KALiNA Power Announces Gas Tolling MOUs for Alberta Projects
KPO (KPO) Share Update August 2024 Wednesday 14th
KALiNA Power Signs Key Gas Tolling MOUs for Alberta Projects
KALiNA Power Limited (ASX: KPO) has announced the signing of significant tolling MOUs with natural gas producers for its Alberta-based power plants. These agreements are expected to play a crucial role in the company's project development portfolio.
Instant Summary:
- KALiNA Power signs multiple non-binding MOUs with natural gas producers.
- MOUs cover 40,000 GJ per day, enough for KDP's first 170 MW project.
- Tolling agreements to convert natural gas into electricity and CO2 sequestration offset credits.
- Tollers to pay capital and operating costs pro rata and assume commodity price risk.
- MOUs set framework for definitive agreements post-FEED work.
Details of the MOUs
KALiNA Power Limited (KPO) has taken a significant step forward by executing multiple non-binding Memoranda of Understanding (MOUs) with natural gas producers. These MOUs are aimed at developing power plants in Alberta that incorporate CO2 capture and sequestration.
The company's Canadian subsidiary, KALiNA Distributed Power (KDP), is at the forefront of this initiative. The MOUs outline a framework of commercial terms under which each gas producer can work with KDP to finalize definitive tolling agreements. These agreements are expected to be completed before each plant reaches its final investment decision (FID).
Scope and Benefits
The MOUs cover a substantial volume of 40,000 GJ per day, which is sufficient to meet the requirements of KDP's first 170 MW project, needing approximately 36,300 GJs per day. These tolling agreements will allow producers to convert their natural gas into two valuable products: electricity and CO2 sequestration offset credits. These credits can be used by tollers to reduce their corporate CO2 emissions liabilities at full value.
In return, tollers will pay their pro rata portion of the capital charge to KDP and cover their share of all operating costs associated with each plant. Additionally, tollers will assume all commodity price risks related to natural gas inputs, electricity sales, and CO2 sequestration offset credit products.
Future Steps
The MOUs provide a structured framework for completing definitive tolling agreements once capital and operating costs are finalized through Front-End Engineering Design (FEED) work. This work is essential for each plant before reaching the FID stage.
The signing of these MOUs is a positive development for KALiNA Power, providing a clear pathway to secure the necessary natural gas supply for its Alberta projects. This move is likely to boost investor confidence, especially given the added certainty from the recent Canadian Federal Investment Tax Credit (ITC) legislation, which offers significant incentives for such projects.
Investor Reaction:
Analysts are likely to view this announcement favorably, as it reduces the project's risk profile and enhances the likelihood of securing financing. The involvement of creditworthy counterparties adds further credibility to KALiNA's plans. However, investors will be keen to see the finalization of definitive agreements and the completion of FEED work before making any major investment decisions.
Conclusion:
Investors should keep a close eye on KALiNA Power's progress in finalizing these tolling agreements and completing the necessary FEED work. The successful execution of these steps will be crucial for the company's future growth and the realization of its Alberta projects. Stay informed and consider the long-term potential of KALiNA Power in your investment strategy.