Kate Chisholm gets nod for coal talks
Kate Chisholm has seen a fair share of deals over her nearly 30-year career as a lawyer, and she knows that dealmaking comes in all shapes and sizes.
In fact, it’s not always the merger and acquisition deal with the most zeros that has the biggest impact on a company, says the senior vicepresident, legal and external relations, at Capital Power Corp.
That was the case in the deal that made her the recipient of the 2017 WCGCA deal-making award. Chisholm was acknowledged for her work in negotiating a $734-million compensation agreement with the Alberta government over its plan to phase out coal-generated electricity by 2030.
Edmonton-based Capital Power, a growth-oriented North American power producer, develops, acquires and operates power generation involving a variety of energy sources. In 2009, the company, which now owns more than 4,500 megawatts of power generation at 24 facilities, was spun out of Epcor Utilities Inc., the City of Edmonton’s power company.
Chisholm says the Alberta government’s decision to scrap coal-fired power generation would have “stranded” billions of dollars in capital investment that power companies had made there.
“This was going to wipe out a lot of our shareholders’ invested capital,” she says. The company’s stock price became “very volatile,” setting up for some tough negotiations.
It didn’t help that at the time of the November 2015 announcement, the newly elected NDP government was still getting its feet under it. It was grappling with financial markets and understanding the complexity of the electricity markets and the impact of eliminating coal.
Adding to the problem was a lawsuit the government had brought against a number of power producers, including Capital Power. It targeted firms that had exercised clauses in their power-purchase agreements allowing them to walk away from deals to buy electricity from coalfired facilities that had become unprofitable under the new regulatory regime.
Alberta was Capital Power’s core market; much of the province’s power comes from coal. “There isn’t a hospital, school or anything that isn’t reliant on coal,” Chisholm says.
That led to negotiations, which lasted almost a year, between the government and power producers; Chisholm led Capital Power’s negotiating team. She says the environment was much different than a typical M&A deal. “If a deal falls apart, both parties walk away and there is no damage. There was no walking away from this.”
And, “we were negotiating under a microscope,” she says of the public attention on the deal.
The negotiations were intense; one of Capital Power’s objectives was to settle the province’s lawsuit as part of the compensation deal.
The biggest challenge in such negotiations, she says, is that “everyone perceives there would be a winner and a loser. The art is turning it around so that it becomes a win-win.”
That means finding common ground. “You really have to talk through what are people’s fundamental objectives,” and thereby build trust.
Alberta achieved its carbon emission reduction numbers, while the producers that agreed to settle their claims will be paid from a carbon tax being implemented as part of the government’s Climate Leadership Plan. Capital Power will receive annual payments of $52.4 million for 14 years, and it agreed to continue to participate in Alberta’s electricity market.
At the time of the deal, Capital Power CEO Brian Vaasjo said in a statement that “the settlement is reasonable because it repays shareholders for the stranding of capital due to the 2030 truncation of coal emissions, while also recognizing the potential for extending the economic lives of certain facilities through conversion to natural gas.”
He added, “the province committed to implement its Climate Leadership Plan in a way that would be fair to communities, companies and workers, and avoid unnecessarily stranding capital. Today’s agreement fulfils that promise to our shareholders.”
Finalists in the deal making category included: M. Joanna Cameron, vicepresident, legal and general counsel of NexGen Energy, Ltd.; Randall C. Chatwin, vice-president and assistant general counsel of Goldcorp Inc.; Deepk Hundal, vicepresident, general counsel and corporate secretary, Ero Copper Corp.; Kevan King, senior vice-president and general counsel, Veresen Inc.; and Darren J. Watt, senior vice-president, general counsel and corporate secretary, Ritchie Bros. Auctioneers Inc.
Clarke Barnes of Fasken Martineau DuMoulin and Kate Chisholm, QC, senior vice-president, legal, Capital Power Corp., this year’s Deal-Making Award winner.