Bruce Power owner in trouble

Sep. 6, 04:45 EDT Toronto Star

Bruce Power owner in trouble
Panel expresses concern over nuclear safety
John Spears, business reporter

The Canadian Nuclear Safety Commission is seeking assurances from Bruce Power that its financially troubled majority owner can make good on guarantees of its ability to operate the nuclear plant safely.

British Energy PLC, which owns an 82.4 per cent stake in Bruce Power, announced yesterday that it is seeking a bail-out from the British government.

If no suitable bailout is forthcoming, “the company may be unable to meet its financial obligations as they fall due and therefore the company may have to take appropriate insolvency proceedings,” British Energy said in a statement.

A Bruce Power spokesperson said yesterday that the nuclear station near Kincardine, which supplies about 15 per cent of the province’s power, continues to operate normally but would make no other comment.

Bruce Power holds an 18-year lease on the Bruce facility, expiring in 2018. The minority partners are Cameco Corp., which supplies uranium fuel, and Bruce Power’s two unions.

Currently, it is operating only one of the two plants on the Bruce site. But it has plans to restart two of the four reactors in the other plant, known as the Bruce A plant, as early as next spring.

The $340 million project is seen as important to the province, whose power grid was severely strained by this summer’s hot weather.

But Bruce Power wasn’t commenting yesterday on the future of the Bruce A restart.

As for the immediate future, Michel Cléroux of the Canadian Nuclear Safety Commission said in an interview that a condition of Bruce Power’s operating licence is that it must prove it has the financial ability to operate for at least six months, even if its revenues dry up.

That would give enough breathing room to find another operator or, in the worst-case scenario, allow for a safe shutdown of the nuclear reactors.

Cléroux said the commission received such a guarantee from Bruce Power on Aug. 12. But the commission wrote to Bruce Power again on Aug. 29, after seeing reports that slumping electricity prices in Britain were putting pressure on the company.

The letter asked Bruce Power to demonstrate that the British Energy guarantee is still good — a guarantee that Cléroux acknowledged seems in question following yesterday’s announcement.

The company may be unable to meet its financial obligations as they fall due…
– British Energy statement

Alternatively, the letter asked Bruce Power to come up with another way of guaranteeing the six months of operating funds. The company has been given until Sept. 10 to reply, he said.

Cléroux wouldn’t speculate on what would happen if the company missed the deadline, or if the response was unsatisfactory.

In its release, British Energy said it “continues to comply with all safety and other regulatory requirements.”

The company blames its problems in part on what it considers are tax disadvantages in Britain.

Bruce Power has been a money-spinner for British Energy since the 18-year lease took effect in May, 2001. British Energy reported that it earned $101.6 million in its first year of operating Bruce, by far the strongest performance of any of its units.

That’s a point in Bruce Power’s favour, noted energy consultant Jan Carr, who said it would be in the interests of all concerned — shareholders and creditors alike — to keep profitable units operating.

Carr said he doesn’t have inside knowledge of British Energy’s financial arrangements, but said it has a tradition of structuring deals with customers and suppliers so that they share rewards for good performance — and risks of potential failures.

While it’s “not positive news” for Bruce Power, Carr said British Energy’s troubles won’t necessarily lead to serious problems for Bruce Power, depending on the terms of the ownership.

Tom Adams, executive director of Energy Probe, was more worried, noting that if managers get sidetracked by worries over financing or legal issues, they would have less time to devote to operating the plants.

There’s also an incentive to operate with a short-term rather than a long-term view during a crisis atmosphere, said Adams, who said regulators should keep a close eye on the plants.

Ontario Power Generation, which owns the Bruce nuclear plants, was maintaining a calm demeanour yesterday.

Spokesperson John Earl noted that British Energy has boasted of Bruce Power being one of its jewels. Obligations under the lease with OPG have been met, Earl said.

Bruce Power has agreed to make fixed payments of $625 million, plus variable annual payments over the life of the lease to be determined by an agreed-upon formula. The payment for the year ending March 31, 2002, was $86 million.

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