Serious rescue bid for half built project - New terms & conditions for Dokie 1

British Columbia's first wind farm - halted in the middle of its construction more than six months ago when its Canadian developer ran out of money - has been thrown a lifeline after GE Energy Financial Services (GEEFS) teamed up with local run-of-river hydro producer, Vancouver's Plutonic Power Corporation, in a bid to buy the project.

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The partners, however, are placing conditions on the purchase of the Dokie wind farm, including the renegotiation of several key agreements. Wind turbine installation at Dokie 1, the 144 MW first phase of the project in Peace region in north-eastern British Columbia (BC), was under way when its developer, EarthFirst Canada, obtained court protection from creditors last November (Windpower Monthly, December 2008). A 156 MW second phase was bid into BC Hydro's yet-to-be-completed 2008 call for clean power.

EarthFirst invested C$100 million in the project before ceasing construction, says Plutonic's Donald McInnes, but will not see any of that recouped in the sale. "In the agreement we have tentatively reached with the court there will not be a payment made to EarthFirst for the assets. It is simply a taking over the responsibility of unsecured creditors and negotiating with them on a settlement, looking after the turbine supply agreement and working with the existing secured creditor of the project."

EarthFirst has estimated it will take another C$250 million to complete Dokie 1, something McInnes says the partners have yet to confirm. "We've started a due diligence on construction costs, but at this time we won't comment on what we believe them to be." McInnes says there are "some significant conditions" to following through on the purchase.

A critical one is amending the power purchase agreement (PPA) with BC Hydro, awarded in a 2006 call for power. Under the earlier PPA, the green credits associated with the generation were retained by EarthFirst. "We are willing to put on the table that BC Hydro could purchase the green attributes to change the economics of the PPA," he says.

McInnes believes the government-owned utility should be motivated to see the project come to fruition. "There is an opportunity to, in good faith I think, negotiate a different PPA. It would still be to BC Hydro's advantage. You can probably make the project work economically and still deliver electricity below pricing they are going to see from the 2008 call for tender. So I think that is a bonus for everybody," he says.

Change of supplier

Another key agreement the partners are looking to change is the turbine supply agreement for the project's 48 Vestas 3 MW turbines. Five turbines have been erected on the site to date. "A number of different companies, since EarthFirst went into bankruptcy, have been negotiating concurrently with Vestas and other vendors on various aspects of the project to see what sort of a package they could put together to resuscitate the project from bankruptcy. GE has been working on this since late 2008," says McInnes.

GE and Plutonic also have to renegotiate agreements with four local First Nations bands with traditional territory in the vicinity of the project, as none of the deals negotiated by EarthFirst were transferable in the event of a bankruptcy. McInnes believes they will also be motivated to work with new owners. "I'm not sure of the exact dollar figure, but a significant proportion of the unsecured creditors are First Nation-owned companies," he says. "If we aren't able to get to yes, their chance of recouping what they are owned is significantly altered. They just won't get there."

Major proviso

Another major proviso to the sale will be to confirm the project's eligibility for a C$0.01/kWh subsidy for its first ten years of operation under the federal government's ecoEnergy for Renewable Power program. EarthFirst applied to the program and the Dokie project qualified, but a contribution was not signed because of the bankruptcy. "I don't think it will be difficult to reactivate that file, but it is certainly one of the conditions," McInnes says. "Unless the power purchase agreement's economics were to change to include that kind of a funding contribution, it would be a deal breaker if we couldn't make it up one way or another."

The Dokie purchase would be Plutonic Power's first foray into wind energy generation. It will allow the company to inject "great diversity" into its existing portfolio of hydroelectric projects while tapping into GE's experience in the wind sector, says McInnes. "The corollary to that for GE is, while they have a great ability in wind and certainly the financial wherewithal to do it on their own, GE doesn't have a management platform in British Columbia and they didn't want to use this, as I understand it, as an opportunity to create that platform."

The Dokie purchase would mark GEEFS' first wind power investment in Canada, although the company is the financial backer for four wind power projects totalling 295 MW, which have been bid into the 2008 BC call for proposals by Vancouver's Finavera Renewables Inc.

GEEFS and Plutonic are already partnering in the construction of the C$660 million, 196 MW East Toba River and Montrose Creek hydroelectric project, which is set to come online in BC next year, and jointly bid two run-of-river hydro projects totalling nearly 1200 MW and costing C$4 billion into BC Hydro's 2008 call for power.

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