Canada-based Maxim Power Corp. (TSX: MXG) said May 13 that it hasn’t made any decisions related to a strategic review for its power generating assets in the U.S. and France.
During the fourth quarter of 2012, MAXIM appointed financial advisors to review its investments in the U.S. and France in order to identify options to maximize shareholder value. Credit Suisse Securities (USA) LLC has been engaged as financial advisor for the U.S. operations and HSBC Bank plc has been engaged as financial advisor with respect to France. The evaluation of these initiatives is ongoing, the company said in a May 13 financial statement.
U.S. assets for the company include:
- the Pawtucket generating station, a 64-MW facility located in Pawtucket, R.I, that was acquired by MAXIM in 2005. The plant is equipped with a GE Frame 6B Gas Turbine with water injection. Sale of electricity is not currently contracted but the plant receives forward capacity market payments from ISO-New England, said the MAXIM website;
- the Pittsfield generating station, a 181-MW plant in Pittsfield, Mass., that was acquired by MAXIM in 2008. Pittsfield provides peaking energy to the New England power market and receives forward capacity and energy payments from ISO-New England;
- the Forked River facility, an 87-MW plant located in Ocean County, N.J., that was acquired by MAXIM in 2008 and is run under a tolling agreement. This is a natural gas-fired, dual fuel capable, simple cycle facility with two GE Frame 6B gas turbines. MAXIM has entered into a 10-year tolling agreement for the entire capacity of the plant with FirstEnergy Generation, which is an affiliate of Jersey Central Power & Light, until 2018, the MAXIM website said. An agreement was also entered into with the adjacent Oyster Creek Nuclear Generating Station to provide station blackout services. The Forked River site includes about 30 acres of land and existing infrastructure to support future development of additional onsite generating capacity;
- Basin Creek, a 55-MW generating facility located in Montana and operated under a 20-year tolling agreement, which commenced operations in 2006. Basin Creek provides electricity under a 20-year Capacity and Energy Sales Agreement to Northwestern, the default electricity supplier in Montana. Basin Creek is configured with nine Caterpillar G16CM34 natural gas-fired reciprocating engines. Caterpillar Power Generation Systems LLC operates and maintains the plant; and
- CDECCA plant, a 62-MW generating facility, which was acquired by MAXIM in 2006. CDECCA is a natural gas-fired, dual fuel capable, combined-cycle cogen located in Hartford, Conn. It provides peaking energy to the New England power market. It also provides steam and chilled water to the Connecticut Department of Public Works under a ten-year contract expiring March 2019, the MAXIM website said.
Stronger Alberta power prices provide a boost
MAXIM said in the May 13 earnings statement that its first quarter revenues in the Canadian province of Alberta were helped by stronger power prices.
“MAXIM’s results were positively impacted by higher Alberta power prices during the first quarter of 2013 when compared to the first quarter of 2012,” the company said. “Alberta power prices averaged [C]$65.30 per MWh in the first quarter of 2013, representing a 9% increase from the [C]$60.12 per MWh average price in the first quarter of 2012.”
Milner generated first quarter net revenue of C$15.1m, which was an increase of C$4.2m or 39% as compared to C$10.9m in 2012. The increase in net revenue was primarily due to higher Alberta power prices and higher plant availability in the first quarter of 2013 as compared to 2012, which was partially offset by lower generation. Milner was available during a period of highly volatile pricing in the first quarter of 2013, which contributed to higher revenues, as opposed to the first quarter of 2012, where Milner had a two-day unplanned outage to repair the boiler that occurred during the highest priced hours in the quarter.
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, the company noted.
MAXIM said it has previously been operating in a low-priced natural gas environment, which has had a positive impact on fuel cost savings at the Milner facility. With the recent strengthening in gas prices, MAXIM will continue to evaluate its fuel blend and use more coal when it is economically prudent to do so. In addition to this, MAXIM retains the option of reselling any excess coal above Milner’s future consumption requirements.
HR Milner is a 150-MW (nameplate) coal-fired power station located near the town of Grande Cache, Alberta.
MAXIM has also previously been operating in a low natural gas price environment in the U.S. Northeast, which has had a neutral to slightly negative financial impact on MAXIM’s power plants. This is due to the positive relationship between electricity energy margins and natural gas prices. Natural gas fired generation is expected to grow as existing facilities retire and coal-fired generation decreases. This will provide positive support for natural gas prices as demand grows for gas-fired power generation in the U.S. Northeast, the company said.
Coal and gas projects in the company’s development pipeline
MAXIM has received regulatory approvals to construct and operate the Deerland Peaking Station, a 190-MW gas-fired facility. Deerland is the only permitted peaking development project in the province of Alberta as of this point, the company noted. In May 2012, MAXIM entered into agreements to secure firm natural gas transportation service for Deerland. MAXIM expects that construction of the facility will commence in 2013 pending commercial arrangements.
MAXIM had gotten government approval to develop a new 500-MW, coal-fired facility adjacent to the existing 150-MW Milner coal facility. But after the Canadian federal government last year enacted new greenhouse gas legislation that limits the amount of CO2 emitted by coal-fired generation facilities, it is now looking at making this a gas-fired project instead. “All aspects are presently being studied to determine the most attractive option for shareholders,” the company said.
On March 21, MAXIM issued the updated Technical Report for its Mine 14 coal project, to be located near the existing Milner coal plant in Alberta. The report was prepared by consultant Golder Associates in accordance with National Instrument 43-101 standards. Measured and indicated resources are 121.1 million tonnes and inferred resources are 67.5 million tonnes. Proven and probable reserves, which are included in the resource estimate, are 18.9 million tonnes of low- to mid-vol metallurgical coal. As a result, the estimated mine life of Mine 14 is 17 years, which is based on the currently planned mining program.
The company’s Summit Coal LP subsidiary has previously entered into a ten-year terminal services agreement with Ridley Terminals Inc., commencing Jan. 1, 2015. This agreement provides it with firm terminal capacity and terminal processing services to enable the Mine 14 coal production to access the valuable seaborne met coal market. Also, the company has secured firm 2014 delivery dates for critical mining equipment.
In the second quarter of 2013, SUMMIT anticipates receiving approvals to construct and operate a coal beneficiation plant as well as a provincial mine license to increase annual coal production. The company considers the advancement of the companion M14 and M16S development projects to be strategic in part because of the value of metallurgical coal and in part due to the Milner power plant’s ability to utilize tailings and lower quality fuels, which are by-products of the beneficiation of coal, to produce electricity.