Syntaris Power

Oil sands, pipeline and coal-power companies now among the biggest players

Several of Canada’s largest energy and resource companies are quietly staking out positions in a sector that seems at odds with their usual extractive activities: the renewable power business.

Oil sands, pipeline and coal-power firms are now among the biggest players in renewables, with portfolios of wind, solar, small hydro power and ethanol production that in some cases outpace the holdings of most “pure” green companies.

Environmentalists and small companies in the sector are sanguine about the competitors; they welcome the big firms as a significant source of clout and capital that can add momentum to the shift to renewable energy.

“It reflects the reality of energy in the 21st century,” said Ian Bruce, a climate change specialist at the David Suzuki Foundation. “A lot of the innovation is happening at the small company level and then is getting [moved] up to larger businesses that have the capital to invest more.”

…Meanwhile, Calgary pipeline operator Fort Chicago Energy Partners recently bought up three small-hydro operations – Swift Power Corp., Pristine Power Inc., and the B.C. hydro assets of Enmax Corp.

…While Suncor plans to add one wind farm a year to its holdings, Mr. Lambert is loath to predict how large a proportion of its business renewables will make up. So much depends on access to power grids, provincial energy rules, and the shape of the still-undefined federal energy strategy.

It makes sense to have a diverse range of companies in the renewable business, he said. “You need to have those entrepreneurial players who are creating new ideas and innovating, then you need the big players for the growth stages of many of these technologies where access to capital is important.”

Small green energy companies agree. “The more that gets done, the better, whether it is by a pure play or by a traditional fossil fuel generator,” said Kent Brown, the former chief executive officer of Canadian Hydro who is now running a startup firm called BluEarth Renewables Inc. “We want to see projects get done and get done successfully.”

News Release

VANCOUVER, B.C. Today, Canada’s Environment Minister, the Honourable John Baird, and British Columbia’s Minister of State for Climate Action, the Honourable John Yap, announced that Canada and British Columbia will coordinate their greenhouse gas emission reporting under a national single window system.

…”Being able to report GHG emissions only once while meeting the requirements of both the federal and provincial governments will save British Columbia industries time and money,” said Minister Yap. “This is another example of the strong partnership we have with the Government of Canada, and single window reporting will be an important tool as British Columbia moves towards a regional cap-and-trade system.”

…Under the auspices of the Canadian Council of Ministers of the Environment (CCME), the federal, provincial and territorial governments made a commitment to ensure that all jurisdictions are able to measure, track and report progress on the reduction of greenhouse gases.

On March 15, 2010, Environment Canada launched its Single Window Reporting System to collect information on greenhouse gas emissions in support of the Department’s mandatory reporting programs for greenhouse gases.

Canada is committed to reaching the target we inscribed in the Copenhagen Accord to reduce greenhouse gas emissions of 17 per cent below 2005 levels by 2020.

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Capital projects, upgrading of infrastructure account for most of proposed increases

By Jesse Ferreras

BC Hydro confirmed last week that independent power producers (IPP) are playing a role in the Crown corporation’s application to the B.C. Utilities Commission for rate increases.

In the fifth paragraph of a Dec. 2 news release, the power authority states that it is forecasting an increase of $7 each year for the next three years, on an average monthly bill of $71 – a total of 27 per cent over three years. The rate increases are subject to approval by the BCUC.

BC Hydro President and CEO Dave Cobb said he’s looking to implement the increases so that the Crown corporation can take on a $6 billion effort to renew and expand the province’s electricity infrastructure.

“We are committed to meeting B.C.’s growing demand for electricity by modernizing and investing in the province’s electricity system to safely keep the lights on for British Columbians,” Cobb said in a news release. “We are also taking steps to keep rates affordable by making our operations more efficient and introducing new conservation programs that will help offset rate increase.”

BC Hydro has a long list of capital projects it hopes to pay for through the rate increases. The projects include adding a fifth unit to the Revelstoke Generating Station; a seismic upgrade at the Coquitlam Dam; and increases in generating capacity at the Fort Nelson Generating Station.

…Speaking on background, a BC Hydro spokesman said in an e-mail that the capital projects account for half of the rate increase, while energy costs from sources such as independent power producers account for less than one fifth of the increases.

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Tax break on flow-through shares cuts risk of renewable-energy investments

It’s often argued that money and the environment don’t mix when it comes to investing. While we all may try to love Mother Nature the best that we can, many of us have investment portfolios that tell a different story.

Let’s face it: Many equity-based mutual fund portfolios owned by Canadians are heavily invested in oil and gas and mining, or financial institutions that receive a significant amount of revenue from financing these sectors.

Even the socially responsible investment funds — be it mutual funds or the handful of Canadian exchange-traded funds — are not very focused on up-and-coming green firms.

Then again, it’s tough to blame anyone serious about investment returns for shunning the green-tech and renewable-energy sectors. For the most part, these firms are in their fledgling phases. They have promising ideas, but they lack the funding to get off the ground in many cases because the markets for their products and services are not yet fully developed, either.

“I think there is a lack of knowledge about and of capital for these companies,” says Stephen Whipp, a board member with the Social Investment Organization and investment adviser with Manulife Securities in Victoria.

…”We have a longstanding history in Canada since ’54 of supporting the development of energy and mining with the use of flow-through, but what a lot of people don’t know is we’ve had this green infrastructure since 1996 that investors can participate in the green sectors of energy,” says Sheldon Stier, president of Manitoba exempt market investment dealer Hatch Alternative Investments.

Flow-through share offerings are a way for companies to attract investment by passing on the tax incentive they receive to investors, reducing the amount of invested capital at risk.

On an investment of $10,000, an investor at the highest marginal tax rate would receive about $4,640 back in taxes. Even more tax savings could be realized the following year by investing the credit money into RRSPs, providing an additional tax refund.

Stier says it’s also possible to receive further tax savings after the flow-through shares’ tax deductions have been realized because the shares may become eligible for an RRSP. But investors should seek expert tax advice in this regard to be sure they abide by the rules under the Income Tax Act, he adds.

Tax incentives aside, however, the renewable-energy sector is becoming a viable investment sector, he says.

And unlike conventional resource exploration, in which the firms aim to discover resources that, if found in large enough quantities, can then be sold to another company to develop, renewable energy firms can often quantify the potential upside of their ventures, says Bob Fraser, CEO of Syntaris Power, a B.C.-based green-tech firm that has a flow-through share offering available in Manitoba through Hatch.

Syntaris develops small hydroelectric projects, called run-of-river. These involve diverting a portion of a stream on a steep mountainside. The rerouted water flows into a pipe called a penstock down a precipitous grade to a small wheelhouse at the bottom.

Fraser says the company is able to project its potential output by studying stream-flow outputs over several years.

“For a very small amount of money, we can know what the energy output will be and what the projects will look like,” he says.

Of course, being able to project output is one thing. Having a market to sell the energy to is another.

Because of new legislation to promote renewable energy, Fraser says run-of-river and other green energy projects now have growing markets.

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