Fredericton-based Atlantic Hydrogen Inc. will build its first industrial-scale facility at Emera’s Bayside electrical generating station near Saint John in a deal that includes an equity investment worth more than $5 million.

AHI released a statement on Wednesday saying that Halifax-based Emera, which is the parent of Nova Scotia Power Inc., has hired AHI to install a CarbonSaver system at the gas-fired Bayside plant – the first such facility aside from the prototype at AHI’s Fredericton headquarters. The company plans to begin construction in the spring of 2013.

AHI has spent 12 years developing systems to reduce the environmental damage produced by burning natural gas. The Bayside facility will use AHI’s CarbonSaver P technology, which uses plasma science to decarbonize natural gas. The system removes hydrogen from the natural gas before it’s burned, and then filters out the carbon, which it then sells.

Atlantic Hydrogen CEO David Wagner, who said this summer that the company was seeking $10 million in funding, today said that Emera will invest more than $5 million in AHI as part of the deal. Emera was a previous investor in the company, and Nancy Tower, Emera’s Executive Vice President of Business Development, sits on the AHI board.

Wagner said the money will be used to build the facility, which will feature three reactors in the early stages and grow to six reactors in the future. The prototype in Fredericton now features just one reactor. 

In addition to money, Emera is committing technical assistance and support on the ground at the Bayside plant.

“This commitment of financial and human resources will be used to get our first off-site plant operational,” said Wagner in the statement. “With Emera’s investment, we will apply developments from our lab and demonstration facility to a scale suitable for industry. It is a big and important step for us.”

He added that the company will make another, similar announcement soon, but that it is still searching for investment. AHI prefers to take investment from strategic partners rather than venture capital funds, but Wagner  would not rule out a VC funding.  The company already has commercial relationships with such companies as Encana of Calgary, National Grid of the U.K. and Columbian Chemicals of Marietta, Georgia.

Up to now, AHI has brought in a total of $32 million in investment, including non-dilutive financing (by which people usually mean non-repayable money received from government).

Emera’s latest investment in AHI means that Atlantic Canadian companies have raised more than $13 million this month from strategic partners,  which could in turn provide a useful source of money for the dozens of post-seed companies looking for several million dollars of funding. Halifax- and Denver-based aioTV raised $8 million last week by selling a 44 percent stake to UTStarcom Holdings Corp of China.