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Capital Power eyes Ontario for expansion as Alberta growth falters

Capital PowerCorp. has its eye on Ontario to grow its power plant portfolio asthe outlook dims for the addition of new generators in its home province ofAlberta.

The company has pushed a final decision on the constructionof the C$1.4 billion Genesee4 & 5 project near its home base of Edmonton, Alberta, to thefourth quarter as power prices in the energy industry-dependent provincelanguish near record lows because of a faltering economy. A decision to delayor shelve the Genesee project could free up investment capital for projects inOntario, where the government is pushing new power developments, CEO BrianVaasjo said on a July 25 conference call.

"We've got a number of opportunities in the U.S. and weare actually developing opportunities right now in Ontario to respond to thenext two calls [for proposals]," Vaasjo said. "In the event thatGenesee 4 & 5 did not proceed, actually what it translates into for thecompany is more capital to spend outside of Alberta. So we are prepared tocontinue to ramp up those activities and still be able to deploy significantamounts of capital in totally contracted projects — again, outside of Alberta."

Alberta's deregulated power-selling market has soured asspot prices slumped to an average C$15/MWh in the second quarter. While CapitalPower was able to boost earningsthrough profitable hedging programs, long-term uncertainty that includes agovernment plan to phase out coal-fired generation by 2030 and a looming tax onemissions have the company looking elsewhere to build new plants.

Ontario is seekingto add as much as 930 MW of wind, solar, hydroelectric and bioenergyelectricity to its grid through the second round of its Large RenewableProcurement process. Capital Power had planned to build the natural gas-firedGenesee 4 & 5 with ENMAXCorp., Calgary's municipally owned utility. The plant could stillbe operating by 2020 if markets improve enough to make a positive decision onits future, Vaasjo said.

Capital Power saw its second-quarter profit surge asforward-market sales bolstered its realized Alberta prices even as spot pricesslumped. The company realized an average C$61/MWh in the second quarter, morethan four times the Alberta spot price. It is fully hedged for the balance ofthis year and through the end of 2017, CFO Bryan DeNeve said on the call. Thecompany's 2017 power has been sold in the mid-C$40/MWh range and significanthedges are in place for in 2018 and 2109, he said.