Orillia Power Generation Grows
By John Swartz
In July a Orillia council held a special meeting with only one agenda item in closed session, a generation opportunity. SUNonline/Orillia believed Orillia Power Generation Corporation (OPGC) had a chance to buy a hydro station, a wind farm, or more likely a solar farm because of the number in the area.
Think about it. Who is going to sell a hydro generation station? They cost millions to build. The proposed hydro project OPGC was partnered in, the Bawitik generating station was going to cost $8 million to build and generate 2.5 megawatts. Anything currently in operation is printing money for their owners. After recouping construction costs, its water in, water out.
Wind? Despite the advantages, they are a headache to own with real, or imagined opposition from those who live near them. Who would want that? Oh, and there doesn’t seem to be, and hasn’t been any talk of a nuclear plant for sale and it’s reasonable to think OPGC doesn’t have deep enough pockets.
Mayor Steve Clarke was asked directly after the meeting if OPGC was buying anything.
“They haven’t necessarily bought anything, it’s an opportunity they are investigating,” said Clarke. So the hunch was on target.
October 1, the full answer was revealed, OPGC was buying more hydro generation capacity, not just a hydro generator, but three of them. It bought Shaman Power Corporation lock, stock and spillway for $11 million.
“They just suddenly put them up for sale. We had a relationship,” said Greg Gee. He is chair of the OPC board, which owns OPGC. The relationship he speaks of is the two companies were 50/50 partners in the Bawatik hydro project.
During the planning stage of the Bawatik project (which was 30 days out from beginning construction when out of left field the provincial government cancelled the project) Shaman’s ownership changed hands.
“The new owners, as opposed to the original owners we started with, are not really experts in this field. They are actually in the hospitality business,” said Gee.
Gee would not name the business they bought from. Data from Shaman ‘s most recent archived website shows Pearle Hospitality as owners of Shaman. Pearle operate hotels restaurants and a golf club in the Hamilton and Cambridge areas.
“I think they just decided they didn’t want to continue in this business, too many headaches. Whereas for us, it’s our core business. We have genuine expertise in this field and I’m a huge believer in sticking to our core business.”
Some people commented on message boards money from the sale of the distribution business to Hydro One, $36 million, was burning a hole in pockets and it was not being used as intended.
“I think it truly is a unique thing. There may be some who feel like it seems like a pleasant coincidence the City sells off part of its power business and then suddenly it makes an acquisition a matter of months later,”
‘The two of them are totally unrelated. There is no connection. It has much more of a connection to the failure of Bawitik than it has to anything else.”
“They’re completely unrelated transactions,” said Gee. “It’s a happy coincidence because we would liked to have acquired this at any time.”
There won’t be any huge cheque issued for the sale either.
“We’re not handing them that much cash. “said Gee. “There’s only a small amount of cash, 2 or 3 million we’re paying and the rest is the line of credit.”
And no, OPGC is not financing the rest. It’s already been financed. They are taking over financing Shaman had.
‘It was put in place by the Shaman people. We looked at replacing it with our own credit facilities, but there was a termination fee that just didn’t make any sense to us to do that. It’s going to expire within a couple years and we’ll decide what to do with it then,” said Gee.
This deal adds 4.6 megawatts of capacity from stations in Fenlon Falls, Elora and Mamora to the existing 15 .5 megawatts generated from the Swift Rapids, Minden and Matthias stations. If Ontario Power Generation wasn’t a thing (the company which emerged from Ontario Hydro’s forced transformation 20 years ago) this deal makes OPGC one of the bigger players in the industry.
The Elora station is only 3 years old, Mamora 28 years old and Fenlon Falls was rebuilt 30 or 40 years ago according to Gee.
“All three of these stations are much newer than ours,” said Gee. “Our newest station is 70 years old. It was built around 1950. I’m talking about the power station itself. You can of course change out and update the mechanical, the turbines generation system.”
The Minden plant was recently put back online following maintenance and upgrades. Over the years OPGC has a good record of working with time and nature, adjusting to water flows for best output and gauging when it’s time to shut down and upgrade.
“Part of the real skill in operating these stations is knowing what’s likely to happen soon with which station and when do you shut it down. You don’t want to shut down a station during a peak water period. You’re going to lose a lot more money, so planning those things is very important.”
The most attractive part of the deal are the licenses to operate and sell electricity into the gird. The Elora station has a 30 year contract, Fenlon Falls was just renewed for a 20 and Mamora’s is less than 20.
“Where the real value is, is in the licenses. (If) you going to have a brand spanking new station and you don’t have a long-term contract, its worth pretty much nothing. It doesn’t matter what you’ve got there.” Those licenses will generate a conservative $2 million revenue to OPGC’s bottom line.
OPGC On It’s Own
OPGC is 100% owned by the City of Orillia. It was the money maker, while the distribution side which was sold to Hydro One cost a lot to maintain. OPGC had to prepare to be on its own when ownership of the distribution changed hands September 1 this year.
During the course of this year, staff started to separate equipment central to the distribution side and to the generation side. This involved mostly office equipment and trucks and things like that. Orillia Power Corporation sold the City its headquarters on West Street. In a sense it did not cost taxpayers to buy something they already owned, OPC issued a special dividend to match the real estate sale value.
In turn the City signed a 5-year lease of the building back to Hydro One (which is still operating here as Orillia Power for the time being), with a 5-year option should Hydro One still need the space. When people go there now to pay bills and etc. it still looks pretty much the same, but behind the scene, the 15 employees of OPGC don’t park their cars in the lot anymore during business hours.
“We had to physically be out of there by closing,” said Gee. They have a new home on Progress Ave and run the entire operation out of what otherwise looks like an office building. There’s no staff permanently assigned to the generating stations. They even have their station monitoring equipment there.
“That used to be true some years ago (staff would be on site at the stations). Our control room metrics and monitoring is so good, it’s actually better than anybody living there (at the station),” said Gee.
Gee cleared up one other thing. During the course of this year the name Genco started to appear in reports and documents generated by City Hall staff. This suggested there was going to be a name change.
“That’s sort of just somebody’s colloquialism. There is no company we have called Genco. We normally call it OPGC, which is the proper acronym,” said Gee.
The only change to come is removing Orillia Power Corporation from the name tree. OPC was the holding company at the top of the structure of the distribution and generation divisions. The name will start fade into history soon along with OWLP (Orillia Water Light and Power) as it was known before 2000.
“We have another corporate reorganization coming up, probably by year end. After that the generation company will be the lead corporate entity,’ said Gee.
In the end, The City’s most valuable asset became more valuable and will continue to pump revenue into the coffers.
(Photos by Swartz – SUNonline/Orillia; Supplied) Main: Fenlon Falls Generating Station
