Canadian Hydro team return to sector

CANADA: The team behind what was Canada's largest wind producer before its takeover last year has raised C$85 million in private equity to fund a return to the renewables sector.

John and Ross Keating, who founded Calgary-based Canadian Hydro Developers, and Kent Brown, who was chief executive of the company when rival TransAlta Corporation bought it for C$1.6 billion last year, launched BluEarth Renewables in September.

At the time of the takeover, Canadian Hydro was the largest wind power producer and the largest dedicated renewable energy developer in Canada, with 21 operating wind, run-of-river hydro and biomass facilities totalling 694MW - and more than 1.8GW in its pipeline.

BluEarth brings experience to bear in a market where the recession has left some projects and developers struggling to move forward, says Brown, who is president and chief executive of the new company.

"I think it is an amazing time because we are not really starting from square one. We are a well-capitalised group with 20 years of experience. We have a track record we can take and use to capitalise on the opportunities that are out there," he says.

The company's game plan is to acquire well-advanced projects that are stuck because of a lack of capital or experience. "Our view is that there are a lot of projects that are likely to be good projects, but for some reason they need help," says Brown.

It is also looking to buy operating assets and is considering an acquisition. Over the longer term, Brown adds, BluEarth will look to develop its own greenfield projects.

"We want to build a significant Canadian renewable energy company in the next five years with a portfolio to become the renewable energy market leader in North America," he says.

BluEarth has so far raised C$85 million in committed equity from ARC Financial, an energy-focused private equity firm in Calgary, and its founding team. "We will continue to look for other private equity players in the future, but right now we have what we need to execute our plan," says Brown.

Although BluEarth is interested in the US market, its early focus will be on Canada. Specifically, says Brown, it is looking at Ontario, which has a feed-in tariff programme for renewable energy; British Columbia, which passed a Clean Energy Act this year targeting new renewable supply for domestic use and export; Saskatchewan, which is adding 200MW of wind to its grid; and Quebec, which is looking to private producers for new wind and run-of-river hydropower.

The company's home province of Alberta is not among its current target markets. Alberta has Canada's only competitive wholesale market for electricity and, according to consultants EDC Associates, spot prices in 2010 are expected to average only C$50/MWh, while the average price of a three-year forward strip from October 2010 to September 2013 is even lower: C$47.38/MWh.

"With the power price where it is today and where the forward price is tomorrow, it does not send a clear market signal to developers to go and build new projects, whether it's renewables or conventional generation," says Brown. "When there's a clear market signal for us to look to Alberta, we will," he adds.

Like Canadian Hydro, BluEarth will not focus on a single technology, but instead is looking at hydro, wind and solar.

The Keating brothers will act as executive advisors to BluEarth and sit on its board of directors, with John as chairman.

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