Wind wire: Hostile takeover

Canadian Hydro, owner of Canada's two largest wind energy facilities, is currently subject to a hostile takeover by fellow Calgary energy company TransAlta Corporation.

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If TransAlta is successful, it will give the heavily coal-based company one of the largest wind portfolios in the country. TransAlta is offering C$4.55 each for Canadian Hydro shares, representing a 30% premium above the volume-weighted average trading price for the ten days prior to the July 20 takeover bid announcement. With 143.7 million shares outstanding, TransAlta's all-cash offer amounts to C$654 million.

The total enterprise value of the transaction is C$1.5 billion, it adds. The company's Steve Snyder says it approached Canadian Hydro in December to discuss a possible deal, but that effort failed and TransAlta felt compelled to make an offer directly to shareholders. Canadian Hydro has urged shareholders not to take any action until a committee of independent directors has completed a review of the offer. TransAlta's goal in acquiring Canadian Hydro, says Snyder, is to accelerate its renewable energy portfolio expansion. Beyond a 450 MW coal plant in construction, TransAlta has no plans to build more coal plant until "the rules around carbon, the pricing around carbon and the technology around carbon capture are clearer," says Snyder.

TransAlta currently has 7963 MW of generating capacity: 62% coal, 23% gas and 15% renewables. Canadian Hydro's operating portfolio of 694 MW is all renewables, 84% of it wind. The acquisition would boost the renewables portion of TransAlta's portfolio to 22%, says Snyder. It would also nearly double its wind development pipeline to 2620 MW, with 404 MW at an advanced stage.

Proposed regulations governing the location of wind turbines could jeopardise 75% of all construction-ready wind projects in Ontario, says the Canadian Wind Energy Association (CanWEA). The rules require turbines to be a minimum of 550 metres from residences and 120 metres or more from roads, railway lines and property lot lines.

Included in proposed environment ministry regulations implementing the province's Green Energy Act (GEA), they are designed as a response to the growing complaints about the potential health and safety impacts of wind turbines while creating a provincial standard that replaces a patchwork of municipal bylaws. CanWEA's Robert Hornung says a survey of 25 wind developers found that 96 of 103 advanced projects, all of which were in compliance with pre-GEA regulations, are affected. Under the rules, 48% of all turbines in those projects could not be installed.

"The net effect is that 79 construction-ready projects representing 2591 MW would either be rendered immediately non-viable or would require a complete back-to-the-drawing board redesign," warns Hornung. He estimates the 79 "lost" projects represent development costs in excess of $50 million.

Instead of basing setbacks on an "arbitrary fixed distance" they should be set according to the ministry's own noise guidelines, argues Hornung. The minimum distance from roads and property lines should be equal to one turbine blade length plus ten metres, he says. A citizen's group called Wind Concerns Ontario says the government's location rules are inadequate. It believes setbacks for residences should be based on the results of a health effects survey it wants the government to conduct. Until one is done, a "setback of 1500 metres is called for from any location where a residence might be constructed," the group says.


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