Canadian Wind Market Case Study. Wind Power Development Workshop Denver, July 19, 2007 Uwe Roeper - ORTECH

Transcription

1 Canadian Wind Market Case Study Wind Power Development Workshop Denver, July 19, 2007 Uwe Roeper - ORTECH

2 ORTECH Consultants Energy & Environment 35 Staff Financial Side (ORTECH Power) Sector research in wind & water power, advisory work, market analysis, project economics, financial modeling, due diligence. Technical Side (ORTECH Environmental) Wind resource assessments, project permits, technical studies, combustion equipment testing Affiliated with DEWI German Wind Energy Institute.

3 Content Canadian Wind Market Markets Wind Farms Financing

4 Courtesy: Canadian Electric Association

5 Power Trade (GWh), 2005 Source: National Energy Board, Canada

6 Residential Power Prices in Canadian Cities Source: StatsCan

7 Can. Power Markets (TWh) BC, 62 North, 1 AC4, 75 AB, 61 SK, 19 MB, 28 QC, 175 ON, 156

8 Market 10 Provinces 10 Wind Power Markets Provincial Purchasing Programs + Federal Subsidy + Minor Tax Break Mostly based on long-term government / utility backed PPAs PPA (90% of market) Bid Round Process Standard Offer Program (ON only, < 10 MW) Alternative markets (10% of market): A) Domestic Spot market + RECs B) Export spot market + RECs Active REC market and GHG trading market missing in CA PPAs provide long term stable cash flow and access to cheap capital

9 Wind Installed Capacity in Canada ,460 1, MW July 2007 Adapted from: Year

10 Wind Installed Capacity in Canada ,000 Estimated Wind Installed Capacity 12,475 Current Wind Installed Capacity 10,945 9,370 7,870 MW ,220 6, , , , Adapted from: and July Year

11 Canadian Wind Farms List of installed List of proposed

12 Installed Wind Farms Alberta and Manitoba Province Wind Farm Site Date Installed Total Nameplate Capacity (MW) Cost ($M) Cost ($M/MW) Castle River Wind Farm $60 $1.52 Chin Chute Wind Farm $60 $2.00 Cowley Ridge North Wind Farm Cowley Ridge Wind Farm Cowley Ridge Wind Farm AB MB Kettles Hill Phase I Lundbreck Magrath $48 $1.60 McBride Lake $199 $1.33 McBride Lake East Sinnot Wind Farm $10 $1.54 Soderglen Wind Farm $70 $0.99 Summerview Summerview $95 $1.39 Tallon Energy Project Taylor Project Vestas Prototype Waterton Wind Turbines Weather Dancer $1.80 $2.00 St. Leon Project St.Leon Project - Phase Source: CanWEA; company reports; Scotia Capital.

13 Installed Wind Farms Newfoundland/Labrador and Nova Scotia Province Wind Farm Site Date Installed Total Nameplate Capacity (MW) Cost ($M) Cost ($M/MW) Nfld/Labrador Ramea Brookfield Digby Limited Fitzpatrick 2 Limited Fitzpatrick Mtn Glace Bay & Donkin Grand Etang, Inverness County Halifax Higgins Mountain NS Riverhurst Lingan Little Brook Marshville Limited Point Tupper Pubnico Point - Phase Pubnico Point - Phase $50 $1.85 Springhill Project Springhill Riverhurst Tiverton Riverhurst Source: CanWEA; company reports; Scotia Capital.

14 Installed Wind Farms Ontario and Prince Edward Island Province ON P.E.I. Wind Farm Site Date Installed Total Nameplate Capacity (MW) Cost ($M) Cost ($M/MW) Dunnville Erie Shores $186 $1.88 Ferndale Ferndale Huron - Kincardine $15 $1.67 Kingsbridge Melanchton 1 - Shelburne $120 $1.78 Pickering Port Albert Prince Project Spring Bay Tiverton Toronto Waterfront $1.60 $2.13 Aeolous Eastern Kings Wind Farm North Cape $9 $0.85 Source: CanWEA; company reports; Scotia Capital.

15 Installed Wind Farms Quebec, Saskatchewan and Yukon Province Wind Farm Site Date Installed Total Nameplate Capacity (MW) Cost ($M) Cost ($M/MW) Baie-des-Sables MW - - Le Nordais (Phase 1 - Cap Chat) Le Nordais (Phase 2 - Matane) $160 $3.74 QC Matane Mont Miller Project $95 $1.76 Mount Copper Project Mount Copper Project (Phase 2) Murdochville $89 $1.98 Parc éolien du Renard Centennial Wind Power Facility $250 $1.67 SK Cypress Wind Power Facility $11 $1.02 Sunbridge $22 $1.96 YUKON Haeckel Hill 1 (Whitehorse) $0.80 $0.99 CANADA 1, Source: CanWEA; company reports; Scotia Capital.

