Varcoe: TransAlta buys Heartland Era for $658M, boosts gas-fired energy footprint in Alberta

Varcoe: TransAlta buys Heartland Era for $658M, boosts gas-fired energy footprint in Alberta

TransAlta’s acquisition of Heartland Era offers it a further 1,844 megawatts (MW) of gas-fired era in Western Canada, primarily in Alberta.

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Amid fast transformation and turmoil sweeping throughout the electrical energy trade, TransAlta Corp. has made a giant wager that there’s nonetheless a future for pure gas-fired energy era in Alberta.

The corporate introduced Thursday the $658-million acquisition of Calgary-based Heartland Era, which incorporates the belief of $268 million of debt.

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The deal will give TransAlta, the biggest generator within the province, a further 1,844 megawatts (MW) of gas-fired era in Western Canada, primarily in Alberta.

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It contains cogeneration crops, “peaking” services and the proposed Battle River Carbon hub, an formidable plan involving hydrogen and carbon seize and sequestration.

Whereas the complete energy sector is being reshaped — from the fast development of renewable power to elevated electrification of the financial system and Ottawa’s push for a net-zero grid (or near it) by 2035 — TransAlta struck a deal to purchase the fleet of gas-generating property from U.S.-based funding agency Vitality Capital Companions, the dad or mum agency of Heartland.

“It alerts our confidence within the province of Alberta and the grid right here, the financial system right here … . That is about us making an acquisition form of in our yard,” TransAlta CEO John Kousinioris stated in an interview.

“We do see continued penetration of renewables and demand for renewables coming in, however fuel goes to proceed to have a task.”2

TransAlta CEO John Kousinioris
TransAlta CEO John Kousinioris Courtesy TransAlta/by way of Postmedia

TransAlta, which completed changing its coal-fired era models within the province to pure fuel on the finish of 2021, has additionally been increasing its renewable enterprise because the push to wash power and decarbonization good points additional momentum.

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The corporate has a big portfolio of electricity-generating property, with greater than 6,600 MW of capability coming from 72 services in Canada, the USA and Australia, together with 29 renewable and 17 gas-fired developments.

Heartland at the moment owns 507 megawatts (MW) of cogeneration property within the province, together with different gas-fired crops, together with the Sheerness and Battle River services.

In 2019, it purchased 10 partly or absolutely owned producing property from Canadian Utilities for about $835 million.

It’s additionally been engaged on plans for the 400 MW Battle River Carbon Hub, a proposed hydrogen-fired electrical energy era growth that would come with carbon seize and sequestration. The venture is estimated to value $1.8 billion to construct.

Heartland has 273 staff within the province, together with about 85 at its head workplace in Calgary.

Thursday’s announcement will let TransAlta hyperlink up with contracted industrial prospects in Alberta by means of Heartland’s current co-generation fleet.

And with extra wind and photo voltaic tasks beginning up in Alberta — though the province has positioned a pause on approving new developments till the tip of February — having versatile fuel era might be wanted for the general system sooner or later, Kousinioris famous.

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The corporate stays dedicated to rising its renewable and storage enterprise, and can use the cash generated from older legacy property to assist fund the shift.

“From our perspective, it’s actually the money flows from the fuel fleet which are enabling the pivot, extra towards cleaner era from the renewable aspect,” he stated.

“We gained’t make the power transition if our grid isn’t dependable, so the fuel is totally wanted to offer that reliability.”

Heartland Generation CEO Rob Dutton
Heartland Era CEO Rob Dutton, seen in a 2022 file picture. Gavin Younger/Postmedia file

Heartland Era CEO Rob Dutton stated the sale of the corporate wasn’t influenced by authorities coverage — such because the federal Clear Electrical energy Rules — and has been within the works for nearly a yr by means of a aggressive course of.

“There’s a pure cadence to personal fairness funding and whereas there’s no excellent time to promote, we felt the situations have been good to check the market,” he stated.

“The demand for dependable electrical energy era is on the rise. And our property are actually completely matched to satisfy that want.”

Kousinioris famous TransAlta has spent about $1.5 billion on renewable power development since 2021, and nonetheless has 1.2 gigawatts of fresh electrical energy it’s focusing on to deliver on-line by 2025.

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Even with extra gas-generating models, the corporate’s aim stays to get to internet zero by 2045, with a near-term goal to decrease emissions by 75 per cent from 2015 ranges by 2026.

The deal to purchase current property is smart because of the excessive prices and normal uncertainty about constructing new greenfield gas-fired energy tasks in Canada, stated Duane Reid-Carlson, CEO of Calgary-based electrical energy consultancy EDC Associates.

Electrical energy knowledgeable Blake Shaffer, an economist on the College of Calgary, stated he’s not stunned to see TransAlta develop its fuel enterprise, as it should assist complement the corporate’s enlargement in renewables.

Whereas older gas-fired crops will function much less steadily sooner or later, there’ll nonetheless be a necessity for models that present flexibility and might run in periods of peak demand for electrical energy.

“It’s a long-term wager on Alberta’s future,” stated Shaffer.

Nonetheless, the takeover may even increase questions of elevated consolidation and focus in Alberta’s deregulated power-generating market, and this may have to be thought-about because the province examines the electrical energy market, he added.

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This week’s provincial throne speech promised to introduce substantive reforms to the ability system in Alberta.

“From a useful resource combine, (the deal) makes plenty of sense. It’s a sensible transfer,” Shaffer stated. “From a shopper standpoint, I believe it actually means the market design conversations which are taking place proper now have to take this into consideration as a result of focus ranges simply rose in Alberta.”

The acquisition will have to be authorised by regulators.

Kousinioris stated the corporate will stay beneath the province’s restrict of 30 per cent of producing capability being within the arms of 1 market participant, and famous new renewable tasks from different corporations and the brand new 900-megawatt Cascade Energy venture are being constructed.

As soon as the Heartland deal is wrapped up — it’s anticipated to shut within the first half of subsequent yr — he tasks the corporate’s possession of put in producing capability in Alberta might be within the “mid-20 per cent vary, but it surely begins to say no fairly dramatically as the entire new builds are available in.”

Chris Varcoe is a Calgary Herald columnist.

[email protected]

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