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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--TransCanada Corporation (NYSE:TRP) (Calgary, Alberta) last month terminated three power-purchase agreements (PPAs) with coal-fired power plants in Calgary following that province's decision last November to phase out coal-fired power generation by 2030. The PPAs, which totaled about 1,678 megawatts (MW), were with the Sheerness, Sundance A and Sundance B power stations. Units of TransAlta Corporation (NYSE:TAC) (Calgary) own the Sundance stations and 50% of the Sheerness plant. The other 50% of Sheerness is owned and operated by a subsidiary of ATCO Limited (TSX:ATC.X) (Calgary).
TransCanada said it would take a pre-tax charge of about $179 million to reflect the diminished value of its original investment in the PPAs. "The agreements contain a provision that permits the PPA buyers to terminate the PPAs if there is a change in the law that makes the agreements unprofitable," Bill Taylor, TransCanada's executive vice-president, said in a statement March 7. "We have made the decision to exercise this right."
Chris Bourdeau, a spokesperson for the Alberta Energy Ministry, confirmed TransCanada's right to terminate the PPAs. "What is driving the profitability of these arrangements right now though is the historically low electricity price we are seeing in Alberta," he said in a statement emailed to Industrial Info.
TransCanada's PPA with Sundance A was scheduled to expire in 2017, while its PPA with Sundance B had a 2020 expiration date. The Sheerness PPA also expires in 2020. The plants will continue operating, and the Alberta Balancing Pool is expected to assume ownership of the PPAs.
Taylor said TransCanada's move was not "a full retreat from the Alberta power market," just the coal component of that market. "TransCanada has a robust gas-fired cogeneration business [in Alberta] totaling 438 MW at four sites. These low-cost and low-CO2 emitting gas units are expected to perform well even in today's market environment." The company sees future investment opportunities in Alberta in renewable and gas-fired generation.
TransCanada's move last month followed a decision last December by Enmax, Calgary's municipal utility, to end its PPA for up to 663 MW of coal-fired power. Enmax's decision was the first such PPA abrogation.
The PPA terminations follow Alberta's provincial elections last May, which were won by the New Democratic Party (NDP). Last November, shortly before the U.N. summit on climate change, Alberta's premier, Rachel Notley, unveiled the province's new climate strategy, which included a carbon tax on coal-fired generation and a cap on oil sands emissions. A carbon tax of $20 per tonne of carbon would become effective for coal-fired generators in January 2017, and it would rise to $30 per tonne in January 2018.
In 2014, 55% of Alberta's electricity was generated from 18 coal-fired generators, according to a fact sheet supplied by the premier's office. Strict federal standards are expected to force the closure of 12 of those generators by 2030. Alberta's climate change strategy targets the other six coal-fired generators. The province's Climate Leadership Plan aims to have zero emissions from coal-fired generators by 2030, and it envisions replacing that generation with gas-fired plants, renewables and zero-greenhouse gas emitting technologies.
In addition to trying to force the closure of Sheerness Units 1 and 2 by 2030, the province also wants to close Keephills Unit 3 as well as Genesee Units 1, 2 and 3 by that date, according to the government's fact sheet.
"Our goal is to become one of the world's most progressive and forward-looking energy producers," Notley said last November in unveiling the strategy. "We are turning the page on the mistaken policies of the past, policies that have failed to provide the leadership our province needed."
Opposition leader Brian Jean was quick to criticize the new direction laid out last November by the NDP. He said the government's climate-change strategy will make "more parts of our energy sector unviable and on an accelerated timeline. This is the first domino to fall for workers in the electricity industry. The government has failed to show how it will look after the workers and families who will be impacted by these decisions."
Alberta's carbon taxes reportedly could generate up to $3 billion a year in new revenue, but Notley pledged to reinvest the funds in Alberta. Some of the revenues will be invested in measures to reduce pollution, including clean-energy research and technology, low-polluting public transit and programs to help Albertans reduce their energy use. Other revenues will be invested in an adjustment fund to help individuals and families make ends meet and provide transition support to small businesses, First Nations and people working in affected coal facilities.
In announcing the province's climate-change strategy, Notley said three principles would guide the provincial government's ramp-down of coal-fired electricity: maintaining reliability, providing reasonable electric price stability and ensuring that capital is not unnecessarily stranded.
Renewables, primarily wind power, are expected to replace about two-thirds of the coal-fired capacity that will be shuttered. New and existing gas-fired generation will back up the renewables and replace the coal-fired generation that will be retired. The province reportedly aims to have renewables account for 30% of electric production by 2030.
