it takes more time, because at this point, the transformer bigger. You want the core of the transformer to get above 100 degrees Celsius. You want that water out of… in between the lamination of the mail and in the paper. Most of the water will be inside the paper, because, as you know, cardboard Grab humidity like crazy, so you wanted that humidity to be moved out. And at the same time. the humidity level inside depends on… at the end of the process, will depend on the voltage you're gonna be running that transformer. If the voltage is below 220 kilovolts. The humidity inside will be 0.05%, and if the voltage you're going to be running the transformer over 220 kilovolts, you need to bring that humidity below 003%, And on the image on the right, as you complete your vapor phase, That vacuum chamber will be put and fill with oil, the same oil that will be filled with… inside the transformer, because you don't want cross-contamination with different type of oil. So. To prevent any humidity to go back to the paper, they will… Right inside the vacuum chamber. Bring the oil in, and… and seal that transformer. As for the larger one, they can't do that. So, when they build the transformer, the core and the coil, they build a case at the same time. So, the tank, which is the transformer gonna be sitting in, they will grab that transformer and put it right away inside that main tank, and fill the tank right before. After the tank is full, they will re-empty the tank, just to make sure that the oil imprint it, the cardboard, they will re-empty the tank and do all the connection afterward. But the first key, important thing is that they imprint that paper with oil right after the vapor phase. And the environment around these kill or vacuum is really control environment, so you don't want too much immunity in these rooms to prevent To prevent any problem. The next step is testing. Testing, there's multiple tests that are gonna be done on that transformer, and at some point, we know that there's some transformer that will fail these tests, and will need to be rewined, will need to… they won't make it to the next step. Normally, the process will start with the easier test and go with the harsher test as the step goes on. So, first step is always a phase ratio. We saw we got A voltage coming in, a voltage coming out, so we need to make sure that the transformer we built We'll supply the exact voltage we're asking. That's gonna be on the nameplate. And at the same time, we have tap changers, so we need to verify each position of the tap if we're getting the proper voltage at each position. So, we do that. So, you saw with the unload tap changer, there's 16 position above, 16 position below, so that there's a lot of testing and making sure. Then, we'll move to a winding DC resistance, we'll imply some DC voltage, we're looking at what they look like. Then we'll move to one critical step. It's called no load loss or extation current. This step… implies you add some current inside and restructure the core, because it's a male. and MEL need to be restructured with alternating current, because you need to align all the molecules. You're gonna have a magnetic field around that transformer, so… When it generates, it magnetized, so you need to align all the structure of the mail at this step. Then you'll move to low loss in pit and voltage, so you're looking at any loss, you add in some resistance. You see, you can't have more than 6% of loss at this step. You always look at temperature, right? So, we know that transformer generates heat, so you want to be sure that that transformer generates heat. not too much, not excessively. Then you'll do some dielectric tests, so lightning strike, switching impulse, implied voltage, or induced voltage. You're looking for partial discharge. Lightning impulse is, very fast high voltage. You want to test, make sure that it will resist. Same thing with switching impulse, so it's a bit longer duration, but less voltage than the lightning strike, so there's many, many tests. We got this zero-phase sequence impedance, and we're looking all the time at sound level, because if the transformers sound weird. we need to investigate. And the last step, before delivering the transformer to the client, will be an oil sampling. We'll review later why it's important, always sampling.  We're gonna be moving to transportation. No, small transformer, no problem. When we get to the larger transformer. There needs to be very, very keyed on how to transport, how to bring it from the manufacturing to your main location. Is it going to be in storage, or it's going to be on-site? For this kind of transformer, when you have a transformer over 200 town, you're looking at a transformer that not all the components are attached to it, you're not seeing the bushing on top, you're not seeing the cooling fin. This transformer for transportation, they remove the oil within the tank, they seal the top of the transformer with just a sheet of metal. Because you want to send it as light as possible. Even at 200 tons, you want to send it as light as possible. On the larger one, when it exceeds, 13 feet, you can send them by railroad, because there's a limitation on width of the transformer on rails. So, trucks, mostly, most of the time, the best Way to ship your transformer. And barge. So, from water to land, land by trucks. These transformers, normally, when they're shipped, there's a transportation regulation, so we… they will attach a transducer on it to verify If there's any impact on the transformer, like an accelerometer, they will measure if there's any impact, if the truck hit a bridge, or the transformer is a bridge, or anything, hit the trucks. It will record any impact, any stuff, so at this point, there will be further investigation to be needed on the transformer if one of these goes. And normally, sorry, normally they… They… they have more than one on the transformer. Installation. When you get to an installation, you want to be sure that The crane operators knows what he's doing. That the crane is well-balanced. There's enough weight on the crane to sustain the weight of the transformer. And at the same time, the operator have to be careful. Sometimes they're working with a very limited perimeter around that transformer. You might have some lifeline around that transformer that you have to be really