Capital Power reaches agreement on two issues with the Government of Alberta
EDMONTON, Alberta – Capital Power Corporation (Capital Power or the company) (TSX: CPX) today released details of agreements reached with the Government of Alberta (Province) relating to the 2030 coal phase-out and settlement of the Power Purchase Arrangement (PPA) dispute.
As compensation for the capital that Capital Power invested in coal generating assets that will be “stranded” effective December 31, 2030, Capital Power will receive cash payments from the Province of $52.4 million annually for 14 years, commencing July 31, 2017, for a total of $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 recognizing 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 $39 million, of which Capital Power’s portion is $20 million or $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 utilize 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.”
Capital Power will describe these developments and their impacts on the Company in more detail at its Investor Day in Toronto on December 15, 2016.
About Capital Power
Capital Power (TSX: CPX) is a growth-oriented North American power producer headquartered in Edmonton, Alberta. The company develops, acquires, operates and optimizes power generation from a variety of energy sources. Capital Power owns more than 3,200 megawatts of power generation capacity at 18 facilities across North America. More than 700 megawatts of owned generation capacity are in advanced development in Alberta and under construction in Kansas.