Prospectors hope to turn Crown Land claim into a big payday

Credit: Written by Rick Conroy, Wellington Times, wellingtontimes.ca 15 July 2010

Trillium Power Wind has never built or managed an industrial wind energy facility. The company has never erected a single industrial wind turbine. Yet it says it wants to erect the largest offshore wind energy project the world has yet seen, right here in Lake Ontario—17 kilometres from Long Point in Prince Edward County.

Trillium Power Wind brought its story to Picton last Wednesday following a roadshow in Napanee and in advance of another in Cape Vincent, New York on Thursday.

Trillium’s current story involves 138 industrial wind turbines erected in a V-shaped clump on a shelf of shallow water that rims the deepest part of the lake between Long Point and Lost Nation National Forest on the U.S. side of the lake—a shelf punctuated by series of islands known as the Ducks, including Main Duck and False Duck.

It is not the first time Trillium has peddled its grand ambition for capturing Lake Ontario wind to a County audience. It seems, however, little has changed in four years since Trillium was last here—other than its name (formerly Trillium Power Energy Corporation) and perhaps a more receptive regulatory regime.

Last year the McGuinty government enacted the Green Energy Act—lowering public safeguards to ease the path for wind developers, and upping the incentives to these developers through the rich feed-in tariff program. If successful, the Trillium project could earn 19 cents per kilowatt hour for 20 years for the developer—a lucrative premium over the average price the province pays for other sources of energy (3 cents per kWh).

Yet the project has barely budged in four years. Trillium was forced to cool its heels for two years after the Ontario government imposed a moratorium on offshore wind projects in 2006.

Then the meltdown of the worldwide financial system in 2008 led to the collapse of the sector needed to finance these large capital projects.

So it is that four years later Trillium is back, trying to craft a story it can use to attract investors and lenders. It has a steep hill to climb.

Trillium neither has the capital to undertake the $1.7 billion price tag, nor does it have a track record in building or managing projects of this scale. Without a track record the project is unlikely to attract investment. Banks and investors are hoarding cash and lending extremely cautiously in the wake of the worst economic collapse since the Great Depression.

Trillium is betting that financial markets will be more receptive in a year or two.

Trillium principal John Kourtoff gave the Picton presentation a pass; instead, Chief Development Officer Martin Parker answered questions for the wind developer.

Parker said he sees signs that the capital markets may be opening slightly for wind projects, pointing to a recent €300 million financing of a Belgian offshore wind project. That financing, however, was provided by the European Investment Bank, an arm of the European Union. It is hardly an indicator of easing credit markets.

“The market is coming around,” said Parker optimistically. “The question is: when we are ready to build, will the market be ready to finance the project? That we don’t know.”

But what about Trillium’s lack of experience and track record? Parker says Trillium will hire the experience it lacks and form partnerships to fill in its limitations. He points to its partnership with Vestas—the Danish supplier of wind turbines. Parker did not provide details of the partnership and how it would work, except to say Vestas wasn’t a financial partner.

“We will bring in people with a track record,” said Parker. “Vestas is the number one manufacturer of wind turbines in the world. We will bring them in as our project manager. They have experience in the European theatre.”

Why should Ontario and New York residents entrust this critical waterway, migratory bird pathway and marine life to a firm without a track record or experience in constructing such a massive project on Crown land?

“The only way I can answer that question is to say that everything we’ve done has been mindful of doing what is good for Ontario. And we will continue to do that.”

Parker says he hopes to have environmental studies completed by the end of this year. Many believe this is an ambitious time line but even Parker acknowledges all of Trillium’s plans hinge on the company’s ability to raise financing.

“If the environmental studies show that everything is okay it is conceivable that we could begin construction next year with turbines starting to go up in 2013—that is if the markets are receptive then.”