TransCanada Corp. (TSX:TRP) (NYSE:TRP), a major pipeline operator and a growing presence in the independent power business, said Feb. 12 in its fourth-quarter 2012 earnings statement that it has made progress on a number of power projects.
In late 2012, affiliate Bruce Power completed the multi-year refurbishment of the nuclear Units 1 and 2 in Ontario by placing them into commercial service on October 22 and October 31, respectively. Both units have operated at reduced output levels following their return to service and in late November 2012, Bruce Power took Unit 1 offline for an approximate one-month maintenance outage.
Bruce Power expects the availability percentages for Units 1 and 2 to increase over time, TransCanada noted. However, these units have not operated for an extended period of time and may experience slightly higher forced outage rates and reduced availability percentages in 2013.
Bruce Power also continued its strategy to maximize the operating life of its reactors. It returned Unit 3 to service in June 2012 after completing the seven-month West Shift Plus life extension outage. Unit 4 is expected to return to service in late first quarter 2013 after the completion of an expanded outage program that began in August 2012. These outages are expected to allow Units 3 and 4 to produce low-cost electricity until at least 2021, the company noted.
In 2013, the overall plant availability is expected to be approximately 90% for Bruce A and in the high 80% range for Bruce B. Following the full return to service of both Units 1 and 2, Bruce Power will be capable of producing 6,200 MW of emission-free power for the province of Ontario.
TransCanada’s loss from Bruce A increased C$39m to a loss of C$54m in fourth quarter 2012 compared to the same period in 2011. This increase was primarily due to lower volumes and higher operating costs resulting from higher outage days. These increases were partially offset by incremental volumes and earnings from Units 1 and 2 which were returned to service on October 22 and October 31, respectively.
TransCanada’s equity income from Bruce B increased C$32m to C$46m in fourth quarter 2012 compared to the same period in 2011. The increase was primarily due to higher volumes and lower operating costs resulting from fewer planned outage days and lower lease expense.
Under a contract with the Ontario Power Authority (OPA), all output from Bruce A in fourth quarter 2012 was sold at a fixed price of C$68.23 per MWh (before recovery of fuel costs from the OPA) compared to C$66.33 per MWh in fourth quarter 2011. Also under a contract with the OPA, all output from the Bruce B units was subject to a floor price of C$51.62 per MWh in fourth quarter 2012 compared to C$50.18 per MWh in fourth quarter 2011. Both the Bruce A and Bruce B contract prices are adjusted annually for inflation on April 1.
Amounts received under the Bruce B floor price mechanism within a calendar year are subject to repayment if the monthly average spot price exceeds the floor price. No amounts recorded in revenues were subject to repayment in 2012 or 2011.
Bruce Power consists of two stations (Bruce A and B) with each station housing four reactors. TransCanada owns 49% of Bruce A and 32% of Bruce B.
In other power developments:
- Napanee Generating Station: On Dec. 17, 2012, TransCanada signed a 20-year contract with OPA to develop, own and operate a new 900-MW natural gas-fired plant. The facility will be located at Ontario Power Generation‘s Lennox Generating Station in Eastern Ontario. The Napanee Generating Station will replace the facility that was planned and subsequently cancelled in the community of Oakville. The company has been reimbursed for C$250m of costs, primarily related to natural gas turbines that were purchased for the Oakville project which will be deployed at Napanee. The company will further invest approximately C$1bn in the Napanee facility.
- Cartier Wind: The 111-MW second phase of Gros-Morne was placed into service on Nov. 6, 2012. This marks the completion of the 590-MW Cartier Wind project in Québec, the largest wind development in Canada. All of the power produced by Cartier Wind is sold under 20-year PPAs to Hydro-Québec.
- Ravenswood: In 2011, TC Ravenswood LLC jointly filed two formal complaints with the Federal Energy Regulatory Commission challenging how the New York Independent System Operator (NYISO) applied its buy-side mitigation rules affecting bidding criteria associated with two new power plants that began service in the New York Zone J market during the summer of 2011. In June 2012, the FERC addressed the first complaint, indicating it would take steps to increase transparency and accountability for future mitigation exemption tests (MET) and decisions. In September 2012, FERC granted an order on the second complaint, directing the NYISO to retest the two new power plants as well as a transmission project currently under construction using an amended set of assumptions to more accurately perform the MET calculations under existing rules and tariff provisions. The recalculation was completed in November 2012 and it was determined that one of the plants had been granted an exemption in error. That exemption was revoked and the plant is now required to offer its capacity at a floor price which has put upward pressure on capacity auction prices since December. The order was prospective only and has no impact on capacity prices for prior periods, TransCanada noted.
With more than 60 years’ experience, TransCanada operates a network of natural gas pipelines that extends more than 42,500 miles, tapping into virtually all major gas supply basins in North America. TransCanada is one of the continent’s largest providers of gas storage and related services with over 400 billion cubic feet of storage capacity. A growing independent power producer, TransCanada owns or has interests in over 11,800 MW of power generation in Canada and the U.S.