TransAlta, Tidewater to Build Natural Gas Pipeline in Canada

Researched by Industrial Info Resources (Sugar Land, Texas)--TransAlta Corporation (NYSE:TAC) (Calgary, Alberta) plans to build a pipeline to bring Montney and Deep Basin natural gas to customers, as the electric power producer accelerates its shift away from coal-fired power -- with forecasts of generous government rewards for its renewables portfolio. Industrial Info is tracking $4.3 billion in active projects involving TransAlta.

With plans to mothball some coal plants in the near term, TransAlta has signed a letter of intent with Tidewater Midstream and Infrastructure Limited (TSE:TWM) (Calgary, Alberta), which has agreed to build a $150 million natural gas pipeline from its processing facility in central Alberta to TransAlta power plants.

The 75-mile pipeline -- with an initial capacity of 130 million cubic feet of gas per day and the potential for expansion -- will connect Tidewater's Brazeau River Complex in west central Alberta to TransAlta's Keephills and Sundance facilities near Edmonton, after it converts the coal-fired plants to natural gas generation. The company is hunting for more pipeline projects to meet its future gas needs.

After securing the pipeline deal and receiving clarity on federal rules, TransAlta plans to convert six of its coal-fired generating units to natural gas by 2022, a year earlier than planned. The $300 million project is expected to cut emissions from the facilities by half and extend their useful life until the mid-2030s.

The power producer also plans to temporarily shut several uneconomic coal-fired generators amid a weak power market, until demand grows or the electricity market is overhauled after the coal phase-out.

Click the image at right for a graph showing opportunities being evaluated by TransAlta.

TransAlta is one of the largest coal-fired power producers in Alberta. But it's also a major electricity provider from renewable sources, owning 90% of the province's hydro capacity. The company expects to reap $30 million to $50 million in annual credits from Alberta's revamped carbon tax on large industrial operations.

"The recent announcement by the provincial government will more competitively position our existing renewable generation," said Dawn Farrell, TransAlta's chief executive officer. "By treating existing renewable generation equally, we expect to eventually receive $30 million to $50 million annually in credits attributable to our existing renewable assets."

The Pan-Canadian Framework on Clean Growth and Climate Change adopted in late 2016 by the Government of Canada and most provinces and territories, including Alberta, is expected to result in the carbon price rising to $40 per ton of carbon dioxide (CO2) in 2021 and to $50 per ton of CO2 in 2022, thereby increasing the value of the carbon credits in the future. The system rewards top performers with credits and penalizes high emitters with a tax, in the hopes that they will improve operations.

Plants that are not large emitters can opt into the program, meaning TransAlta can add its suite of hydro, solar and wind units to the carbon system and receive credits, because they produce no emissions.

The company also has proposed a $2.5 billion hydro pumped storage project at its existing Brazeau Hydro Station in Drayton Valley. If the project secures a long-term contract to supply power, it could be operational as early as 2025. For more information, see Industrial Info's project report.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle TM, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com