Dana Flavelle
Toronto Star
March 11, 2002

Ontario’s electricity market has inched closer toward a competitive model with the sale of four previously government-owned hydro-electric generating plants to a private operator.

Ontario Power Generation announced yesterday it has sold four plants in northern Ontario to a division of Toronto-based Brascan Corp. for $340 million.

The sale reduces OPG’s dominance in the marketplace by just 2 per cent. Four other OPG plants remain on the auction block with uncertain prospects.

OPG chief executive Ron Osborne said the company has no plans to alter course.

"I have indicated parts of the process are moving more slowly than we would have liked," Osborne said in an interview yesterday. "We’re still in discussions with a number of interested parties. I can’t predict the outcome or the timing."

Some critics said yesterday it appears Brascan got a better deal than Ontario taxpayers. The proceeds of the sales of any OPG assets are to be used to pay down the $21 billion debt incurred by its predecessor, Ontario Hydro.

The plants, which generate an average of 0.7 terrawatts of power a month, are worth $50 million a year in sales to Brascan, a Sierra Club of Canada official estimated yesterday.

"The payback on their investment will be 7 years. That’s a good deal for Brascan," said John Bennett, director of atmosphere and energy for the Ottawa-based environmental lobby group.

Another sometime critic, however, disagreed. Energy Probe‘s Tom Adams said the price appears to be fair given current electricity rates.

Osborne defended the deal: "We think we got a full price here for these assets. Hopefully this signals other parties that we mean business. We’re not prepared to divest any other assets without getting a fair price."

Brascan was the obvious front-runner for the four plants on the Mississagi River, just east of Sault Ste. Marie, because the Toronto-based conglomerate owns one of the few independent power generating companies in the province and has run generating stations in that region for nearly 100 years.

"We’re delighted to have acquired the plants and think in conjunction with our existing operations we’re in good shape. We were also delighted to have been able to invest in Ontario," Harry Goldgut, chairman and chief executive of Brascan Power, said in an interview yesterday

Brascan, which also has mining, real estate and financial services interests, said the deal boosts its North American power generating capacity by 50 per cent to 1,500 megawatts. Its other facilities are in Quebec, Maine, British Columbia and Louisiana.

The Mississagi plants will be used to meet peak market demand in Ontario, Quebec and Michigan, Goldgut said. They’re not suitable as base load operations because their capacity is limited at certain times of the year by water availability, he said.

The plants employ about 24 people, who will all be offered jobs with the new owners.

The sale comes just weeks before the May 1 deadline for opening Ontario’s $10 billion annual electricity market to competition.

OPG controls about 75 per cent of the market, a figure it must reduce to 35 per cent within 10 years under the provincial deregulation scheme.

OPG’s only other major competitor currently is British Energy PLC, which owns about 15 per cent of the market through a long-term lease it signed with OPG to operate the Bruce nuclear facility.