Enbridge moves further into power generating business in 2014

Canada-based Enbridge Inc., primarily an operator of gas and oil pipelines, is rapidly expanding its power generation portfolio as its diversifies its holdings.

“The development of new platforms to diversify and sustain long-term growth is an important strategic priority,” said a Feb. 19 financial report from Enbridge. “The Company is currently focusing its development and diversification efforts towards securing investment in additional renewable energy and power transmission facilities and in energy marketing, as well as developing opportunities in gas-fired power generation, liquefied natural gas (LNG) development and select energy delivery assets outside North America. The Company also invests in early stage energy technologies that complement the Company’s core businesses.

“Since the end of 2013, Enbridge has continued to grow its renewable power portfolio, placing into service Blackspring Ridge in Alberta and the Keechi Wind Project (Keechi) in Texas. The Company also increased its interest in the 300-MW Lac Alfred to 67.5% and in the 150-MW Massif du Sud to 80%. Late in 2014, Enbridge finalized the purchase of an 80% interest in a portfolio of two wind farms located in Texas and Indiana. With the closing of this transaction, Enbridge’s enterprise-wide renewable energy portfolio has a net generation capacity of approximately 1,600 MW.

“In September 2014, the Company entered into an agreement to purchase additional interests in the 300-MW Lac Alfred and the 150-MW Massif du Sud from existing partner, EDF EN Canada Inc. Under the agreement, Enbridge invested approximately [C]$225 million to acquire an additional 17.5% interest in Lac Alfred and an additional 30% interest in Massif du Sud. The Lac Alfred transaction closed in October 2014 and Enbridge now holds a 67.5% interest in Lac Alfred. The Massif du Sud transaction closed in December 2014 and Enbridge now holds an 80% interest in Massif du Sud.

“North American wind and solar resources fundamentals remain strong; in the United States there are nearly 66 gigawatts (GW) of installed wind power capacity and in Canada over nine GW of capacity. Solar resources in southwestern states such as Arizona, California and Nevada are considered to be some of the best in the world for large-scale solar plants and the United States currently has over 16 GW of installed solar photovoltaic capacity. However, expanding renewable energy infrastructure in North America is not without challenges. Growing renewable generation capacity is expected to necessitate substantial capital investment to upgrade existing transmission systems or, in many cases, build new transmission lines, as these high quality wind and solar resources are often found in regions that are not in close proximity to markets. Furthermore, the profitability of renewable energy projects, to date, has in part been supported by certain tax and government incentives. In the near-term, uncertainty over the continuing availability of tax or other government incentives and the ability to secure long-term power purchase agreements (PPA) through government or investor-owned power authorities may hinder the pace of future new renewable capacity development. However, continued improvement in technology and manufacturing capacity in the past few years has reduced capital costs associated with renewable energy infrastructure and has also improved yield factors of power generation assets. These positive developments are expected to render renewable energy more competitive and support ongoing investment over the long-term.”

Recent developments include:

  • In 2013, Enbridge secured a 50% interest in the development of the 300-MW Blackspring Ridge wind project, located 50 kilometers (31 miles) north of Lethbridge, Alberta in Vulcan County. The project was constructed under a fixed price engineering, procurement and construction contract and commercial operations commenced in May 2014. Renewable Energy Credits generated from Blackspring Ridge are contracted to Pacific Gas and Electric under a 20-year purchase agreement. The electricity is being sold into the Alberta power pool with pricing fixed on 75% of production through long-term price swap arrangements. The Company’s total investment in the project is approximately C$0.3 billion.
  • In November 2014, Enbridge announced it had entered into an agreement with E.ON to purchase an 80% interest in a wind farm portfolio which included the 203-MW Magic Valley 1 wind farm located near Harligen, Texas, and the 202-MW Wildcat 1 wind farm near Elwood, Indiana, for approximately US$0.3 billion. Both wind farms are operational and were placed into service in 2012. Upon closing of the transaction on Dec. 31, 2014, E.ON retained a 20% interest and remained the operator.
  • In January 2014, Enbridge announced it had entered into an agreement with Renewable Energy Systems Americas (RES Americas) to own and operate the 110-MW Keechi wind project, located in Jack County, Texas. The project was constructed by RES Americas under a fixed price, engineering, procurement and construction agreement at a total cost of approximately US$0.2 billion, and it entered service in January 2015. Keechi will deliver 100% of the electricity generated into the Electric Reliability Council of Texas market under a 20-year PPA with Microsoft Corp.

Enbridge is a North American leader in delivering energy. As a transporter of energy, Enbridge operates, in Canada and the United States, the world’s longest crude oil and liquids transportation system. it also has growing involvement in natural gas gathering, transmission and midstream businesses and an increasing involvement in power transmission. As a distributor of energy, Enbridge owns and operates Canada’s largest natural gas distribution company and provides distribution services in Ontario, Quebec, New Brunswick and New York State. Enbridge has interests in more than 2,200 MW (1,600 MW net) of renewable and alternative energy generating capacity and is expanding its interests in wind, solar and geothermal. Enbridge employs more than 11,000 people, primarily in Canada and the United States.

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.