careful. The process before needs to be assessed And say, okay, we're looking at this, we know, we plan before, when it's in the air, it's too late, we need to be sure what we're doing. And you can drop that transformer. It needs to be attached and secure with the proper type of hook and the proper installation. Then, we'll move to the maintenance. Once your transformer is in operation has been running, what to do? Where? is that… these impacts normally would need to look at. The most common inspection are visual, infrared, and oil. There's other type of inspection we're not going to review, because these are the most important, and you'll see from my slide, you get a lot of The, the importance with… with these three types of maintenance. Let's move to the visual inspection. As you can see from the image on the left, you see paint peeling and some rust on the coil. It's the thin coil of the transformer. The thing when you see stuff like this is that the fin and the coils are made of very thin metal. You need that exchange of heat in between the oil inside to the air outside, so… that coil been very thin, you got a battery exchange, but that corrosion could lead to a transformer leak completely, so… then the client will need to assess at some point this and say, okay, do we need to repaint that transformer? And that could reveal other aspects of it. If the paint is peeling. was that transformer designed for the application, or the location? Where is it installed? So, if you're installing a transformer close in Vancouver, where you have a lot of salt in the air. you're probably gonna need a transformer with a paint that's resistant to salt in the air. If you're putting that transformer in a landfill operation. then you're looking at this and say, okay, different type of gas in the air, different type of paint. So, during that manufacturing, or the process of ordering your transformer, you need to look at these conditions. Where are you going to put that transformer as an impact on the design, as an impact on the paint, and preventing some of that stuff to come. The Ross on the small… the transformer casing is not as much of an impact, because we know that transformer… that casing has to sustain the weight of the transformer, has to sustain lifting. It's made of thick metal, sometimes half an inch thick, so there's less impact rust on the tank than rust on the fin.  And from this image, visual inspection, you could see that there's an oil leak on that transformer. It's… you could see the cloud, no cloud outside from this image, so… when you look, you see oil, so I mean, they need to look at this and prevent it, and find where the leak is coming from. And from this image, you're seeing tree gauge at the same time. We'll see on the next slide. The importance of these gauge. The… image on the left is the pressure gauge. Underneath is the level of oil, so in this tank, it's just a level telling you how much oil you got inside the tank. The important one on this type, because it's a seal-type transformer, there was no conservator on top of the transformer, so it's a seal-type transformer. they could build pressure, they could be in vacuum, or they could be in pressure. We recommend that they are always in pressure, because it prevents air being sucked inside the transformer and humidity at the same time. So, you always want a slight pressure in that transformer. As the gauge on the right is the temperature gauge inside. You got two needles. The white one telling you exact temperature of that transformer at the moment, and the red one is the highest point it went from the last time you reset it. As you take on your logbook, you note this temperature, you bring it back, and you log it. Other thing on the image on the left, you could see that the gasket on top, in between where there's the bolt, is cover with oil, too. So, at this point, we don't know if it's the gasket leaking, or the oil is coming from above. from one of the bushings. So that means there's two things to assess. If the oil is not coming from the bushing. Probably the seal on the gasket is leaking at the moment. This is a submission that came. I went for a coat, I'm looking at this, I see garbage falling over, I'm seeing garbage on the door, all around the padlock. It took about 20 minutes for the guy just to remove all that Piece of plastic, that garbage around, just to access inside the transformer enclosure. Not good. And the image on the right, it's a view I had from my hotel. I'm looking at that transformer, and they're… cover in bush. I took this image, it's not the first time I'm seeing transformer cover in leafy ground… green stuff, so they grow, it's normal that they grow, but you need to assess them. the leaf around and the vegetation will prevent air. The circulation of air to the coil is important. We saw longevity of the transformer, better cooling, better longevity of the transformer. So, when you have these, and it looks good, you look at your transformer, and they say, wow, they're good, they're perfect, nothing's wrong. What is the next step after this? Infrared. As you can see on this image, we see the bushing, but on top of the bushing, there's connection, where you connect your transformer to your cable. These… if there's any heat on the transformer, at this point, it means that there's a loose connection. A connection shouldn't be more hot than the entire system. If the connection is more hot, it means that we have some A connection, loose connection, and we're generating heat. One of the most important aspect is oil analysis. Oil analysis will tell you what's the condition inside the transformer. What we've seen so far, it's always what we could see outside. The oil analysis will give you the right, or the picture, of the inside of the transformer. This oil analysis is called DGE, so it stands for Dissolved Gas Analysis. we have, on this report, we got multiple gas. There's gas level, so you look at these gas, and for someone that knows what they mean. Each gas as… Something that tells you some things. So, the TDGA is the total dissolved gas inside the transformer. We look at the visual aspect of the oil. We look at the color of the oil. If the oil is getting darker, is getting… yellow, brown, red, or anything. We look at the color, it's important. We look at the water content. We don't want to see water inside. And… and fewer