CALGARY, Alberta (January 11, 2022) – TransAlta Renewables Inc. (“TransAlta Renewables” or the “Company”) (TSX: RNW) announced today additional findings from the ongoing investigation pertaining to a tower collapse at the Kent Hills 2 wind site.
Following extensive independent engineering assessments and root cause failure analysis, the Company has determined that all 50 turbine foundations at the Kent Hills 1 and 2 wind sites require a full foundation replacement. The root cause failure analysis indicates that deficiencies in the original design of the foundations have caused crack propagation within the foundations and that the foundations must be replaced. The Company is in the process of planning the rehabilitation of the wind sites and currently expects the wind facility foundations to be fully replaced by the end of 2023. Based on the recommendations of independent engineers, and in order to maintain the safety of the affected sites and turbines, the wind turbines will cease to operate until their associated foundations are remediated. The foundation issues at the Kent Hills 1 and Kent Hills 2 sites are unique to the design of those sites. There is no indication of any foundation issue at the Kent Hills 3 site or the Company’s other wind sites.
“We remain focused on our objective to safely return the site to service as soon as reasonably practicable”, remarked Todd Stack, President of TransAlta Renewables. “We are appreciative of the support and cooperation of NB Power in furtherance of NB Power’s commitment to deliver reliable, safe and clean energy to its customers. As a result of the site remaining down for an extended period during remediation, we also continue to work closely with our project lenders and look forward to being able to resume delivery of renewable electricity as the foundation replacements are complete,” added Mr. Stack.
Based on initial estimates, replacement of the 50 foundations is expected to cost between $75 million and $100 million, in aggregate, and is expected to result in foregone revenue of approximately $3.4 million per month on an annualized basis for so long as all 50 wind turbines are offline, based on average historical wind production. Revenue generation is expected to resume as wind turbines are individually returned to service following foundation replacement. The Company is actively evaluating any options that may be available to recover these costs from third parties and insurance.
The Company has been in discussions with New Brunswick Power Corporation (“NB Power”) and they have been supportive of the efforts undertaken to investigate the incident and return the site to service in a safe and prudent manner in accordance with good industry practice. The Company expects to work closely with NB Power through the remediation process.
As a result of the determination that all 50 foundations require replacement, as well as certain resulting amendments to applicable insurance policies, the Company has provided notice to BNY Trust Company of Canada, as trustee (the “Trustee”) for the approximately $222 million outstanding non-recourse project bonds (the “Bonds”) secured by, among other things, the Kent Hills 1 and 2 wind sites, that events of default may have occurred under the trust indenture governing the terms of the Bonds. Upon the occurrence of any events of default, holders of more than 50% of the outstanding principal amount of the Bonds have the right to direct the Trustee to declare the principal and interest on the Bonds and all other amounts due thereunder, together with any make-whole amount due thereunder, to be immediately due and payable and to direct the Trustee to exercise rights against certain collateral. The Company intends to engage in discussions with the Trustee and holders of the Bonds to negotiate required waivers and amendments while the Company works to remedy the matters described in the notice. Although the Company expects that it will reach agreement with the Trustee and holders of the Bonds with respect to terms of an acceptable waiver and amendment, there can be no assurance that the Company will receive such waivers and amendments.
The 167 MW Kent Hills wind facility in Kent Hills, New Brunswick (the “Facility”) is owned as to an 83% interest by the Company’s indirect subsidiary, Kent Hills Wind LP. Natural Forces Technologies Inc. owns the remaining 17% interest. The Facility was completed in three phases and consists of 50 turbines at Kent Hills 1 and Kent Hills 2, which achieved commercial operation in December 2008 and November 2010, respectively; and five turbines at Kent Hills 3, which began commercial operations in October 2018.
About TransAlta Renewables Inc.
TransAlta Renewables is among the largest of any publicly traded renewable independent power producers (“IPP”) in Canada. Our asset platform and economic interests are diversified in terms of geography, generation and counterparties and consist of interests in 27 wind facilities, 13 hydroelectric facilities, eight natural gas generation facilities, twenty-one solar facilities, one natural gas pipeline, and one battery storage project, representing an ownership interest of 2,966 megawatts of owned generating capacity, located in the provinces of British Columbia, Alberta, Ontario, Québec, New Brunswick, the States of Pennsylvania, New Hampshire, Wyoming, Massachusetts, Michigan, Minnesota, Washington, North Carolina, and the State of Western Australia. Our objectives are to (i) provide stable, consistent returns for investors through the ownership of, and investment in, highly contracted renewable and natural gas power generation and other infrastructure assets that provide stable cash flow primarily through long-term contracts with strong counterparties; (ii) pursue and capitalize on strategic growth opportunities in the renewable and natural gas power generation and other infrastructure sectors; (iii) maintain diversity in terms of geography, generation and counterparties; and (iv) pay out 80 to 85 per cent of cash available for distribution to the shareholders of the Company on an annual basis.
Cautionary Statement Regarding Forward-looking Information
This news release contains “forward-looking information” and “future oriented financial information” within the meaning of applicable Canadian securities laws, and “forward-looking statements”, within the meaning of applicable United States securities laws, including the United States Private Securities Litigation Reform Act of 1995 (collectively referred to herein as “forward-looking statements”). In some cases, forward-looking statements can be identified by terminology such as “plans”, “expects”, “proposed”, “will”, “anticipates”, “develop”, “continue”, and similar expressions suggesting future events or future performance. In particular, this news release contains, without limitation, forward-looking statements pertaining to: the tower collapse incident at the Kent Hills wind farm and the Company’s plans in response to such incident; the outcome of the engineering assessments and root cause failure analysis, including expectations regarding required remediation resulting therefrom; the timing and cost of remediation; the impact of the tower collapse incident and the replacement of the foundations on revenue and other financial metrics including the Company’s payout ratio of cash available for distribution; expectations to return the Kent Hills 1 and 2 wind sites to service and the timing thereof; the Company’s ability to resume delivery of renewable electricity; expectations that an agreement will be entered into with the Trustee and holders of the Bonds with respect to the waivers and amendments because events of default may have occurred under the trust indenture governing the terms of the Bonds; and the Company’s objectives. The forward-looking statements contained in this news release are based on current expectations, estimates, projections and assumptions, having regard to the Company’s experience and its perception of historical trends as well as other factors management of the Company believes to be reasonable and relevant in the circumstances, and includes, but is not limited to, expectations based on preliminary assessments by the Company’s internal and third-party engineers and prior dealings with the Trustee and holders of the Bonds. The forward-looking statements are subject to a number of risks and uncertainties that may cause actual results to differ materially from those contemplated by the forward-looking statements. Some of the factors that could cause such differences include: supply chain disruptions; regulatory delays in respect of any remediation plan; effects of weather, catastrophes and public health crises, including COVID-19; labour availability; the material costs associated with replacing the foundations; adverse impacts under material agreements, including the power purchase agreement; failure to obtain necessary regulatory approvals in a timely fashion, or at all; and other risks and uncertainties discussed in the Company’s materials filed with the securities regulatory authorities from time to time and as also set forth in the Company’s Management’s Discussion and Analysis and Annual Information Form for the year ended December 31, 2020. The financial guidance included herein has been prepared by management to provide an outlook of the Company’s activities and results in light of the tower collapse incident, and such information may not be appropriate for other purposes. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect the Company’s expectations only as of the date of this news release. TransAlta Renewables disclaims any intention or obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Note: All financial figures are in Canadian dollars unless noted otherwise.
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