In late November 2016 the Alberta government announced several significant agreements affecting existing coal fired power generation facilities in Alberta. The first set of agreements relate to the government’s promise to phase out emissions from coal by 2030 and to ensure this did not create unnecessary stranding of investments for the companies who operate and own these facilities. At almost the same time the government and several generators settled their outstanding disputes over the early termination of certain Power Purchase Agreements (PPAs).
TransAlta reached agreement with the provincial government over the Keephills 3, Genesee 3 and Sheerness coal-fired plants. Under the terms of the Off-Coal Agreement, TransAlta will receive annual cash payments of approximately $37.4 million, net to TransAlta, commencing in 2017 and terminating in 2030. On the same day ATCO also entered into a similar agreement over the Sheerness station.
Additionally, TransAlta announced that it had reached an understanding with the Government pursuant to a Memorandum of Understanding to collaborate and cooperate in the development of a policy framework to facilitate the conversion of coal-fired generation to gas-fired generation, facilitate existing and new renewable electricity development through supportive and enabling policy, and ensure existing generation and new electricity generation are able to effectively participate in the recently announced capacity market to be developed for the province.
At the same time, TransAlta also announced that it had begun development of a pumped hydro project at its existing Brazeau facility and that it expects to begin stakeholder consultations in the near future. The company is targeting 2021 for the commencement of construction of the project, subject to receiving a long-term contract.
TransAlta commended the agreements saying, “For more than a year, the province’s power sector leaders have worked with the government to find a way to reach an agreement that will meet these ambitious environmental goals, while also respecting the previous investments that have been made in Alberta, as well as the needs of communities, companies and electricity sector workers. In November 2016, we achieved a historic agreement that does all of this.”
On the same day, Capital Power Corporation released details of similar agreements with the province. As compensation for the capital invested for its share in the Genesee power station, Capital Power will receive cash payments from the province of $52.4 million annually for 14 years, commencing July 31, 2017, for a total of $734 million. Capital Power has agreed to continue to participate in the Alberta electricity market, support the local communities surrounding the coal facilities through 2030, and fulfill its pension and other commitments to employees.
Under the terms of a separate agreement between Capital Power and the province relating to Capital Power’s termination of its role as a buyer of the Sundance C PPA, and that was also announced on November 24, the province agreed to discontinue its legal action against Capital Power and to arrange for the Balancing Pool to accept Capital Power’s termination of its role as a buyer of the Sundance C PPA. Capital Power and its Syndicate partners agreed to pay the Balancing Pool $39 million.
“It is important that the uncertainty associated with these issues is behind us, so that we can continue to develop generation opportunities in Alberta, subject only to market and economic signals,” said Capital Power President & CEO Brian Vaasjo. “It also helps clear the way for us to consider ways in which we can utilize both new and existing assets to extend the life of the Genesee site as a major contributor to Alberta’s power needs beyond 2030.”
A few days later similar agreements were announced with Trans-Canada Pipelines Corporation and AltaGas Ltd. settling disputes over Power Purchase Agreements (PPAs).
See related article, “Alberta tests legality of special termination provisions in coal PPAs,” in IPPSO FACTO, June 2016, and reports on broader changes underway in Alberta, “Clearer picture of restructuring priorities emerges,” and “Alberta announces major changes to its electricity market,” elsewhere in this issue of IPPSO FACTO.
See also: Clearer picture of Alberta restructuring priorities emerges, in this issue of IPPSO FACTO.