Bruce Power is working to secure the commitment from its two leading shareholders – TransCanada Corp. and the Ontario Municipal Employees Retirement System (OMERS) – for a 15-year, $15-billion project to refurbish six Candu reactors at its Lake Huron site.
The effort comes after Saskatoon-based uranium giant Cameco Corp. reached an agreement in January to sell its 31.6-per-cent stake in the nuclear power operator to OMERS's Borealis infrastructure unit. That would leave the provincial pension fund with a 56.1-per-cent stake in Bruce Power, although TransCanada – currently at 40 per cent – and other small shareholders are still reviewing their right of first refusal to take up the Cameco shares.
In an interview Thursday, Bruce Power chief executive officer Duncan Hawthorne said the company is currently negotiating a contract with the Ontario Power Authority to underpin the refurbishment work, which is expected to begin in late 2016. But he said he also has to persuade shareholders to commit to the required investment.
"Right now, the conversation with the investors is all about me providing the assurance that when I say it's going to be achieved for a budget and cost that I can demonstrate that is something they can rely on, given the previous experience," he said during the annual meeting of the Canadian Nuclear Association. "That's not an unreasonable test for me to have to pass. If you ask me where the hard part is right now, it is about convincing the investors that we do have a good understanding of what the cost and schedule is."
Under the Liberal government's long-term energy plan released last fall, the province will continue to rely on nuclear power for 50 per cent of its generating capacity through to 2031. While the government rejected proposals to build two additional reactors, it gave the green light to Bruce Power and Ontario Power Generation (OPG) to retool 10 reactors – six at Bruce and four at OPG's Darlington plant on Lake Ontario.
The industry has run into big problems in previous refurbishments. Bruce Power ran well over budget and past schedule with its work on two plants, while the former Atomic Energy of Canada Ltd. – now SNC-Lavalin Group Inc.'s Candu Energy – had major cost overruns at New Brunswick Power's Point Lepreau plant.
Mr. Hawthorne said Bruce learned valuable lessons from its previous work, and noted that the two units had been idled for 17 years, making the job far more complicated than the planned work on currently operating units. He said the work schedule was far too ambitious in the earlier refurbishment.
"I'm very confident on the next wave for us because obviously we learned some pretty expensive lessons from [the work on units] 1 and 2," he said. But he added that Bruce Power and its shareholders would be taking on the financial risk, although he said the details of the contract were still being negotiated.
OPG has allocated more than $700-million to prepare for the Darlington work, including the construction of a mock reactor and issuance of contracts with suppliers. It plans to begin its work on the first reactor there in late 2016 – the same time that Bruce will commence with the first unit at Lake Huron. Mr. Hawthorne said, at the urging of Energy Minister Bob Chiarelli, that Bruce Power is working with OPG to identify ways to jointly reduce costs, for example, through common procurement efforts.
TransCanada has an option to take an equal ownership stake as that held by OMERS, and says it will consider whether to exercise that option.
"We remain very committed to Bruce, we think that there is a great opportunity for refurbishment and by negotiating the option we have, it gives us a lot of flexibility as we go forward," company spokesman Shawn Howard said Thursday.
Both Bruce Power and OPG say they expect the cost of power from their refurbished Candus to be in the range of 7 to 9 cents per kilowatt-hour, which would be among the cheapest new sources of Ontario-produced power. But critics don't trust those claims.
They are "not credible in light of the track record of refurbishment," said Mark Winfield, co-chair of the Sustainable Energy Initiative at York University. He said all proposals should be submitted to the Ontario Energy Board and weighed against competing options, including the importation of power from Quebec.
Industry analyst Steven Paget said TransCanada took a hit from previous cost overruns but could do well by participating in the refurbishments. "It all depends on what they get paid for the power from the refurbished reactions," said Mr. Paget of Calgary-based FirstEnergy Capital. He said the price will have to compensate for the risk being assumed, and for the reactors being taken off line while they could still operate and generate power.