Kensington’s Power Income Fund achieves its competitive advantage by sourcing investment opportunities through partnerships with strong project development teams. One such platform is Genalta Power, a developer of waste heat and gas power plants, which plans to commission between 50 and 100 MW of generating capacity, mainly in Alberta, each year. Kensington has the option to purchase up to 50% of each project when they become operational. This pipeline has been looking more attractive due to many factors, including projected increases in transmission costs and a more stringent greenhouse gas reduction program in Alberta.
Transmission refers to the process of transporting electricity over transmission lines from power plants to industrial users (or to substations, which distribute the power to residential and commercial users). This is a costly process: transmission makes up 35% of industrial users’ electricity costs. Moreover, transmission rates are forecasted to increase from sub $30/MWh to $45/MWh by 2020. Genalta provides industrial users the opportunity to eliminate transmission costs by constructing and operating power plants on-site, or “behind-the-fence.” These high transmission costs allow Genalta to negotiate more attractive terms on power purchase agreements (PPAs) with large industrial clients.
Additionally, the Government of Alberta, after their recent election victory in Alberta, have raised carbon taxes and reduced the amount of greenhouse gases facilities can emit. By 2017, carbon taxes should double to $30/tonne. Facilities that emit over 100,000 tonnes of greenhouse gases/year must also reduce their emissions intensity 12%. This reduction increases to 20% by 2017. Genalta’s clean energy solutions provide companies opportunities to reduce their greenhouse gas emissions; the more stringent policies provide additional incentives for industrial users to install Genalta systems at their facilities.
These factors, along with increasing power prices from the decommissioning of coal plants, have created substantial opportunities for Genalta and Kensington. Kensington is constantly fostering relationships with development platforms across various generation sources and geographies to take advantage of changes in multiple markets and the Power Income Fund will allocate its portfolio accordingly to provide solid, stable cash flows to investors.
Examples of Kensington’s Clean Energy Solutions, in Partnership with Genalta