Plutonic, with help from investors like General Electric, aiming to tap rivers in British Columbia for roughly 1,300 megawatts of hydroelectric energy

Business in Vancouver February 26-March 3, 2008

Krisendra Bisetty

B.C.’s first utility-scale independent run-of-river hydroelectric power plant developer is developing a pipeline of projects worth more than $3 billion this year.

Plutonic Power Corp. (TSX:PCC) is preparing to bid two new hydroelectric projects into a BC Hydro call for power later this year that, if successful, will give the Vancouver developer just under 1,300 megawatts of capacity contracted to the utility. That’s enough to power approximately 400,000 homes.

The 200-employee company is expecting massive growth before the end of 2008, Plutonic boss Donald McInnes told a CIBC World Markets investor audience in Vancouver last week.

“It should be a huge year for Plutonic.”

Construction of a $660 million, 196-megawatt pair of run-of-river plants has already started on two sites on the East Toba River and Montrose Creek, 150 kilometres north of Powell River. The company will also build a 145-kilometre-long transmission line that will connect to the electricity grid. A 250-man five-year camp is also being set up in the Toba Valley to build five projects in the area.

If Hydro’s last power call is anything to go by, its next one may prove tantalizing to independent power producers.

McInnes said the utility would ask for twice the energy it bought or contracted for in 2006. “They went to market for 2,500 gigawatt hours, and they contracted for a little over 7,000,” he said. “This year, they’re going to market for twice that. They say they’re going to market for 5,000 gigawatts of firm energy, and the likelihood is that they’ll contract for a lot more as long as the price is reasonable.”

Plutonic will enter its Upper Toba Valley project into the call. It includes three power facilities to be built at the headwaters of the Toba Inlet on Jimmie Creek, Dalgleish Creek and the Upper Toba River. The installed capacity of the three facilities is estimated to be 120 megawatts, or an expected annual energy generation of 350 gigawatt hours (gw/h).

Unlike the plant under construction, for which it received financing support, including $190 million in equity and other financial instruments from a Canadian affiliate of GE Energy Financial Services, a unit of General Electric (NYSE:GE), Plutonic plans to fund the Upper Toba project by raising approximately $60 million on the capital market.

“We think we can deal with that one on our own,” McInnes said.

But GE may again be called upon for Plutonic’s Bute Inlet project, which consists of 17 project sites at the headwaters of Bute Inlet. McInnes said that the sites had a combined potential capacity of roughly 1,000 megawatts and a potential energy generation of more than 3,000 gw/h a year. That would be enough to power approximately 300,000 homes.

McInnes said Plutonic plans to bring in a financial partner to backstop its bid for Bute, which is a $3 billion undertaking.

If Plutonic gets the guarantee, it expects to negotiate a 50% ownership of the project after it pays for the permitting and early engineering costs.

For its equity contribution and guarantees to the East Toba/Montrose project, GE gets 60% of the cash flow for the duration of Plutonic’s 35-year power purchase agreement with Hydro.

That plant is projected to generate an average of $89 a megawatt hour in revenue.

After taking into account the operating costs, which McInnes said are low – typically 18% of revenue – and debt service and interest, Plutonic estimates that it will be left with approximately $20 million a year. •

kbisetty@telus.net