The Kensington Power Income Funds seek to develop partnerships with power infrastructure developers to grow an exclusive pipeline of investable opportunities. One of these partnerships is with Horseshoe Power, an entity designed to acquire low cost oil, gas, and power assets in Alberta, securing a supply of low-cost fuel for additional gas-fired power generation to be developed by Horseshoe Power. Horseshoe Power currently owns an interest in 130 oil and gas wells and associated gathering pipelines, treatment and compression facilities, and 1.0 MW of gas-fired generation. It is currently developing 6.5 MW of additional gas-fired generation, and is in discussions to integrate new power generation with agricultural industries.
Horseshoe Power benefits from two key drivers: increasing power prices and transmission costs. Horseshoe Power directly benefits from higher power prices through the sale of power generated. Moreover, Horseshoe Power receives transmission credits for generating and selling power directly on the distribution system (i.e. avoiding the transmission system).
Power Prices: Alberta power prices have been depressed for an extended period due to a slowdown in the Albertan economy and an oversupply of generation. Both industry experts and forwards markets are pointing towards a significant appreciation in electricity prices over the next years, particularly as the provincially-mandated retirement of coal plants begins.
Transmission Costs: Transmission costs, which currently make up approximately 35% of industrial users’ electricity bills, are expected increase as new transmission infrastructure is built up to support the Alberta government’s goal of installing 5,000 MW of renewable power by 2030. As transmission costs increase, the credits Horseshoe Power receives for selling power directly onto the distribution grid increases.
We believe Horseshoe Power is uniquely positioned to take advantage of the increases in power prices and transmission costs. Horseshoe Power is continuing to work on further acquisitions of gas reserves in areas that are optimal for the development of new power generation, providing Kensington with a solid, long-term pipeline of investable opportunities.