NaiKun Wind Energy Group Inc.

NaiKun Wind Energy Group Inc.

November 03, 2009 08:30 ET

NaiKun Wind Issues Project Update

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 3, 2009) - NaiKun Wind Energy Group Inc. (TSX VENTURE:NKW) distributed a quarterly project update to shareholders after the close of markets yesterday. The content of the update appears below.

NaiKun Wind Quarterly Shareholder Update

Welcome to the NaiKun Wind Quarterly Shareholder Update for October-December 2009. The status of the Clean Power Call and the Haida Nation's new level of participation in our project are the two issues shareholders have asked most about over the past few months and we address both of these in this quarter's Update. We are pleased that our environmental assessment continues to progress on schedule and have good news to report on that front as well. Read on for details on these topics and more.

Clean Power Call – the Latest

By now, everyone knows that NaiKun Wind is pursuing a contract through the Clean Power Call to sell electricity from our 396MW project to BC Hydro, and also that the Call has been underway since last year. Below, we explain the path to the Call's current status and what to expect in the near term.

Contract awards under the Clean Power Call were originally scheduled for no later than June 2009 but were delayed following a set of rulings by the provincial energy regulator (British Columbia Utilities Commission; BCUC), some directly related to the Call and some not. With conflicting messages coming from the Provincial Government and the BCUC, BC Hydro required guidance from its sole shareholder – the government – on how to implement provincial energy policy. Perhaps the most pressing issue to deal with was that of the gas-fired Burrard Thermal generating facility, which provincial energy policy calls for phasing out but which the BCUC recommended be relied upon far more heavily than had been the case to date.

The tool chosen to deliver the required instructions is known as a Special Direction. In short, Special Directions are government regulations issued by the Province to Crown agencies with specific instructions for the agencies to follow. Unlike policy objectives or statements, these instructions are binding, similar to legislation.

On October 28, the Government issued a Direction to the BCUC stating that, effective immediately, Burrard Thermal is to be relied upon for zero gigawatt hours per year of firm energy. In other words, BC Hydro cannot use Burrard Thermal as a source of electricity, except in times of emergency. Recent planning documents released by BC Hydro called for Burrard Thermal to supply substantial amounts of electricity each year – electricity that will now have to be obtained from other sources.

In addition, the government re-emphasized its commitment to the Clean Power Call, noting that the decision on Burrard Thermal allows BC Hydro to continue with the acquisition of 6,000 GWh of cost-effective, clean and renewable power, including some 5,000 GWh from the Clean Power Call and 1,000 GWh from the Phase 2 Bioenergy Call for Power.

So, what does this mean for the issue of contract award timing? BC Hydro stated in an August news release that it anticipates Electricity Purchase Agreements being awarded in the fall, noting also that the BCUC had granted an extension of the timeframe within which the decisions were to be made to December 31. The release also highlighted BC Hydro's intention to assess whether Clean Power Call participants have conducted adequate consultation with First Nations with respect to their power sale proposals. NaiKun Wind is confident that we have not only met, but exceeded, these requirements, thus enhancing our positioning to receive a contract.

In summary, the Special Direction removed much of the planning uncertainty that had tied BC Hydro's hands since the BCUC's report during the summer. We believe the door is open for the awarding of contracts under the Clean Power Call in the near future.

BC Government Moves Quickly on Throne Speech Commitments

The Burrard Thermal decision discussed above is the first step in the BC Government's effort to follow through on commitments made in the Throne Speech it delivered in late August, one in which development of the province's clean energy resources was a primary focus. As not all shareholders will have seen the Speech, here are some of the relevant excerpts:

"Green energy will be a cornerstone of British Columbia's climate action plan."

"The BC Utilities Commission will receive specific direction."

"Phasing out Burrard Thermal is a critical component of BC's greenhouse gas reduction strategy."

"We will build on past successes with new strategies aimed at developing new clean, renewable power as a competitive advantage to stimulate new investment, industry and employment."

A new Green Energy Advisory Task Force will shortly be appointed to complement the work of the BCUC's long-term transmission requirement review. That task force will be asked to recommend a blueprint for maximizing British Columbia's clean power potential, including a principled, economically-viable and environmentally-sustainable export development policy."

"BC's multiple sources of clean, renewable energy are far preferable to reliance on other dirtier forms of power. We will open up that power potential with new vigour, new prescribed clean power calls and new investments in transmission."

For those wishing to read the full text of the Speech, please use the following link:

In a press release dated November 2, the government made good on another of the announcements in the Speech, this time moving forward with its pledge to set up a Green Energy Advisory Task Force. Actually, it set up four of them, one each for Procurement and Regulatory Reform; Pricing, Trading and Export Market Development; Community Engagement and First Nations Partnerships; and Resource Development.

