NaiKun Wind Energy Group Inc. (TSX VENTURE: NKW) distributed a
quarterly project update to shareholders after the close of markets
yesterday. The content of the update appears below.
NaiKun Wind Quarterly Shareholder Update
Welcome to the NaiKun Wind Quarterly Shareholder Update for
October-December 2009. The status of the Clean Power Call and the
Haida Nation's new level of participation in our project are the
two issues shareholders have asked most about over the past few
months and we address both of these in this quarter's Update. We
are pleased that our environmental assessment continues to progress
on schedule and have good news to report on that front as well.
Read on for details on these topics and more.
Clean Power Call - the Latest
By now, everyone knows that NaiKun Wind is pursuing a contract
through the Clean Power Call to sell electricity from our 396MW
project to BC Hydro, and also that the Call has been underway since
last year. Below, we explain the path to the Call's current status
and what to expect in the near term.
Contract awards under the Clean Power Call were originally
scheduled for no later than June 2009 but were delayed following a
set of rulings by the provincial energy regulator (British Columbia
Utilities Commission; BCUC), some directly related to the Call and
some not. With conflicting messages coming from the Provincial
Government and the BCUC, BC Hydro required guidance from its sole
shareholder - the government - on how to implement provincial
energy policy. Perhaps the most pressing issue to deal with was
that of the gas-fired Burrard Thermal generating facility, which
provincial energy policy calls for phasing out but which the BCUC
recommended be relied upon far more heavily than had been the case
to date.
The tool chosen to deliver the required instructions is known as
a Special Direction. In short, Special Directions are government
regulations issued by the Province to Crown agencies with specific
instructions for the agencies to follow. Unlike policy objectives
or statements, these instructions are binding, similar to
legislation.
On October 28, the Government issued a Direction to the BCUC
stating that, effective immediately, Burrard Thermal is to be
relied upon for zero gigawatt hours per year of firm energy. In
other words, BC Hydro cannot use Burrard Thermal as a source of
electricity, except in times of emergency. Recent planning
documents released by BC Hydro called for Burrard Thermal to supply
substantial amounts of electricity each year - electricity that
will now have to be obtained from other sources.
In addition, the government re-emphasized its commitment to the
Clean Power Call, noting that the decision on Burrard Thermal
allows BC Hydro to continue with the acquisition of 6,000 GWh of
cost-effective, clean and renewable power, including some 5,000 GWh
from the Clean Power Call and 1,000 GWh from the Phase 2 Bioenergy
Call for Power.
So, what does this mean for the issue of contract award timing?
BC Hydro stated in an August news release that it anticipates
Electricity Purchase Agreements being awarded in the fall, noting
also that the BCUC had granted an extension of the timeframe within
which the decisions were to be made to December 31. The release
also highlighted BC Hydro's intention to assess whether Clean Power
Call participants have conducted adequate consultation with First
Nations with respect to their power sale proposals. NaiKun Wind is
confident that we have not only met, but exceeded, these
requirements, thus enhancing our positioning to receive a
contract.
In summary, the Special Direction removed much of the planning
uncertainty that had tied BC Hydro's hands since the BCUC's report
during the summer. We believe the door is open for the awarding of
contracts under the Clean Power Call in the near future.
BC Government Moves Quickly on Throne Speech Commitments
The Burrard Thermal decision discussed above is the first step
in the BC Government's effort to follow through on commitments made
in the Throne Speech it delivered in late August, one in which
development of the province's clean energy resources was a primary
focus. As not all shareholders will have seen the Speech, here are
some of the relevant excerpts:
"Green energy will be a cornerstone of British Columbia's
climate action plan."
"The BC Utilities Commission will receive specific
direction."
"Phasing out Burrard Thermal is a critical component of BC's
greenhouse gas reduction strategy."
"We will build on past successes with new strategies aimed at
developing new clean, renewable power as a competitive advantage to
stimulate new investment, industry and employment."
A new Green Energy Advisory Task Force will shortly be appointed
to complement the work of the BCUC's long-term transmission
requirement review. That task force will be asked to recommend a
blueprint for maximizing British Columbia's clean power potential,
including a principled, economically-viable and
environmentally-sustainable export development policy."
"BC's multiple sources of clean, renewable energy are far
preferable to reliance on other dirtier forms of power. We will
open up that power potential with new vigour, new prescribed clean
power calls and new investments in transmission."
For those wishing to read the full text of the Speech, please
use the following link:
http://www.leg.bc.ca/39th1st/4-8-39-1.htm
In a press release dated November 2, the government made good on
another of the announcements in the Speech, this time moving
forward with its pledge to set up a Green Energy Advisory Task
Force. Actually, it set up four of them, one each for Procurement
and Regulatory Reform; Pricing, Trading and Export Market
Development; Community Engagement and First Nations Partnerships;
and Resource Development.
While each task force will deal with specific issues to improve
the efficiency and vitality of BC's energy sector, the Procurement
and Regulatory Reform task force will be of particular interest to
many NaiKun Wind investors. The stated objective of this task force
is to "enhance clarity, certainty and competitiveness."
