What do you do when you’ve laid nearly all the gas pipeline you can but you still need to grow your company? Check out the power business, says Hal Kvisle, CEO of TransCanada Corp.

For years known as a pipeline behemoth, TransCanada has cut a new profile as a leading North American energy company. The transformation was a necessity as Canada’s interstate system had been built out during the 1990s.

“We went through the largest gas transmission building program ever undertaken by anybody in North America, and that was from 1990 to 1998,” explained Kvisle.” During that seven- or eight-year period we doubled the capacity of all of the pipelines moving western Canadian gas to market, and we did that because Canadian gas production doubled over that period.

“You get to the end of that and you’ve got spare capacity and no more pipe is needed. What does a company like TransCanada do? Do we just collect our tolls and slowly shrink the company?”

TransCanada has taken the cash flow from its pipeline operations and deployed it in the power business. “We’ve built a very substantial and very profitable power business,” Kvisle told NGI during a recent interview.

TransCanada has 10 wholly owned power plants with combined capacity of 2,159 MW. Three power purchase agreements total 1,669 MW. TransCanada’s Cartier Wind Energy Inc. has 458 MW of wind power and is developing more. TransCanada also is behind the restart of the massive Bruce Power nuclear facility in Ontario. The Portland Energy Centre, also in Ontario, is under development in conjunction with Ontario Power Generation and will produce 550 MW.

The TransCanada strategy seeks to develop a diverse portfolio of generation. The company will make high-cost power endeavors only if they are covered by long-term power purchase agreements, Kvisle said. When it comes to lower cost plants, TransCanada is willing to accept more commodity price risk. For instance, the company’s coal-fired generation rights in Alberta are low on the cost curve. “We had the opportunity to buy long-term offtake and then trade and remarket that power in the commercial market,” Kvisle said.

When it’s all said and done, the Bruce Power facility will have capacity of 6,200 MW. “Not only did it offer a low-cost source of power, but it also offered some very attractive expansion opportunities, and we’re now going ahead with that.”

TransCanada’s wind business will be the largest in Canada, Kvisle said. Normally, wind is not low-cost and is not attractive on a stand-alone basis, Kvisle said. TransCanada has long-term contracts with Hydro Quebec, which will use the wind-generated electricity while it replenishes its hydropower dams.

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