Lily Nguyen
Globe & Mail
September 15, 2000

Plans to spend $400-million on country’s largest co-generation facility.

TransAlta Corp. said yesterday that it plans to spend $400-million on a Sarnia, Ont., power project that could produce enough electricity to light up a city of 500,000.

Observers said the Calgary-based company’s plans to build, own and operate what will be Canada’s largest co-generation plant is a sign that Ontario’s emerging open market for electricity is catching fire.

"It’s really one of the first projects to go forward under the new open Ontario market," said Steve Snyder, TransAlta’s chief executive officer.

Tom Adams, the executive director of Energy Probe, a Toronto- based environmental think tank, hailed the news as a sign that Ontario’s competitive power market is finally becoming a reality.

"It’s a good sign. It’s a really good sign," Mr. Adams said.

The plant, which was originally scheduled for early 2001, is now set for October of 2002.

The natural-gas-fired project, which will produce 650 megawatts of electricity per hour, enough to meet 2.5 per cent of the province’s demand, has been in the works for more than two years. In June, 1998, TransAlta announced it was selected for the power project being proposed by major industrial consumers such as Bayer Inc., Dow Chemical Canada Inc., Imperial Oil Resources Ltd., Nova Chemicals (Canada) Ltd. and Shell Canada Ltd. But as deregulation of the power industry in Ontario stalled, so too did the power project. It’s only now that the company has been able to move ahead, Mr. Snyder said.

"We had to know the rules by which we could sell the power," he said. "We had to wait for Ontario."

Sam Kanes, an analyst with Scotia Capital Inc. in Toronto, said "I think the Ontario government’s happy to see any development, given this delay to open up market and some confusion still over the rules."

Mr. Adams of Energy Probe said that if "there had been a stronger, more stable institutional environment, they could have come to this conclusion earlier."

Deregulation was supposed to happen this November, he said. Instead, the province has shuffled it off to some indeterminate date in the future – although he added he was hopeful it would happen by the middle of next year.

Mr. Snyder said that although the timing of Ontario’s open market is a concern, it’s not enough of one to stall the project any longer.

"We’re patient," he said. "Any market we’ve been in, be it Australia, New Zealand, Mexico ro the U.S., it does take time to go from an unregulated market to a regulated market." He added that the regulatory regime is "getting clearer," and TransAlta has plans to do another project of similar size in Ontario.

But in the intervening time from the initial announcement of the project, many of the original players in the project dropped out leaving only Bayer, Dow Chemical and Nova as acting participants.

In the deal, TransAlta will take over those companies’ existing facilities generating 210 megawatts, build a new plant supplying 440 megawatts, and provide Bayer, Dow and Nova with roughly 175 megawatts.

"They’ve outsourced their electricity and their steam," Mr. Snyder said, adding that the three remaining large customers are enough to make the project viable. That leaves 475 megawatts that can be sold into the market to provide consumers’ needs.

Mr. Adams noted that the project is good for the environment, since natural-gas-fired plants spew less pollution into the air than coal-burning plants. That’s even after environmental initiatives such as one announced by Ontario Power Generation yesterday to spend $250-million over three years to clean up its generators.

Mr. Adams dismissed it as a "Band-Aid solution."