SOURCE: Capital Power Corporation

Capital Power

July 25, 2016 20:31 ET

Capital Power Responds to Government of Alberta's Litigation Seeking to Reinstate Power Purchase Arrangements

EDMONTON AB --(Marketwired - July 25, 2016) - Capital Power Corporation (Capital Power or the company) (TSX: CPX) issued the following statement, following the Government of Alberta's commencement of legal action that seeks to retroactively amend and reinstate certain Power Purchase Arrangements (PPAs, or Arrangements), and prevent the Balancing Pool from accepting Capital Power's termination of its role as a Buyer of the Sundance C Power Purchase Arrangement (Sundance PPA, the Arrangement).

Under the terms of the PPA, as drafted and then sold at auction by the Government of Alberta, Capital Power had earlier given notice to the Balancing Pool of its intent to terminate its role as Buyer of the Sundance C PPA, effective March 24, 2016.

"We will exercise every legal avenue at our disposal to ensure that the Government of Alberta honours the terms of the PPAs," said Capital Power President & CEO Brian Vaasjo. "We believe the legal claim is without merit, and we will look to the courts to ensure that the Government of Alberta cannot retroactively amend an arrangement for which Albertan companies paid and upon which they have been relying in good faith for 16 years."

"We will ask the courts to direct the Government of Alberta to honour the law and the terms of the Arrangements, which include our right to terminate under the change in law provision," said Capital Power Senior Vice-President, Legal and External Relations Kate Chisholm, Q.C.

"When companies purchased the PPAs at auction, they bid on the Arrangements based on their terms, which included the change in law protection. Collectively, we and other Buyers paid $3 billion for the PPAs -- money that was returned to Albertans by the Government through the Balancing Pool. Buyers would have paid substantially less to purchase any PPA that was missing a change in law clause.

"Today's announcement by the Government of Alberta claims that the PPA terminations will result in consumers bearing up to $2 billion in costs between now and 2020. This claim is misleading because it is incomplete. Based on available public information, the Balancing Pool can reduce its liability to an estimated $950-million by terminating the PPAs that were recently turned back to them, or to an estimated $635-million by terminating some PPAs, and retaining and managing others.

"The PPAs were essential to the successful restructuring of Alberta's electricity markets. Alberta consumers continue to benefit from the restructuring and the PPAs, with an abundant and reliable supply of power, and extraordinarily competitive prices. Alberta's wholesale electricity system is currently generating power at less than $20 per megawatt hour (MWh), a savings of almost $4-billion a year for Alberta homes and businesses when compared to long-run average prices of $65/MWh.

"Capital Power continues to support action to reduce Alberta's greenhouse gas emissions, including the Specified Gas Emitters Regulation (SGER) changes made as part of the Climate Leadership Plan. The terminations of the PPAs are one of the costs of transition. If the Balancing Pool took prudent action to reduce the costs of PPA management to $635-million, and spread those over 14 years to align with the overall timeline of the Climate Leadership Plan, the expected impact for an average Alberta family would be about 30-cents per month."

BACKGROUND

Power Purchase Arrangements (PPAs or the Arrangements) were created by the Government of Alberta in 2000 as part of the transition from a regulated to a competitive generation market. PPAs are statutory instruments, established under the Power Purchase Arrangements Determination Regulation and continued through the Electric Utilities Act. The PPAs impose legal rights and obligations on Buyers, Owners, and the Balancing Pool in respect of the costs, revenues, and the right to dispatch the electrical output and capacity associated with the relevant power plants, which here built in the regulated era. The proceeds from the initial PPA auctions and later sales were paid to the Balancing Pool, resulting in $3 billion being paid to Alberta electricity customers since 2000.

About Capital Power
Capital Power (TSX: CPX) is a growth-oriented North American power producer headquartered in Edmonton, Alberta. The company develops, acquires, operates and optimizes power generation from a variety of energy sources. Capital Power owns more than 3,200 megawatts of power generation capacity at 18 facilities across North America. More than 700 megawatts of owned generation capacity is in advanced development in Alberta and Kansas.

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