CALGARY - TransCanada Corp. (TSX:TRP) has won a contract to build a $1.2-billion natural gas-fired power plant west of Toronto, as the Calgary-based company continues to add to its presence in Ontario's power market.
The Ontario Power Authority awarded TransCanada a 20-year contract to build, own and operate the 900-megawatt plant in Oakville, Ont. It is scheduled to start producing power by the end of 2013, the Calgary company announced Wednesday.
"We look forward to providing additional electricity supply and reliability within this key North American market," Hal Kvisle, TransCanada's chief executive officer, said in a statement.
"The Oakville generating station is a strong fit with our strategy of developing large scale energy infrastructure projects that will produce stable, long-term returns for our shareholders."
Ontario is seeking new sources of clean power such as hydro, wind and gas-fired generation to offset the impact of the province's plans to close coal-fired plants in southwestern Ontario and in northern Ontario. A Toronto-area plant was shut down a few years ago.
Conventional coal-fired power plants, which create more greenhouse gas than natural gas, once accounted for about a quarter of Ontario's power needs but they have become a political hot potato for the Liberal provincial government.
Peter Tabuns, the Ontario New Democratic Party's energy and environment critic, issued a statement Wednesday condemning the proposed Oakville gas-fired plant, saying it has been opposed by local politicians, medical officers and residents because of the potential health effect from its emissions.
"Why put a new gas plant in an area where air pollution already adversely affects the health of thousands of people? The wiser choice would have been to wait until June, when a task force will report back on ways to reduce pollution in the area," Tabuns said.
Tabuns also said the Ontario Power Authority has overestimated energy demand in the province and "gives priority to large-scale polluting plants."
TransCanada estimates that construction of the Oakville power plant will create 600 jobs over about 28 months. The plant itself will create about 25 permanent jobs.
The Oakville plant would be TransCanada's third power generation project in the Toronto area.
The company. which is also Canada's largest shipper of natural gas from Western Canada to markets in the East and U.S. Midwest states, has been rapidly growing its power generation business.
"TransCanada really is too big to pursue many of the smaller power plants that are out there. A 200 megawatt power plant is not worth it to them anymore. It's not worth their time," said FirstEnergy Capital analyst Steven Paget
TransCanada started with the 550-megawatt natural-gas-fired Portlands Energy Centre in downtown Toronto, which first began producing electricity in the spring of 2008.
Construction is underway on a 683-megawatt gas-fired plant in Halton Hills, northwest of Toronto. It is scheduled to come into service in the summer of next year.
"They are very experienced now in building plants in the Toronto area. The first one was probably the hardest," Paget said.
TransCanada is in the midst of pursuing a wide array of pricey capital projects, such as its $12-billion Keystone oil pipeline that will eventually carry Alberta crude to refiners in Texas.
"We view (the Oakville Generating Station) positively as it adds to (TransCanada's) post-Keystone growth profile with a large, low-risk project while building on its positions as Ontario's largest private sector generator," wrote UBS Investment Research analyst Chad Friess in a note to clients.
The OPA, one of several agencies that oversee the province's system for generating and distributing electricity, had been looking for proposals to provide a dependable source of power.
The reliability of the Oakville facility will help support the province's efforts to add more renewable sources, like wind and solar, to its electricity diet, TransCanada said.
The current government headed by Premier Dalton McGuinty has said it's committed to close several coal-fired power plants and increase the amount of electricity produced at more environmentally friendly plants.
However, the McGuinty government has been unable to meet the timetable outlined in the campaign leading to its first term in power in 2003, when the Liberals replaced a Progressive Conservative government led by Ernie Eves.
The company's shares fell 11 cents to $33.09 at the Toronto Stock Exchange.
