CALGARY, Alberta (June 2, 2022) – TransAlta Renewables Inc. (TSX: RNW) (the “Company” or “TransAlta Renewables”) announced today that Kent Hills Wind LP (“KHLP”), the Company’s indirect subsidiary, has amended and extended its current power purchase agreements (“PPAs”) with New Brunswick Power Corporation (“NB Power”) in respect of each of the Kent Hills 1, 2 and 3 facilities, representing total generating capacity of 167 MW. The amending agreements provide for a blend-and-extend of the PPAs for an additional 10-year period through to December 2045. KHLP is proceeding with its rehabilitation plan to replace the foundations at Kent Hills 1 and 2 and restore the sites to full operation, which is expected to occur in mid-2023.
“Our extended partnership with New Brunswick Power reflects our commitment to our customers and maintains our reputation as a supplier of choice for clean electricity,” said Todd Stack, President. “Our team has created a solution that meets the needs of New Brunswick Power for both the near and long term, has received the consent of our lenders and allows us to commence site rehabilitation to restore an important source of renewable energy to the region,” added Mr. Stack.
“We are pleased to be extending our relationship with TransAlta to ensure that our customers and grid can continue to rely on the zero-emitting generation of the Kent Hills wind facilities to provide sustainable and affordable energy while also supporting our transition towards a net-zero economy,” said Keith Cronkhite, President and CEO of NB Power.
The PPAs have been extended 10 years to December 31, 2045 and NB Power has also been provided with an effective 10 per cent reduction to the current contract price until 2033. During the extended period after 2033, the contract price in the agreements have been set to align with current competitive pricing for wind generation and include escalators intended to reflect inflation. In addition, both parties have agreed to work in good faith to evaluate the installation of a battery energy storage system at Kent Hills and to consider a potential repowering of Kent Hills at the end of life in 2045. KHLP has also reached an agreement with NB Power regarding the rehabilitation plan that is expected to see the site return to service in mid-2023, in a safe and responsible manner. KHLP expects to work closely with NB Power throughout the rehabilitation process.
As a result of the determination that all 50 turbine foundations at the Kent Hills 1 and 2 sites require replacement, as well as certain resulting amendments to applicable insurance policies, KHLP provided notice to BNY Trust Company of Canada, as trustee (the “Trustee”) for the approximately $219 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 (the “Bond Indenture”). Following engagement with the Trustee and holders of the Bonds, KHLP has been able to secure an acceptable waiver of those events of default and has also entered into a supplemental indenture that amends the Bond Indenture and facilitates the rehabilitation of the Kent Hills 1 and 2 sites.
KHLP is now proceeding with its rehabilitation plan which consists of dismantling all 49 remaining turbines, demolishing and removing all existing tower foundations, replacing them with newly-designed foundations, reassembling the wind turbine towers and generators, replacing the wind turbine that collapsed, and testing each wind turbine generator before returning it to service. KHLP has entered into agreements with Bird Construction Industrial Services Ltd. and Vestas-Canadian Wind Technology, Inc. to complete the rehabilitation.
Rehabilitation for the Kent Hills 1 and 2 sites is targeted to be completed by mid-2023. Each turbine at Kent Hills 1 and 2 will be re-energized and returned to service as soon as its foundation is replaced and the turbine is reassembled and tested. The current estimate of the total rehabilitation expenditures is approximately $120 million, net of insurance proceeds, and inclusive of contingency. The Company and KHLP intend to pursue claims to recover costs and related damages from third parties.
The 167 MW Kent Hills facilities are located near Moncton, in Albert County, New Brunswick and were completed in three phases consisting of 50 turbines at Kent Hills 1 and Kent Hills 2, which achieved commercial operations in December 2008 and November 2010, respectively; and five turbines at Kent Hills 3, which began commercial operations in October 2018. Natural Forces Technologies Inc. owns a 17 per cent interest in respect of each of the Kent Hills 1, 2 and 3 facilities through its ownership interest in KHLP.
About New Brunswick Power
For over 100 years, NB Power has been a part of the fabric of New Brunswick, Canada. The provincial electric utility has one of the most diverse generation fleets in North America, with approximately 80 per cent non-emitting generation. Over 2,600 energy experts provide reliable, safe and sustainable energy for over 400,000 direct and indirect customers every day. Using a customer-centric approach, NB Power is committed to developing sustainable energy for future generations of New Brunswickers. Part of this commitment includes investments in energy efficiency programs, energy solutions, renewable energy sources and smart grid technology.
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 26 wind facilities, 13 hydroelectric facilities, eight natural gas generation facilities, two solar facilities, one natural gas pipeline, and one battery storage project, representing an ownership interest of 2,968 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.
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 (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 2 wind site and the Company’s plans in response to such incident; the timing and cost of rehabilitation of the Kent Hills 1 and 2 wind sites, including that the sites will be restored to full operation in mid-2023 and that the total net rehabilitation expenditures will be approximately $120 million; the evaluation of a battery energy storage system at Kent Hills and the potential for repowering at the end of life in 2045; that KHLP will work closely with NB Power throughout the rehabilitation process; the scope of work involved in the rehabilitation plan, including as it pertains to the newly-designed foundations and demolition of all existing foundations; and the timing of re-energization of each turbine at Kent Hills. 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 relating to the conditions at the Kent Hills 1 and 2 sites and that the Kent Hills wind site will be able to operate until 2045. 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 the rehabilitation 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; failure to adhere to the terms of the Bond Indenture; 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, 2021. 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 otherwise indicated.
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