MAXIM pursues new Canadian coal plant, gas peaker

Canada-based Maxim Power Corp. (TSX: MXG) said May 8 that it is actively pursuing commercial arrangements that will allow for the construction of the 190-MW Deerland peaking station (D1) to commence in late 2012.

MAXIM received regulatory approvals in 2008 to construct and operate D1. The D1 site is located near Bruderheim in Alberta’s industrial heartland, and is in close proximity to the entry point of the proposed Gateway pipeline and adjacent to the existing Deerland high voltage substation. Deerland is the only permitted peaking facility in the province of Alberta at this point. This project is highly attractive due to a contraction of reliable baseload supply in the Alberta power market. MAXIM expects peaking requirements across Alberta to continue to grow to meet increasing demand and to provide firm backup for additional intermittent wind resources.

Other development projects include:

  • Under Summit Coal Limited Partnership, MAXIM is advancing the development of Mine 14 to realize value through the potential sale of coal to metallurgical coal markets and potentially to augment coal supply to its neighboring Milner power plant. Mine 14, which is located north of Grande Cache, Alberta, is estimated to contain 18.7 million tonnes of coal reserves. In 2011, Milner Power Inc. was granted a license to commence underground mining of the Mine 14 coal reserve. SUMMIT has firm terminal capacity and terminal processing services to enable the majority of Mine 14’s proposed coal production to access the valuable seaborne coking coal market commencing Jan, 1, 2015. SUMMIT has also secured firm 2013 delivery dates for critical mining equipment, including continuous miners and shuttle cars.
  • In August 2011, MAXIM received approval from the Alberta Utilities Commission for its new 500-MW M2 project. MAXIM is planning to construct and operate this new coal station adjacent to the existing 150-MW Milner station. The M2 design incorporates emission control equipment capable of achieving 60% to 80% reductions in SO2, NOx and mercury compared to the conventional coal-fired plants still operating in Alberta. The highly efficient M2 design will also reduce CO2 emissions by 20% compared to these existing plants. Advancing the project is subject to pending government of Canada regulations, which are expected in 2012.
  • MAXIM acquired the Buffalo Atlee Power Project (B1), located near Brooks, Alberta, through an amalgamation with EarthFirst Canada Inc. This project has the potential for development of over 200 MW of wind capacity. Wind data has been collected on the site for about four years and supports project development based on higher power prices than those realized during recent months. MAXIM holds an exploratory Crown land permit with a term of five years, expiring on Jan. 1, 2016. The addition of wind to MAXIM’s existing portfolio of assets will diversify MAXIM’s generation types and provide the potential to offset the impact of proposed carbon legislation. MAXIM plans to advance the development of this project once greater clarity on carbon policy is available in 2012.

In a May 8 financial report called a management’s discussion and analysis, MAXIM said that first quarter Milner fuel costs decreased C$1.1m or 14% in 2012 when compared to 2011. The decrease is primarily the result of reduced coal consumption, which was partially offset by an increase in coal costs due to the standard escalation of coal costs under Milner’s long-term coal supply agreement. In addition to this, more natural gas was consumed during the first quarter of 2012 as compared to 2011. As a result of a recent decline in natural gas prices, it has become a less expensive fuel source than coal.

Natural gas is consumed when the facility is operated in a derated (low production) mode and can be used when production exceeds 90 MW. Milner is derated during certain periods of low power prices in order to maximize profitability, and this was done more frequently in the first quarter of 2012 than in 2011 due to decreased Alberta power price volatility.

“The Corporation’s outlook is significantly impacted by Alberta electricity and fuel prices,” said MAXIM in the MD&A report. “Alberta electricity prices are a key revenue determinant for MAXIM’s Milner and Gold Creek facilities. Alberta electricity prices fluctuate based on the supply of and demand for electricity within Alberta, the cost of key inputs such as natural gas, and other market factors.”

MAXIM said it will continue its strategy to target growth through acquisitions and development of power plants in the markets of Western Canada, the U.S. and France. MAXIM will target opportunities with generating capacity of 50 MW or greater, except in France where its Comax France S.A.S. subsidiary has a distributed generation platform that targets smaller scale power plants.

Based in Calgary, Alberta, MAXIM is an independent power producer, which acquires or develops, owns and operates innovative and environmentally responsible power and power-related projects. MAXIM currently owns and operates 40 power plants in western Canada, the U.S. and France, having 788 MW of electric and 111 MW of thermal net generating capacity.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.