Fortis and Teck Announce Agreement for Waneta Dam

ST. JOHN’S, NEWFOUNDLAND AND LABRADOR – (Marketwired – May 12, 2017) – Fortis Inc. (“Fortis”) (TSX: FTS) and Teck Resources Limited (“Teck” .A) (TECK.B) (NYSE: TECK) today announced that it has entered into an agreement whereby Fortis acquires Teck’s interests in the Waneta Dam, two thirds of the property and assets Transportation services located in British Columbia, Canada, for a total of $ 1.2 billion in cash.

The agreement provides for a 20-year lease under which Teck Metals Ltd. (“Teck Metals”) may utilize Fortis’ interest in the Waneta dam to generate electricity for its Trail industrial facilities (the “Trail Facilities”). The annual payments will initially amount to approximately $ 75 million and will increase at a rate of 2% per year, corresponding to an initial price of $ 40 / MWh for an annual electricity consumption of 1,880 GWh. Teck Metals will also have the option to extend the lease for another 10 years at comparable rates.

“Through this agreement, Teck further strengthens its balance sheet and gets substantial capital to reinvest in the overall growth of its business,” said Don Lindsay, Teck’s President and Chief Executive Officer. As a result, our Trail facilities will benefit for a long time from a secure supply of electricity at competitive prices that are lower than those of the market, which will allow us to invest in innovative projects to upgrade our facilities. “

“The Waneta dam is the ideal complement to our sustainable energy investment strategy,” said Barry Perry, President and Chief Executive Officer, “a high-quality, renewable energy facility located at the heart of our British Columbia operations. Direction of Fortis. This is a durable asset that will generate excellent cash flow, secured by the 20-year lease with Teck. We expect this acquisition to contribute immediately to earnings per share. “

At the close of the transaction, Teck expects to realize approximately $ 800 million in net accounting income, which will not be subject to any tax deduction.

Since 2012, Teck has invested approximately $ 525 million in various projects to improve the efficiency, productivity and environmental performance of its facilities. In addition, it has committed $ 174 million for the construction of a second acid plant, which is already under construction and scheduled to be commissioned in summer 2019. Teck has also targeted new projects, Which represent a total investment of $ 150 million over five years to improve its profitability, productivity and environmental performance.

The acquisition of the Waneta Dam, located in the heart of the FortisBC territory, demonstrates Fortis’ confidence and commitment to British Columbia. FortisBC has been rooted in the region for more than a century and employs approximately 350 workers in the Kootenay area. In addition to its four production facilities on the Kootenay River, FortisBC operates and maintains the Waneta Dam and Waneta Expansion.

The Waneta Dam will be operated as a non-regulated energy infrastructure subsidiary of Fortis Inc. Fortis will finance the transaction through cash on hand, debt and equity.

The closing of the transaction is subject to customary reserves, ie obtaining the required approvals and consents. In addition, BC Hydro, which holds the remaining third of the interest in the assets of the Waneta Dam and currently receives one-third of the energy generated, is entitled to preemption of Teck’s interest, The co-ownership and operating agreement entered into by Teck Metals and BC Hydro in 2010 with respect to the dam. BC Hydro must also provide certain consents and make changes for the operation to materialize. Teck will pay a severance payment to Fortis if BC Hydro decides to exercise its right of pre-emption. The transaction is expected to close in the fourth quarter of 2017.

CIBC World Markets Inc. acts as exclusive financial advisor to Teck Resources in connection with the transaction.

About the Waneta Dam

The Waneta Dam, located on the Pend d’Oreille River, has a total capacity of 496 megawatts (MW) of renewable energy and generates an average of 2,750 gigawatt hours per year. The Teck facilities at Trail consume around 1,880 gigawatt hours of electricity from the Waneta dam. BC Hydro holds one third of the interest in the Waneta dam and receives about one third of the energy it produces. Fortis holds 51% of Waneta Expansion, which ended in 2015 and added 335 MW of clean energy through the addition of a second downstream power plant. The Waneta Dam is governed by the Canal Convention (“CCC”) agreement between BC Hydro, FortisBC and the owners of other power stations along the Kootenay and Pend d’Oreille rivers. Through the coordinated use of water flows and the coordinated operation of storage tanks and power stations, CCC allows parties to produce more electricity from their Could do so if they operated independently. Teck’s interests in the production of the Waneta Dam are defined and determined in accordance with CCC stipulations. CCC reduces the hydrological risk associated with the Waneta dam. Assets acquired also include transmission line 71, which provides access to import and export markets in the United States, and other local transportation assets. Operation of storage tanks and power stations to produce more electricity from their respective production resources than they would be able to do if they operated independently. Teck’s interests in the production of the Waneta Dam are defined and determined in accordance with CCC stipulations. CCC reduces the hydrological risk associated with the Waneta dam. Assets acquired also include transmission line 71, which provides access to import and export markets in the United States, and other local transportation assets. Operation of storage tanks and power stations to produce more electricity from their respective production resources than they would be able to do if they operated independently. Teck’s interests in the production of the Waneta Dam are defined and determined in accordance with CCC stipulations. CCC reduces the hydrological risk associated with the Waneta dam. Assets acquired also include transmission line 71, which provides access to import and export markets in the United States, and other local transportation assets. Teck’s interests in the production of the Waneta Dam are defined and determined in accordance with CCC stipulations. CCC reduces the hydrological risk associated with the Waneta dam. Assets acquired also include transmission line 71, which provides access to import and export markets in the United States, and other local transportation assets. Teck’s interests in the production of the Waneta Dam are defined and determined in accordance with CCC stipulations. CCC reduces the hydrological risk associated with the Waneta dam. Assets acquired also include transmission line 71, which provides access to import and export markets in the United States, and other local transportation assets.

About Trail Facilities

Teck’s facilities in Trail, a city in southeastern British Columbia, are one of the largest integrated zinc and lead smelting and refining complexes in the world. It also produces a range of precious and special metals, chemicals and fertilizers. More than half of the products refined at the Trail facilities come from the Teak mines.

In 2016, Trail’s facilities produced 312,000 tonnes of refined zinc, which generated sales of $ 2.05 billion and gross profit before amortization of $ 241 million.

About Fortis

Fortis is positioned among the North American giants in the regulated electricity and gas sector, with assets of approximately $ 48 billion. Its 8,000 employees serve clients in five Canadian provinces, nine US states and three Caribbean countries.

Fortis shares are listed on the TSX and NYSE under the symbol “FTS”.

Source: Fortis Inc.