Plan of Operation
Our plan of operations for the next twelve months is to commence discussions with potential customers that may be interested in purchasing electricity that would be generated from our potential wind power project in southwest Saskatchewan, contact wind turbine suppliers regarding the planned purchase and delivery of equipment and seek potential sources of debt and equity financing.
We erected a meteorological tower on a property in southwest Saskatchewan for the purpose of determining whether the property possesses a wind resource sufficient to justify the erection of wind turbines. This 12 month study was completed during the quarter ended November 30, 2006. Data continues to be collected, additional resource assessment reduces uncertainty in long term yield projections.
We have determined that the Saskatchewan property has a wind resource that warrants the erection of wind turbines. We must now negotiate a lease, purchase or further land access agreement with the landowners and/or surrounding land owners of the Saskatchewan property. Currently, all land owners in the area have indicated their preference to retain ownership of their lands and enter into a lease arrangement with us, although we have not reached any formal agreement in this regard. Accordingly, we do not expect to incur any expenses in connection with acquiring a property interest until the wind towers have been erected. Annual land lease costs are estimated to be $60,000.
In 2007, we entered into a letter of intent with Sky Harvest Windpower Corp. (“Sky Harvest”), a private Canadian company, whereby Keewatin intends to acquire all of Sky Harvest’s issued and outstanding share capital.
Sky Harvest holds the rights to construct a wind power facility on approximately 8,500 acres of land located in southwestern Saskatchewan. The company has completed a wind resource assessment on the property that demonstrates that the potential wind resource greatly exceeds the minimum capacity factor necessary to justify the planning and construction of a 150 megawatt wind power project. The company is now in the process of completing the necessary environmental assessment and permitting of the property. Sky Harvest has also commenced initial discussions regarding the potential sale of electricity that would be generated by a wind power facility.
In order to acquire a 100% interest in Sky Harvest, we have agreed to issue a total of up to 17,343,516 restricted shares of common stock to the shareholders of Sky Harvest, equating to 1.5 shares of common stock in our capital for every currently issued common share of Sky Harvest.
Over the next twelve months, we anticipate spending $300,000 on administrative costs, including management fees payable to our president, professional fees and general business expenses, including costs related to complying will our filing obligations as a reporting company. As our operations become more complex, it is anticipated that these costs will increase. We intend to cover these costs from current cash on hand.
To erect wind turbines on the Keewatin property, at an anticipated cost of $67,250,000, we expect to raise up to 75%, or approximately $50,000,000 by way of debt financing and 25%, or approximately $17,000,000 through the sale of our common stock. Additional funds will be required to develop the Sky Harvest property following the completion of our acquisition of the company.
The chartered banks in Canada, as well as many United States financial institutions, each have departments that are familiar with financing wind power projects and assessing the ability of companies with proposed projects to generate profit through operations. These institutions may be approached for debt financing following completion of our wind study and once we have entered into an agreement in principal to sell the power to be generated from the project. The factors that the banks consider in
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providing the debt financing include wind study data, the size and number of wind turbines to be erected and the price the purchaser has agreed to pay for the power produced.
We have not had any specific communications with any representative of a debt financing institution regarding our proposed wind power project. Accordingly, we cannot guarantee that we will be able to raise 75% of our required funds through debt financing. The following table discloses the number of shares of common stock that we would have to issue in order to raise the $25,000,000 in equity financing at various prices, resulting in dilution to existing shareholders:
Price Per Share No. of Shares Issuable
$2.00 12,500,000
$3.00 8,333,333
Wind power generation companies typically make marginal profit based upon the price they receive for each kilowatt hour of power they sell.
Government subsidies and credits add to the profit margin that such companies realize.
We will intend to execute a power purchase agreement with a utility in Saskatchewan or a neighboring jurisdiction. The agreement will include the price to be paid for the electricity we produce in cents per kilowatt hour and the term of the agreement. It will also be subject to us obtaining the necessary financing to proceed with the wind power project.
Debt financiers will only provide us with the financing that we require if our project will be economically viable based on the terms of the power purchase agreement.
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