The City of Kimberley is proposing to sell the SunMine solar facility to Teck Metals Limited. Section 28(4) of the Community Charter, related to disposal of water systems, sewage systems and other utilities, states that Council may only dispose of the works for the supply and distribution of gas or electrical energy with the approval of the electors.
The assent voting is going to take place at the same time and place as municipal election. The following key dates have been established, and voting hours for all opportunities will be from 8:00 a.m. to 8:00 pm at Centennial Centre:
Advance Voting Opportunities:
SunMine Elector Assent (Referendum) Information Package
The City of Kimberley is proposing to sell the SunMine solar facility to Teck Metals Limited. Section 28(4) of the Community Charter requires that the sale of a utility that supplies electrical energy requires the approval of the electors. Electors will have an opportunity to vote on the sale of SunMine in conjunction with the municipal election on Saturday, October 20th, 2018, or at the advance voting opportunities on October 10th and 17th.
The question being submitted to electors is:
Are you in favour of the City of Kimberley selling the assets of SunMine to Teck Metals Limited for fair market value?
Why does the City want to sell SunMine?
Issues with Operational Costs:
In November 2011, the City of Kimberley conducted a referendum on borrowing up to $2M to construct a two (2) megawatts (MW) solar facility to be known as SunMine. Seventy six percent (76%) of Kimberley’s resident electors voted in favour of borrowing the $2M.
However, prior to the start of construction the project lost $1.6M in federal grant funding. This prompted the project to be reduced from two (2) megawatts (MW) to 1.05 megawatts (MW). In three years of approximately $600K in revenue has been generated and only $32K has been allocated to reserves for future maintenance and capital replacement. Although SunMine has been financially self-sustaining for the first three years of operation, these costs are expected to increase. This would result in SunMine requiring subsidization from taxation to cover operational costs and capital replacement.
In the 2011 referendum information package, the City stated that it “anticipates that this project will be self-sustaining and pay for itself through the sale of the solar-generated electricity to BC Hydro through their standing offer program. Since the revenue received from the sale of energy will more than cover the loan payments and the annual operating costs there will not be any increase to City of Kimberley property taxes.” Utilizing taxpayer’s funds to operate SunMine is not consistent with the City’s original vision for SunMine.
Issues with Expansion:
The City of Kimberley has an Energy Purchase Agreement with BC Hydro through the Standing Offer Program to purchase two (2) megawatts of power, and is currently fulfilling only 1.05 megawatt (MW) of that commitment. The SunMine needs to expand to two (2) megawatts of power (that the City is already contracted to sell to BC Hydro) to make the project financially viable. The Standing Offer Program is under review and has suspended applications, so expansion of the SunMine beyond two (2) megawatts (MW) of power is not imminent. The City of Kimberley has other infrastructure priorities competing for the more than $2M necessary to expand the SunMine, so a private sector partner was sought to fund the expansion.
What has the interest from potential partners and investors been?
More than a dozen private sector companies expressed interest in partnering with the City for expansion of SunMine. As owners of the brownfield land upon which SunMine is located, and the substation infrastructure to which SunMine is connected, Teck is a party to any potential expansion and must give their approval. After weighing the options of working with potential partners for expansion and considering that the Community Charter has restrictions on the type of partnership the City can enter into, Teck suggested and the City agreed that Teck itself would be the best proponent to take over the expansion of SunMine to two (2) megawatts (MW) of power and beyond.
How has market value for SunMine been determined?
Due to the unique nature of the asset being Western Canada’s only grid-connected solar facility it is difficult for an independent appraiser to determine fair market value. The most recent (2018) BC Assessment value of the SunMine is $1,693,301, which the Ministry of Municipal Affairs and Housing suggests can be used as a reasonable proxy for fair market value.
The development cost of SunMine was $5.5M, which included $4.2M in construction cost with the balance being engineering, legal and other administrative costs. $2M of that total was funded with donations received from Teck. The book value of SunMine as of December 31, 2017 after depreciation is $4.9M
What will be done with the proceeds of the sale of SunMine?
Teck Metals Limited will pay the City of Kimberley the balance of the outstanding debt as of the date of purchase, which is currently approximately $2.15M, including interest charges. This will be used to pay off the amount of outstanding debt as the City of Kimberley share of the project cost, and result in Teck’s total investment in SunMine to be $4.15M.
The proceeds from the proposed sale of SunMine would be placed into a reserve fund in order to continue to make debt payments on the outstanding debt.
Summary of expected benefits to Kimberley
An information meeting to address questions on the proposed sale of SunMine will be held on October 1st, 2018 at 7:00 pm in Council Chambers.
As of June 2018, Kimberley's SunMine has been in operation for three full years.
It is a well known fact that SunMine has been an award-winning project, and has brought major attention to Kimberley. It has won many awards since 2015 to date, including:
Over 2,000 visitors have toured the SunMine site. Tod Caton from Simply Kimberley and Resort Tours has been assisting the City with meeting the demand for SunMine ecotours. Tod can be reached at 1-844-474-6759 to arrange for a tour.
The past three months has brought in the following revenue:
April 2018 Revenue - $18,603 on 176.81 MWh
May 2018 Revenue - $21,481 on 240.48 MWh
June 2018 Revenue - $18,058 on 203.8 MWh
Production for the second quarter was 102.8% of projected, after a particularly productive month of May. June 22nd marked the third anniversary of commercial production.
As of June 30th, 2018, the SunMine has generated $569,864. Annual debt payments on the $2M are $125,722/year. Any surplus once debt and operating costs are paid goes into a reserve, which was at $32,746 at the end of 2017.
There are 36 different rates paid for the electricity that is generated by the SunMine, dependent upon two factors. The first factor is which month of the year. Rates paid in May and June are much lower than those paid in December and January. The rates are lower when hydroelectric power is plentiful, and higher when water levels are lower. The second factor is time of day, divided into Peak (6 am to 4 pm and 8 pm to 10 pm), Super Peak (4 pm to 8 pm) and Off Peak (10 pm to 6 am and Sundays). The most profitable months for the SunMine are July and August, and the least profitable months are November, December and January. December in particular has been very disappointing compared to projections.