Vancouver Island residents are going to get a new natural gas-fired power plant at Nanaimo after all – just not one built by BC Hydro.

Duke Point Power Limited Partnership is the successful bidder in BC Hydro’s call for private-sector bids to supply much-needed power to Islanders.

The Duke Point partnership is majority owned by Macquarie Essential Assets Partnership (MEAP), Pristine Power Inc. of Calgary and a group of private investors.

MEAP is part of the global Macquarie Group of companies, headquartered in Australia. Macquarie Bank established MEAP, an unlisted fund of $460 million, last May to offer investors the ability to invest – especially in deregulated power markets – in relatively low-risk essential infrastructure assets, including electricity transmission and distribution networks.

The Duke Point partnership successfully bid to build a 250-megawatt power plant in the Duke Point Industrial Park in Nanaimo.

It’s exactly the same place BC Hydro had planned to build its gas-fired power plant, before the BC Utilities Commission decided in September 2003 that Hydro’s $370-million plan was too expensive and ordered the Crown corporation to call for private- sector proposals.

Like the defunct Hydro power plant, the Duke Point partnership’s facility will use proven combined-cycle natural gas-fired turbine technology.

Pristine Power will be responsible for the day-to-day management.

The independent power firm estimates it will be able to build the power plant in 18 months for $280 million in “hard-capital costs” (excluding the cost of carrying interest on the debt during construction). That’s $90 million cheaper than what Hydro had in mind.

Pristine and its partners’ biggest hurdle now will not be getting through B.C.’s streamlined regulatory process.

The challenge will be convincing Nanaimo residents, many of whom don’t want the plant in their backyard, that it should be built there so all Islanders aren’t left in the dark.

BC Hydro spent $120 million developing its Duke Point power project, but will recover only $50 million of that amount in the deal announced with Pristine, according to a report.

So who’ll get stuck with the remaining $70-million tab? Ultimately, it will be B.C. taxpayers, either though higher electricity rates for all Hydro customers, a cut in Hydro’s dividend to taxpayers or a slash in the Crown corporation’s budget.

Blow, Wind, Blow

BC Hydro and the B.C. government are finally getting serious about opening the door to clean, renewable energy development. It’s about time.

Hydro announced last month that it will call for power proposals from the private sector for the spring of 2005 and the fall of 2006, each for 1,000 gigawatt hours per year or enough to supply a total of 200,000 homes.

In another positive move, the province has granted an environmental permit to Holberg Wind Energy GP Inc., for what will be B.C.’s first wind farm to be given a long-term contract to sell power to BC Hydro.

The $120-million, 58-megawatt wind farm, near Port Hardy on the northern tip of Vancouver Island, could be providing electricity by 2006.

Stothert Power Corp. of Vancouver and Global Renewable Energy Partners Inc., a Danish-U.S. company, are partners in the project. It would include up to 45 turbines, each 80 metres high, and supply enough power for about 20,000 homes.

Some B.C.-based wind-power producers, including Sea Breeze Energy Inc., have complained that the provincial government and BC Hydro have been disinterested in wind-power development.

Vancouver-based Nai Kun Wind Development Inc., a wholly owned subsidiary of Uniterre Resources Ltd., wants to start building a 700-megawatt wind farm with up to 350 turbines off the north coast of B.C.

Now that the door is open a crack, wind-power developers need to keep pushing to open it wide.

Gateway To Opportunity

Oilsands crude is still coming down the pipe, as far as Enbridge Inc. is concerned.

Enbridge CEO Pat Daniel says the continuing cost overruns in the oilsands won’t derail his company’s plans to build a 1,200- kilometre pipeline from Edmonton to either Kitimat or Prince Rupert.

Enbridge’s $2.5- to $3-billion “Gateway” pipeline would ship 400,000 barrels per day of oilsands crude to the coast and from there to markets in Asia or California.

By the end of the decade, investment is expected to double the current oilsands production of about one million barrels per day.

Enbridge is in a race to carry that crude oil with Vancouver-based Terasen, which proposes to spend up to $2.5 billion to either twin its existing Trans Mountain pipeline from Edmonton to Vancouver or run a new northern leg of the line from Jasper to either Prince Rupert or Kitimat.

Neither company has yet to announce any contracts with oilsands producers or downstream refiners and markets in Asia. But Daniel says he’s encouraged by interest in a new pipeline, especially in Southeast Asia, and Enbridge still intends to have its Gateway line up and running by late 2008-09.

EnCana Tends Home Fires

EnCana Corp. is going against the flow of multinational oil business by bailing out of the North Sea and focusing on developing unconventional natural gas in North America.

But it looks like a shrewd, shareholder-driven strategy by EnCana CEO Gwyn Morgan, at least for the next decade or so.

EnCana announced last month that it was selling its major Buzzard oil discovery in the North Sea to Nexen Inc. for $2.1 billion US.

EnCana, Canada’s largest oil and gas company, also said it’s putting its controversial Ecuador oil pipeline venture and its holdings in the Gulf of Mexico up for sale.

So is EnCana beating a hasty retreat to North America? No, it’s more like a calculated retrenchment in what the company does best.

Morgan’s strategy in the past year has been increasingly to focus his firm on big North American resource plays, especially so-called tight reservoirs of natural gas along the Rockies. These are proved reserves that can be steadily produced for 30 years or more.

Unless George W. Bush decides to march the U.S. Marines across the 49th parallel, EnCana’s North American assets are reliable and safe, as opposed to high-risk offshore exploration or volatile properties in foreign lands.

At the same time, Morgan is betting that natural gas prices will remain high enough to support EnCana’s assembly-line approach to gas production, rather than an expensive hunt for increasingly rare “elephant” discoveries.

It looks like a pretty safe bet for the next 10 to 15 years, until tanker-loads of liquefied natural gas and pipelines filled with Arctic gas start to flood the North American market.

But as long as gas prices stay robust until then – and there’s no reason to believe they won’t – Morgan will have delivered shareholders a steady, predictable return on their investment.

(Mark Lowey can be reached at mark@businessedge.ca)