Developer in search of market stability -- Moving north of the border

Leading US wind project developer Padoma Wind Power is making its first foray north of the international border, entering into a joint venture with Gale Force Energy of Toronto to develop more than 500 MW of wind power projects in central and eastern Canada. Gale Force Energy is a privately held wind farm developer with no projects in the ground but 2000 MW in the development pipeline. It has been "actively studying" Canada's wind market for several years, says Padoma CEO Jan Paulin.

Padoma's interest in the deal has been driven, in part, by the contrast between the Canadian and US positions on issues that affect the wind business, like climate change. "The Canadian market obviously has taken off in recent years, driven, at least to some extent, by the fact that Canada, unlike the United States, has seen that it is its social responsibility to go along with the rest of the world and do something about global warming," says Paulin.

The lack of long term, stable policy support for wind in the United States is also a factor, says Paulin, pointing to the all-too-familiar pattern of short-term extension of wind's production tax credit (PTC) resulting in the on-again, off-again project development that has driven up equipment and balance of plant costs.

Less dependent

"Therefore we see it as a well-timed opportunity to diversify ourselves and not be so dependent on whatever Congress, at any given time, sees fit to do," he says. "The idea of having a comprehensive energy policy related to renewables obviously has never been accomplished and probably won't be, at least not as long as we have the current administration in the White House."

Padoma and Gail Force Energy plan to collaborate on a number of projects ranging in size from ten megawatt to 200 MW and located in Ontario, Quebec, Manitoba and Atlantic Canada, all regions where provincial governments and utilities are looking to add significant amounts of wind power to their electricity grids. "It is really a true joint venture in the sense that we will be co-funding the development activities. But that is really not what drove the joint venture in the first place, or the desire by Gale Force to get us involved," says Paulin.

Gale Force, as a relative newcomer to the wind business, lacks the kind of track record secured by Padoma, whose principals have developed, financed, built and operated more than 40 wind farms in the United States and Europe. Padoma was formed in 2001 by three former executives of SeaWest Windpower of California, including Paulin. The three left the company after a long standing disagreement with SeaWest's owner, Chuck Davenport, who at the time did not see the need for a strong investment partner. Earlier this year SeaWest was sold to AES Corporation, of Arlington, Virginia, with power plant operations across 27 countries.


Of Padoma's new Canadian partner, Paulin says: "They have smart people with good basic business backgrounds, but they don't have the wind specific knowledge we have. And that is really what we are bringing to the table." He adds, "When a market is relatively new there is an awful lot of opportunity for error and from any conceivable standpoint, it is a bad thing to go in and build sizeable wind farms representing hundreds of millions of dollars of investment that aren't optimised and don't work as well as they should."

At the same time, says Paulin, Gale Force brings the local knowledge and contacts that are "extremely useful" in the development business. It is a model the company has used successfully in the US, where it has similar joint ventures with US Windforce, covering the mid-Atlantic region, and with TradeWind Energy in the Midwest.

Paulin expects Padoma will not be alone in looking north for development opportunities. "I would say there would be other US developers who at some point might find an interest," he says. "We may be a little bit unique in that throughout our careers in the industry, which span a long time, we have developed projects overseas as well as in the US. We had extensive experience in the UK and Spain back in the 1990s, creating development organisations and doing projects, so we may be more inclined to think about overseas or cross-border type of activity than many other more traditional US-based companies."