While each task force will deal with specific issues to improve the efficiency and vitality of BC's energy sector, the Procurement and Regulatory Reform task force will be of particular interest to many NaiKun Wind investors. The stated objective of this task force is to "enhance clarity, certainty and competitiveness." Essentially, this group is going to take a look at what has caused delays and other inefficiencies in contract procurement to date and eliminate them, targeting this coming January for recommendations to government. The four Advisory Task Forces will report to the new Cabinet Committee on Climate Action and Clean Energy chaired by Premier Gordon Campbell. Membership will include the chairmen of BC Hydro and the BC Transmission Corporation.

It should be noted that work performed by the task forces will not influence the Clean Power Call timeline. What it will do, however, is ensure the inefficiencies of the past are not repeated, thus providing greater certainty going forward for both clean energy development companies such as NaiKun Wind and the investors who support them.

Haida Approach to Federal Government Going Well

In mid-August, the Haida Enterprise Corporation (HaiCo) announced that the Haida Nation planned to purchase up to a 40% stake in NaiKun Wind's 396 MW project. We were already in talks with other potential partners but were delighted to welcome the Haida Nation when its leadership expressed interest in exploring the opportunity to take an ownership stake in the project, a position consistent with their long-term commitment to what we are trying to achieve.

HaiCo requires Federal Government support in order to purchase its stake and make the necessary equity contribution, and that support would likely come in the form of a loan guarantee. Meetings in Ottawa began immediately after Labour Day and HaiCo has now submitted a proposed structure for the government's consideration.

So far, the reception from various federal government departments has been positive. The project hits the mark on a number of fronts important to the federal government including that it reflects the spirit of the Federal Framework on Aboriginal Economic Development announced in June of this year. In addition the degree of support requested is modest compared to federal spending on carbon capture and other environmentally focused programs.

The Haida leadership has signed a Memorandum of Understanding with NaiKun Wind regarding the ownership position and is undertaking a process for the Haida people to receive relevant information to ensure majority acceptance of the investment plan. It is a large commitment for the Haida, to be sure, yet also perhaps the biggest economic opportunity the Nation has ever had. Meetings between senior Haida leadership and Federal Government officials will take place over the coming months and HaiCo hopes to have a proposal in place around year-end for consideration by the Haida people.

While NaiKun Wind continues to support the Haida Nation in its pursuit of an ownership position in the project, we have maintained contact with other potential investors regarding the unique opportunities the project presents. NaiKun Wind remains confident that it will secure a commercially viable partner to join ourselves and ENMAX Corporation in funding the equity elements of the financing plan. In addition, we continue to work with our debt advisor, Bank of Tokyo Mitsubishi, to fine tune the debt financing plan, taking into account the evolving and improving financial markets.

Environmental Assessment Decisions Drawing Near

Obtaining environmental approval is one of the biggest milestones for a project such as NaiKun Wind's and we are delighted to be close to the decision date on our environmental assessment for the 396MW project. Representatives from the provincial and federal governments, the Haida Nation and other participating First Nations have provided constructive input and we are pleased to say that we are on track to achieve this significant milestone.

Once an environmental assessment report and its accompanying recommendations are complete, the package is referred by the Environmental Assessment Office to the provincial environment and energy ministers for review. The ministers work with a 45-day timeline to make their final decision, with the federal decision expected thereafter. After the decisions are finalized, environmental certificates are issued.

The decision window for NaiKun Wind's environmental approval is fast approaching and we are confident that the process will continue to proceed according to plan. Word on the outcome of the assessment is expected toward year-end.


Work by the NaiKun Wind team on development of our project continues to go well but uncertainty surrounding the contract procurement process has been holding the share price back. We believe it is logical to conclude that issuance of the Special Direction opens the door for near-term announcement of successful participants in the Clean Power Call.

As we await the Call announcement, we are managing cash ($16.14 million as of June-end) prudently. Our partners – ENMAX Corporation, the Haida Nation, plus the Metlakatla and Lax Kw'alaams First Nations – continue to work closely with us and make valuable contributions to project development. We also maintain strong relationships with key suppliers, who remain committed to the project and are providing the flexibility we need to keep our construction plans on schedule.

From the entire team at NaiKun Wind, thank you for your continued support.


Paul Taylor, President and CEO

NaiKun Wind Energy Group Inc.

Caution Regarding Forward-Looking Statements - This news release contains certain forward-looking statements, including statements regarding the business and anticipated financial performance of the Company. These statements are subject to a number of risks and uncertainties. Actual results may differ materially from results contemplated by the forward-looking statements. When relying on forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and should not place undue reliance on such forward-looking statements. The Company does not undertake to update any forward-looking statements, oral or written, made by itself or on its behalf.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

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