tests, it's a… it's a test… That could be done independent from the DGA, and it will assess the condition of the paper directly, only the paper. from this, I highlight in yellow two important ones, just to show they're not critical, they're not alarming, but… We know that acetyl N should be below 1. When you get to a number 2, it's a case of condition, level 2 condition. It means that this transformer, there's some kind of arcing at some point, very high temperature arcing, and carbon monoxide and carbon dioxide are related to the paper, the craft paper, so… it means that the craft paper is starting to degrade slowly. It's a normal step in the transformer, the transformer is aging, but to which condition, sometimes it's important to have. Within these reports, sometimes there's a recommendation section. It's not on this Image, but there's a recommendation section from the person that's done the test. telling you, reassess in a year, reassess in 6 months. We need more gas to do a better analysis, so sometimes you look at these recommendations within the transformer, and you do it. Next poll, what can we… what can be the downtime when a 4MV transformer fails? Some time to answer these. Majority, I've got it. It's more than 12 months. Good. So, let's move to the entrance part. As an inspector, what we're looking, or as an insurance company, what we're looking when we do inspection, is the deductible in place according to the equipment we're seeing? Is our waiting period according? Do we have expedited expense? And what could be the implication for an insurer? do my client have a contingency plan? So a lot of people, first question you go when you visit a client is, who owns that transformer? And they reply, we don't know. And you… by the look at it, you know it's… it's theirs, so we have a problem. So they don't have a contingency plan in place, and it's important to have, because we've just seen it, you could be down for 12 months, and more. Do we have the capacity to have a generator on site to sustain the production? Do we have pre-existing connection to bring that rental transformer or rental generator? And at the same time, do we have a contract with a rental company? So if during a storm, everybody's calling for a transformer or a generator, and you don't have that priority contract, you're not gonna get, most likely. Another poll. What do you estimate is the replacement cost of a 4MVA transformer? Yes, the right answer was $240,000, roughly. It's about this. So 34% of the polling people have the right answer. So we'll move on to a case study. We got two, so we'll move on to the first one. We're looking at a scenario of during a severe storm, lightning strikes, we got a coal facility, cold storage with 10 million perishable goods, and we got some in frozen, some in refrigerated. Then, we have that storm, lightning, boom, catch fire, you got the image on the left. And you could lose some of that No, refrigerated stuff could be lost faster than frozen. Frozen by the time it gives you more time to do. Does my client is prepared? for that loss of current. Do we have a contingency plan? So you could see, we're looking at $240,000 of physical damage. We might have $100,000 surrounding the object. I've put 126 days, this was prior to COVID. I think I've changed a lot during COVID. It was more than a year during COVID. Things are going down at the moment, depending on size of the transformer. It's not… still not clear on… the business interruption part, are we looking at 126 to 365? It's still not clear at this point. If we look at our case study number 2, during a peak summer heat wave, a utility company operating an 875 MVA transformer Severe consequence was extreme temperature, then we got that internal short circuit inside the transformer short itself ground, we lose power. From a utility standpoint. they're gonna reroute electricity. They're not as bad as we think they could be, compared to a small company that's gonna be impact way more than the utility. They're gonna… they're gonna reroute the electricity, they're gonna buy from maybe their neighbor, if it's Hydro Quebec, they might buy from Ontario, they might buy from New Brunswick, they might buy from… No, U.S. So, it's not as bad, but we're looking at a transformer of $18,000… $18 million, with sometimes damage to up to $10 million on the surrounding, and we're looking for 3-year to maybe 4-year in some case, on… on replacement. What are the major changes in the recent year? The major change is… is the lead time. We're still not clear on the smaller transformer. The larger one… the larger one, we're still in that 3-year to 4-year. It's not going down, it's not getting any better, but most of the utility have spare of every kind, so… Less impact there, but the bigger one, the bigger customer out there might be impact. As for the price. Manufacturer of transformer will not give an official price till 6 months prior to shipment, because they need to secure the price of the copper. No, copper is on the market, is on Dow Jones or all these, so you look at the price of copper. They need to secure the price before manufacturing, they need to secure the price of the steel, the core, and they need to secure the… to have the price of the, you know, the man labor, the manpower. So, at that time. Manpower, those are the three impact on the price, so they need to be sure that they secure all this, then they manufacture Then they ship it to you, and you have a… and you have your price. On the bad stuff, as we could see on the image on the left and the center, same piece of equipment. It's an unload tap changer. I told you that they gunk over time, they need replacement, they need maintenance. This is the reason it's called Coke around the transformer. And we need to maintain that as certain. That's the reason why the new transformer are not built with this piece of equipment inside the main tank. And on the image on the right, you got a bushing. I told you, bushing cracks are… one of the most common stuff you're going to see out there is bushing, braking, need replacement. Last image, it's a transformer that ground itself, and it ground really bad. That's a bad grounding. Normally, you see what point out, it's very limited, but this one is really bad. And on the image on the left, that transformer burned down completely, so it needs total replacement.

