By Doug Hadfield
In the last few years, investors in green energy will have noted the impact that calls for private sector power have had on some publicly traded companies. BC Hydro’s 2006 call for power had the notable effect of boosting Plutonic Power Corp. (TSX: PCC) from under $1 per share to its new trading range between $7.50 and $8.50.
That jump represents unprecedented growth for a TSX-listed run-of-river company, and is due to the scope of the hydroelectric projects Plutonic Power is developing. For example, if all the company’s development-stage projects were completed today, its total power capacity would be approximately 1,900 megawatts (MW).
By way of comparison, the largest wind farm in the world, the Horse Hollow Wind Energy Center in Texas, has a capacity of 735.5 MW.
Other methods of producing energy, such as coal- and nuclear-generated, do often produce more energy at a lower cost per dollar of capital invested, but with unwelcome environmental effects. Even hydroelectric facilities, which typically produce 1,000 to 2,500 MW each, have fallen from favour due to their relatively large ecological footprint.
Run-of-river projects differ because they do not gather water in large reservoirs, but divert a portion of the river water into a pipe, downhill to a power generating station. The water then leaves the generating station and is returned to the river, unaltered.
What sent Plutonic Power’s share price soaring was a 2006 Electricity Purchase Agreement (EPA) with BC Hydro that guarantees the province 745 gigawatt hours (GWh) of electricity annually from Plutonic’s East Toba River-Montrose Creek project for 35 years.
“Our 35-year EPA with BC Hydro was a real coup,” Plutonic’s Director of Communications, Elisha Moreno said. “It basically gave us the go-ahead to move forward to construction phase.”
Moreno, who was previously a spokesperson for BC Hydro, added “We’ve projected about $65 million in revenues per year from Toba-Montrose,” she said.
That figure is calculated using the contractual per MWh price in the EPA, which is between $71.37 and $84.23 - Moreno couldn’t reveal the exact figures. Since Plutonic’s EPA deal signed with BC Hydro is for a maximum of 745 GWh, that equates to between $53,170,650 and $62,751,350 annually, or as much as $2.2 billion over the initial 35-year life of the project.
In a report by its Equity Research department last October, Scotia Capital stated, “If [Plutonic Power] wins 1,500 MW in upcoming BC Hydro Clean Power Calls, which are backed by identical financing arrangements and similar construction contracts as its first pair of projects [Toba-Montrose], the stock could be worth as much as $32 per share by about 2015.” The authors predicted a one year trading price of $10 per share.
Toba-Montrose, now in construction phase and scheduled for completion in 2010, is actually two large run-of-river projects, located about 130 km north of Powell River. These two projects combined have a capacity of 196MW, which Scotia Capital values at $3 per share.
In part, Plutonic’s present trading value is reflected in forward-looking analysis by powerhouse investors like Scotia Capital. This is because, when the next call to power happens - and it’s expected any day now - Plutonic will be making two more bids totaling over 1,000 MW of capacity.
The first, smaller bid is the Upper Toba, which will share transmission lines with Toba-Montrose. Installed capacity of the three Upper Toba facilities is estimated to be 133 MW with an expected annual energy generation of 460 GWh annually.
Plutonic Power’s second bid is much larger. The Bute Inlet Project consists of 18 facilities located above the headwaters of Bute Inlet, some 200 km north of Toba-Montrose. These 18 run-of-river facilities combined will have a potential capacity of 914 MW with potential energy generation of 2980 GWh per year.
The scope of Plutonic’s run-of-river program is one of the largest of its kind in the world. Remarkably, if built, it will also have one of the smallest environmental impacts of any other energy project. In a comparison of scored environmental impacts by the Ontario Power Authority, run-of-river scored 21 points, hydroelectric (dams) 30.5 and wind 34.5. Coal weighted in at a hefty 216.5.
For company founder and CEO Donald McInnes, considerations like these feature largely as a sense of accomplishment.
“One of the biggest upsides in this project is that it continues to build out the green power corridor which will allow Southwestern British Columbia the ability to call itself the green power capital of Canada,” he says.
Find out more about BC’s call for power at www.bchydro.com and more about Plutonic Power at www.plutonic.ca.