Essentially, this group is going to take a look at what has caused
delays and other inefficiencies in contract procurement to date and
eliminate them, targeting this coming January for recommendations
to government. The four Advisory Task Forces will report to the new
Cabinet Committee on Climate Action and Clean Energy chaired by
Premier Gordon Campbell. Membership will include the chairmen of BC
Hydro and the BC Transmission Corporation.
It should be noted that work performed by the task forces will
not influence the Clean Power Call timeline. What it will do,
however, is ensure the inefficiencies of the past are not repeated,
thus providing greater certainty going forward for both clean
energy development companies such as NaiKun Wind and the investors
who support them.
Haida Approach to Federal Government Going Well
In mid-August, the Haida Enterprise Corporation (HaiCo)
announced that the Haida Nation planned to purchase up to a 40%
stake in NaiKun Wind's 396 MW project. We were already in talks
with other potential partners but were delighted to welcome the
Haida Nation when its leadership expressed interest in exploring
the opportunity to take an ownership stake in the project, a
position consistent with their long-term commitment to what we are
trying to achieve.
HaiCo requires Federal Government support in order to purchase
its stake and make the necessary equity contribution, and that
support would likely come in the form of a loan guarantee. Meetings
in Ottawa began immediately after Labour Day and HaiCo has now
submitted a proposed structure for the government's
consideration.
So far, the reception from various federal government
departments has been positive. The project hits the mark on a
number of fronts important to the federal government including that
it reflects the spirit of the Federal Framework on Aboriginal
Economic Development announced in June of this year. In addition
the degree of support requested is modest compared to federal
spending on carbon capture and other environmentally focused
programs.
The Haida leadership has signed a Memorandum of Understanding
with NaiKun Wind regarding the ownership position and is
undertaking a process for the Haida people to receive relevant
information to ensure majority acceptance of the investment plan.
It is a large commitment for the Haida, to be sure, yet also
perhaps the biggest economic opportunity the Nation has ever had.
Meetings between senior Haida leadership and Federal Government
officials will take place over the coming months and HaiCo hopes to
have a proposal in place around year-end for consideration by the
Haida people.
While NaiKun Wind continues to support the Haida Nation in its
pursuit of an ownership position in the project, we have maintained
contact with other potential investors regarding the unique
opportunities the project presents. NaiKun Wind remains confident
that it will secure a commercially viable partner to join ourselves
and ENMAX Corporation in funding the equity elements of the
financing plan. In addition, we continue to work with our debt
advisor, Bank of Tokyo Mitsubishi, to fine tune the debt financing
plan, taking into account the evolving and improving financial
markets.
Environmental Assessment Decisions Drawing Near
Obtaining environmental approval is one of the biggest
milestones for a project such as NaiKun Wind's and we are delighted
to be close to the decision date on our environmental assessment
for the 396MW project. Representatives from the provincial and
federal governments, the Haida Nation and other participating First
Nations have provided constructive input and we are pleased to say
that we are on track to achieve this significant milestone.
Once an environmental assessment report and its accompanying
recommendations are complete, the package is referred by the
Environmental Assessment Office to the provincial environment and
energy ministers for review. The ministers work with a 45-day
timeline to make their final decision, with the federal decision
expected thereafter. After the decisions are finalized,
environmental certificates are issued.
The decision window for NaiKun Wind's environmental approval is
fast approaching and we are confident that the process will
continue to proceed according to plan. Word on the outcome of the
assessment is expected toward year-end.
Conclusion
Work by the NaiKun Wind team on development of our project
continues to go well but uncertainty surrounding the contract
procurement process has been holding the share price back. We
believe it is logical to conclude that issuance of the Special
Direction opens the door for near-term announcement of successful
participants in the Clean Power Call.
As we await the Call announcement, we are managing cash ($16.14
million as of June-end) prudently. Our partners - ENMAX
Corporation, the Haida Nation, plus the Metlakatla and Lax
Kw'alaams First Nations - continue to work closely with us and make
valuable contributions to project development. We also maintain
strong relationships with key suppliers, who remain committed to
the project and are providing the flexibility we need to keep our
construction plans on schedule.
From the entire team at NaiKun Wind, thank you for your
continued support.
Sincerely,
Paul Taylor, President and CEO
NaiKun Wind Energy Group Inc.
Caution Regarding Forward-Looking Statements - This news release
contains certain forward-looking statements, including statements
regarding the business and anticipated financial performance of the
Company. These statements are subject to a number of risks and
uncertainties. Actual results may differ materially from results
contemplated by the forward-looking statements. When relying on
forward-looking statements to make decisions, investors and others
should carefully consider the foregoing factors and other
uncertainties and should not place undue reliance on such
forward-looking statements. The Company does not undertake to
update any forward-looking statements, oral or written, made by
itself or on its behalf.
The TSX Venture Exchange does not accept responsibility for the
adequacy or accuracy of this release.
Contacts: NaiKun Wind Energy Group Inc. - Investor Relations
Enquiries Peter Murray Manager, Investor Relations 604-631-4494
pmurray@naikun.ca NaiKun Wind Energy Group Inc. - Media Enquiries
Doug McClelland Director, Communications 604-631-4487
dmcclelland@naikun.ca
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