TransCanada Pipeline to buy hydroelectric plants

TransCanada Pipelines Ltd moved further into the power business with a purchase of two hydroelectric power plants located in New York for $285 million. TransCanada will buy the power plants from International Paper Co. which sells the entire output from the facilities under a fixed price power purchase agreement with Niagara Mohawk Power Corp. The contract has 25 years remaining.

March 13, 2001

2 min read

By the OGJ Online Staff

HOUSTON, Mar. 13�TransCanada Pipelines Ltd. moved further into the power business with the purchase of two hydroelectric power plants in New York for $285 million.

TransCanada will buy the power plants from International Paper Co. which sells the entire output from the facilities under a fixed price power purchase agreement with Niagara Mohawk Power Corp. The contract has 25 years remaining.

�The purchase comes with no commodity risk,� says Glenn Herchak, spokesman for TransCanada. �The average price of power over the length of the contract is $120/Mw-hr.�

The transaction is expected to immediately contribute to TransCanada�s earnings. The costs of operating the hydro plants is about $10/Mw-hr which compares favorably with gas fired generation at $50/Mw-hr, assuming $5/Mcf of gas and a heat rate of 10,000 btu/kw-hr. Heat rate measures the efficiency of converting input fuel to electricity.

�The 12-13% rate of return of this transaction is in line with what the company expects from its investments,� said Herchak.

The two hydro facilities have been relicensed by the Federal Energy Regulatory Commission for an additional 40 years of operation. The purchase is pending other regulatory approvals and is expected to be completed by the second quarter.

TransCanada recently acquired the rights to the output of a coal-fired power plant near Edmontun, Alta. In all, the company owns or controls 1,600 Mw.

�Power is one of our core businesses and the US Northeast is one of our core markets. This acquisition will help us diversify our portfolio of power assets in one of North America�s fastest growing power markets,� said Doug Baldwin, TransCanada�s CEO in a statement.