By Stephen Kishewitsch
There’s a template, of sorts, for a community, including First Nation or Metis communities, wetting its feet in power development: get a couple of years worth of resource data, start small (a few megawatts or less), access some of the funding available to cover initial costs and to build community capacity, use their guidance to write a business plan, find a commercial partner and rely on it for most of the detailed work.
Henvey Inlet isn’t doing it that way.
First of all, they’re going about as big as they come: 300 MW of wind, costing close to $1 billion, including almost 100 km of feeder line.
That latter single fact is what’s made the project fly, explained President and CEO of Nigig Power Corporation, Ken Noble in a telephone interview. “Most projects put in an application and wait for the connecting line to come to them. We knew that was never going to happen in our lifetime, so we made the project big enough to justify a merchant line – that‘s why it’s 300 MW.”
Nothing else is by the book either. Startup project funding, lining up investors – not quite, more a case of jumping in at the deep end and dealing with needs as they arise.
No insult to the funding programs, for example, but “if we’d listened to the governments we wouldn’t be here,” Noble said. “They’ll say, start off with a business plan, start small. We’re starting with almost a $1 billion project, and we haven’t written our business plan yet. If we’d gone after government funds we’d have missed the boat, we wouldn’t have got the FIT contract at this price. The programs do work for a lot of people, though there are things wrong with them – the model is so criteria-driven; they just didn’t fit what we needed to do, and we needed the flexibility. So we did it more under a project management model. We had to attend to whatever is most important today, while the needs of tomorrow might be different. We had to move all these elements along to the finish line together, and if we’d had to comply with some program’s timeline it would have bogged us down.”
As a result, the early stage money was “a bit of a challenge,” Noble admits. To get from zero to the point where the project becomes a going concern capable of attracting capital, “We pretty much did it on our own. I wouldn’t recommend this approach to anyone as a strategy, but we started as a cash-poor band, so that we couldn’t even fund our $1.5 million application security. We searched the market for that and finally the Bank of Montreal came through a year ago in June [2010], when we submitted our FIT application, and they backed us with a letter of credit, just on our signature. That got us into the queue, we got a contract offer in February, which required an additional $1.5 million, and the BofM came through again.”
Again, in terms of capacity-building, Henvey Inlet did it themselves, with an in-depth due diligence process lasting from November until May to find a partner. Decisions on suppliers and subcontractors will be made together with the JV Partner. Former Anishnabek Nation Grand Chief John Beaucage joined along with a First Nation CGA. A legal, financial and political advisory crew of about a half-dozen people then joined, pared down the list of potential partners, and engaged McCarthy Tetrault after “an intense negotiation process” to assist in getting to the development agreement stage.
As a result, “we owe everyone money,” Noble admits. But that should turn around as progress payments start to come in.
The Band Council was very careful not to expose the FN to liabilities, Noble says, ensuring access to employment, ensuring veto rights over land use when it comes to siting turbines. “First Nations are often exploited in such dealings just because of their inexperience. We really tested the developer to make sure all the moving parts of the deal were visible.” But first they did two years of internal community consultation, including seeking out band members living off-reserve in Sudbury, Sault Ste. Marie and Toronto. “We couldn’t find so much as a handful of people who were against it,” Noble said.
Detailed wind resource studies didn’t even start until after the application was made for a FIT contract. A met tower went up in the winter, another this past summer, with two more still to come. Noting that this is not the usual order of things, Noble said the band decided the risk even of investing in met towers was too great without the assurance of a contract. “But I know a lot of First Nations have had towers up for six and eight and ten years,” he observes, “and they’re not as far ahead as we are.”
In any case Notice to Proceed won’t occur for perhaps another year, which will give them a year’s data to work with. The wind resource is known to be excellent at 8.5 meters per second at the shoreline; the additional data, needed for turbine siting, is to determine how it falls off as one moves inland. The overall average wind speed will be in the “acceptable” range based on early stage data.
Nigig Windfarm project summary
Location: North shore of Georgian Bay
Size: 300 MW
Company name: Nigig Power Corp.
Project partner: To be determined.
Project structure: Ownership and revenue stream shared 50-50 between Henvey Inlet and International Power. Additional royalties also go to Henvey Inlet.
Financing: To date, the Bank of Montreal has provided two letters of credit, $1.5 million each to support initial work. Milestone payments to ensue once construction begins. International Power will also provide equity financing.
Government-sourced funding: Approved for some pre-development funding from the OPA’s Aboriginal Renewable Energy Fund; looking to the Ontario Financing Authority for the loan guarantee as well.
Timeline:
• FIT application submitted in June 2010, secured February 2011
• collection of wind data begun winter 2011
• environmental assessment initiated in April 2011
• Notice to Proceed expected late summer 2012
Suppliers: Not yet selected.
Connecting line: 100 km line south to connection point in Parry Sound. Paid for by Nigig Power Corp.