"The NDP is taking Alberta in a bold new direction on energy and environmental matters," noted Britt Burt, Industrial Info's vice president of research for the Electric Power Industry. "But bold changes can backfire, with significant negative consequences, when they aim to transform entire sectors like power and oil sands in a relatively short period of time. We'll have to keep an eye on Alberta's electric and energy markets to see how they respond to the NDP's climate-change strategy."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 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, 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/.
TransCanada said it would take a pre-tax charge of about $179 million to reflect the diminished value of its original investment in the PPAs. "The agreements contain a provision that permits the PPA buyers to terminate the PPAs if there is a change in the law that makes the agreements unprofitable," Bill Taylor, TransCanada's executive vice-president, said in a statement March 7. "We have made the decision to exercise this right."
Chris Bourdeau, a spokesperson for the Alberta Energy Ministry, confirmed TransCanada's right to terminate the PPAs. "What is driving the profitability of these arrangements right now though is the historically low electricity price we are seeing in Alberta," he said in a statement emailed to Industrial Info.
TransCanada's PPA with Sundance A was scheduled to expire in 2017, while its PPA with Sundance B had a 2020 expiration date. The Sheerness PPA also expires in 2020. The plants will continue operating, and the Alberta Balancing Pool is expected to assume ownership of the PPAs.
Taylor said TransCanada's move was not "a full retreat from the Alberta power market," just the coal component of that market. "TransCanada has a robust gas-fired cogeneration business [in Alberta] totaling 438 MW at four sites. These low-cost and low-CO2 emitting gas units are expected to perform well even in today's market environment." The company sees future investment opportunities in Alberta in renewable and gas-fired generation.
TransCanada's move last month followed a decision last December by Enmax, Calgary's municipal utility, to end its PPA for up to 663 MW of coal-fired power. Enmax's decision was the first such PPA abrogation.
The PPA terminations follow Alberta's provincial elections last May, which were won by the New Democratic Party (NDP). Last November, shortly before the U.N. summit on climate change, Alberta's premier, Rachel Notley, unveiled the province's new climate strategy, which included a carbon tax on coal-fired generation and a cap on oil sands emissions. A carbon tax of $20 per tonne of carbon would become effective for coal-fired generators in January 2017, and it would rise to $30 per tonne in January 2018.
In 2014, 55% of Alberta's electricity was generated from 18 coal-fired generators, according to a fact sheet supplied by the premier's office. Strict federal standards are expected to force the closure of 12 of those generators by 2030. Alberta's climate change strategy targets the other six coal-fired generators. The province's Climate Leadership Plan aims to have zero emissions from coal-fired generators by 2030, and it envisions replacing that generation with gas-fired plants, renewables and zero-greenhouse gas emitting technologies.
In addition to trying to force the closure of Sheerness Units 1 and 2 by 2030, the province also wants to close Keephills Unit 3 as well as Genesee Units 1, 2 and 3 by that date, according to the government's fact sheet.
"Our goal is to become one of the world's most progressive and forward-looking energy producers," Notley said last November in unveiling the strategy. "We are turning the page on the mistaken policies of the past, policies that have failed to provide the leadership our province needed."
Opposition leader Brian Jean was quick to criticize the new direction laid out last November by the NDP. He said the government's climate-change strategy will make "more parts of our energy sector unviable and on an accelerated timeline. This is the first domino to fall for workers in the electricity industry. The government has failed to show how it will look after the workers and families who will be impacted by these decisions."
Alberta's carbon taxes reportedly could generate up to $3 billion a year in new revenue, but Notley pledged to reinvest the funds in Alberta. Some of the revenues will be invested in measures to reduce pollution, including clean-energy research and technology, low-polluting public transit and programs to help Albertans reduce their energy use. Other revenues will be invested in an adjustment fund to help individuals and families make ends meet and provide transition support to small businesses, First Nations and people working in affected coal facilities.
In announcing the province's climate-change strategy, Notley said three principles would guide the provincial government's ramp-down of coal-fired electricity: maintaining reliability, providing reasonable electric price stability and ensuring that capital is not unnecessarily stranded.
Renewables, primarily wind power, are expected to replace about two-thirds of the coal-fired capacity that will be shuttered. New and existing gas-fired generation will back up the renewables and replace the coal-fired generation that will be retired. The province reportedly aims to have renewables account for 30% of electric production by 2030.
"The NDP is taking Alberta in a bold new direction on energy and environmental matters," noted Britt Burt, Industrial Info's vice president of research for the Electric Power Industry. "But bold changes can backfire, with significant negative consequences, when they aim to transform entire sectors like power and oil sands in a relatively short period of time. We'll have to keep an eye on Alberta's electric and energy markets to see how they respond to the NDP's climate-change strategy."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 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, 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/.
