Rob Ferguson, Business Reporter
Toronto Star
November 16, 2002

British Energy confirms it’s trying to unload 82% stake

Cash-strapped British Energy PLC confirmed yesterday it’s in talks to sell its 82 per cent stake in Bruce Power, the nuclear generating station on Lake Huron that is Ontario’s largest electricity provider.

The move raised concerns on at least two fronts – that the potential buyers have no experience running nuclear power plants and that blackouts could result next summer if Bruce Power’s $400 million plan to restart two reactors is delayed by the sale.

"We’re really worried," said Tom Adams, executive director of Energy Probe, an industry watchdog group.

A source close to the talks said TransCanada PipeLines Ltd. and Toronto investment firm Borealis Capital Corp. are involved in negotiations along with Cameco Corp., a Saskatchewan uranium producer that has said it’s interested in increasing its 15 per cent stake in Bruce Power.

The talks began two months ago but hit a snag this week when the Ontario government announced it would cap retail electricity prices at 4.3 cents per kilowatt hour until 2006, the source said.

"It certainly made the purchasers nervous."

Premier Ernie Eves introduced the rate cap and rebates to mitigate skyrocketing hydro bills homeowners have faced since the electricity market was opened to competition in May.

But industry analysts say the cap has lowered the value of electricity plants and makes it less likely new power producers will come to Ontario because profits will be limited.

Cameco spokesperson Jamie McIntyre acknowledged the rate cap is a concern but added: "I don’t think it has diminished Cameco’s original intent."

Bruce Power earned $101.6 million for British Energy in its first year of operation, becoming the company’s most profitable unit.

TransCanada PipeLines wouldn’t confirm it’s in the talks, but spokesperson Glenn Herchak said: "We are still looking at opportunities for growth in both our pipeline and power business in North America, and that does include Ontario."

Calgary-based TransCanada has stakes in 17 North American hydro plants. None are nuclear.

It’s not known if federal regulators would let companies with no experience in operating nuclear reactors – among the most complex technologies on the planet – purchase Bruce Power.

"That’s a real safety issue," Adams said.

McIntyre called Adams’ concerns "speculation."

Talk of blackouts next summer is "fear mongering" because projections for 18 months show Ontario will have a "sufficient supply of energy" regardless of what happens at Bruce Power, said Dan Miles, spokesperson for provincial Energy Minister John Baird. Those projections include power purchases from the United States.

But it’s in the Ontario government’s interest to get the idle Bruce reactors online quickly to keep hydro prices down "so it won’t have to spend as much on rebates," said Bruce Sharp, senior consultant at Aegent Energy Advisors in Toronto.

Bruce Power said the refurbishing of two reactors slated to resume hydro production next spring is on schedule. Pending approval from regulators, the first of the two reactors should be operating in April with the other following before summer, Bruce Power spokesperson Steve Cannon said.

Adams said delays remain possible because it’s not unusual for problems to surface in the final approval and testing process.

"It just seems to be something generic with nukes. . . . I’m not taking anything at face value from these guys."

A deadline for the sale by British Energy is fast approaching.

The British government has given the company an emergency loan of about $1.6 billion until Nov. 29 and is exploring ways to keep the firm solvent.

Its profits have sunk because of a 40 per cent plunge in U.K. electricity prices after the industry opened to competition in 1998.

Some observers aren’t sure British Energy will survive, even if it does get $1 billion – a price estimated by London’s Financial Times newspaper – for its stake in Bruce Power, which originally cost $650 million.

"It’s a short reprieve from death row," said Clive Roberts, an analyst with Charles Stanley in London. "They are not going to get very much from Bruce. . . . There are few people who would bid for a nuclear business."

Repaying the loan is unlikely to solve long-term woes at British Energy, the former government nuclear power firm that was privatized in Britain’s electricity deregulation process, analysts said. Electricity prices in the U.K. are expected to stay weak for the next three years.