Energy distributor Fortis Inc. (TSX:FTS) and the provincial government announced plans Thursday morning to each spend about $450 million to expand the Waneta Dam near Trail, B.C.
As part of the deal, Fortis will own 51% of the 335-megawatt (MW) Waneta expansion and will operate the facility when it comes into service in 2015.
The B.C. government, through Columbia Power Corp., and the Columbia Basin Trust, will own the remainder of the expansion.
BC Hydro will buy about half of the energy produced by the expansion under a long-term energy purchase agreement. The rest would be sold to Fortis’ B.C. subsidiary, subject to the approval of the British Columbia Utilities Commission.
Barry Perry, Fortis’ CFO told BIV Thursday morning that the expansion will resolve capacity shortfall issues for FortisBC.
Fortis has about 160,000 customers, mostly residential, through the Kootenays and Okanagan.
“There are times during the year when FortisBC is short on capacity as much as 300 MW at any given time,” said Perry. “It has to go into the market and buy [that power], so it is subject to a lot of volatility in terms of market prices for that capacity.
“This project will make as much as that [shortfall] capacity available, so it will be rare in the future once this is up and running that FortisBC will need to actually buy capacity on the open market.”
Federal and provincial environmental assessment approvals are in place for the project.
Teck Resources Ltd. (TSX:TCK.A) owns a majority interest in the existing dam, which is managed by Fortis on Teck’s behalf.
The B.C. government bought a one-third interest in the dam from Teck in March for $825 million.
Fortis’ share price range during the last week: $28.68 to $29.36; 52-week high: $29.51; 52-week low: $21.60