Capital Power, ENMAX team up on 800-MW Calgary gas plant

Capital Power (TSX: CPX) and ENMAX are forming a joint venture to build, own and operate the Shepard energy center, an 800-MW combined-cycle natural gas power plant located on the southeast edge of Alberta, Calgary.

The facility is currently under construction by ENMAX and is about half completed with an expected commercial operation date in the first quarter, 2015, the companies said in a Dec. 6 news release.

Once completed, ENMAX will operate the facility and Capital Power will dispatch the electrical output.

Both parties have also entered into various commercial agreements including a 20-year tolling agreement. Under the terms, ENMAX will pay Capital Power a fixed capacity charge for 75% of Capital Power’s share of the output from the Shepard facility for the 2015 to 2017 period, and decreasing to 50% of Capital Power’s output for 2018 to 2035.

The tolling agreement has operating and maintenance cost flow-through provisions to ENMAX. Commercial arrangements also include contracts for differences for 100 MW in 2013, 300 MW in 2014, and 100 MW in 2015 at current Alberta forward power prices.

Capital Power plans to finance its 50% share of the approximate C $1.6bn construction budget (includes interest during construction) for Shepard with: proceeds from a planned divestiture of its 150-MW Halkirk wind facility in 2013; cash from operations; proceeds from dividend reinvestment programs; proceeds from the issuance of preferred shares; and a modest amount of debt.

Capital announces several updates

The Shepard project is one of several updates announced by Capital Power during its annual investor day briefing in Toronto.

Capital is planning further investment in Alberta with its Capital Power Energy Center, a natural gas facility that will use the latest General Electric (NYSE: GE) turbine technology.

The Capital Power plant is scheduled for completion sometime between 2017 and 2020. The project should be a large one, up to 900 MW. The combined-cycle project can be built in phases with the first phase being 400 MW, Capital Power said. The Capital Energy Center will be located in Alberta to meet provincial power needs. Other partners could potentially be included in the project.

 “Alberta remains one of the fastest growing economies and power markets in North America and continues to be an attractive market in which to invest,” said Capital Power President and CEO Brian Vaasjo.

As for the Halkirk wind facility in central Alberta, Alberta Electric System Operator (AESO) declared it in commercial operation on Dec. 1. The facility was completed slightly ahead of schedule and final cost is expected to be approximately 3% below its C $357m budget, including acquisition costs.  

Halkirk will earn revenues from the sale of energy into the Alberta spot market, and from the sale of Renewable Energy Credits (RECs) to Pacific Gas and Electric under a 20-year fixed-price agreement. Approximately 40% to 45% of Halkirk’s revenue is expected to come from the sale of the credits.

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.