Canada-based independent power producer Capital Power Corp. (TSX: CPX) said in an April 25 earnings statement covering the first quarter of this year that a Kansas wind project is about ready to kick into construction.
“Capital Power continued to advance priority growth initiatives in the quarter,” said Brian Vaasjo, President and CEO of Capital Power. “We have now secured a contract for our Bloom Wind project in Kansas, and expect to begin construction in the third quarter of 2016. We have also worked with our partner and suppliers to restructure the construction execution of the Genesee 4 and 5 project, moving the decision point for proceeding to the fourth quarter of 2016, resulting in modestly higher cost and risk. The decision to proceed with construction will be based on our view of market conditions, and the impact of government policy on our existing assets and the proposed units. The revised construction plan would achieve substantial completion of the first unit in early 2020.”
Genesee 4 and 5 would be two new gas-fired units at an existing coal plant in Alberta, Canada. They would have 1,060 MW of total capacity. I
“First quarter earnings include a non-cash charge related to the termination of Capital Power’s role as a buyer of the Sundance PPA,” said Vaasjo. “Excluding that charge, our normalized earnings reflect strong operating performance and portfolio management. While Alberta power prices averaged [C]$18 per megawatt-hour (MWh) in the first quarter, our trading desk captured a realized average price of [C]$52 per MWh for the Alberta portfolio through our hedging program.”
He added: “We continue to be engaged with the Alberta government to ensure fair compensation is received for the proposed accelerated closure of coal-fired generating units by 2030 under the Alberta government’s Climate Leadership Plan. “Initial discussions with the government-appointed facilitator took place earlier this month. We continue to work collaboratively with the government and remain optimistic that a fair and appropriate outcome will be reached for our shareholders.”
In various first-quarter developments:
- On March 24, Capital Power gave notice to terminate its role as buyer of the acquired Sundance PPA effective March 24. Capital Power exercised its right to terminate the acquired Sundance PPA under the Change in Law provisions of the arrangement, following changes to the Specified Gas Emitters Regulation that took effect at the start of 2016. As a result of this termination, no further economic benefits are expected from the acquired Sundance PPA and the related intangible asset was derecognized.
- On March 16, the Alberta government appointed a coal phase-out facilitator to oversee the transition away from coal-fired generation in Alberta by 2030. The facilitator’s background is with large public power providers and centrally dispatched power systems and advising energy leaders in numerous countries around the world. The facilitator’s mandate is to provide options to the Alberta government to phase out emissions from coal-fired generation by 2030 while maintaining the reliability of Alberta’s electricity grid and price stability for consumers without unnecessarily stranding capital assets. It is expected that the facilitator will report to the Alberta government on this mandate in the last half of 2016.
- On Jan. 26, the Alberta government tasked the Alberta Electric System Operator (AESO) to develop and implement a plan to bring on new renewable electricity generation capacity to the grid by 2030 in connection with the CLP. The Alberta government mandated that the process must operate in concert with the retirement of coal generating units. The Alberta government also confirmed that it has not chosen to fundamentally alter the current wholesale electricity market structure. A plan is due to the Alberta government by May 2016.
On April 25, after the close of the first quarter, Capital Power announced that construction of its Bloom Wind project is expected to commence in the third quarter of 2016. Bloom Wind is a 178-MW facility in southwestern Kansas consisting of fifty-four 3.3-MW turbines and is anticipated to cost C$358 million (US$272 million). Commercial operation of the facility is expected in the third quarter of 2017.
Capital Power will operate Bloom Wind under a 10-year fixed price contract with Allianz Risk Transfer, a subsidiary of Allianz SE, the worldwide insurance and asset management group, covering 100% of the project’s output. Under the contract, which was executed on April 21, Capital Power will swap the market revenue of the project’s generation for a fixed annual payment for a 10-year term. The agreement will secure long-term predictable revenues and mitigate generation volume uncertainty related to wind resources, allowing Bloom Wind to secure renewable energy tax equity financing and provide Capital Power the opportunity to complete its first wind development project in the growing U.S. renewables market.