Sep. 8, 01:00 EDT – Toronto Star Editorial
Only two years ago when British Energy PLC took over effective control of the Bruce nuclear facility, the Scotland-based company was riding high. It was strong and it was solvent.
But then came last week’s bombshell: British Energy announced that unless it got a bailout worth hundreds of millions of dollars from the British government, it would face bankruptcy. British Energy owns 82 per cent of Bruce Power, which operates the massive nuclear facility on Lake Huron.
If the thought of an insolvent private company running nuclear generators in Ontario isn’t scary, what is?
This turn of events gives no consolation to those who warned that the Ontario government was set on a dangerous route when Ontario Power Generation signed an 18-year lease on the Bruce facility. It was sheer folly to hand over a vital piece of the province’s infrastructure to the private sector, particularly a facility that provides 15 per cent of the province’s power.
The implications for Ontario homeowners and factories are immense.
This summer, Ontario had to import power and it was counting on promises made by Bruce Power to bring two mothballed generators back on line next spring. The cost of restoring the generators is estimated at $340 million, but at this point no one is quite certain whether Bruce Power has the money to pay for the refit.
As for other financial worries: British Energy provides a guarantee of so-called “shutdown money” — roughly $220 million that Bruce Power is required to set aside, a safety cushion to run the facility for six months. Canadian authorities are trying to determine whether Bruce Power can still provide this financial guarantee, and if not, what happens next.
British Energy said it may try to raise cash by selling assets, such as its stake in a U.S. nuclear station at Three Mile Island. Does it have similar leeway to sell or sublet its Ontario lease? It is also unclear whether British Energy creditors have any recourse to go after the assets of Bruce Power.
And there is a big question of whether Bruce Power can continue to meet its commitments to pay lease costs to Ontario Power Generation, estimated to be $150 million this year.
If there is any bright spot in all of this, it is the knowledge that it is not in anyone’s interest to see Bruce Power in trouble. It is a major money maker for British Energy, returning a profit of $102 million last year.
But that certainly doesn’t mean the Ontario government should sweeten its already generous deal to bail out Bruce Power. Indeed, if there is any indication the company cannot meet its obligations, Ontario must move to take back control of the plant.
This certainly provides a cautionary tale for any further sales of the old Ontario Hydro assets. Whatever its faults, Ontario Hydro gave the province the advantage of competitively priced power, which is vital to the province’s economic health. It has never made sense to give this advantage away.