May 3, 2002

Deal unites Alberta electricity generators

TransAlta, Epcor to split plant costs

Grant Robertson

TransAlta Corp. and Epcor Utilities Inc. - two power producers looking to grow significantly under electricity deregulation - are in talks to begin sharing costs on more than $2-billion worth of new projects.

The companies announced a proposed partnership Thursday, a move that allows the Alberta utilities to expand faster, while keeping costs in check, officials said.

The deal, which is expected to be completed by August, will see TransAlta take a 50 per cent stake in Epcor's proposed $700-million Genesee 3 power plant expansion.

Epcor, Edmonton's municipally owned utility, will jointly develop the expansion of TransAlta's $1.8-billion Keephills generator.

As well, Epcor has the option to take a 50 per cent stake in a new $400-million plant being built by TransAlta in Sarnia, Ont.

"This is a very capital-intensive business. Most of our projects cost $500 million. But the challenge is how may of those can you do," TransAlta chief executive Steve Snyder said.

"We want to grow and we want to balance risks. We can do more though partnerships."

The proposed pact is part of a memorandum of understanding signed by the companies. The deal won't close until each utility has had the chance to inspect the other firm's projects.

The companies will also seek approval from the competition bureau for the partnership.

Epcor, which has made recent investments in the newly deregulated Ontario market, said the partnership in TransAlta's new gas-fired Sarnia plant was a key piece of the deal.

"We had been looking at Ontario for generation assets," Epcor chief executive Don Lowry said.

"When you have a strong retail base in one particular area, you balance that with (power production)."

Epcor has 1.3 million customers in Ontario, picked up when the company acquired Union Energy Inc., as well as the contracts to as many as 400,000 customers of Hydro One.

The 650-megawatt Sarnia plant is expected to begin producing electricity next year. One megawatt is enough to supply 1,000 averaged-size homes.

The proposed 900-megawatt expansion of TransAlta's coal-fired Keephills plant near Edmonton would be one of the biggest injections of new electricity to the Alberta power grid over the next decade.

TransAlta has expressed doubts in recent months that the Keephills expansion would go forward because of lagging power prices, transmission concerns and environmental regulatory hurdles.

Snyder said a firm decision on the Keephills project will be made by the two companies after Epcor has inspected the project.

"Both companies need some time to do their due diligence on each other's plants," Snyder said.

Copyright 2002 Calgary Herald