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Canada power giant enters wind business -- TransAlta adds industry credibility

TransAlta Corporation, Canada's largest investor-owned electricity generating company, has launched its bid to become the country's leading developer of renewable energy with the C$37 million purchase of Calgary's Vision Quest Windelectric Inc. Calgary-based TransAlta, which already holds a C$13 million minority stake in the private wind power company, will also assume Vision Quest's C$32 million debt. The acquisition is still subject to regulatory approval, but TransAlta expects Vision Quest to be a wholly owned, independently operated subsidiary by January.

"The purchase of Vision Quest is the cornerstone of our renewable energy strategy," says chief executive Steve Snyder. "TransAlta's long term goal is to have 10% of our total generation from renewable energy." TransAlta currently has 9000 MW of generating capacity in operation or under construction, about three quarters of which is coal-fired. It wants to even out that mix by taking a "multi-fuel, balanced approach" to developing its generation portfolio, says Snyder.

The 10% target represents about 1000 MW of capacity, says the company's Tim Richter. TransAlta expects to spend about C$1 billion over the next ten years to meet it. "We're not saying it's going to be exclusively wind, because we don't think it will be. We're certainly putting a stake in the ground on the future of wind because we think there's a great deal of potential. But that said, we don't want to limit our opportunities."

Vision Quest, however, expects to claim a big piece of TransAlta's renewables budget. "When we look at that goal we just see wind," says executive director Jason Edworthy. "There's no doubt when we look around the world, wind is the most viable renewable energy source, the most competitive and most mature in the marketplace."

Although Vision Quest, which owns and operates 67 turbines with a combined capacity of 44 MW, is one of Canada's most successful wind companies, as a TransAlta subsidiary it will be better positioned to expand more rapidly, says Edworthy.

HELPS VISION QUEST

In particular, he says, it helps Vision Quest deal with the growing concerns over counterparty credit that has hit the North American power industry in the wake of the Enron scandal and the California power meltdown. "In order to do long term deals in today's environment, you have to be able to provide letters of credit to back them up. That's not something a small company is easily able to do," says Edworthy. "There is no doubt now we are investment grade. We meet the credit requirements of any market in North America."

The acquisition also opens up new opportunities for growth in the US and Mexico, where TransAlta is already active as a power producer, says Edworthy. "We're not going in to rush off and spread ourselves thin right away, but I think it gives us a much better launching pad and local people on the ground to help us." Reaction to the sale among Vision Quest's wind energy peers in Canada has been positive, says Edworthy. The consensus is, he says, that TransAlta's investment "gives a huge stamp of credibility to the industry" that will raise the profile, and the value, of other wind power companies as a result.

Edworthy, however, would not say whether Vision Quest's decision to sell sends the message that the capital-intensive wind industry is becoming a game for big players with deep pockets. "I wouldn't want to imply that it's inevitable. For us, at this time, it was the right decision. I think only time will tell if those things we saw and acted upon are all true. If they are, it might be a very tough time for smaller players."

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