Lakewind Project Proposal

Transcription

1 Lakewind Project Proposal WindShare General Meeting Wednesday, June 7 th, 2006 at 7 p.m. Walmer Road Baptist Church 188 Lowther Avenue, Upper Gym (south entrance off Lowther) The WindShare I 1 Board invites you to a special General Meeting of the co-op membership to review a new wind turbine investment proposal: the Lakewind Project. Context At the WindShare I Annual General Meeting in February 2006, the Board reported on its analysis of several new turbine investment scenarios. Some key factors prevented any of these Toronto waterfront options from showing good economic returns including: Poor pricing for power produced Lack of a long term power purchase agreement (PPA) Height restrictions preventing the use of larger, more efficient turbines (Transport Canada restrictions due to Toronto Island Airport) Since then, the province announced a Standard Offer Contract (SOC) program for small renewable power developments under 10 Megawatts. Once in place, SOCs are expected to provide wind power developers with a realistic contract price of 11c/kWh for 20 years, indexed for inflation. Such a contract would improve the economics of our current turbine; however, height constraints along the Toronto waterfront continue to prevent us from investing in any new developments in downtown Toronto (see the Scenario Comparison on page 6 for more details). As a result, the Board concluded that we have to look elsewhere for our next investment. Lakewind Overview As you know, the Toronto Renewable Energy Co-Operative (TREC) originally created WindShare I to encourage and develop new community owned co-operative power projects. Recently, TREC has been instrumental in evaluating wind developments elsewhere in the province through Lakewind, a new co-operative. Lakewind intends to develop several new wind turbine projects. For the purposes of developing one of those projects, Lakewind-Bervie, TREC established the WindShare II Cooperative. In 2004, TREC entered into a joint venture agreement with Countryside Energy Cooperative (CEC) ( a rural cooperative based in Milverton, Ontario. CEC brings a rural perspective and image to the Lakewind project. CEC was incorporated in August 2005 with a similar mandate to that of WindShare I and WindShare II. 1 Toronto Renewable Energy Co-op has created a new co-op known as Windshare II. For reasons of clarity we are referring to our co-op as Windshare I.

2 Lakewind currently has two sites that are being developed, Lakewind-Bervie and Lakewind-Milverton. Lakewind-Bervie is the more advanced of the two projects. A wind study is ongoing at Lakewind-Milverton. Lakewind Bervie: Project Description Lakewind-Bervie is a proposed 10MW power project located near Bervie Ontario, 12 km east of Kincardine. This wind farm will be composed of five turbines each with a capacity of 2 megawatts (ExPlace turbine = 650kw). The project has progressed to a point where a Land Option/Lease Agreement has been signed for a 900-acre site near Bervie. A wind study spanning 18 months shows a high quality of data indicating an average wind speed of 6.5 m/s, 23.4 km/hr (ExPlace site = 6m/s, 21.6 km/hr) making this an excellent site for Ontario. Two years of complete data will be available in early July, at which point Dr. Jim Salmon of Zephyr North will prepare a formal wind study report. Based on initial data, these turbines should have a gross annual production of more than 25 Gigawatt-hours (ExPlace ~ 1 GWh). The Bervie site could support up to 24MW of wind development. The first phase target is limited to 10 MW since this is the largest renewable energy project allowed under the SOC Program. Critical to any wind project is its connection to Ontario s power grid. The further the grid, the greater the cost. Fortunately, the Bervie site has a 44-kilovolt hydro line running down the road, providing up to 24 MW of reserve capacity. Lakewind has initiated an interconnect study putting it in the queue for 10MW (initial) capacity and 24MW total future capacity. A bird study initiated last fall by Dr. Ross James surveyed the site during the fall migration and indicated that the site was unlikely to have any avian issues. Spring migration information will complete the report. Environmental assessment reporting also includes community involvement efforts. To date, one community outreach meeting targeted immediate neighbours of the Bervie site. Future community meetings will expand the targeted geographical radius to reach a broader audience of citizens close to the project site. Lakewind-Bervie: The Business Case The SOCs have created a secure market for renewable energy, reduced risk and increased financial viability for community wind power projects in Ontario. Economic analysis of the Lakewind project indicates an opportunity to generate healthy revenue over a 20 year investment term. WindShare, # Richmond Street West, Toronto, ON, M5V 3A8 2

3 Given the SOC price and the wind regime determined to date, the internal rate of return for Lakewind-Bervie is projected to be 7.03% (see the Scenario Comparison on page 6 for more details). Lakewind-Bervie: WindShare II Member Offering Statement The Member Offering Statement for WindShare II contains comprehensive information regarding Shares, Risks, Financials and Development Schedules for the Lakewind-Bervie project. The draft Offering Statement will be available on the WindShare website on June 1, 2006 ( Please note that this offering statement is a draft only, and is subject to change until the final statement/version is released. Lakewind-Bervie: Business Partnership Structure Currently, the Windshare I share capital co-op operates the Ex Place turbine in a joint venture with Toronto Hydro Energy Services Inc. (THESI). WindShare I THESI Toronto Hydro Energy Services Ex Place Turbine WindShare, # Richmond Street West, Toronto, ON, M5V 3A8 3

