Ontario Power Authority - TransCanada Energy Reach Deal to Relocate Power Plant

TORONTO, Sept. 24, 2012 /CNW/ - Minister of Energy Chris Bentley announced today that the Ontario Power Authority has reached an agreement in principle with TransCanada Energy to develop a new 900-megawatt natural gas-fired power plant on the site of Ontario Power Generation's Lennox Generating Station in eastern Ontario.

The location was selected to take advantage of existing transmission and gas infrastructure as well as the expertise of local workers. The plant is expected to be in service by the first quarter of 2017 and will provide 600 jobs during construction.

"Today's announcement helps support Ontario's plan to modernize the province's electricity infrastructure, clean up the air we breathe and end the use of coal by 2014," said Minister Bentley.

The cost of TransCanada's plant at Lennox will be comparable to the cost of the original competitively procured Oakville plant. In addition, TransCanada will receive $40 million to cover the costs it incurred for goods and services that cannot be used at the Lennox site.

The OPA-TransCanada agreement has been formalized in a memorandum of understanding. OPA and TransCanada will now negotiate a contract based on the terms of that agreement. TransCanada will also finalize site-specific arrangements with Ontario Power Generation. It is expected that the contract and other arrangements will be finalized by December 14, 2012.

"OPA and TransCanada's existing power generation contracts provide good value to ratepayers with clean, cost effective electricity. The Lennox agreement will do the same and will benefit from OPA and TransCanada's positive, long-standing relationship," said Colin Andersen, OPA's chief executive officer.

Backgrounder

Relocating the Oakville Gas Plant to Lennox

Cost of Relocating the Plant

The total cost for goods and services TransCanada incurred for Oakville that cannot be used at the Lennox site is $40 million.  These costs include:

• Engineering and design work
• Permitting
• Land cost
• Employee costs and overhead
• Legal fees

Minimizing the Impacts

To minimize the cost of the relocation, gas turbines will be repurposed and used at the Lennox plant ($210 million).

• Gas turbines
• Turbine design and engineering costs
• Storage and transportation of turbines

These costs will be subject to verification by an independent auditor.

The turbine payment recognizes that TransCanada would be carrying these costs beyond the period of time expected under the Oakville contract.

Net Revenue Requirement

• The Net Revenue Requirement is the monthly payment a power plant developer uses to cover the fixed costs to build and operate the plant.
• OPA contracts are structured so that the power plant developer only receives payment from the OPA once the plant starts generating electricity
• The Net Revenue Requirement for Lennox is $15,200 MW/Month.
• The original Oakville Net Revenue Requirement was $17,277 MW/Month under the 2009 contract.
• Once a contract is executed, OPA will pay TransCanada $210 million for the cost of the gas turbines and other turbine related costs. The turbine payment as well as covering the gas management costs for the new plant reduces the Lennox Net Revenue Requirement.

SOURCE: Ontario Power Authority

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