Ontario and TransCanada reach deal on power plant relocation

The Ontario Power Authority (OPA) has reached a deal “in principle” with TransCanada (TSX:TRP) to develop a new 900-MW natural gas-fueled power plant on the site of Ontario Power Generation’s (OPG) Lennox station in eastern Ontario.

A few years ago TransCanada had hoped to build a similar gas plant at Oakville, but the Ontario government announced cancellation of that project in late 2010. Gas turbines that would have been used at the Oakville project, which are valued at C$210m, will now be used at Lennox, OPA said Sept. 24.

Ontario Minister of Energy Chris Bentley said the location was selected to take advantage of existing transmission and gas infrastructure as well as the expertise of local workers. The combined-cycle plant is expected to be in service by the first quarter of 2017 and will provide 600 jobs during construction.

“Today’s announcement helps support Ontario’s plan to modernize the province’s electricity infrastructure, clean up the air we breathe and end the use of coal,” Bentley said in a statement. OPG plans to shut its last coal plant by the end of 2014 under a provincial policy mandate to reduce greenhouse gas emissions.

“We are very pleased an agreement was signed today to build a power plant in Ontario,” said TransCanada President and CEO Russ Girling. “TransCanada looks forward to expanding our contribution of clean, safe and reliable power to the residents of Ontario.”

TransCanada already owns significant generating resources in Ontario, including part of the Bruce Power nuclear station, the company noted.

The cost of TransCanada’s plant at Lennox will be comparable to the cost of the original competitively-procured Oakville plant. In addition, TransCanada will receive C$40m to cover the costs it incurred for goods and services that cannot be used at the Lennox site, OPA said.

OPA and TransCanada have drafted a memorandum of understanding. The parties must now negotiate a contract based on the terms of that agreement. TransCanada will also finalize site-specific arrangements with OPG. It is expected that the contract and other arrangements will be final by Dec. 14.

An OPG website identifies Lennox as probably Canada’s largest oil-and-gas fueled power generation station at more than 2,000 MW.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.