Canadian Utilities selling Canadian fossil fuel power assets

CALGARY — Eight months after announcing a strategic review of its power plants business, Canadian Utilities Ltd. has struck a deal to sell its entire Canadian fossil fuel-based electricity generation portfolio for about $835 million.

Heartland Generation Ltd., an affiliate of American investment firm Energy Capital Partners, has agreed to buy 11 partly or fully owned CUL natural gas-fired and coal-fired power plants with a total of 2,100 megawatts of capacity, the Calgary-based company announced Monday.

Nine of the plants are in Alberta and one each is in BC and Ontario.

Included in the sales price is a separate deal to sell CUL’s 50% in the Cory Cogeneration Station near Saskatoon to its partner, Saskatchewan government-owned SaskPower International, after it enacted its right to buy ahead of Heartland.

The deals leave CUL, which is 52% owned by holding company Atco Ltd., with just 250 MW of generating capacity in five plants, one in Alberta, two in Australia and two in Mexico.

“The rationale (for the review) was really around the fact that these plants were entering into the latter stages of their lives,” said CEO Siegfried Kiefer in an interview.

“Many of them were becoming more and more un-contracted, so they were exposed to merchant power price fluctuations and so they started as a fleet to not match our investment criteria.”

The review process attracted a “healthy” amount of interest from potential buyers and the price was fair to both buyers and seller, he said.

The price received was in line with expectations, said Ben Pham of BMO Capital Markets, and clears the way for CUL to proceed with its $3.6-billion three-year capital spending plan.

The company’s strategy remains the same – to invest in long-life energy infrastructure assets that deliver predictable returns – although it may now look at more international projects and acquisition opportunities, Kiefer said.

He said the coal-fired plants in Alberta were being converted to natural gas and that process is expected to continue with the new owners.

CUL is also reviewing its 80% ownership of the Alberta PowerLine electric transmission system and Kiefer said that process is going well.

The company reported adjusted earnings of $200 million in the first quarter of 2019, compared with $181 million in the same period of 2018.