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Sell the farm

Atlantic Canada’s largest wind farm will soon be controlled by an American power giant.

Creststreet Power and Income Fund LP announced Friday it had signed a deal to sell Pubnico Point Wind Farm in Yarmouth County and its Mount Copper Wind Power project in Quebec to an affiliate of FPL Energy of Florida for $121.6 million.

FPL Energy is the power generation arm of FPL Group, a publicly traded energy company with US$16 billion in assets. It has 55 wind farms in 16 states and is the largest generator of wind power in North America and the second largest in the world, behind Acciona Energy of Spain.

Creststreet Power of Calgary said it decided to put the two wind farms up for sale after a strategic review process, partly due to the federal government’s decision to tax income trusts the same as corporations beginning in 2011.

“In the end, it was determined that the best course of action for unitholders was to realize on the partnership’s assets, distribute the proceeds to unitholders and wind up the partnership,” president and CEO Robert Toole said in a statement.

Charles Demond, the developer of the $50-million Pubnico wind farm, compared the deal to selling a house that you have to build by hand and really enjoyed, but you recognize the time is right to move on.

Mr. Demond and his three partners have been running the 17 turbines at Pubnico Point in partnership with Creststreet Power for the past three years. As part of the new deal they sold their stake in the project to Creststreet, so it could sell the project intact to FPL Energy.

Pubnico Point wind farm has been generating electricity since 2005 and sells directly to Nova Scotia Power through a long-term power agreement.

Mr. Demond would not disclose his partnership’s share of the purchase price, but said some of his share would go into financing the development of Atlantic Wind Power, a company interested in developing a wind farm venture in Pugwash.

“The price was sensible, but you sell it with a little tug at your heartstrings,” he said, adding the project never made a lot of money as it was built up through the operations phase. But the sale “unlocks its value.”

Atlantic Wind Power and a partner, Cobequid Area Windfarms, recently sold the right to develop a 45-megawatt wind project on Nuttby Mountain to EarthFirst Canada Inc. of Calgary for $75,000 cash, along with $374,400 in shares. The wind farm, with up to 22 turbines, will cost an estimated $90 million to $100 million.

Financial information released earlier this year showed electrical revenues at Pubnico Point in 2007 were $17.6 million, an increase from $15.3 million from 2006. The information also indicated wind production from the 17 turbines was five per cent below management’s long-term projection.

Creststreet Power’s second wind project in Quebec, located near Murdochville, was built at a cost of $90.8 million and has 30 turbines.

Steve Stengel, spokesman for FPL Energy, said his firm has been looking for an opportunity in Canada for some time, and the two Creststreet projects will allow the company to test the Canadian waters.

“Both projects are located in good wind regimes and use machinery that we have in our existing fleet,” he said in a telephone interview from the company’s headquarters in Juno Beach, Fla.

“Both have long-term power purchase agreements. These will be our first assets in Canada, but not our last.”

Mr. Stengel said the company buys existing operations and has developed projects from scratch. The Canadian projects are smaller than many of its existing farms, “but when you are getting into new territory you have to crawl before you can walk or run.”

Mr. Stengel and Mr. Demond said they believe the four jobs associated with operating the Pubnico farm are safe.

Mr. Demond said the entry of a big American player into the Atlantic Canadian market changes the face of the industry, but competition from large international players has been inevitable.

The deal requires approval by unitholders at a special meeting to be held in June, and by convertible debenture holders.

Creststreet units gained 42 cents to $6.40 at the end of trading on the Toronto Stock Exchange after being halted earlier in the day.

By Steve Proctor
Business Editor

The ChronicleHerald

19 April 2008