With BC Hydro stepping into the dam deal, ratepayers in the Trail area may be wondering if the recent power play will affect their energy bill.
The sale of Waneta Dam, regardless the buyer, would not impact FortisBC customers, says Micheal Allison.
“FortisBC’s service to all of its electricity customers, including those in Trail, remains unchanged,” Allison, FortisBC’s manager of corporate communication, told the Trail Times.
“The agreement announced in May involved FortisBC’s parent company, Fortis Inc. Regardless of the outcome, the sale of the asset by Teck does not affect rates for FortisBC customers.”
Allison was referring to an agreement Fortis Inc. and Teck Resources entered earlier this year -for $1.2 billion cash, Fortis would purchase the mining company’s two thirds share of Waneta Dam in the fourth quarter of 2017.
That deal terminated this week when BC Hydro exercised its right of first offer to Teck’s remaining interests in the dam.
In a deal that parallels the Fortis-Teck agreement, on Aug. 1, BC Hydro announced its plans to purchase the Teck shares for $1.2 billion cash - however this transaction is not expected to be completed until sometime next spring.
With the Fortis agreement null and void, where does this leave the company?
Entering the agreement to purchase two-thirds of the Waneta Dam from Teck, Fortis was aware that the closing of the transaction was subject a number of customary conditions and considerations, Allison said.
“This included BC Hydro’s right of first offer with respect to the sale … under the 2010 co-ownership and operating agreement between Teck Metals and BC Hydro in relation to Waneta.”
(When BC Hydro purchased one-third share of the Waneta Dam in 2010, the company negotiated a right of first offer on any future sales of the remaining two-thirds interest retained by Teck.)
“While it is disappointing that the acquisition will not take place by Fortis, British Columbia remains integral to its business,” Allison reiterated.
“FortisBC’s service to its electricity customers in the Trail area will not be impacted due to the August 1 announcement.”
Notably, as a result of the Fortis-Teck agreement being terminated, the energy company stated, “Teck will pay Fortis a break fee of approximately $28 million.”
Allison clarified that Fortis continues to own the Waneta Expansion, which is located immediately downstream of the Waneta Dam on the Pend d’Oreille River, along with Columbia Power Corporation and Columbia Basin Trust.
The utility company is a 51 per cent owner in the Waneta Expansion Project, with Columbia Power Corporation and the Columbia Basin Trust holding a 32.5 per cent and 16.5 per cent share, respectively.
Completed in 2015, the Expansion is operated by FortisBC, which also operates Brilliant, Brilliant Expansion and Arrow Lakes on behalf of other regional power producers.
An interesting side note; on Feb. 9, Fortis Inc. announced a definitive agreement to acquire ITC Holdings Inc., the largest independent transmission utility in the United States for US$11.8 billion.
In a Tuesday news release, Teck stated in the BC Hydro sale, there are no material changes to the commercial terms of the previously announced Waneta purchase agreement between Fortis Inc. and Teck.
Under the agreement, Teck Metals Ltd. will be granted a 20-year lease to use the two-thirds interest in Waneta to produce power for its industrial operations in Trail. Annual payments will begin at approximately $75 million per year and escalate at two per cent annually … Teck Metals will have an option to extend the lease for a further 10 years at comparable rates.
Teck expects to gain approximately $800 million on closing.
The transaction is subject to customary conditionsand is not expected before the first quarter of 2018.