IKEA’S RENEWABLE ENERGY PLAN NOT JUST HOT AIR.
Company buys wind farm in Drumheller
For the fourth time in the past half- dozen years there is a new owner of the Wintering Hills wind farm in Drumheller, Alta.
But this time, the new 100- per- cent shareholder of the 55 turbine project — which was started by Suncor Inc. in 2010 and can produce 88 MW of electricity a year — is far removed from companies normally associated with owning wind farms.
Ikea Canada, the company best known for selling furniture in boxes and whose stores are typically full to overcrowded — is the new owner.
It agreed to pay almost $ 120 million for the project, which was owned by Teck Resources ( which had a 49-per-cent stake) and TransAlta Corp. ( 51 per cent.)
The acquisition marks Ikea’s second Alberta wind farm purchase: In late 2013, it purchased a 46 MW wind farm in Pincher Creek from Mainstream Renewable Power. That farm, known as Oldman 2, became fully operational in the fall of 2014, and generates 161 gigawatt hours each year — or twice Ikea Canada’s total energy consumption.
Teck i nvested i n Wintering Hills — a project started by Suncor — in mid2010 for a 30-per-cent stake. That i nvestment marked Teck’s entry into the windpower business. In 2014, Teck upped its interest to 49 per cent. In 2015, as part of an asset swap with Suncor, TransAlta ended up with the remaining 51- per- cent stake in the project.
But in late 2015, at a time when Teck was in less robust financial shape than it is today, it indicated it wanted a potential monetization of its stake in Wintering Hills. It hired Barclays Canada to handle the sale. Teck said it sold the wind farm as “part of a plan to reduce non-core assets.”
Paul Knight, the firm’s global head of mining investment banking, said Teck’s sale decision was motivated by strategic ( the need, or otherwise, to be in the wind power business) and financial factors.
“Would another buyer be better ( in the business) and pay more for wind farms than they valued ( the operations) themselves,” he said, adding TransAlta was an interested observer to the process before deciding the deal made sense for them to also sell.
So, Knight together with Derek Ha, who heads the firm’s infrastructure group, indicated to Teck “we should approach Ikea,” Knight said.
“There was a small universe of logical buyers,” he noted, adding it takes time to complete the deal, in part because wind farms aren’t the core competency of either Teck or Ikea and because there have been so few wind power transactions.
Ha added potential buyers have to “take a fundamental view of Alberta’s economy,” and of the province’s power business, given the slew of factors at work. Knight noted the price paid represents “a high multiple. For Teck shareholders it’s a good win.”
But Ikea Canada was a logical buyer, given its 2013 acquisition and because of the objectives outlined by the Swedish- based parent. Calls to Ikea seeking a comment weren’t returned.
“Because we want to become energy independent, we’re making the switch to renewable energy,” said a note on its website. “We’re ‘ walking the walk’ by investing in renewable energy that will exceed our company needs worldwide by 2020.”
Ikea also produces an annual sustainability report. In its 2016 report it referred to its plans to make 600 million euros of investments in wind and solar projects.
“The new commitment builds on the 1.5 billion euros invested in wind and solar since 2009 in 314 off- site wind turbines and 700,000 solar panels on Ikea buildings,” it said.