Nova Scotia Power will go ahead with its plan to burn wood to generate electricity at a new power plant in Port Hawkesbury, says the utility’s vice-president of sustainability.
"We are proceeding and will be closing that transaction as soon as possible," said Robin McAdam at an energy conference in Halifax hosted by the Atlantic Provinces Economic Council on Monday.
Nova Scotia Power and its partner, NewPage Port Hawkesbury, received regulator approval for the $208-million project two weeks ago but had been reviewing the decision, which had conditions attached stipulating any cost overruns must be paid by the utility’s shareholders, not customers.
The decision to proceed came three days before NewPage Port Hawkesbury’s parent company, NewPage Corp. of Ohio, releases its third-quarter financial results.
The paper company has been confident the project would go ahead and that it would receive an $80-million upfront payment from Nova Scotia Power for a 30-year-old boiler.
The utility intends to spend about $200 million, including $80 million to buy NewPage’s boiler and $93 million in construction costs.
NewPage has said the $80 million from the boiler sale will enhance its liquidity. The company has reported having $7 million in cash and $113 million available on a line of credit, but it also has a $3.4-billion debt.
Later Monday, Nova Scotia Power issued a news release stating the sale of the boiler is expected to "close in the near term."
The 60-megawatt power plant is expected to create 150 new jobs in northern Nova Scotia, primarily in the forestry business.
"This new biomass facility is important for NewPage, for the Port Hawkesbury mill and rural Nova Scotia," said Bill Stewart, NewPage Port Hawkesbury’s director of woodlands and strategic initiatives.
On Monday, McAdam defended the controversial project and the use of burning 650,000 tonnes of wood a year to fire a steam generator at NewPage’s mill in Cape Breton. The project has an in-service date of early 2013 and would account for about three per cent of Nova Scotia’s electrical generation.
The utility says the facility will burn stem wood and won’t include tree tops, stumps and branches from the forest floor, which are considered necessary in restoring nutrients to the soil so new trees can grow.
"Still, it’s evident that there is a lot public concern about using biomass as fuel for electricity. We certainly have not had our head in the sand as these concerns have been raised," said McAdam.
He said the utility has no interest in using a fuel source that isn’t sustainable.
"We fully appreciate the value of Nova Scotia’s forest from an environmental, recreational and economic perspective. Using biomass for electricity doesn’t conflict with these values."
McAdam said biomass is wood that has no other commercial use.
"Biomass is wood that needs to come out of the forest so the higher-value tree can grow and replace that diseased, crooked and knotty tree that isn’t doing anything."
NewPage, the utility’s largest customer, will be responsible for supplying fuel to the plant and will be utilizing about 1.1 per cent of the land it manages, said McAdam.
The deal between the two companies stated that if Nova Scotia Power gives notice to proceed after Sept. 30, the contract price will escalate by 0.2 per cent per month.
The Nova Scotia Utility and Review Board released its decision Oct. 14 and stated the most important part of the project is a contract worth $92.9 million covering engineering, procurement and construction costs. Any additional costs cannot be passed along to power customers on their bills.
Also, if there are capital cost overruns, the power company must come back before the board for another public hearing.
The utility says it needs the biomass project to proceed in order to meet the province’s renewable energy target of generating 10 per cent of its electricity from wind, tides or biomass by 2013.
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