4 The first Lakewind project is a joint venture between Countryside Energy Cooperative (CEC) and WindShare II to develop the Lakewind-Bervie site. CEC (Countryside Energy Co-op) WindShare II Lakewind Power Co-operative Lakewind Bervie Project The projected capital cost of the Bervie project is $20million, comprised of 50% equity and 50% debt financing. The intent is for WindShare II and CEC to each raise half of the equity capital for Lakewind-Bervie. Separate Offering Statements from WindShare II and CEC will be submitted to Financial Services Commission of Ontario (FSCO), with a target public offering in fall Proposal: Merge WindShare I with WindShare II At the WindShare General meeting on June 7 th, the Board of WindShare I will propose a merger between WindShare I (including current investors and investors in waiting ), and WindShare II, to create one WindShare share capital cooperative. Members who attend the General Meeting will be asked to vote on the merger at the end of a presentation and after questions from members. WindShare, # Richmond Street West, Toronto, ON, M5V 3A8 4

5 Proposed Business Partnership Structure: With the merger of WindShare I and II we will be in two joint ventures: ExPlace turbine and Lakewind-Bervie. CEC (Countryside Energy Co-op) WindShare 1 & II THESI Toronto Hydro Energy Services Lakewind Development Co-op Lakewind Bervie Project Ex Place Turbine Benefits of Merger: As community wind power pioneers, WindShare members have a practical understanding of the environmental benefits and social values of community wind power cooperatives. WindShare s ExPlace turbine represents an important milestone in the development of the wind industry and co-operatively owned power generation in Canada. The merger of WindShare I and WindShare II benefits both organizations. WindShare I will gain financial stability through the economies of scale that WindShare II represents. WindShare II will be able to build on the reputation of WindShare I. Together, the combined organizations will be better able to represent the advantages of community owned power in Ontario. As we ve learned from the ExPlace turbine project, community roots inspire local cooperation. A local partner assists in building support and minimizing local opposition to wind power projects. CEC brings a rural perspective and image to the Lakewind project. The rural location of the Lakewind project introduces additional social and economic considerations: - Rural communities have extensive cooperative experience and networks - The additional revenue of wind power land lease agreements supplements incomes in rural communities, increases local tax revenues and stimulates local WindShare, # Richmond Street West, Toronto, ON, M5V 3A8 5

6 job creation; local cooperative investment opportunities further extend economic potential for local landowners For all investors, economic considerations include: - Standard Offer Contract provides security of market and price - Economies of scale of five turbines amortizes costs associated with environmental assessment, installation, maintenance, and other costs A WindShare/CEC joint venture provides us with the unique opportunity to create an urban/rural partnership similar to the concept of community shared Agricultural (CSA). Scenario Comparison: To provide a comparative context, several scenarios are analyzed from economic perspectives: Scenario One: 50% ownership in Exhibition Place turbine (status quo) Scenario Two: 50% ownership in Exhibition Place turbine + construct additional turbine in Toronto (100% owned) Scenario Three: 50% ownership in Exhibition Place turbine + Lakewind-Bervie project (50% ownership in 5-turbine site) Based on Power Purchase Agreement price of 11 cents per kilowatt hour (Standard Offer Contract price), and a discount rate of 7%, the following chart compares the three scenarios: Capital Structure Equity Investment (WindShare) Net Present Value Projected Internal Rate of Return Scenario One $800,000 (-504,000) -3.14% Scenario Two $1,553,741 (-457,000) +3.16% Scenario Three $5,800, , % Implications on Membership: The co-operatives (Windshare I and II) would continue to run as separate business entities until the turbine orders have been placed for the Lakewind-Bervie site. This will protect the capital assets of the WindShare I during the membership offering phase of the Lakewind-Bervie project. Pending a vote by WindShare I members in favour of a merger with WindShare II, a binding contract to merge the two organizations would be signed by respective Boards. This contract would set out the conditions of the merger. WindShare I memberships would be affected in the following manner: WindShare, # Richmond Street West, Toronto, ON, M5V 3A8 6

7 - All current WindShare I investors and investors-in-waiting would be issued WindShare Pioneer Memberships, identifying them as original members in the combined WindShare cooperative. - Pending FSCO (Financial Services Commission of Ontario) approval of the WindShare II Offering Statement, funds currently held in escrow on behalf of WindShare I investors-in-waiting will be transferred to the WindShare II escrow and allocated to the Lakewind project, with individual investor-in-waiting approval. - Preference shares owned by current WindShare I investors would be transferred to the Lakewind project at a point in the future when the Lakewind project has reached a certain threshold (to be determined, ex. when the order for the turbines is placed or when construction commences) Proposed Lakewind Project Timeline: - May 2006: Membership offering agreements submitted to FSCO from WindShare II and CEC - June 2006: WindShare I membership votes on proposed merger with WindShare II - Fall 2006: FSCO approval of membership offering expected - Fall 2006: EA completed for Bervie - Fall 2006: WindShare membership offering launch campaign (ongoing) - Spring 2007: targeted turbine order date - Autumn 2007: targeted turbine installation at Bervie Conclusion: The WindShare I Board passed the following motion at their most recent meeting: RESOLUTION: Moved that the Board of WindShare recommends to the WindShare I membership at their general meeting of June 7, 2006, the merger of WindShare I and WindShare II for the purpose of entering into the activities necessary for the development of the proposed Lakewind Proposal. WindShare members are encouraged to submit their questions in advance. Responses will be provided at the General Meeting. info@windshare.ca WindShare, # Richmond Street West, Toronto, ON, M5V 3A8 7