Canada-based independent power producer Maxim Power Corp. (TSX: MXG), while sounding a “going concern” warning in a May 12 earnings report due in part to lower Alberta power prices that have forced the idling of its coal-fired power plant there, said it is working on future projects at prioritized financial levels.
Based in Calgary, Alberta, MAXIM currently owns and operates 39 power plants in Alberta, the United States and France, having 778 MW of electric generating capacity.
MAXIM said it is continuing its independent power producer strategy through the advancement of its development initiatives. Supply and demand for electricity, reserve margins, tariff structures, and the regulatory environment will be key fundamental factors in determining the pace at which to pursue opportunities.
Its projects are:
- Milner Unit 3 (M3) – MAXIM is proposing to increase generating capacity at the currently coal-fired Milner Unit 1 (M1) site in Alberta by building M3, which will be comprised of two gas-fired turbines located next to M1 and is a cost-effective solution to transition M1 from coal to natural gas. M3 will utilize existing M1 assets including, but not limited to, its boiler, steam turbine, generator, water license, as well as electrical and gas interconnections. The development of M3 will also result in a reduction to total greenhouse gases and air emissions from current levels. Exhaust energy from M3’s gas turbines will be converted to steam and utilized to generate electricity in the existing M1 steam turbine, displacing coal-sourced steam. Before giving effect to the development of M2, M3 will increase the nameplate capacity at the Milner site from 150 MW to 236 MW. MAXIM has received regulatory approval to construct and operate M3. M1 was idled in March due to lower Alberta power prices.
- Milner Unit 2 (M2) – MAXIM has received regulatory approval to construct and operate M2, a 520 MW natural gas-fired combined cycle facility. The M2 facility is to be located adjacent to the existing 150-MW M1. Synergies with existing M1 infrastructure such as electrical interconnection, fuel delivery, water license and a skilled operations team, allow the M2 project to achieve a competitive advantage as compared to a greenfield development. The M2 project will be one of the most efficient combined cycle gas turbines in the province and is anticipated to run as a base load facility, similar to that of the recently commissioned Shepard Energy Centre.
- SUMMIT – This is MAXIM’s development initiative located north of Grande Cache, Alberta, that owns metallurgical coal leases for Mine 14 (M14) and Mine 16S (M16S). Current estimates for M14 are 18.9 million tonnes of low-mid volatile metallurgical coal reserves with a mine life of 17 years. M16S is located 30 kilometers northwest of M14 and represents 1,792 hectares or 29% of SUMMIT’s total area of coal leases. M14 is permitted for a run-of-mine production rate of up to 1,300,000 tonnes per year. MAXIM has also received approval from the Alberta Energy Regulator to construct and operate a Coal Beneficiation Plant. This Coal Beneficiation Plant, to be located on MAXIM’s existing M1 industrial complex, will bifurcate M14’s run-of-mine coal into an estimated annual production of 950,000 tonnes of high-quality, low-mid volatile and metallurgical coal for shipment to export markets. These approvals provide SUMMIT with all of the requisite government and regulatory approvals to construct and operate M14. MAXIM has received delivery of five pieces of mine equipment including two continuous miners and three shuttle cars. The units are in storage awaiting development of M14.
- Deerland – MAXIM has received regulatory approvals to construct and operate the Deerland peaking station, a 190-MW natural gas-fired peaking facility. MAXIM has entered into agreements to secure firm natural gas transportation service for Deerland. MAXIM expects that full-scale construction of the facility would commence pending improved prices in the Alberta power market and satisfactory commercial arrangements.
- Buffalo Atlee – MAXIM acquired the Buffalo Atlee Power Project, situated near Brooks, Alberta, through an amalgamation with EarthFirst Canada Inc. This project has the potential for development of up to 200 MW of wind capacity in multiple phases. The first phase consists of 33 MW and MAXIM anticipates this capacity will participate in the Government of Alberta (GoA) renewable generation competition launching in the fourth quarter of 2016. The addition of wind generation to MAXIM’s existing portfolio of assets would diversify further potential changes to MAXIM’s generation fuel types and provide the potential to offset the impact of potential provincial emissions legislation, once enacted.
- Forked River Expansion – MAXIM owns approximately 32 acres of land adjacent to the existing facility that can accommodate an additional greenfield expansion. The initial feasibility analysis of this greenfield expansion for up to 500 MW has commenced. This site is being evaluated for supporting natural gas, water and electrical interconnection infrastructure. The Forked River generating station, an 87-MW facility located in Forked River, New Jersey, was acquired by MAXIM in 2008.
Said the company in the May 12 management’s discussion and analysis (MD&A) report: “MAXIM is currently in the process of pursuing various asset sales. The proceeds from these may in part be used to cash collateralize existing letters of credit under the Canadian credit facility and repay any draws on the revolving credit facility occurring in 2016, thereby mitigating the risk of covenant default and decreasing the Corporation’s debt service charges. In the event the sales do not proceed in a timely fashion, management is also actively pursuing financing options with current and prospective lenders which both would, in management’s view, enable the Corporation to achieve its business plans. No agreements have been reached as of the date of this MD&A and there can be no assurance that such agreements will be reached.
“In 2016, the Corporation is also pursuing only necessary sustaining capital and development projects with the highest return on investment. It is also continuing the cost cutting initiatives implemented in 2015 and into 2016. Management’s decision to dial down operations at M1 was an initiative to maintain positive working capital and sufficient levels of liquidity. MAXIM will actively monitor the Alberta power market to determine the appropriate time to economically resume generation activities.”