The Telegraph Journal
July 28, 1998
‘You’d have better luck selling a 1983 K-Car,’ analyst says of Point Lepreau
FREDERICTON – A nuclear energy expert says that privatizing NB Power will not allow the province to recoup the huge losses it has incurred because of the utility.
But Tom Adams of Energy Probe believes there are still substantial advantages to selling NB Power, which is currently in debt to the tune of about $3.4-billion.
The possibility of privatizing NB Power has become a hot topic once again following the recent release of a study into the future of the utility and media reports that Hydro Quebec is interested in snatching up some of the utility’s assets.
But Mr. Adams said yesterday that some NB Power assets are worth considerably more than others.
“The Point Lepreau generating station is almost worthless because there just isn’t much of a market out there for used nukes. You’d have better luck selling a 1983 K-Car,” said Mr. Adams during an interview from his office in Toronto.
And the Belledune power station would also be hard to unload at a decent price, “because it’s extremely uneconomic and was built at a very high cost. There’s no way you’re ever going to get what you’ve invested out of those plants,” he said.
He added that NB Power’s coal company is also worthless – “In fact, it’s running at a loss.”
But other assets, such as NB Power’s transmission system, its hydro-electric stations, its local distribution network and its fossil-fired stations fueled with coal, oil and light oil would all go for a respectable price on the present energy market, Mr. Adams said.
“The transmission system [which allows NB Power to wheel energy through the province and among producers and consumers here] is probably worth a lot of money because the high-voltage power lines are in a key location in the North American power grid,” he said.
“And worth substantially more than the utility has allowed on its books is its local distribution system. The wires that run up and down streets and deliver power to businesses and hosptals and places like that are also a very valuable asset, because if NB Power is privatized and subject to regulation, the operator of that business can expect to earn a reasonable rate of return on that service, judging by what it sells for in other parts of the world.
“And a lot of companies would like to be in power distribution business because they could expand into local telephone and cable services, for instance, that would use the same wires and could easily add fibre optics on the same poles,” he said.
As for hydro-electric stations like the ones at Mactaquac and Beachwood, Mr. Adams said they would be attractive to prospective buyers thanks to their low cost and easily manageability.
“Their running cost is low, they’re very controllable and they’re reliable,” he said.
He added, however, that some of the hydro stations – including Mactaquac and Beachwood, have some serious engineering problems stemming from a chemical in the concrete used to build the stations.
But while the province stands to make money by selling several of NB Power’s assets, other parts of the power monopoly – especially Point Lepreau – will make it impossible for the Thériault government to break even.
“There just isn’t a market out there,” he said.
“For example, British Energy just bought a used reactor two weeks ago that is a few years older than Point Lepreau but, in terms of operating hours, it’s in the same ballpark. The reactor was on the books of the utility for aproximately $500-million, but they were only able to sell it for, I believe, $23-million.”
Mr. Adams added that 15 nuclear reactors in the U.K. were also sold recently – for roughly the amount it had cost to build just one.
But despite these horror stories, Mr. Adams said there would be many benefits to selling NB Power.
The province would be able to put a cap on its liability. “As NB Power goes along, its liabilities keep increasing. This utility is not capable of controlling its liability and that’s evident through its continuing financial losses,” Mr. Adams said.
Privatizing the utility would likely lower power costs. “Competition in other power systems has lowered costs for consumers,” he said.
Selling the utility would go a long way toward improving power regulations in the province.
“One of the reasons NB Power is such a mess is that it’s not properly regulated and the public utilities board is powerless to do anything because it’s not allowed to oversee NB Power, while private utilities elsewhere are usually vigorously regulated,” he said.
“The province is in a conflict of interest when it comes to regulating because regulations are there to protect consumers, usually to the detriment of the company.
“So, until we clear up this conflict, we’re never going to have good, clean public regulation of the power industry.”
Mr. Adams said that if the province proceeds in an intelligent and thoughtful way in the sale of its utility “it could really be good for the province.”