Rival companies join forces on power plant
A 50-per-cent stake in a natural gas-fired electricity plant being built in Calgary by cityowned Enmax was an opportunity too good to pass up, says Capital Power Corp. president and CEO Brian Vaasjo.
The Edmonton-based power producer said Thursday it is buying a half interest in the Shepard Energy Centre on the eastern outskirts of Calgary.
“Capital Power believes that the Alberta market is a tremendous power generation market in North America,” Vaasjo said. “In fact, we think it’s the best market for participants like ourselves.
“When you look at the Shepard facility being constructed in Calgary, that ends up being the most efficient natural-gas facility in the province. It’s being built at a reasonable cost and we see it as a tremendous opportunity to add a strategic asset to our portfolio of assets in the province.”
Capital Power will invest about $860 million into the $1.4-billion project, once interest during construction is included.
Work on Shepard started in July 2011 after a two-year delay because of an economic downturn. The project is on budget and on schedule for completion in the first quarter of 2015.
The 800MW generation facility features two 240-MW natural gas-fuelled turbines and one 320-MW steam turbine, all manufactured by Mitsubishi.
Shepard, which will be the largest natural-gas-fuelled power facility in Western Canada, is expected to produce less than half the carbon dioxide per MWh of a conventional coal plant, according to Enmax. It will also produce less carbon monoxide, sulphur dioxide and nitrogen dioxide.
“Enmax — it’s been relatively public — they’ve been looking for the right kind of partner over the last year or so and we and others have been in conversation with them,” Vaasjo said.
The two companies are a good match for the joint venture, he said.
“They are a retailer and have significant load. We have significant power generation. They will be short of power supply in 2014. What’s beneficial to us is being able to sell some of our 2014 power today so that was part of the transaction.
“They also are going to have a growing base of customers, and the overall arrangement recognizes that in that half our generation in that facility will be sold to them for 20 years.”
Under the agreement, Enmax will pay Capital Power a fixed capacity charge for 75 per cent of Capital Power’s share of the Shepard output between 2015 to 2017. It decreases to 50 per cent for 2018 to 2035.
Enmax president and CEO Gianna Manes said the partnership is a “complementary opportunity” for both companies.
Under the joint venture, Enmax will be responsible for completion of construction and will operate the facility while Capital Power will administer the dispatch of the electrical output. Both Enmax and Capital Power have dispatch rights to their own blocks of capacity. Vaasjo said that means each company has 400 MW.
“Depending on where you are in your commitments, you may not want to turn on 200 of the 400. … Or more appropriately in our market, you price this block at X, and if the market needs it, it will pay for it. If not, it doesn’t get turned on,” Vaasjo said.
When Shepard comes onstream, it will reduce power prices in the province on a wholesale basis and add to the stability of the power grid, Vaasjo said.
Capital Power also says it’s developing a natural gas-fired facility similar to Shepard in the Edmonton region that is expected to go online between 2017 and 2020.
“That will satisfy the next wave of demand in the province … and at that point in time, there’s also expected to be a number of coal plants retiring,” Vaasjo said.