MAXIM looks to ‘maximize’ value of U.S. power generating assets

Maxim Power Corp. (TSX: MXG) said March 21 that during the fourth quarter of 2012, it appointed financial advisors to review its investments in the United States and France in order to identify options to maximize shareholder value.

Credit Suisse Securities (USA) LLC has been engaged as financial advisor for investments in the U.S. and HSBC Bank plc has been hired as financial advisor with respect to MAXIM’s investments in France. The evaluation of these initiatives is ongoing, MAXIM noted.

MAXIM owns five natural gas-fired facilities with a combined net generating capacity of 446 MW in its United States segment. The Capitol District Energy Centre Cogeneration Associates (CDECCA), Pittsfield and Pawtucket facilities are located in the ISO New England (ISO-NE) market. All three of these facilities currently receive monthly capacity payments along with electrical generation revenue at the spot price from the ISO-NE. The CDECCA facility also provides steam and chilled water under a long-term contract with the state of Connecticut until 2019. The Forked River and Basin Creek facilities are located in New Jersey and Montana, respectively. These facilities operate under long-term tolling agreements for which they receive monthly capacity payments until 2018 and 2026, respectively.

The France segment consists of 32 natural gas-fired facilities with a combined 192 MW of electrical and 109 MW of thermal net generating capacity. MAXIM’s wholly-owned subsidiary COMAX France S.A.S. operates cogeneration facilities operating under twelve-year contracts with Electricité de France (EDF). Electricity is sold to EdF and thermal energy is sold to local businesses such as greenhouses. At the end of an EdF contract, COMAX can renew the cogeneration contract for an additional twelve years upon obtaining a thermal energy contract and upgrading the facility to current efficiency standards.

COMAX also provides electrical peaking services to EdF. There were eleven plants providing peaking services in 2012 and three additional plants are scheduled to begin providing peaking services in 2013.

MAXIM advances what are now two Alberta coal mining projects

During 2012, Summit Coal Limited Partnership acquired two additional coal leases adjacent to its Mine 14 underground coal mine project, which is located north of Grande Cache, Alberta, Canada. It also advanced the development of the Mine 14 project and acquired an additional coal lease for a potential new property, called Mine 16S. SUMMIT’s lease holdings increased by 140% to 6,669 hectares following these additions.

SUMMIT has since completed the 2012 exploration program for Mine 14. Current estimates for Mine 14, which includes the two additional adjacent leases, are 18.9 million tonnes of low-to-mid volatile metallurgical coal reserves with a mine life of 17 years. Mine 16S is located 30 kilometers northwest of the Mine 14 leases and represents 1,792 hectares or 29% of SUMMIT’s total area of leases.

SUMMIT has previously entered into a ten-year terminal services agreement with Ridley Terminals Inc. on the British Columbia coast, commencing Jan. 1, 2015. This agreement provides SUMMIT with firm terminal capacity and terminal processing services to enable SUMMIT’s proposed coal production to access the seaborne met coal market. In addition to this, SUMMIT has secured firm 2014 delivery dates for critical mining equipment. During the fourth quarter of 2012, SUMMIT amended the agreement with the mining equipment supplier to allow for an extension for delivery to 2014.

SUMMIT plans to spend additional funds in 2013 on a further deposit for mining equipment and approvals to construct and operate a coal beneficiation plant as well as amend the existing provincial mine license in order to increase annual coal production. SUMMIT anticipates receiving the mine license amendment and coal beneficiation plant approvals in the second quarter of 2013.

MAXIM considers the advancement of the M14 and M16S development projects strategic for MAXIM in part because of the value of metallurgical coal and in part due to the Milner coal-fired power plant’s ability to utilize tailings and lower quality fuels, which are by-products of the beneficiation of coal, to produce electricity. Despite the recent drop in quarterly pricing for met coal, the long-run average price forecast is expected to remain strong, which will allow for the economically viable development of SUMMIT.

Deerland peaker also in the works

MAXIM is actively pursuing commercial arrangements that will allow for the construction of the 190 MW Deerland Peaking Station Unit 1 (D1) to commence during 2013. In the second quarter of 2012, MAXIM entered into an agreement to secure firm natural gas transportation services for Deerland. MAXIM had previously received regulatory approvals to construct and operate D1.

The D1 site is located near Bruderheim in Alberta’s Industrial Heartland, close to the entry point of the proposed Gateway pipeline and adjacent to the existing Deerland high voltage substation. This area is expected to experience significant growth in electrical demand. D1 is the only permitted peaking development project in the province of Alberta at this point. This project is attractive due to an anticipated contraction of reliable base load supply in the Alberta power market, MAXIM noted. MAXIM expects peaking requirements across Alberta to continue to grow to meet increasing demand and to provide firm backup for additional intermittent wind resources.

New unit for Milner now likely be gas-fired, not coal

Provincial regulators have granted MAXIM approval to develop a coal-fired 500-MW generating facility adjacent to the existing 150 MW generating Milner facility (M1). In September 2012 the government of Canada enacted new greenhouse gas legislation that limits the amount of CO2 emitted by coal-fired facilities. MAXIM is examining ways to meet the new standards including a natural-gas fired facility.

MAXIM acquired the Buffalo Atlee (B1) power project, situated 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 approximately five 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 generation to MAXIM’s existing portfolio of assets will diversify its generation fuel types and provide the potential to offset the impact of the new greenhouse gas legislation.

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 41 power plants in western Canada, the United States and France, having 806 MW of electric 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.