16 Proposed Wind Farms - Alberta Province Wind Farm Site Progress Total Nameplate Capacity (MW) Cost ($M) Cost ($M/MW) Taber Wiind Power Project Expected Online AB Kettles Hills - Infill Construction Phase Expected Online $83 $1.54 Sinnott Infill 52 $94.00 $1.81 St. Henry's 72 $130 $1.81 Cyr's Ridge 18 $32 $1.78 Fort Macleod Blue Trail County of Warner Medicine Hat Waterton Macleod Flats Pincher Creek Southern Alberta Wind Project Prairie Home Estimated Completion Estimated Completion Estimated Completion Estimated Completion First order placed for turbines $55 $ Source: CanWEA; company reports; Scotia Capital.

17 Proposed Wind Farms British Columbia Province Wind Farm Site Progress Total Nameplate Capacity (MW) Cost ($M) Cost ($M/MW) Mount Hays Wind Farm Expected Online Blue Mountain Wind Park Expected Online Dokie Wind Energy Project Expected Online $600 $2.00 Knob Hill Wind Farm Rec'd final EAO approval Sept. 2004/Awaiting PPA 99 $550 $5.56 BC Shushartie Mountain Waiting for EA approval God's Pocket Waiting for EA approval Hushamu Wind Farm Waiting for EA approval Nimpkish Wind Farm Waiting for EA approval Newcastle Ridge Holberg Wind Energy Nahwitti Wind Power Project Nai Kun Offshore Farm Phase I Estimated completion October $100 $1.71 Files with EAO Jan $1,000 $2.22 Construction to begin on Phase 1 in $1,500 $4.29 Source: CanWEA; company reports; Scotia Capital.

18 Proposed Wind Farms Manitoba and Newfoundland Province Wind Farm Site Progress MB NF The Hilltop Heights Wind Farm Big Island Wind Farm Green Ridge Wind Farm (Dominion City St. Ambroise Oak Point Macdonald Reykjavik Long Point Fort Alexander Churchill Estimated in service September 2007 Env. Impact tests set for spring 2005 Env. Impact tests set for spring 2005 Wind monitoring process until fall 2007 Wind monitoring process until fall 2007 Wind monitoring process until fall 2007 Wind monitoring process until fall 2007 Wind monitoring process until fall 2007 Wind monitoring process until fall 2007 Wind monitoring process until fall 2007 Total Nameplate Capacity (MW) Cost ($M) Cost ($M/MW) N/A - - N/A - - N/A - - N/A - - N/A - - N/A - - N/A - - St. Lawrence Expected Online Burnt Ridge Argentia Wind Farm St. Johns (Goulds) Wind Farm 10 $18 $1.76 The Arches and Flat Hills Source: CanWEA; company reports; Scotia Capital.

19 Proposed Wind Farms Nova Scotia Province Wind Farm Site Progress NS Total Nameplate Capacity (MW) Cost ($M) Cost ($M/MW) Lingan Phase 2 Expected Online Canso Wind Farm Screening began July $34 $2.36 Cape Breton Operational Creignish Mountain Irish Mountain Goodwins Island Estimated Completion Estimated in service Sept Source: CanWEA; company reports; Scotia Capital.

20 Proposed Wind Farms Ontario Province Wind Farm Site Progress Total Nameplate Capacity (MW) Cost ($M) Cost ($M/MW) Ontario Wind Power Expected online Blue Highlands Wind Farm Expected completion Carruthers Point 3 $6.50 $2.17 Echo Power Wind Farm 75 $1.60 $2.13 Erie Shores 99 $186 $1.88 Greater Kingston Trade Wind Project Innisfil 400 Wind Farm Estimated in service September Kingsbridge Wind Power Project II Expected online Kruger Energy Port Alma Expected online ON Leader Wind Project A Leader Wind Project B Melanchton III 40 $46 1/15 Melancthon II Expected online $2.65 $2.01 Mt. Baldy Wind Farm Pine River Ripley Wind Power Project Expected online $165 $2.17 Robaitaille Farm Wind Park Royal Road Wind Farm Taylor Kidd Industrial Complex Wainfleet Wind Power Wingham Wind Farm Wolfe Island Expected online $410 $2.07 Source: CanWEA; company reports; Scotia Capital.

21 Proposed Wind Farms Prince Edward Island and Quebec Province Wind Farm Site Progress Total Nameplate Capacity (MW) Cost ($M) Cost ($M/MW) Norway Wind Park Project Expected Online P.E.I. QC West Cape Phase I Expected Online Eastern Kings Expected Online West Cape Phase II 80 $9 $0.85 Riviere-du-Loup SuperPark Expected Online $300 $1.50 Anse a Valleau Expected Online St-Ulric/St-Leandre Expected Online Carleton Expected Online Les Mechins Expected Online Mont-Louis Expected online Montagne-Seche Expected Online Gros-Morne I and II Expected Online Murdochville Wind Farm Baie des Sables Brisay Wind Park Project Chisaibi Commissioning begins 2007 up to 2012 Screening started Feb 2006 Screening started Feb Source: CanWEA; company reports; Scotia Capital.

