Province considers wind-farm bailout; Project downsized to 138 megawatts

The Selinger government is considering a bailout deal to rescue the financially floundering wind farm slated to be built near St. Joseph.

Following some pointed questions from Tory MLA Cliff Graydon during a committee hearing late Tuesday night, Finance Minister Rosann Wowchuk acknowledged Pattern Energy has approached the government for funding and that the province is considering it.

"We have staff looking at it," said Wowchuk. "We have had discussions with the company and are working to see how we might move this project forward."

Australian mega-firm Babcock & Brown was originally chosen out of 84 bids to build a 300-megawatt wind farm near St. Joseph. It would have been the biggest wind farm in Canada.

But the company imploded late last year and sold all its North American wind projects to San Francisco-based Pattern Energy. Since then, the project has been stalled and Manitoba Hydro revealed during Tuesday night's hearing it's been downsized to just 138 megawatts.

Pattern Energy's Colin Edwards said the original $800-million project will now be worth less than half that and the global economic downturn has made it hard to secure financing. That's why the company has approached the provincial government for help with financing.

But neither Edwards nor the province would say whether the financial help involves direct grants, loan guarantees or some other aid.

"Until we actually finalize something, we can't really talk about it," said Edwards, adding financial matters should be settled within a month.

In an unusual move, Wowchuk ducked questions about the bailout Wednesday. Her staff said she was too busy to answer questions and noted no financial commitments to Pattern Energy had yet been made.

But the possible bailout raises questions about the government's promise to build 1,000 megawatts of wind power by 2015 and whether it's feasible in a province with such cheap water power.

The Tories noted none of the other companies who bid to build the next wind farm was offered provincial cash and it's not clear why the province would subsidize a project instead of asking Hydro to simply pay a little more for wind power.

Global Wind Group president Alex Stuart said any bailout puts the province on the hook for a private sector project. And a bailout is only a Band-aid solution for a bigger problem -- Manitoba Hydro's unwillingness to pay more for wind power than it costs to generate a kilowatt from northern dams.

"The province would be better off forcing Hydro to offer a better feed-in tariff," said Stuart, referring to the set price some governments like Ontario pay for renewable power.

On the plus side, Pattern has locked in the last of Ottawa's eco-energy subsidies and already has a contractor lined up to build the turbines. Preliminary construction could start as early as next month or January.

Cost of energy

It's tough to know what power costs in Manitoba, which makes it hard to know whether Manitoba Hydro is being too chintzy with companies who want to sell wind power onto the grid.

WIND -- The power deals are secret, so no one knows what Manitoba Hydro pays for wind. But Hydro president and CEO Bob Brennan told MLAs six to seven cents a kilowatt hour is "in the ballpark." Compare that to Ontario, which has said it will buy wind power for 13.5 cents per kilowatt hour from pretty much anyone who is selling. That's widely seen as a pretty high price, but there's less wind in Ontario than there is in Manitoba.

HYDRO NOW -- The dams built a generation ago are all paid off and it costs about six cents a kilowatt hour to produce residential power. That's extremely cheap.

HYDRO LATER -- In the next decade or so, Hydro is spending billions on three new northern dams and a transmission line. That will boost the cost of power, but no one knows how much. The Public Utilities Board speculated last year Hydro would need to charge 11 cents to break even, which means water power may no longer be way cheaper than wind. "At 11 cents, the economics for wind start looking a little more attractive," said Tory MLA Cliff Cullen.