Canada

Canada

Pulled out of credit crunch hole -- Utility rescues wind project

Nova Scotia Power has bought the development rights to the 45 MW Nuttby Mountain Wind Project from a cash-strapped developer that had hoped to be supplying the Canadian utility with power from the facility by the end of the year, but got into financial difficulty when the global credit crunch hit.

The developer, EarthFirst Canada, based in Calgary, put the project up for sale last August before it obtained court protection from its creditors in November (Windpower Monthly, December 2008). Nuttby Mountain was one of seven projects to win power purchase agreements in a request for proposals issued by Nova Scotia Power in 2007. "Becoming directly involved as the developer of the Nuttby wind project should allow it to advance, despite the challenges that exist in today's financial markets," says the utility's Robin McAdam.

Nova Scotia Power bought the rights to Nuttby for C$800,000, minus closing adjustments. The funds will be released from a C$1.125 million letter of credit EarthFirst had posted with the utility as security in case the project did not proceed. The purchase includes land leases and transmission interconnection rights as well as a provincial environmental permit.

The project is currently undergoing federal environmental assessment, which would qualify it for Canada's C$0.01/kWh ecoEnergy for Renewable Power (ERP) production incentive. The utility still has to do some geo-technical work on the site and procure turbines for the project. "We've been having conversations in the marketplace so we're starting to get a feel for where it is. We haven't done anything formal," says McAdam. It is still too early to say when construction might start, he adds.

Nova Scotia Power is legally required to supply 5% of its electricity sales from new renewable energy sources by 2010. But as the rules stand, power from a project owned by the investor-owned, monopoly utility cannot be used to meet the target. The government's aim when it passed the 5% mandate in 2007 was to bring competition into the market by fostering growth of an independent power (IPP) sector.

In the wake of the financial crisis, however, it is considering relaxing the rules to allow the utility to help bring wind projects forward that are stymied for lack of financing (Windpower Monthly, May 2009). "We don't have any certainty from government about whether it will count or not at this stage," says McAdam. Nuttby does qualify for the second phase of Nova Scotia's renewable energy standard, which requires that 10% of electricity come from new renewables by 2010.

More waiting

Several other developers who have contracts with the utility have said that they will not be able to get their projects built by the end of this year. McAdam declines to say which projects the utility might be interested in taking a stake in should the regulations be amended to allow it.

"We want to achieve the targets, so we're open to pursuing avenues that are comfortable for the IPP sector and of course the government," says McAdam. "It is too early to tell exactly what other steps might be most fruitful. But this was a project that was clearly stalled. The IPP sector knew it was for sale for a long time and it wasn't going any place, so it was clear we weren't crowding anybody out of the market with this step."

The government is also considering other options for helping move projects forward, including the provision of loan guarantees.

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