Innergex Renewable Energy (TSX: INE) announced Feb. 25 that, in partnership with the Cayoose Creek Indian Band, it has completed the acquisition of the Walden North hydroelectric facility located in British Columbia, Canada.
Innergex and Cayoose Creek Development Corp., the economic arm of the Cayoose Creek Indian Band, have formed the Cayoose Creek Limited Partnership, which in turn has acquired the assets that make up the facility from FortisBC. The transaction closed at a final total purchase price of C$9.2 million.
Walden North is a 16-MW facility commissioned in 1992 and located on private land in Cayoosh Creek near Lillooet, in close proximity to several of Innergex’s other hydroelectric facilities.
Innergex is a Canadian independent power producer. Active since 1990, it develops, owns, and operates run-of-river hydroelectric facilities, wind farms, and solar photovoltaic farms, and carries out its operations in Quebec, Ontario, British Columbia, and Idaho. Its portfolio of assets currently consists of: interests in 35 operating facilities with aggregate net installed capacity of 716 MW (gross 1,232 MW), including 28 hydroelectric facilities, six wind farms, and one solar photovoltaic farm; interests in four projects under development or under construction with an aggregate net installed capacity of 187 MW (gross 297 MW), for which power purchase agreements have been secured; and prospective projects with an aggregate net capacity totaling 3,280 MW (gross 3,530 MW).
Innergex said in a Feb. 24 financial report covering the year 2015 that it is continuing to make progress on renewable energy projects in Canada and elsewhere.
- The construction of the Tretheway Creek hydroelectric facility in British Columbia began in October 2013. The facility began commercial operations with an effective commissioning date of Oct. 27, 2015. Tretheway Creek’s average annual production is estimated to reach 81,000 MWh. All of the electricity the facility produces is covered by a 40-year fixed-price power purchase agreement with BC Hydro, which was obtained under that province’s 2008 Clean Power Call Request for Proposals.
- In March 2015, Innergex announced the closing of a C$491.6 million non-recourse construction and term project financing for the Boulder Creek (25.3 MW) and Upper Lillooet River (81.4 MW) run-of-river hydroelectric projects in British Columbia. The construction of the Upper Lillooet River and Boulder Creek hydroelectric facilities began in October 2013. Construction activities have resumed after being halted for two months due to a forest fire that swept through the area. Damage to the project site from the fire was very limited and all structures and equipment remained intact, except for a portion of the transmission line between the two powerhouses. As of Feb. 24, the installation of the joint transmission line, the powerhouses, the intakes and the tunnels are well under way. Both generators for the Boulder facility were delivered in mid-December and stored in the powerhouse. Both projects are due for commercial operation in 2017
- On April 2015, Saik’uz First Nation and Innergex announced the signing of an agreement to jointly develop a prospective wind energy project at Nulki Hills near Vanderhoof, British Columbia. The corporation and Saik’uz have agreed on the commercial terms for a 50-50 partnership to develop the proposed Nulki Hills wind project, representing up to 210 MW of power.
- In June 2015, Innergex announced the closing of a C$197.2 million non-recourse construction and term project financing for the Big Silver Creek (40.6 MW) run-of-river hydroelectric project located in British Columbia. Construction of this facility began in June 2014. As of Feb. 24, the civil works for the intake, tunnel, penstock, powerhouse and tailrace have been completed. The majority of the turbines and generators have been delivered to site and their installation is under way. Transmission line construction continued for both the terrestrial line and the submarine cables. Procurement and delivery of the electrical equipment were under way. Commercial operation is expected to begin in the third quarter of 2016.
- In September 2015, Innergex and its partner announced the closing of a C$311.7 million non-recourse construction and term project financing for the 150-MW Mesgi’g Ugju’s’n wind project located in Quebec. Construction of this wind farm began in May 2015. As of Feb. 24, the access roads and wind turbines generator (WTG) areas have been completed. All the WTG foundations have been completed but one, which will be backfilled in early spring 2016. The electrical works will not be completed during the winter but will resume in 2016, along with other activities. As planned, the other construction activities have been halted for the winter period and will also resume in the spring of 2016. The end of construction and the commissioning of the Mesgi’g Ugju’s’n wind farm is expected for the end of 2016.
- In October 2015, the corporation signed a memorandum of understanding with the Comisión Federal de Electricidad (CFE), the government-owned utility in Mexico, to jointly study a number of renewable energy project opportunities in Mexico with the aim of jointly developing selected projects. The main purpose of this agreement is to coordinate efforts and develop activities that will allow the corporation and CFE to define their joint participation in the development of prospective renewable energy projects, in particular small hydroelectric plants of less than 200 MW.
Innergex looks at growth opportunities in various locations
With a combined potential net installed capacity of 3,280 MW (gross 3,530 MW), all the unspecified prospective projects for the company are in the preliminary development stage. Some of these projects are targeted toward specific future requests for proposals, such as the current request for proposals for new wind and solar energy in Ontario. Others will be available for future requests for proposals yet to be announced or are targeted toward negotiated power purchase agreements with public utilities or other creditworthy counterparties.