22 Proposed Wind Farms New Brunswick and Saskatchewan Province Wind Farm Site Progress NB Total Nameplate Capacity (MW) Cost ($M) Cost ($M/MW) Kent Hills Expected Online Village of Dorchester - - Dark Harbour Wind Farm Kwesawek Memramcook Wind Park Filed EAO Feb Red Lily Wind Farm Riverhurst Construction begins Spring SK Tompkins Saskatchewan Wind Estimated completion fall Power Project (Phase II, 2007 post Centennial) CANADA 8, Source: CanWEA; company reports; Scotia Capital.

23 Wind Install Cost 3,000 2,500 $ / kw ($CDN) 2,000 1,500 1, Source: SEDAR Year

24 Wind Cost Pressure Tight turbine supply Raw materials Canada s booming economy Currency exchange Financing costs

25 Historical & Projected Wind Energy Costs 30 cents US/kWh Price Reduction Due to Technology Innovation Not attainable Adapted from: CanWEA 2004 Year

26 Ontario Wind Power Purchases $CDN/MWh Source: Gov't of Ontario RFP 1 RFP 2 SOP

27 A look at some factors Raw materials Currency exchange Financing costs

28 Hot Rolled Steel Price

29 Ontario Wind Power Purchases 150 $CDN/MWh (2004) 10 (2005) 10 (2006) Source: Gov't of Ontario RFP 1 RFP 2 SOP

30 US$/C$ Exchange Rate

31 C$/Euro

32 Gov t of Canada 10-Yr Bond Yield

33 Operational Performance Operational performance of Canadian wind farms has been close to revenue expectations, but under performance of 1% to 5% appears typical. Wind farm economics are highly sensitive to even small marginal underperformance.

34 Op. Performance Examples Operating Performance Capacity Factor Wind Farm Actual Expected Difference Cowley Ridge 31.2% 32.3% -1.1% Cowley Ridge N 30.0% 30.7% -0.7% Sinnott 26.9% 30.7% -3.8% Taylor 17.2% 25.9% -8.7% Mount Copper 30.8% 39.3% -8.5% Pubnico Point 35.3% 37.6% -2.3% Mont Miller 31.1% 41.4% -10.3% Simple Avg. 28.9% 34.0% -5.1% Source: BMO Capital Markets, "Wind Storm", 2007

35 IRR - Revenue & Op Costs IRR - Levered Pre Tax 12.0% 7.0% 2.0% -3.0% 102.0% Per Cent Average Output 100.0% 98.0% 96.0% 94.0% 92.0% 90.0% 88.0%

36 WF Underperformance Causes: Equipment availability / downtime Equipment efficiency below design spec Wind resources expectation not met

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38 Electrical Electronics Sensors Hydraulics Yaw/Pitch Sys. Rotor Blades Mech. Brakes Rotor Hub Gearbox Generator Structurals Drive Train 1 0,75 0,5 0, Annual failure frequency [-] Down time per failure [days] FAILURE FREQUENCY & DOWNTIME Courtesy: B. Hahn, ISET: Wind Energy Report Germany 2006 (draft)

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45 A Word on Financing Flow Through expense Income funds

46 Flow Through Tax Act allows for flow through (FT) of exploration expenses to third parties up to 30% of project can be executed as FT requires project execution in 2 phases separated by 120 days (test phase & infill phase) several public issues have underperformed (compared to oil / mining issues) resulting in temporary loss of interest in public markets can (and is) done in-house or private basis by FT to affiliate entity.

47 Income Funds Income fund: Pays no corporate tax, distributes all earnings to unit holders (then becomes taxable) Canada announced 31-Oct-06 to close income fund tax loophole in 4 years, limit expansion of existing income funds and curtail issuance of new income funds. Curtails one of the cheapest sources of equity in Canada for infrastructure project finance in wind sector result is higher cost of capital for wind projects. Demise of income trusts improves the position of other infrastructure investors (eg. pension funds, utilities, US firms).

48 Power Trust Yields as of March 20, 2006 Name Yield Algonquin 8.6 Atlantic 10.0 Boralex 8.0 Calpine 9.4 Clean Power 12.5 EPCOR 7.3 Great Lakes Hydro 6.9 Innergex 7.0 Northland 6.9 TransAlta 8.9 Average 8.6 (Less Clean Power) 8.1 (Adjusted Average + 50 bps) 8.6

49 Canadian Wind Market Case Study Wind Power Development Workshop Denver, July 19, 2007 Uwe Roeper - ORTECH