Positioning for a growth market -- TransAlta footholds in wind

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Canada's largest investor-owned power producer, TransAlta Corporation, has bought a C$5 million share of Vision Quest Windelectric, making it part owner of a prominent Canadian wind energy developer. TransAlta, with C$6 billion in assets and 8000 MW of generating capacity, powered mostly by coal, is one of the largest emitters of greenhouse gases in Canada and among the most active in the emerging emissions reduction market.

At its annual general meeting in May the Calgary power producer unveiled a C$100 million environmental fund for investments in renewable energy, greenhouse gas offset projects and clean coal technology research and development. Because TransAlta has no plans to buy and consume Vision Quest wind power, it will not reduce its emissions through this deal, which means the investment is from the renewable energy portion of the fund. "It gives TransAlta an entry point into alternative generation technologies and supports our sustainable development goals," says TransAlta president Steve Snyder.

Vision Quest, also based in Calgary, has six utility-scale wind turbines operating in Alberta and is in the process of installing 14 more, which will give it a total of 13 MW of wind capacity before the end of the year. Managing director Fred Gallagher says TransAlta is making a "significant investment" in his company and will provide valuable input and directional support at the board level. "TransAlta will have a positive influence on us from the point of view that it has some maturity we've probably lacked to date," says Gallagher. "It's supportive of our growth philosophy and what we believe to be the business fundamentals. I think it's going to add to the strengths we currently have."

Real leverage

TransAlta director of operations for sustainable development, Mike Kelly, believes his company will give Vision Quest "some real leverage" in terms of market positioning, and acquiring new contracts and markets for green power. The Vision Quest investment will show "fast growth," says Kelly.

"We've got a minority share of the company and we wanted it to be that way because they're the entrepreneurs. As a minority shareholder there's some cash flow there, and over the long run that looks pretty positive to us. According to our calculations, this is a rapidly growing business with good returns. It has a business model that we like a lot, and it matches what we're looking for."

The investment in Vision Quest is not the first indication of TransAlta's interest in wind energy. In June, it announced the purchase of 24,000 tonnes of wind-generated emissions reductions from the German electric company Hamburgische Electricitäts-Werke AG (Windpower Monthly, July 2000).

Paul Vickers, TransAlta's director of sustainable development, says the contract with Hamburgische Electricitäts-Werke (HEW), which runs from this year through 2008, is of a shorter term than the kinds of arrangement TransAlta would normally pursue, but was done with specific policy objectives in mind. The deal was designed, he says, to help convince European governments that international emissions reduction trading not only works, but can be done "with fewer impediments and lower transaction costs than they currently seem to be contemplating."

He says TransAlta is frustrated by the lack of action by the Canadian government on the issue. "After two-and-a-half years of talking and putting concrete proposals forward, it doesn't seem to be making any difference. So there was no advantage to doing exactly this deal in Canada."

The HEW reductions cost TransAlta between C$1 and C$4 per tonne, says Vickers. He would not disclose the exact amount.

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