Pristine Power

A complete approach to power┬áPristine Power is a relative newcomer to the Canadian sustainable power generation market, but its founders and managers are old hands, determined to take it into the top ten within the next four years.  Pristine came into being following the meltdown of the electricity markets in 2001/2002.   In 2003, having stayed on to wind up its operations following the acquisition of Westcoast Power by Duke Energy, Jeffry Myers set up the new company together with Harvie Campbell, Ken Spinner (vice president of engineering) and Julia Ciccaglione, who heads sustainable development and environment. Campbell, executive vice president of strategy and development, acted as CFO until the appointment of Geoff Krause in 2007.What differentiates Pristine from other players that have entered the market is the depth of experience and judgment it possesses. ÔÇ£In 2001 there were 22 members in the Independent Power Association of British Columbia. Today there are 370, so if youÔÇÖre looking for someone experienced in BC in this sector, good luck!ÔÇØ says Campbell ironically. Best practices are hard to find across the sector, says Campbell. Companies have taken on projects without sound capitalization, without securing the permits they need and without the resources to bring them in on schedule. ÔÇ£ItÔÇÖs something weÔÇÖre very sensitive to because the reputation of this industry is something we have worked very hard to establish. Excellence in this company has its foundation in over 300 years and 3,000 MW of experience, not just of the directors but the management team and everyone working on these projects.ÔÇØPristine is positioned among the much smaller group of dependable independent power developers with a sound business model and robust project management capabilities embedded in its people. Its approach to business is risk averse: the company keeps its financial exposure low, carries out extensive due diligence, and has a policy of diversification. Its eggs are in a variety of baskets. Diversification applies in the nature of the projects, the size of the projects, the mix of short- and long-term projects, and even in geographical terms. The company is working on several large gas-fired projects in Ontario and Saskatchewan, run of river hydro and biomass in BC, and waste heat recovery across the country.Myers led the launch of Pristine on the Toronto Stock Exchange in March this year, raising $55 million that will, he says, be earmarked for growth. It is not required to fund any ongoing projects, secured early in 2007 in private equity project funding of $45 million. In terms of work in progress, Pristine is in very good shape and is at a significant point in its developmentÔÇösince August this year, it is actually receiving money for electricity it has generated. ÔÇ£We have four projects under contract,ÔÇØ explains Myers. ÔÇ£The 84-MW East Windsor cogeneration project in Ontario, two smaller ERG [energy recovery generation] projects at 150 Mile House in Savona, British Columbia, and in the longer term, the Mackenzie Green Energy Centre, also in BC.ÔÇØEast Windsor is a conventional gas turbine cogeneration facility that is 60 percent complete in Windsor, Ontario. The project will generate electricity for the Ontario power grid, steam for the Ford Motor Company of Canada, and is a long-term investment in Windsor, says Myers. ÔÇ£We expect it to be operational by the middle of 2009, and weÔÇÖve structured that deal commercially so that the economics remain sound no matter the long term outcome of the host manufacturing facility.ÔÇØPristine wants to be seen as a clean and green electricity developer, using the best available technology, best practice engineering management and being socially responsible. Campbell warns, however, that ÔÇ£greenÔÇØ and ÔÇ£environmentally friendlyÔÇØ donÔÇÖt always equate: gas is environmentally friendly in Ontario because it replaces coal, but in BC at least, waste biomass is better than either. ÔÇ£We have a broad bioenergy approach, founded on fundamental economics. Today you can develop a 20 MW bioenergy plant and produce power as cheaply as a 250 MW gas-fired generator, but that was not the case even five years ago.ÔÇØ The first duty of the industry is to keep the lights on, he stresses, and while wind and hydro may be an important part of the national mix, they work at the whim of Mother Nature. Bioenergy from wood waste is as sustainable as wind and hydro, and as reliable as coal or industrial gas-fired installations. The technology is not complicated or new, but the first challenge is to use sound technology. ÔÇ£In their attempts to make bioenergy at a competitive price, some people were tempted to rely on renovated or adapted equipment. Sometimes it succeeded; more often than not it failed.ÔÇØThe second challenge is around fuel supply. Again that looks obvious, but Pristine wonÔÇÖt go ahead with a bioenergy project unless, to use CampbellÔÇÖs words, it can actually see the trees it will be using in 20 yearsÔÇÖ time. ÔÇ£WeÔÇÖve cracked that particular nut with proper contracting arrangements and tying those contracts back to the actual forests, so that if the wood doesnÔÇÖt come in, we can go and get it.ÔÇØThe companyÔÇÖs first big foray into bioenergy is the Mackenzie Green Energy Centre, which is designed to harness energy from wood waste in BCÔÇÖs northern interior and produce 50 to 60 MW of green electricity, provide an economic source of steam through co-generation, and at the same time contribute to improved air quality. It is also a dynamic example of PristineÔÇÖs business model, as Campbell explains. ÔÇ£We have enough money to fund the plant. We have all the permits we need to go ahead and build it, and we are nearly there on fuel supply.ÔÇØ Most of the boxes are ticked, he says. Unfortunately, the forest industry, the main fuel supplier, is in severe recession and the main pulp mill in the area, Pope & Talbot, went into receivership in May this yearÔÇöa big setback. Maybe the industry will rebound and the mill will restart; maybe a replacement supply of fuel will be found. If so, the project will go ahead; if not, it wonÔÇÖt,ÔÇØ says Campbell firmly.Either way, PristineÔÇÖs investors will be protected to a degree rare in this volatile market. As Myers says, ÔÇ£I wouldnÔÇÖt want to be in the market raising capital in the present climate,ÔÇØ but Pristine is already rather well insulated from that eventuality. Of the expected total project cost of $270 million for Mackenzie, 70 percent is anticipated to be funded from long-term non-recourse project debt. Pristine will divest half of its 35 percent ownership interest in the project to recoup its development costs. So its at-risk exposure is effectively zero, while it will receive 17.5 percent of the cash flows from the plant in perpetuity. ÔÇ£Because we chase multiple technologies across Canada,ÔÇØ said Myers, ÔÇ£Mackenzie is only one of our near-term opportunities.ÔÇØ Pristine is awaiting news on the BC Bioenergy Phase One bids due in late October, and is one of four pre-qualified bidders for a 350 MW gas-fired peaker in the province of Ontario. And we have new bid processes in our windshield in the next six months in BC, Saskatchewan, and Ontario.ÔÇØ ItÔÇÖs not hard to see why Pristine expects to be among the top ten independent power producers in Canada by 2012.┬á