Capital Power, ENMAX target Genesee power project decision for Q1 2017

Capital Power Corp. (TSX: CPX) said in an Oct. 24 quarterly earnings report that itand its partner ENMAX Corp. are moving the Genesee 4 and 5 project decision to proceed to the first quarter of 2017.

The decision to proceed at that point in time will continue to be contingent on fair compensation being announced for the proposed accelerated closure of the company’s coal facilities in Alberta under a provincial greenhouse gas reduction plan and also favorable conditions existing within the Alberta electricity market, Capital Power said. There is no anticipated impact to the substantial completion date of the first unit at this time, the company added.

The proposed Genesee 4 and 5 combined cycle natural gas-fired facility is a joint venture project between Capital Power and ENMAX. Capital Power will lead the development and construction of the project and subsequently be the operator. The facility will have a nominal capacity of 1,060 MW, consisting of two 530-MW units. It will consist of two one-on-one, single shaft power islands, each incorporating a 501 J-class natural gas turbine, steam turbine, generator and heat recovery steam generator.

Among the other significant events for the company:

  • Impairment loss on Southport – During the third quarter, the company recognized a pre-tax impairment charge of $6 million with respect to its Southport power plant in North Carolina, which reduced the carrying amount of the related goodwill. This impairment was based on reduced expected future cash flows as a result of lower than expected generation and realized prices. The impairment charge has no cash flow impact. Southport is an 88-MW cogeneration’ facility which provides steam to a nearby Archer Daniels Midland facility. The facility’s electrical output is sold under a Power Purchase Agreement to Duke Energy Progress. Southport’s six stoker boilers use a mixture of wood residuals, tire-derived fuel and coal.
  • K2 Wind Partnership – On Aug. 9, 2016, a consortium composed of Axium Infrastructure, Alberta Teachers’ Retirement Fund Board, and Manulife Financial Corp. acquired Samsung Renewable Energy‘s one-third interest in K2 Wind in Ontario. There is no change to the remaining interest in K2 Wind, which is still held equally by Pattern Energy Group Inc. and Capital Power.
  • Completion of contract for output for Bloom Wind – The Bloom Wind project 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). Construction of Bloom Wind commenced during the third quarter of 2016. Commercial operation 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.
  • Termination of the Sundance PPA – On March 24, Capital Power notified the Balancing Pool of its decision to terminate its role as buyer of the Sundance power purchase agreement (PPA), which involves coal-fired power in Alberta. Capital Power exercised its right to terminate the Sundance PPA under the Change in Law provisions of the arrangement, following changes to the Specified Gas Emitters Regulation (SGER) that took effect at the start of 2016. As a result of this termination, no further economic benefits are expected from the Sundance PPA and the related intangible asset was derecognized. The company has recorded a non-cash pre-tax loss of C$53 million (C$46 million post-tax) with respect to the derecognition of the Sundance PPA asset.
  • Climate Leadership Plan (CLP) Update – In late September 2016, the Alberta government initiated formal consultations relating to the Carbon Competitiveness Regulation (CCR) which are scheduled to conclude by the end of 2016. The CCR will establish the performance standard and carbon pricing framework that will apply to facilities that are currently subject to the Specified Gas Emitters Regulation and will replace SGER effective Jan. 1, 2018. Capital Power said it expects that the performance standard for the electricity sector will be consistent with the emissions performance of a combined-cycle natural gas-fired facility in Alberta, with specific details to be developed through consultation.

On March 16, the Alberta government appointed a 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 was to provide options and preferred approaches to the Alberta government to phase out emissions from coal-fired generation by 2030 that will maintain both the reliability of Alberta’s electricity grid and price stability for consumers, while avoiding unnecessarily stranding capital. Throughout this process, the Alberta government has indicated that all parties are treated fairly. Capital Power will continue to actively participate in this process to ensure that fair compensation is received for the proposed accelerated closure of the company’s coal facilities. The facilitator has provided recommendations to the Alberta government and the Company expects the Alberta government will make a decision on the facilitator’s recommendations by the end 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 Company expects that the process will operate in concert with the retirement of the current coal generating units. The Alberta government also confirmed that it has not chosen to fundamentally alter the current wholesale electricity market structure.

The AESO undertook a process to receive industry perspectives regarding various elements of the Renewable Electricity Program (REP), and provided its recommendations regarding the REP to the Alberta government on May 31. The recommendations have not been made public. On Sept. 14, the Alberta government confirmed a firm target of achieving 30% of Alberta’s electricity use by 2030 from renewable energy sources, and announced that the Alberta government would support 5,000 MW of additional renewable capacity to help achieve that target. It is currently expected that the Alberta government will provide direction on the REP during the fourth quarter of 2016, and the AESO currently expects to initiate the process for the first procurement by year-end.

Capital Power is a growth-oriented North American power producer headquartered in Edmonton, Alberta. It owns more than 3,200 MW of power generation capacity at 18 facilities across North America. 

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.