Cap­i­tal Power reaches agree­ment on two is­sues with the Gov­ern­ment of Al­berta

The McLeod River Post - - The Patch - Spe­cial to the Post

Cap­i­tal Power Cor­po­ra­tion (Cap­i­tal Power) (PPA) dis­pute.

Coal Phase-Out

As com­pen­sa­tion for the cap­i­tal that Cap­i­tal Power in­vested in coal gen­er­at­ing as­sets that will be “stranded” ef­fec­tive De­cem­ber 31, 2030, 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.

“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,” said Cap­i­tal Power Pres­i­dent & CEO Brian Vaasjo. “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 ful­fills that prom­ise to our share­hold­ers.”

Power Pur­chase Ar­range­ment Dis­pute

The Prov­ince has also 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 Power Pur­chase Ar­range­ment (the Ar­range­ment), in ac­cor­dance with the terms of the Ar­range­ment. In con­sid­er­a­tion of th­ese ac­tions, Cap­i­tal Power and its syn­di­cate part­ners have agreed to pay the Bal­anc­ing Pool $39 mil­lion, of which Cap­i­tal Power’s por­tion is $20 mil­lion or $15 mil­lion after tax.

“On bal­ance, this rep­re­sents a fair set­tle­ment, hav­ing re­gard to un­cer­tainty re­gard­ing the ef­fec­tive date of the ter­mi­na­tion and the PPA value de­cline be­cause of mar­ket fac­tors,” con­tin­ued Mr. Vaasjo.

“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,” Mr. Vaasjo added. “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.”

“In ad­di­tion, we look for­ward to en­gag­ing with the Gov­ern­ment of Al­berta on the evo­lu­tion of Al­berta’s elec­tric­ity mar­ket de­sign, in­clud­ing par­tic­i­pa­tion in stake­holder con­sul­ta­tions re­gard­ing the de­sign and in­tro­duc­tion of a ca­pac­ity mar­ket,” Mr. Vaasjo con­cluded. “A well de­signed and fairly im­ple­mented ca­pac­ity mar­ket can de­liver an af­ford­able power sup­ply for Al­ber­tans, re­duce mar­ket price volatil­ity, and pro­vide cer­tainty that gen­er­a­tion ca­pac­ity will be there when needed.”

Cap­i­tal Power will de­scribe th­ese de­vel­op­ments and their im­pacts on the Com­pany in more de­tail at its In­vestor Day in Toronto on De­cem­ber 15, 2016.

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