BC Hydro has staked its claim to gain full ownership of the Waneta Dam.
Late Tuesday, the company announced it will spend $1.2 billion cash to purchase the remaining two-thirds interest from Teck Resources Ltd. in a deal expected to close after the first quarter of 2018.
Teck will gain approximately $800 million on closing.
Ken Peterson, BC Hydro executive chair stated,” BC Hydro was presented with a unique opportunity to purchase the remaining two-thirds interest in the Waneta Dam and our analysis shows that this purchase is in the best interest of our customers. Our number one priority is to keep rates low, and this purchase will help make rates more affordable.”
The transaction includes a 20-year lease agreement where the electricity generated from the two-thirds share will continue to supply power to Teck Trail Operations at set prices.
Teck also has an option to extend the lease by a further 10 years.
The news echoes a $1.2 billion cash agreement that Teck and Fortis Inc. released earlier this year.
In May, Teck announced it had reached an agreement to sell its two-thirds share of the Waneta Dam and generating station to Fortis Inc. – Teck Metals would sign a 20-year power lease with annual payments beginning at $75 million.
This was not a done deal, however, because of a Co-Ownership and Operating Agreement between BC Hydro and Teck.
When BC Hydro purchased one-third share of Waneta in 2010, the company negotiated a right of first offer on any future sales of the remaining two-thirds interest retained by Teck.
As a result of this agreement, Teck offered to sell the two-third interest to BC Hydro on substantially the same terms and conditions that it was prepared to sell to Fortis Inc.
On May 12, BC Hydro released a statement saying the company had 60 days to review the transaction and make a decision- the company’s board of directors was briefed throughout and gave its final approval last week.
The agreement is subject to a number of conditions, including approval by the BC Utilities Commission.
And, Fortis Inc. will not walk away entirely empty handed.
“Under the Waneta purchase agreement with Fortis, Teck expects to pay Fortis a break fee of approximately $28 million,” Teck stated in Tuesday’s press release.
The company also confirmed there are no material changes to the commercial terms of the previously announced Waneta purchase agreement between Fortis Inc. and Teck.
Under the BC Hydro agreement, Teck Metals Ltd. will be granted a 20-year lease to use the two-thirds interest to continue powering the Trail smelter, with the option to extend the lease for another 10 years at comparable rates.
Annual payments will begin at approximately $75 million annually and escalate at two per cent per annum, equivalent to an initial power price of $40/MWh based on 1,880 GWh of energy per annum.
“Securing a long-term source of clean, reliable power at a cost-effective price to continue serving the Trail smelter is a great development for the entire province,” said Kootenay West MLA Katrine Conroy, Minister of Children and Family Development.
“At the same time,Kootenay jobs and economic investment will strengthen as a result of BC Hydro’s purchase of the Waneta Dam.”