Utilities company Fortis has entered an agreement to acquire two-thirds of Teck Resources' interest in the Waneta Dam and related transmission assets in British Columbia for $1.2bn.

Under the deal, Teck Metals will be granted a lease to use Fortis’ interest in the Waneta hydroelectric power plant for 20 years to generate electricity for industrial operations in Trail.

Fortis' president and chief executive officer (CEO) Barry Perry said: “Waneta is a high-quality, renewable energy facility located in an area central to our British Columbia operations, making this acquisition a natural fit with our strategy to increase our investment in sustainable energy.”

Annual payments will start at approximately $75m per year and rise 2% annually. This is equivalent to an initial power price of $40 per megawatt-hour based on 1,880GWh of energy per annum.

In addition, Teck Metals will have an option to extend the lease for an additional ten years at comparable rates.

"This agreement will further strengthen Teck’s balance sheet and provide significant new capital."

Teck's president and chief executive officer (CEO) Don Lindsay said: “This agreement will further strengthen Teck’s balance sheet and provide significant new capital that can be reinvested to grow our overall business.

“We have secured a long-term power supply for Trail Operations at competitive, below-market pricing and will invest in innovative projects to further enhance and modernise this facility.”

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

Subject to customary conditions, and receipt of certain approvals and consents, the closing of the transaction is expected to take place in Q4 of this year.