The 3rd Annual Canadian Power Finance Conference held
in Toronto last week brought together a number of executives from
some of the leading developers, investors and lenders in the
Canadian energy market. Most of the sessions focussed on renewable
energy, particularly wind, solar and hydro.
The tone was relatively optimistic for growth for a number of
reasons including attractive medium-term renewables targets in
provinces like Nova Scotia and Ontario and the need for large
amounts of new energy infrastructure across Canada. Members of the
developer panel were confident Canadian power purchase agreements
will be attractive to lenders and other financing parties in late
2012 and beyond as procurement programs elsewhere in the world slow
down. Most panelists anticipate significant consolidation and
a lot of M&A activity this year. Still, there
were concerns raised about the lower demand for energy and
increasing government scrutiny over ratepayers' costs.
Speaking in regard to independent power producers, panelists
said they expect lots of requests for proposals (RFPs) to continue
out of British Columbia for the foreseeable future. Alberta is also
looking relatively attractive as it is expected to grow at 3%
annually and to shut down a number of coal plants over the next
decade or two. There should be opportunities for RFPs in Ontario,
if somewhat lesser than had been expected given what may be a
situation of oversupply in the short term. With a certain amount of
attrition expected from Ontario's feed-in tariff contract
holders, the phase-out of coal, and the possible drop in nuclear
energy production, panelists expect the need for supply in Ontario
to increase significantly from 2016.
Domestic and foreign lenders were confident significant capital
is available for good projects with experienced sponsors. Canadian
lenders seemed to have a good amount of capital and were praising
the flexibility offered by micro-perm tenors. Where European
lenders may have slowed, Asian, particularly Japanese, lenders are
increasing their presence in the Canadian market. While European
banks expressed optimism, given market turmoil, it sounds as though
the construction + 18 year tenors often seen from European banks
may not remain the norm going forward and rates may not be as
favourable from European banks given the cost of currency and Euro
The private equity and infrastructure fund panel was also
optimistic. Because of their higher cost of capital, they tend to
prefer projects with some issues where they can take on a more
active role and provide more value-add.
Lenders suggest they are requiring a higher degree of due
diligence for nuclear projects in the wake of the Fukushima
disaster. There may be possibilities for new builds in Saskatchewan
and New Brunswick, and maybe Ontario as well though there are
conflicting messages coming out of Ontario in this regard.
Some activity in transmission line building is expected in the
short term in particular to connect new energy to the grid: from
Southern Alberta, down from Fort McMurray, and in Ontario along the
north shore of Lake Superior. A current project running from
Québec down to New York City is benefitting from little
community pressure given the use of high-voltage direct current
(HVDC) technology that is installed underground.
The topic of community and First Nations involvement featured
prominently throughout the conference. Developers stressed that by
engaging with local communities at the earliest stages of a
project, maintaining transparency, and investing in the local
economy, renewable energy projects are increasingly gaining
widespread support not only for providing cleaner energy but also
for stimulating economic development in otherwise stagnant regions
of the country.
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Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
The Government of Alberta recently announced a number of policy changes that will impact the Alberta Electricity Market, composed of its generators, transmitters, distributors, retailers, electricity consumers and wholesale electricity market.
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