Capital Power reaches agreement with the Government of Alberta

Coal phase-out

As compensation for the capital that Capital Power invested in coal generating assets that will be "stranded" effective 31 December 2030, Capital Power will receive cash payments from the Province of US$52.4 million annually for 14 years, commencing 31 July 2017, for a total of US$734 million. Capital Power has agreed to continue to participate in the Alberta electricity market, support the local communities surrounding the coal facilities through 2030, and fulfill its pension and other commitments to employees.

"The settlement is reasonable because it repays shareholders for the stranding of capital due to the 2030 truncation of coal emissions, while also recognising the potential for extending the economic lives of certain facilities through conversion to natural gas," said Capital Power President & CEO Brian Vaasjo. "The Province committed to implement its Climate Leadership Plan in a way that would be fair to communities, companies and workers, and avoid unnecessarily stranding capital. Today's agreement fulfills that promise to our shareholders."

Power purchase arrangement dispute

The Province has also agreed to discontinue its legal action against Capital Power and to arrange for the Balancing Pool to accept Capital Power's termination of its role as a Buyer of the Sundance C Power Purchase Arrangement (the Arrangement), in accordance with the terms of the Arrangement. In consideration of these actions, Capital Power and its syndicate partners have agreed to pay the Balancing Pool US$39 million, of which Capital Power's portion is US$20 million or US$15 million after tax.

"On balance, this represents a fair settlement, having regard to uncertainty regarding the effective date of the termination and the PPA value decline because of market factors," continued Mr. Vaasjo.

"It is important that the uncertainty associated with these issues is behind us, so that we can continue to develop generation opportunities in Alberta, subject only to market and economic signals," Mr. Vaasjo added. "It also helps clear the way for us to consider ways in which we can utilise both new and existing assets to extend the life of the Genesee site as a major contributor to Alberta's power needs beyond 2030."

"In addition, we look forward to engaging with the Government of Alberta on the evolution of Alberta's electricity market design, including participation in stakeholder consultations regarding the design and introduction of a capacity market," Mr. Vaasjo concluded. "A well designed and fairly implemented capacity market can deliver an affordable power supply for Albertans, reduce market price volatility, and provide certainty that generation capacity will be there when needed."

Read the article online at: https://www.worldcoal.com/power/25112016/capital-power-reaches-agreement-with-the-government-of-alberta/