August 29, 2008

Plutonic lands GE financial services as P3 partner in B.C. Hydro bid

$4 billion plan would be Canada’s largest private hydro investment

VANCOUVER

Landing General Electric as a financial backer for its hydroelectric projects should give Plutonic Power Corp. significant clout to win a BC Hydro contract to provide “clean energy” to British Columbians, say analysts and the company’s CEO.

“Plutonic, feeling it prudent to have the best bid possible, felt it would make sense to bring in a financial partner to backstop our bid to show the utility that we have the financial wherewithal to undertake the projects,” Donald McInnes, chief executive and vice-chairman of Plutonic Power, told a recent conference call.

“It’s a tremendous testimonial statement.”

Vancouver-based Plutonic Power says it has signed a partnership with giant GE Energy Financial Services to develop approximately 1,000 megawatts (MW) of clean, run-of-river hydroelectric capacity in the Toba and Bute Inlets along the southwestern coast of British Columbia.

Plutonic said the deal, which has estimated capital costs of about $4 billion, would be the largest single private-sector investment in hydroelectric generation in Canada.

The proposal is in response to a request for proposals by Crown-owned utility BC Hydro to create clean energy, which is part of the province’s plan to be electricity self-sufficient by 2016.

Analysts say having solid financial backing is key because there have been problems in the past with winning bids not being completed after funding fell through.

“(Plutonic) enters the call with not only a solid hydro resource, but with a clear financial deal that will allow it to understand in a very detailed way what it must bid to make its threshold economics,” MacMurray Whale, an analyst at Cormark Securities, said in a note to clients.

“As a result, their bids will be deemed much lower risk than any other potential projects by BC Hydro. In effect, this should lead to a much lower discount rate to be applied to these projects.”

If the joint bid is successful, GE Energy Financial Services, a unit of U.S. industrial giant General Electric (NYSE:GE), will invest $70 million for a 50 per cent stake in the Upper Toba Valley project. It will also contribute, by itself or with other partners, another $650 million for 60 per cent of the Bute Inlet project.

Prior to GE’s investment, Plutonic would be responsible for all costs of permitting, public consultation and environmental assessment certification.

Plutonic can repurchase a 10 per cent interest in the Bute Project by making a $100-million contribution to capital costs.

Run-of-river hydroelectric power, which doesn’t use dams to store water to run the generator, is considered to be one of the most environmentally friendly and commercially viable sources of electricity generation.

McInnes said the company’s biggest competition in the BC Hydro bid process will likely come from wind farms, but that those projects are located much further north.

“We think, given our proximity to Vancouver, that we will be extremely competitive in the call for tender,” McInnes said.

Plutonic says its projects have the potential to generate enough clean energy to meet the needs of over 300,000 homes and offset more 2.2 million tonnes of CO2 emissions.

The Upper Toba Valley project has three sites with a capacity of about 120 megawatts and the Bute Inlet project is made up of 18 sites with a capacity of 900 megawatts.

Canadian Press

Print | Email | Comment