TransAlta Corporation and SemCAMS Midstream ULC, a subsidiary of SemGroup Corporation announce that they have entered into definitive agreements to develop, construct and operate a new cogeneration facility at the Kaybob South No. 3 sour gas processing plant. The Kaybob facility is strategically located in the Western Canadian Sedimentary Basin and accepts natural gas production out of the Montney and Duvernay formations. TransAlta will construct the cogeneration plant which will be jointly owned, operated and maintained with SemCAMS. The capital cost of the new cogeneration facility is expected to be approximately $105 million and the project is expected to deliver approximately $18 million in annual EBITDA. TransAlta will be responsible for all capital costs during construction and, subject to the satisfaction of certain conditions, SemCAMS will purchase a fifty percent (50%) interest in the new cogeneration facility as of the commercial operation date, which is targeted for late 2021.
The highly efficient cogeneration facility will have an installed capacity of 40 MW. All of the steam production and approximately half of the electricity output will be contracted to SemCAMS under a 13-year fixed price contract. The remaining electricity generation will be sold into the Alberta power market by TransAlta. The agreement contemplates an automatic 7-year extension subject to certain termination rights. The development of the cogeneration facility at Kaybob South No. 3 will eliminate the need for traditional boilers and reduce annual carbon emissions of the operation by approximately 100,000 tonnes CO2e, which is equivalent to removing 20,000 vehicles off Alberta roads.
“We are very pleased to collaborate with SemCAMS on this project which will enhance their operational and energy efficiency through on-site cogeneration,” said Dawn Farrell, President and Chief Executive Officer of TransAlta. “This project represents an important addition to our on-site cogeneration business and we welcome SemCAMS as a valued new customer and partner.”
“We are excited to partner with TransAlta on this highly strategic project which will enable SemCAMS to further reduce the annual carbon emissions from its facility while lowering operating expenses for the Kaybob 3 producers” said Dave Gosse, President of SemCAMS. “The cogeneration facility is an important addition to SemCAMS’ growing midstream portfolio and furthers SemCAMS’ focus on providing reliable, low-cost processing solutions to our customers.”