Just a couple of hurdles remain in a two-decade effort by Vancouver’s Sea Breeze Power to join the ranks of independent power producers who’ve made it from wannabe to commercial electricity producer.
Environmental approvals are in place and a contract with Hydro secured. Now the company needs to conclude negotiations with three first nations who will receive a share of the economic benefits of the Knob Hill wind farm project on northern Vancouver Island, Sea Breeze president and CEO Paul Manson said Tuesday.
The company recently announced a deal with International Power Canada that gives the subsidiary of International Power, a British energy giant, majority ownership of the 99-megawatt project, but provides an option for Sea Breeze and the first nations to purchase equity positions in Knob Hill.
The deal also provides Sea Breeze a developer’s fee as well as continuing royalty revenue for the duration of the energy purchase agreement with Hydro.
The deal is similar to the typical arrangement that transpires when a junior mining company with a viable metal or mineral deposit hands over controlling interest to a senior miner with the financial resources to develop it.
By contracting with International, Sea Breeze appears to have made the leap from prospect to legitimate developer – an achievement that over the past decade has eluded proponents of dozens of electricity projects who assumed they were home free when they were awarded purchase agreements by Hydro, only to find out that their resources or their financing were not adequate.
The project is part of BC Hydro’s 2008 Clean Call, which wrapped up earlier this month with power purchase agreements awarded to 27 green power projects promising a total of 3,300 gigawatt hours per year of new electricity supply – enough to power nearly 300,000 homes.
That’s about a third more power than Hydro believes it needs to add from independent producers over the next five or six years, although the Crown corporation anticipates about a 30 per cent attrition rate for projects that were awarded contracts.
One possible wrinkle for Sea Breeze is that International last week made a joint announcement with France’s GDF Suez that the companies were merging to form the world’s largest independent power producer – with Suez holding a 70 per cent interest in the combined company.
Manson could not say much about the announced deal, but noted that he was meeting with the president of International Power Canada this week, and that media reports suggest management of International will remain intact.
“From my standpoint I’m certainly hopeful. I don’t expect that this transaction around International Power will have any sort of detrimental impact on what we are working toward with them,” Manson said.
Sea Breeze has been “pretty vague” about the structure of its deal with International, Manson said.
“That’s largely because we have confidentiality provisions. They are negotiating with other people in the province on other projects and they don’t want to be showing their hand too much as to how they do things.”
Sea Breeze began as a developer of renewable generation 20 years ago and Knob Hill is the company’s first project to win a contract with Hydro.
The project is bolstered by as many as seven years of data.
“The restructured ‘New International Power’ will be the largest independent power producer in the world [with estimated annual sales of $18 billion Cdn] so hopefully we’re in with good company here,” Manson said.
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