Pipeline firm invests in wind transmission

CANADA: Canadian pipeline giant Enbridge has signalled its entry into the electricity transmission sector with the purchase of a stalled cross-border project that, if built, would bring hundreds of megawatts of new Montana wind-energy projects online.

Calgary-based Enbridge, which owns and operates the world's longest crude-oil pipeline system and Canada's largest natural-gas distribution company, will pay C$70 million (US$71.6 million) to acquire the 345-kilometre, 230kV Montana-Alberta Tie Line (MATL) project and its developer. The company is buying all the outstanding common shares of Toronto-based Tonbridge Power for C$20 million - C$0.54 a share - and will repay about C$50 million of debt incurred during the development of MATL. Tonbridge stock was trading at C$0.25 a share prior to the announcement of the sale.

Enbridge said it would spend another C$300 million to complete construction of the 300MW line, as well as an upgrade that would boost capacity to 550-600MW. About half of the cost will be funded through a low-cost, 30-year US$161 million loan from the US Department of Energy's transmission utility, the Western Area Power Administration. This loan was awarded to Tonbridge as part of the Obama administration's economic stimulus spending.

The pipeline firm has been looking for opportunities to expand into the electricity transmission sector, where tens of billions of dollars will be invested across North America to replace ageing infrastructure, remove bottlenecks and connect renewable-power projects to distant markets.

"The MATL project is the first step in Enbridge's plans to develop a power transmission growth platform," said J. Richard Bird, the company's chief financial officer. "Power transmission fits well with Enbridge's overall energy-infrastructure value proposition, typically involving long-lived assets with stable cash flows and earnings."

Strong foundations

The local fundamentals of the MATL project are particularly strong, said Bird. The line is fully permitted and ties strong power demand in Alberta - where the oil and gas sector is helping drive an expected average load growth of 3.2% a year over the next 20 years - to wind-energy supply in northern Montana. Lack of high-capacity transmission has stymied the ability of developers in Montana to bring projects online.

Three wind-energy producers have acquired long-term capacity rights on the MATL line and will connect projects at its midpoint, with 300MW of wind power flowing north into Alberta and 250MW south to Great Falls. Western Area Power Administration holds the rights to the remaining 50MW of southbound capacity.

The project has had its share of problems. Construction halted in June after a dispute with the general contractor building the project. Two weeks later, the company announced it needed another C$25 million to finish the project, a shortfall partially attributed to legal clashes with Montana landowners. Tonbridge later doubled this estimate to C$50 million.

The MATL line should be completed in mid-2012. In the meantime, Enbridge is considering further transmission investments, including the Green Line, a 200-kilometre extension of MATL that would link Montana wind to load centres in the US Pacific Northwest.

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