In December 2015, the Quebec government, in collaboration with Hydro-Québec, announced the issuance of a 200 MW block of wind energy to the Innu First Nation in the province’s Côte-Nord region and Innergex said it plans to seek opportunities in relation to that initiative. The corporation remains confident in the long-term viability of the small hydro and wind energy sectors in this province and has a number of projects that it continues to advance for future renewable energy procurement opportunities.
In Ontario, the government has instituted a competitive procurement process, the Large Renewable Procurement (LRP) that will take into account local needs and considerations, including those of municipalities and First Nations. The LRP is currently underway with procurement targets of 300 MW of wind energy, 140 MW of solar, 75 MW for water power, and 50 MW for bioenergy. The LRP II procurement process, which is expected to begin in late 2016, may procure up to 300 MW of wind energy and 150 MW of solar energy, with planned annual revisions thereafter. Innergex said it has a number of wind and solar projects that it continues to advance in preparation for submissions under these competitive bid processes. In 2015, it submitted bids for one solar project and one wind project, both in partnership with a First Nations partner, and is awaiting an imminent response from the governing authorities. Other prospective projects in Ontario, especially in the wind sector, remain predicated on both the transmission grid expansion in the northern part of the province and decisions regarding nuclear refurbishment to represent longer-term growth potential.
In British Columbia, while the government has stated its support for a diverse clean energy sector and clean energy opportunities for First Nations, it has provided no specific procurement targets for renewable energy at this time beyond the Standing Offer Program (150 GWH/year), said Innnergex. Furthermore, the province is currently experiencing decreasing demand for electricity over the short term, although the longer term forecast is for an increase. While plans remain to develop its mining and liquefied natural gas (LNG) sectors, they have been delayed due to the current global economy. Construction has commenced on BC Hydro’s 1,100 MW Site-C hydroelectric project, which is scheduled to reach commercial operation in 2024 and which may reduce some prospects for independent power producers.
In the United States, Innergex said it will continue to selectively assess potential opportunities, particularly in light of the current U.S. administration’s focus on addressing climate change and reducing greenhouse gas emissions as well as the existence of renewable portfolio standards in several states and the increasing procurement of renewable energy. In the short term, generation from renewable resources is expected to grow in response to federal tax credits and state-level policies. However, in the long term, renewable generation growth is expected to be driven by increasing cost competitiveness with other non-renewable technologies. In many markets across the U.S., wind and solar energy are already among the least costly new generation sources, even compared with currently low-cost natural gas.
To replenish its sources of long-term growth, the corporation has identified a number of target markets internationally in which it expects to gain a foothold in the coming years. In developing economies in Latin America, demand for electricity remains strong and governments are seeking to increase the production of renewable energy, of which they have an ample supply. More economically mature countries in Europe have adopted ambitious GHG emissions reduction targets and governments are seeking to reduce their dependency on conventional forms of generation, both of which developments require a greater proportion of renewable energy in these countries’ energy portfolios.
Over the past two years, the Mexican government has undertaken vast reforms of its electricity market, opening it to private power producers, Innergex noted. The government has implemented ambitious targets to increase capacity to meet the rapidly growing demand for electricity, while also transitioning from fossil fuel to renewable energy generation in order to achieve greenhouse gas emission reduction targets. As the country’s largest electricity producer, CFE is looking to make significant investments in order to meet the annual renewable energy quotas. On Nov. 30, 2015, Mexico’s National Energy Control Center (CENACE) released the tender rules for participating in Mexico’s First Long-Term Energy Auction. The purpose of the auction is to award Electricity Coverage Agreements on behalf of the CFE for the acquisition of electric power, accruable electric energy and clean energy certificates.
In France, the corporation is actively assessing a number of renewable energy opportunities and hopes to establish its presence during the course of 2016. Since 2007, France has put in place an ambitious strategy for the development of renewable energies within its territory. France’s energy policy emphasizes the implementation of renewable energies with a targeted additional production of 20 megatonnes of oil equivalent (Mtoe) compared with 2006,or an approximate doubling in production of renewable energies by 2020.
Power deals for a couple of hydro facilities in Quebec have expired
The company noted that the power purchase agreement (PPA) for its 8-MW St-Paulin hydroelectric facility reached the end of its initial 20-year term in November 2014. Innergex sent Hydro-Québec a notice of automatic renewal of the PPA for an additional 20-year term. Following initial discussions, the corporation and Hydro-Québec could not reach agreement on the renewal terms and conditions and the corporation subsequently filed a notice of arbitration. Innergex said it has agreed with Hydro-Québec to suspend its arbitration proceeding until a decision is made in another arbitration proceeding already underway between Hydro-Québec and other independent power producers. In the meantime, Hydro-Québec has agreed to maintain the terms and conditions of the St-Paulin PPA until 30 days following the decision in this other arbitration proceeding.
Also, the PPA for the company’s 5.5-MW Windsor hydroelectric facility reached the end of its initial 20-year term in January 2016 and it has sent Hydro-Québec a notice of automatic renewal of the PPA for an additional 20-year term.