[00:56:09] Chris Davis: Richard, thank you. Yes, I'm just going to the Q&A section, and the first question is, what are the most common issues you see with transformers, and how can businesses prevent them?

[00:56:23] Richard Lesperance: Yeah. Normally, what I see out there, it's… it's not… on the transformer, it's the client by themselves. No, when you get to a client and you ask. who owns that transformer? And the reply is, I don't know. And you know they own it, because by the look of it, it doesn't belong to your utility, doesn't have the tags, doesn't have anything. You look at it, you say. They don't know, they don't do the maintenance. They don't… they're not gonna do what they do. They don't have a business contingency plan in place. There's nothing. So, there's a lot to tell to your client. You need to… bring awareness. And at the same time, you need to… even if I put a wreck, I need to explain why I'm gonna put a wrecks, I need to explain why. we need this in place, and what will be the impact on the long run if they lose that transformer? Because at the moment, they have no idea on what will be the impact of that transformer.

[00:57:25] Chris Davis: Okay, thank you. I'll move over to the next question. As you're addressing rising costs and longer lead times, what should organizations be thinking about when planning for potential transformer failures?

[00:57:38] Richard Lesperance: when we look at Transformer and the lead time. we need to make sure our clients are prepared. No, due diligence on maintenance. Preventive maintenance is probably… the key part here is the only thing that the client has impact on is business contingency. Have something written, enforced in place, a well-structured business contingency, and a well-structured preventive maintenance program in place, because As you can see, the lead time will have an impact, no matter how much an insurance will pay To cover the damage. Your name, your reputation, and your client. If you don't have anything in place. Client will go to the next one. And your reputation will be down. And there's no money to get these back.

[00:58:37] Chris Davis: Thank you, and the last question, what role does insurance play in helping businesses stay resilient when transformers go down?

[00:58:47] Richard Lesperance: The main role, we're kind of a safeguard at the moment. And our role is to educate. Sometime the broker, sometime the client on… on… Putting in place the best practice on preventing, putting in place a well-designed contingency plan, because client, I have no idea where to get information sometimes, where to get all the knowledge to Implement all these factors, so we go on these, we put our stuff, we… Guide them, we help them build sometime these plans and these… Structure everything around that transformer with our best knowledge and experience.

[00:59:40] Chris Davis: And, with that, thank you. That's all the time that we have today. A huge thank you to everyone who participated in our polls and with the questions. Our recording will be available to watch on Insurance Business website. In the meantime, thanks again to Richard at Sovereign Insurance. On behalf of insurance business, thank you, and we hope to see you all again soon.

[01:00:07] Richard Lesperance: Thank you.