SkyPower Wind Energy Fund LP (the “Partnership”) announced today that Terrawinds Resources Corp. (“Terrawinds”) continues to experience delays in obtaining various regulatory approvals for its 201 MW wind park in RiviÃ¨re-du-Loup, QuÃ©bec (the “Facility”). Terrawinds had initially expected to complete the installation of up to 26 test wind turbines (the “CRCE Phase”) prior to December 31, 2006. As a result of unanticipated delays in obtaining various regulatory approvals, Terrawinds will not be able to complete the construction of the CRCE Phase before the end of 2006.
The Partnership believes that continuing to pursue the necessary approvals and completing the construction of the Facility is in the best interest of unit holders and remains committed to completing the construction of the CRCE Phase as soon as practicable and, assuming a successful CRCE Phase test, completing the installation of up to 108 additional wind turbines (the “Infill Phase”) at the Facility in 2007. The Partnership will continue to assess other potential strategic options to maximize unit holder returns while pursing the necessary approvals.
Terrawinds continues to work diligently with local municipal officials to obtain the appropriate rights-of-way in connection with the CRCE Phase and Infill Phase turbines. In order to facilitate the ongoing rights-of-way and permitting negotiations, Terrawinds has, at the request of the municipalities, offered to reduce the size of the Facility by 20 wind turbines, from 201 MW to 170 MW. Terrawinds will work with the MunicipalitÃ© rÃ©gionale de comtÃ© de RiviÃ¨re-du-Loup (“MRC”) and local municipalities to identify, if possible, mutually agreeable alternative locations for these 20 wind turbines for installation during the Infill Phase in 2007.
In addition to delays in obtaining rights-of-way and local permitting approvals, Terrawinds is experiencing delays in obtaining other regulatory approvals, including the environmental Certificate of Authorization and approvals from the Commission de protection du territoire agricole du QuÃ©bec (“CPTAQ”). It is now anticipated that the environmental and CPTAQ decisions may be delayed into the first quarter of 2007. As a result, it will be necessary to defer some portion of the CRCE Phase, along with the Infill Phase, into 2007. If the rights-of-way and other local permitting issues in the municipalities are obtained in the near term, it is possible that construction of a portion of the CRCE Phase could be completed in 2006.
As a result of the delays in the commencement and completion of the CRCE phase, unit holders are not entitled to their full CRCE deduction for 2005 as originally contemplated. The Board of the Partnership has reviewed and approved a proposal to amend the Flow-Through Subscription Agreement entered into between Terrawinds and the Partnership to permit Terrawinds to complete the CRCE Phase in 2007 and provide unit holders with a 2007 CRCE deduction for the balance of the CRCE deductions not eligible to be claimed in 2005, thereby providing unit holders with the entire CRCE deduction originally anticipated, split between 2005 and 2007. The Partnership is in the process of applying for an advance income tax ruling from the Canada Revenue Agency (“CRA”) confirming the anticipated result of the proposed amendment.
Based on the amount of CRCE eligible expenditures incurred in 2006, unit holders who claimed the full amount of the CRCE deduction allocated to them in 2005 (or who claimed CRCE in 2005 in excess of the proportion that Terrawinds will incur in 2006) will be required to pay tax on any additional income arising in their 2005 taxation year as a result of the reduction in the CRCE that can be claimed by them. Income taxes payable by individual unit holders as a result of the reduction in the 2005 CRCE deduction will be due and payable by April 30, 2007. Provided an individual unit holder pays any such income tax by April 30, 2007, there will be no interest or penalties assessed against the unit holder in accordance with current CRA regulations. The Partnership will provide unit holders with additional information regarding the CRCE adjustments for 2005 when the amounts deductible for 2005 can reasonably be determined based on the amount of CRCE eligible expenditures ultimately incurred by Terrawinds in 2006.
Terrawinds may be subject to certain taxes and penalties as a result of the anticipated shortfall in CRCE expenditures incurred in 2006, which may increase the estimated project costs by up to approximately 2.5%.
The Partnership continues to closely evaluate the progress of the Facility and the potential impact of the above developments on construction costs, turbine layout and number of turbines, energy production, financing and projected profitability of the Facility, including its impact on the profitability of Terrawinds and the Partnership, and continues to assess other potential strategic options to maximize unit holder returns. The Partnership will continue to provide updates to unit holders on the progress and status of the Facility as new developments or information is available. Failure to obtain all the necessary authorizations, approvals, rights-of-way and permits or to secure any necessary contracts, contract revisions or other accommodations with various third parties that may be required could result in the construction of the Facility not being completed or could otherwise have a material adverse effect on the Partnership. In addition, failure to receive a favourable advance income tax ruling from CRA regarding the proposed amendment to the Flow-Through Subscription Agreement could result in a reduction of the overall anticipated CRCE deduction for unit holders.
About SkyPower Wind Energy Fund LP
Pursuant to a Flow-Through Subscription Agreement dated December 23, 2005, the Partnership invested in common shares of Terrawinds. Terrawinds is a Canadian corporation that is constructing, and intends to operate, up to 26 test wind turbines for purposes of conducting certain tests and, if such tests are successful, intends to construct and operate up to an additional 108 wind turbines to create a wind energy project near RiviÃ¨re-du-Loup, QuÃ©bec. The Facility will generate electricity for sale to Hydro-QuÃ©bec pursuant to a 21-year power purchase agreement (the “Power Purchase Agreement”).
Certain statements included in this news release constitute “Forward-Looking Statements” within the meaning of the Securities Act (Ontario). Such forward-looking statements involve unknown risks, uncertainties and other factors including risks in obtaining permits, authorizations, rights-of-way and approvals required for construction, construction risks, possible failure of the test phase, risks relating to the Power Purchase Agreement, requirement for additional financing, variable wind resource and associated wind energy production, turbine design and local climatic conditions, risks relating to interconnection, reliance on key suppliers and one customer and regulatory risks. These risks and uncertainties as well as additional information are outlined in the Partnership’s continuous disclosure documents. These risks may cause the actual results, performance or achievements of the Partnership to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
The forward-looking information contained in this news release represents the expectations of the SkyPower Wind Energy Fund LP as at October 11, 2006 and, accordingly, is subject to change after such date. However, SkyPower Wind Energy Fund LP expressly disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable law.
For further information
Investor Contact: David Bacon, Vice President, Finance, (416) 979-4625, of SkyPower I GP Inc., General Partner to the SkyPower Wind Energy Fund LP (www.skypowerwindenergyfund.com).
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