Allan Danroth keeps Capital Power plugged in
Recasting a utility spin-off as a North American powerhouse
Last year was not an easy one for strategic planners. Debt woes threatened an economic meltdown in Europe; brinksmanship did the same on Capitol Hill; civil war tore through Libya; and the Arab Spring upended old allegiances, roiling global markets. Amid what was a banner year for volatility, Allan Danroth kept his cool. “We spend a lot of time with the analysts,” the vice-president of planning, business transformation and information systems at Edmonton-based Capital Power Corp. says. “You very quickly learn how to filter.”
It’s exactly that sort of variety that motivates the 42-year-old fourth-generation power engineer and recipient of Alberta Oil magazine’s 2011 C-Suite award for top information officer at an Alberta-based company. After graduating to the executive suite from the front lines of management as vice-president of operations at the Genesee power plant west of Edmonton in January 2011, Danroth has grown accustomed to thinking on his feet. “No two days are the same,” he says.
No fewer than a dozen market analysts measure the effects on Capital Power’s operations of everything from popular uprisings in the Middle East and the resulting changes in global commodity flows to the precarious financial state of the European Union and its impact on investor confidence. “We factor that in,” Danroth says. “We have models. We rerun the models. We’ll run them eight ways to Sunday.”
The sheer volume of information can at times overwhelm even the most diligent planner. “We’re a data-driven society,” the systems boss says. “It’s coming at you from every angle possible.”
Among the biggest shifts underway on the North American energy landscape he has been forced to confront is the advent of shale gas. Power producers like Capital Power are widely forecast to act as a domestic sop for incremental amounts of the new supply pool unlocked by advances in drilling techniques. As the man responsible for updating Capital Power’s 10-year strategic plan, Danroth has kept one eye firmly glued to the unfolding supply story. “It really is a shale gale,” he says.
The company expects prices for the cleaner-burning fossil fuel will stay “pretty constant” over the next 10 years, he says. But prudence built into internal forecasts also raises potentially prickly questions about the durability of the new supply source, which is running afoul in some jurisdictions of local sensitivities to industrial development. A lingering question persists among the executive team, he says. What’s the black swan associated with shale gas? “We ask it all the time,” Danroth says. “We spend a lot of time thinking about that. … We do feel it’s going to be a pretty steady state with what you see.”
The confidence is reflected in Capital Power’s generation portfolio (it’s 49 per cent gas and growing) and its move last spring to snap up gas-fired generation assets in the northeast United States at the bottom of the market. In February, the firm paid $315 million to acquire 549 megawatts of merchant capacity at two plants, one in Rhode Island and the other in Maine. Just two weeks later, in March, another purchase – valued at $355 million – brought a combined-cycle power plant in Bridgeport, Connecticut, with a nominal capacity of 520 megawatts into the fold. Declines in forward power prices – the result, in part, of Marcellus gas flooding the New England market – have since seen the company revise expectations for the newly acquired gas-fired units, but together they brought the amount of new capacity added or placed into development since Capital Power’s 2009 initial public offering to 2,000 megawatts.
That total does not include the massive, $1.98-billion Keephills 3 facility west of Edmonton, commissioned with partner TransAlta Corp. in September. Capital Power poured $955 million into construction of the coal-fired power plant, billed as the most technologically advanced – and for a coal plant, environmentally benign – of its kind ever built in Canada. Its 495-megawatt capacity moves Capital Power closer to its goal of tripling the size of its current generation capacity to 10,000 megawatts by 2020.
For Danroth, the facility, much like its sister plant to the south, is a testament to prudent planning. It took eight million person-hours to complete the job; 22,000 welds to install the boiler; plus 40 individual contractors and a peak workforce of 1,900 during four years of construction (there were also just five lost-time incidents before the first shovelfuls of coal hit the fire.) “Minimizing the risk on these big capital spends is your central focus,” he says.
It’s a difficult task made harder by the dearth of new graduates stepping up to replace a retiring generation of skilled tradesmen and women. “That is a serious constraint,” Danroth says.
A former tradesman himself, Danroth learned how to operate boilers and turbines as a power engineer at pulp and paper mills. He joined Capital Power predecessor Epcor Utilities Inc. in 2008, and now finds himself tasked with transforming a once sleepy division of a city-owned utility into a publicly traded energy powerhouse. An early step in the transition saw the company sell its 29 per cent share in Capital Power Income LP, acquired by Epcor in 2005 but no longer needed as a vehicle for accessing equity markets. The corporate evolution is also defined by technology. It has also meant investments in alternative energy (nearly 400 megawatts’ worth of wind power is expected to come online by 2013).
But for Danroth personally, the shift means not forgetting what it’s like to work outdoors during a bitter Alberta winter, even as you rub shoulders with executives high up in a glass tower. “On a nice summer day when I’ve been inside all day,” he says, pausing to consider an unseasonably mild November day, “I kind of miss it.”
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