CBC Radio One reported this morning on several issues regarding ENMAX’s Shepard Energy Centre in Calgary. The story had a number of inaccuracies and ENMAX would like to present just the facts.
CBC: Dale Hodges can't recall if Council actually approved this kind of expenditure. ENMAX needs Council's permission before it spends anything more than $30 million.
Fact: The Shareholder approved the project in February 2008.
CBC: ENMAX told the Commission (AUC) it had to delay this project yet again for another two years.
Fact: Approval is now in place from both the AUC and the provincial government. Longer than anticipated regulatory and permitting timelines and the economic downturn moved the planned June 2013 (as contemplated at the time of our permit application) operational date to 2015. The project construction schedule was optimized by our contractor and then modified based upon short term economic conditions (this is not unlike buildings being delayed a year in downtown Calgary). Our current schedule for the Shepard Energy Centre has the start of construction in early July of this year.
CBC: ENMAX spent more than $400 million dollars acquiring equipment for this plant. The gas turbines were ordered from Mitsubishi in January of 2009 and that's long before ENMAX even applied for a license to operate this plant.
Fact: The CBC has its facts wrong. Their number was almost double of what was actually spent. A thorough risk assessment is done when all these decisions are made including noting the additional costs of having to wait for equipment that isn’t ordered before a permit is granted or the increased costs of ordering equipment after permitting is granted.
For large and complex industrial projects (power, oil & gas, petrochemical), it is a common practice to order equipment long before all approvals are in place to enable design and complete permit applications.
The provincial regulator, the Alberta Utility Commission (AUC), requires detailed information on proposed plants before issuing permitting. This includes data on the equipment to be used, engineering plans, environmental analysis, etc. In the absence of this information, including extensive details on the equipment, it would be impossible for the regulator to approve the application.
Also, ENMAX had multiple exit strategies such as selling equipment and land, using the equipment at a new site, etc. Abandoning the project and liquidating all the assets would have cost ENMAX a fraction of the cost (elements such as business development costs and engineering work would not have been recoverable for example).
Lastly, a similar power plant near the Shepard location was successfully permitted in 2001, however it was never built. The AUC’s approval of this project indicated that the location at least was already favourable to the regulator, a benefit to ENMAX’s submission.
CBC: ENMAX is paying millions of dollars just to store the equipment required for the plant and that there are risks in doing this, the biggest being what if your application is rejected?
Fact: Equipment storage and the cost to do so was always in the plan. Also, the equipment was designed to be stored and operated outside and is being stored in accordance with the manufacturer’s standards. The equipment consists of structural components, piping, and other materials for the heat recovery steam generator (boilers) only. The equipment stored outside will be assembled and then located outside once the plant is complete.
CBC: The company's own documents indicate the final design of the plant still isn't complete That design work won't be done for another sixteen months or so. The build-out time for the plant is twenty-four to thirty months. So this equipment is not going to be in use or even indoors for a long time yet. In fact, one engineer we showed the equipment to said to me, you realize what you're looking at here? This is city money or city resources that could have been used to build an airport tunnel or two or several major intersections that are needed around Calgary. Instead, we have a lot of equipment that won't be benefiting any Calgarians in any way until at least 2015. So his question then--and it's powerful one--is this the best use of city resources?
Fact: Again, it is common industry practice to order equipment long before completing plant design (i.e. for large and complex industrial projects in industries such as power, oil & gas, petrochemical). ENMAX is a separate, standalone company governed by its own Board of Directors and not a City department. Funds used towards the Shepard project are not taxpayer dollars and were not allocated by City Hall.
CBC: Energy analysts have heard ENMAX has unsuccessfully tried to find partners to go into business for this plant with it and maybe even wanting to sell the equipment for this plant.
Fact: ENMAX intends to proceed with the Shepard Energy Centre and will not sell the equipment. The question of whether we have sought or are currently negotiating with partners is both a competitive and disclosure issue.
ENMAX Corporation, through subsidiaries and predecessors, has provided Albertans with safe and reliable electricity for more than 100 years. ENMAX provides electricity, natural gas and value-added services to more than 660,000 residential, commercial and industrial metered customer locations in Alberta. ENMAX Energy Corporation, a subsidiary of ENMAX Corporation, is Alberta’s leading competitive electricity retailer. Through subsidiaries, ENMAX Energy is one of Alberta’s largest investors in renewable energy and was the first Canadian electricity retailer to offer customers the option to support wind generated energy. As well, ENMAX Corporation, through its subsidiary ENMAX Envision Inc., provides fibre optic networks for high speed data and internet communications.
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