CALGARY, AB --Canada's largest private power producer says Ontario's newly deregulated and volatile electricity market is a fine time to bring on its new power plant in the industrial southwest part of the province.
TransAlta Corp. said Thursday its $400-million, 650-megawatt cogeneration plant in Sarnia, Ont., should benefit from high demand and very little new electricity production in Canada's most populous province. "Right now the signs we see in Ontario, despite the messiness of the uncertainty and the government interference, generally we see improvements in the Ontario market," president Steve Snyder told analysts on a conference call to discuss the Calgary company's strong quarterly results.
Calgary-based TransAlta said its Sarnia plant is being tested now and should be producing power commercially in the first quarter of 2003 after years of planning and construction.
Soaring electricity costs have become a hot political issue in Ontario as consumers and industries get hit with sharply higher power bills, reflecting a newly deregulated market where supply shortages and rising demand have caused prices to spike.
Snyder said electricity prices are rising because of continued shutdown of some Ontario nuclear power plants, the sizzling summer that increased air conditioner use and air pollution in southern Ontario that limits the use of older coal-fired plants.
"We're more positive about the Ontario market in terms of pricing than we were six months ago," Snyder said.
Only about a third of the electricity from the Sarnia plant is under long term contracts, despite TransAlta's preference to lock up 75 per cent of power production.
This will allow the company to sell more power on high spot markets, said Dan Pigeon, TransAlta's director of investor relations.
"We think that situation is timely for Sarnia coming on," said Pigeon.
"Short-term we can obviously provide around 400 megawatts of power into that tight market until the supply side gets caught up again."
Earlier this month, a report from the Independent Electricity Market Operator warned of a serious shortage of generating capacity in Ontario and said high prices could recur if demand unexpectedly soars again.
Premier Ernie Eves suggested last week that he might protect consumers from several unpopular decisions by the province's energy-price regulator.
Making matters more critical, two shut down nuclear reactors at the Bruce and Pickering plants are expected to restart over the next two years, but it remains unclear when that might happen.
Pigeon said current speculation is that the nuclear plants won't be operating in time for next summer's high demand. "Therefore we're going to see some pretty volatile supply-demand situations translate into some volatile price situations."
TransAlta is one of the major Canadian private power companies expanding into the deregulated Ontario market. But the Calgary company remains focused on the United States, where it's on the hunt for acquisition targets.
Snyder told analysts that the company has looked at more than 100 plants and could make an acquisition before the end of the year.
In its financial report, TransAlta unveiled a 64 per cent third-quarter profit gain Thursday, reflecting "continued strong operating performance of the overall fleet."
Production was flat a year-earlier levels of about 11,400 gigawatt-hours, as the company continued to purchase power from spot markets when prices were below the cost of running its plants.
Electricity trading volumes surged to 33,985 gigawatt-hours from 5,579 "at a time when many other trading operations were losing money or shutting down."
However, TransAlta's natural-gas trading operations were down. Meanwhile, revenue from continuing operations fell to $450.3 million from $573.3 million.
The latest quarter's profits benefited from tax losses carried forward and from lower operating costs, while year-ago results were hit by outages at TransAlta's Centralia power plant in Washington state.
"The market continues to be difficult for the electricity industry and we are continuing to focus our efforts on the fundamentals of cost and availability," stated Snyder.
"With our strong balance sheet we expect to be able to take advantage of an increasing number of attractively priced acquisition opportunities to grow our capacity."
In trading on the Toronto stock market Thursday, TransAlta (TSX:TA) shares rose 32 cents to $18.12.
Source: CP
