Stuart Laidlaw
Kitchener-Waterloo Record
October 7, 2000

The world of privately owned nuclear plants that Ontario is about to enter is going through a consolidation as companies build worldwide conglomerates that dwarf the province’s utility.

"There’s a lot of buying and selling going on," said Pat Kane, an analyst with Federated Investors in Pittsburgh. For the last three years or so, American state governments have been deregulating the electricity sector, leading to a wave of utilities selling nuclear reactors.

The trend has extended internationally, with Britain and Norway shifting their nuclear plants to the private sector in hopes of making them more efficient.

"The nuclear industry is really consolidating," said Tom Adams of Energy Probe, a power industry watchdog group based in Toronto.

Ontario Power Generation Inc. announced this week it’s seeking private investment for its nuclear operations. Ontario has 20 reactors, only 12 of them functioning at the moment.

Ontario Power Generation is one of five successor companies to Ontario Hydro, the Crown utility broken up under the Ontario government’s plan to open up the province’s 90-year-old electricity monopoly to competition next year.

In announcing the move to nuclear privatization, Ontario Power Generation president Ron Osborne said Ontario will likely have to look to foreign companies for investment because no Canadian companies exist that could run the plants.

This will take the province into a tumultuous industry where traditionally staid utilities suddenly find themselves selling off entire divisions, buying others and mapping out new strategies.

In the U.S., while power generation companies have been privately owned for decades, they have until recently been heavily regulated.

Now the power generation field has moved out of regulation, while prices and profits in power-line operations have remained regulated, said Kane.

As a result, utilities have had to decide whether to be unregulated power generators or regulated distributors. Once they decide which side of the company to concentrate on, they sell the other part.

"Once they sell off, they are suddenly half the size," said Kane. " They need to get some scale back," which has led to consolidation.

British Energy took its nine nuclear plants private in 1996, and has since been buying up nuclear plants abroad. It has an office in Toronto.

The British company has also set up a joint venture in the U.S. with Peco Energy called AmerGen, which is buying half-a-dozen reactors.

Peco, meanwhile, plans to merge with Unicom Corp. to form the largest utility in the United States, with 14 nuclear reactors and sales of $12.4 billion US.

Another company, Entergy Corp., operates six reactors and has been looking to buy more.

The moves have resulted in a web of companies controlling more than 30 reactors, and Kane expects much more consolidation as companies continue to look for ways to cut costs and boost profits.

Kane said consolidation makes sense since companies can no longer count on state regulators to guarantee a return on investment.

"Nobody seems to want to take on nuclear, except for Peco and Entergy," he said.

They have been acquiring atomic plants at a fraction of the cost it took to build them.

Creating a network of nuclear plants allows a company to cut staff to improve profits. For instance, a company with 10 nuclear plants could operate safely with five fire protection engineers — one for every two plants, Kane said. "But if you only have one plant, you still need one engineer. You can’t have half."