The plants impacted by the decision include Sheerness in Hanna, northeast of Calgary, and Sundance A and Sundance B, both west of Edmonton.
TransCanada Executive Vice President and President Bill Taylor said there is a provision in those contracts that allows them to cut the deals because they now have become unprofitable due to regulatory changes.
“We have made the decision to exercise this right,” he said, adding that those declining CO2 emissions-related conditions are forecast to continue over the power purchase agreements’ (PPA) terms.
The company, which expects the termination to improve its cash flow and comparable earnings in the near term, will write down the remaining value of the PPAs, representing a non-cash charge of about $235 million ($175 million after taxes).
TransCanada will also continue to seek out other opportunities, but that search will likely not include coal, according to Taylor.
“The company does not view this action on the PPAs as a full retreat from the Alberta power market,” he said. “TransCanada has a robust gas-fired cogeneration business totaling 438 megawatts (MW) at four sites. These low-cost and low-CO2 emitting gas units are expected to perform well, even in today’s market environment.
“Investment opportunities [also] remain in the Alberta power market and are expected to begin with new wind projects and later with the need for gas-fired power capacity required to replace retiring coal-fired plants.”