Pacific Northern Gas Ltd.
TSX : PNG
TSX : PNG.PR.A

Pacific Northern Gas Ltd.

April 28, 2011 16:54 ET

Pacific Northern Gas Advances Renewable Energy Strategy With an Investment in the Narrows Inlet Project

VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 28, 2011) - Pacific Northern Gas Ltd. (TSX:PNG)(TSX:PNG.PR.A) continues to advance its renewable energy strategy with an investment in the 45 MW Narrows Inlet run-of-river renewable energy project ("Narrows Inlet Project"), also referred to as the Stl'ixwim Renewable Energy Initiative or the Stl'ixwim Project.

The Company has formed Narrows Inlet Limited Partnership ("NILP") with Skookum Power Corp. to undertake an investment of up to $2.5 million to advance the Narrows Inlet Project to the start of construction. To March 31, 2011, the Company has invested $300,000 in the Narrows Inlet Project. Prior to the commencement of construction, the Company will make its final investment decision, and through NILP, will have an exclusive option to provide the construction equity as well as an option to ensure NILP owns a 50% interest in the Project.

Partnering with Skookum Power Corp., as it did on the McNair Creek facility, allows the Company to gain access to hydro development and construction expertise. Both parties will be working closely with the team of existing Narrows Inlet Project developers, Renewable Power Corp. and Altaqua Renewable Power Corp., to advance the project through the B.C. Environmental Assessment process. Renewable Power Corp. has extensive experience in hydro project development, construction and operations and was the founding partner of the McNair Creek facility which the Company purchased in 2010 and was the developer and current majority owner of the Tyson Creek facility which is located in the vicinity of the Narrows Inlet Project.

The Narrows Inlet Project was awarded a 30 year energy purchase agreement with B.C. Hydro in spring of 2010. Construction on the Project is expected to commence in mid/late 2012, with an estimated capital cost of approximately $190 million of which approximately $20 million would be equity provided by the Company if NILP elects to proceed with funding the construction. The Narrows Inlet Project consists of five developments on four creeks that are located within a radius of 5 - 7 km of each other at the northern end of Narrows Inlet which is located approximately 35 km north of the town of Sechelt, British Columbia and lies within the Sechelt Nation's traditional territory. The Narrows Inlet Project benefits from coastal precipitation patterns, some storage capacity and close proximity to the largest electricity load center in British Columbia.

"We are very pleased to be advancing our renewable energy strategy with an initial modest investment in the Narrows Inlet Project. While the Company has moved to invest in renewable power development projects sooner than it had originally planned, it could not pass on this opportunity which secures an option to fund the construction equity at attractive returns," said Mr. Kevin Teitge, Vice President Corporate Development & Treasurer. "We are also pleased to be working alongside experienced hydro developers, Renewable Power Corp. and Skookum Power Corp., to ensure the project provides the anticipated value for our shareholders."

Mr. Marc Soprovich, President of Renewable Power Corp, spoke about the transaction with Pacific Northern Gas, commenting, "We are very pleased to be partnering with Pacific Northern Gas to advance the development of the Narrows Inlet Project. Pacific Northern Gas is an ideal partner adding synergies to the advancement of the Narrows Inlet Project with their experience of successfully navigating the Environmental Assessment process and their financing capabilities."

The commercial agreement between Narrows Inlet Limited Partnership and the existing owners of the Narrows Inlet Project provides for a risk allocation mechanism and a target return for the Company that is above the risk adjusted returns on its utility business.

Assuming NILP elects to fund construction, the Company expects that when the Narrows Inlet Project is fully operational by 2015/2016, the Company's interest in the project will be accretive to cash flow per share and EPS.

The Narrows Inlet Project would generate "clean" electricity that will be sold under a 30 year energy purchase agreement with B.C. Hydro. The Narrows Inlet Project entails the construction of five hydroelectric projects and associated transmission line at an estimated cost of $190 million. Subject to a number of conditions including the exercise of the construction investment option by NILP, construction of the Narrows Inlet Project is expected to commence in mid/late 2012 for completion in 2015/16 when all five projects are expected to be fully operational. Conditions to construction include the receipt of the necessary environmental and construction permits required to commence construction, securing of contractor agreements to construct the facility, and financing for construction of the Narrows Inlet Project. The Company can give no assurances that these conditions will be satisfied or that construction of the Narrows Inlet Project by NILP will proceed.

Forward-looking statements

This news release includes forward-looking statements. Forward-looking statements relate to, among other things, anticipated financial performance, key project related assumptions and market forces. Many of these statements can be identified by words such as "believe", "expects", "expected", "will", "intends", "projects", "anticipates", "estimates", "continues" or similar words. PNG believes the expectations reflected in such statements are reasonable but no assurance is given that such expectations will be correct. There are no assurances, for example, that expected project returns will be achieved, or that the conditions precedent to the commencement of project construction will be satisfied. All forward-looking statements are based on management's beliefs and assumptions based on information available at the time the assumption was made and on its experience and perception of historical trends, current conditions and expected further developments as well as other factors deemed appropriate in the circumstances.

By its nature, such forward-looking information is subject to various risks and uncertainties that are known and unknown, including those material risks discussed in PNG's 2010 Annual Information Form under "Risk Factors" which could cause PNG's actual results and experience to differ materially from the anticipated results or other expectations expressed. Such risks and uncertainties include but are not limited to: general economic conditions and markets; financing of investments, failure to secure project approvals or project financing, energy generation; seasonal weather patterns; federal and provincial climate change initiatives; the cost and availability of capital; the impact on PNG's liquidity if it were to go offside of the covenants in its debt facilities; and the impact of accounting changes including the transition to International Financial Reporting Standards. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date it is expressed in this news release or otherwise, and PNG undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.

About Pacific Northern Gas

Headquartered in Vancouver, British Columbia, Pacific Northern Gas Ltd. (TSX:PNG)(TSX:PNG.PR.A) owns and operates natural gas transmission and distribution systems. PNG's western transmission line extends from the Spectra Energy (formerly Duke Energy) gas transmission system north of Prince George to tidewater at Kitimat and Prince Rupert, and provides service to 12 communities and a number of industrial facilities. In the northeast, PNG's subsidiary Pacific Northern Gas (N.E.) Ltd. provides gas distribution service in the Dawson Creek, Fort St. John and Tumbler Ridge areas. Further information is available at: www.png.ca.

Contact Information

  • Pacific Northern Gas Ltd. - Investor Inquiries
    Kevin Teitge
    Vice President, Corporate Development & Treasurer
    (604) 691-5689

    Pacific Northern Gas Ltd. - Media Inquiries
    Greg Weeres, P.Eng.
    Vice President, Operations & Engineering
    (604) 691-5677
    www.png.ca