TransAlta Watches Changing Ontario Market

CALGARY, AB -- - Calgary-based TransAlta Corp. is ready to invest in wind power plants in Ontario, but not until it can sort through complicated regulatory issues at provincial and municipal levels, says the company's president and CEO.

"We are ready to go tomorrow morning with an investment if we could find a site and get a contract," TransAlta's Steve Snyder said Wednesday following his company's annual meeting with shareholders in Toronto.

However, Snyder said that, despite the environmentally friendly appeal of wind-powered generation instead of coal or gas-fired plants, "there's a whole bunch of complications" that make such investments difficult, "particularly in Ontario right now with the uncertainty" over the future of the provincial electricity market.

The Ontario government backtracked last year on its electricity market deregulation strategy amid soaring energy bills and put in place a cap on hydro rates to 4.3 cents per kilowatt hour for consumers and small businesses.

Those and other changes have left TransAlta, a private power generator with nearly $9 billion in assets across Canada, the United States, Mexico and Australia, unwilling to invest in new gas or coal-fired plants in Ontario until the provincial rules are more clear and consistent.

TransAlta's last major new investment in Ontario, where potential supply shortages have been a concern, was for a 440-megawatt gas-fired power plant in Sarnia, which began operating in March.

However, TransAlta has scouted potential sites for wind-power plants in Prince Edward county on the shores of Lake Ontario in eastern Ontario.

That fits into the company's strategy of growing the share of renewable energy plants in its portfolio, boosted by a $37-million purchase last year of Vision Quest Windelectric Inc. Vision Quest operates 67 wind-turbine power plants in western Alberta. Snyder has said the company is willing to spend $100 million a year for 10 years on wind power.

But the company has faced difficulty in Ontario getting approval for permits at the local level, where windmills are seen as an eyesore to some residents. Such issues are understandable concerns but time-consuming, Snyder said.

Additionally, TransAlta said it would only make such an investment in Ontario if it could secure long-term contracts with local utilities.

Those contracts, he said, are hard to come by since utilities are unsure where the provincial electricity market is headed. As well, utilities and potential industrial users are unsure what prices to negotiate.

In its March budget, the Ontario government said big industrial companies that build their own power plants that use alternative or renewable energy will get additional tax breaks.

But, for private power companies building wind-power plants to supply into the existing provincial electricity grid, Snyder said the price would have to be well above 4.3 cents per kilowatt hour -- as high as 5.5 or six cents -- for shareholders to get a decent return on wind-power investments.