UPDATE 3-Epcor cancels Ontario wind-farm deal

(Updates with ownership detail and trade in units)

OTTAWA, Oct 16 (Reuters) - Epcor Utilities Inc EP_u.TO said government delays forced it to cancel a contract that would have substantially expanded its wind farm operations on the south shore of Lake Huron in Ontario.

Epcor said late Wednesday it had agreed along with the Ontario Power Authority to terminate the renewable energy supply agreement struck in 2005 for the 160 megawatt Kingsbridge II wind project near the town of Goderich.

The company said it faced delays in provincial and municipal approvals and uncertainty on regulations concerning the layout, design, and testing of the project, which it initially estimated to cost C$300 million ($252 million).

As a result, Epcor said it could not meet conditions in a power purchase agreement, which required the project to be in service by Oct. 31, 2008.

The company, which has spent about C$20 million on development costs over the last two years, said it would not incur any asset write-downs as a result of the decision.

The Kingsbridge II wind farm was planned near the 40 megawatt Kingsbridge I wind farm, which has 22 turbines and supplies around 109,000 megawatt hours of renewable power annually, or enough to heat about 12,000 homes.

The Kingsbridge II project would have had between 60 and 80 turbines and generated enough electricity for an 45,000 homes.

Edmonton Alberta-based Epcor said it will continue operations at Kingsbridge I as it decides on the future of Kingsbridge II and related assets.

"We have to solve a bunch of the uncertainties before we go ahead," said spokesman Neil Levine. "We told our landowners that we're going to talk to them very shortly in November."

Units of Epcor Power LP, of which Epcor Utilities is a majority owner with about a one-third stake, were down 6.3 percent at C$17.57 on the Toronto Stock Exchange amid broad market declines late on Thursday.

The unit, which has no ownership stake in Kingsbridge, has shed close to 30 percent of its value in the last 12 months. Epcor Utilities is wholly owned by the city of Edmonton, Alberta. ($1=$1.19 Canadian) (Reporting by Susan Taylor and John McCrank, editing by Frank McGurty)