Capital Power shifts focus closer to home

By Dave Cooper, Edmonton Journal October 28, 2013

EDMONTON – Capital Power Corp. had its eyes set on diversifying assets across North America, but Alberta’s open power marketplace and strong growth prospects have convinced the Edmonton-based company that this province is where it’s at.

The company recently sold three merchant power plants in New England and made 220 staff reductions at U.S. and Canadian operations, paring its acquisition-seeking department.

“We have done a strategic review of where the markets are, and when you look at growth potential combined with the retirement of coal-fired power plants, it (the opportunity) is all here in Alberta,” said Brian Vaasjo, Capital Power’s chief executive.

The company reported strong third quarter earnings on Friday and expects to exceed its earlier financial forecast for the year.

When the sale of its three New England gas-fired plants is complete, that money will go toward paying its share of the 800 megawatt Shepard Energy Centre in Calgary.

Capital Power also is set to announce its own energy project, called Genesee 4 and Genesee 5. These two combined-cycle gas turbines would produce just over 1,000MW, and sit beside the company’s three other coal-fired power generators southeast of Wabamun Lake.

“We are close to announcing a partner, so it is not really appropriate to call it the Capital Power Energy Centre anymore,” said Vaasjo.

The project could be phased in, depending on the market, but there is no doubt it will be built.

“People in the industry here have a very positive outlook, and the significant thing is that we know the coal-fired plants will be retired on schedule — there will be 1,000MW retired by the end of this decade and another 3,000MW by the end of the next decade, plus AESO is talking about a four per cent increase in demand (each year), so there are lots of opportunities for new plants,” said Vaasjo.

Atco Power has plans for a 400MW Heartland power plant that could be approved in 2014 and TransAlta Utilities is planning for a gas-fired Sundance 7 turbine beside its existing coal-fired Sundance power plant.

“Right now we are looking at when our Genesee plant 4 would fit in. If Atco moved forward now, that might push us out another year, but not beyond 2020,” said Vaasjo.

The new federal rules surrounding the lifespan of coal plants (most will close by 2030 unless new technology is added) has given the industry a backstop and some certainty so that natural gas, wind or water replacements can be brought on.

In the U.S., the coal-powered plant retirements debate is a huge — and unresolved — issue.

Capital Power retains two small power plants in North Carolina that have contracts, and Vaasjo said the company would consider buying ones that came with contracts. But the merchant business — where plants bid on power demand — is now largely uneconomic in the U.S.

“It has changed down there. You have governments sticking their fingers in with the view of suppressing prices, or increasing supply on the green side where there is not the demand, which undercuts the (existing) merchant market producers. So the markets there are significantly less desirable for a power generator than Alberta,” he added.

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