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Building owners behind energy systemAs long as it's cheaper than oil and contracts are short-term, landlords say they'll hook up
Northern News Services
Published Friday, March 4, 2011
Northern Property Commercial, formerly known as Northern Property REIT, owns five of the buildings the city has proposed to hook up to the system. Kelly Hayden, the company's vice-president of commercial property, said it's a great opportunity for Northern Property to stabilize costs, while becoming more sustainable.
The residential side of the company has already switched a number of its buildings to wood-pellet boilers to avoid the volatility of oil prices, he said, adding there isn't the space to do that in the commercial buildings, making the district energy system an appealing alternative.
"What this does is it helps you to take out the peaks," he said, referring to the unpredictability of oil prices.
As long as the city ensures the utility is cheaper than oil, pays for the hook up - as it has promised - and gives building owners the opportunity to sign short-term contracts, the project will be of great benefit to the 39 buildings the city intends to hook up to the system, said Hayden.
The proposed community energy system, if completed, will heat select downtown buildings with a mixture of wood-pellet boilers and geothermal heat generated by the earth below the now-defunct Con Mine.
Built into the system would be the ability to switch energy sources if one source becomes less viable.
"I'm not worried about the source - that could change many times," said Hayden. "It just lays the infrastructure for energy switching."
The city hasn't yet entered into contracts with building owners, but has been gauging interest in recent weeks.
City administrator Bob Long said 60 per cent of the building owners he has spoken with have expressed interest in the project and are willing to hook up to the system.
Long said the city is looking at signing long-term contracts with the building owners, but the agreement might be something like a mortgage, where you sign on in pieces.
"The mortgage is calculated for the whole 20-year period, and in fact you have an obligation for that long a period, but you get to renegotiate the rate at certain junctions in that mortgage.
"We may enter into those kind of agreements. It's just too early for me to know."
Ray Decorby, owner of Polar Developments which has two buildings in the proposed service area, said a 20- or 30-year contract is a big commitment.
"Things gotta look pretty good to sign on to something for 30 years. I mean, that's a hard commitment," he said. "Other than getting married, what would you sign up for 30 years for, right?"
Decorby said without having a contract in front of him, he isn't yet in a position to say whether the Anderson Thompson Tower or the Watermark Tower will be signing on to the system.
"I haven't seen the deal yet, so it's almost impossible to comment," he said.
"The big concern is you're really tied into their (the city's) good management or mismanagement of the operation."
Darin Benoit, property manager for Bellanca Developments which owns the Precambrian Building, Scotia Centre and Bellanca Building - all of which are included in the proposed service area - agreed that a long-term contract isn't appealing.
If the city can offer five-year contracts and the business case remains strong, he said Bellanca would be happy to sign on.
"If all the numbers come out the way they should be, then yes (we'll hook up)."
Long said the city won't move forward with the project unless the costs are less than the business as usual costs. But the city does have the ability to set a policy that requires buildings to hook up.
The city will be asking residents for permission to borrow up to $49 million in order to move ahead with the project, in a referendum March 14.
Voting yes doesn't mean the city will turn around and borrow the money the following day, it just gives the city the go-ahead to continue moving forward with the project.
Hayden said he'll be voting yes.