Atlantic Power has executed a new 10-year Energy Purchase Agreement (EPA) with BC Hydro for the Williams Lake biomass plant in British Columbia, Canada. The new EPA became effective on October 1, 2019. The plant had been operating under a short-term EPA since April 2, 2018, which expired on September 30, 2019.
Williams Lake biomass plant
Under the new EPA, Williams Lake will receive a fixed price per megawatt-hour for energy produced. This price escalates annually with the British Columbia CPI. The EPA does not provide for a capacity payment and the energy payment structure does not include a fuel cost passthrough.
The Atlantic Power Williams Lake Project (APWL) is a 66 MW biomass-fired generating facility located in Williams Lake, in south-central British Columbia. The project commenced commercial operations in April 1993. Atlantic Power operates and manages the project while indirectly owning 100 percent. Biomass fuel consists of wood waste from sawmill operations and roadside logging debris, which is sourced under short-term supply agreements with various suppliers.
Conditions in the British Columbia timber market for the past couple of years have adversely affected both the availability and cost of fuel, which as previously noted by the company represents the most significant operational and financial risk for Williams Lake. During the period the plant has been operating under the short-term contract, the company has been procuring fuel on a short-term basis. With a long-term EPA now in place, Atlantic will be evaluating fuel supply options and plans to provide EBITDA guidance for Williams Lake under the new EPA at a later date. Considering market conditions and the absence of a fuel cost passthrough, it is expected there will be greater variability to EBITDA and cash flow from this plant as compared to its other contracted biomass plants.
Several major maintenance projects at Williams Lake are expected that will result in a higher level of maintenance expense for the plant in 2020. These projects may be commenced as early as the fourth quarter of 2019 and are expected to be completed in 2020.
"As we have highlighted previously, biomass plants provide benefits beyond the generation of electricity, including support for the local economy and timber industry, and environmental benefits, including forest management," said Joe Cofelice, Executive Vice President, Commercial Development. "We are very pleased to be extending our longstanding relationship with our customer BC Hydro at Williams Lake in order to serve the interests of consumers, the environment and the local community. We thank all those in the local community who supported our efforts to obtain a new long-term contract for this plant."