zaps OPG profit
Utility's 2008 operational performance improves but net income drops 83% on investment losses
TheStar.com: Tyler Hamilton - February 14, 2009
Market turmoil last year vaporized $670 million from a special fund created in 2003 to pay for the decommissioning of old nuclear plants, Ontario Power Generation reported yesterday.
The province-owned utility said market losses were primarily responsible for an 83 per cent drop in 2008 profit. OPG's net income last year was $88 million, compared with $528 million in 2007.
"OPG's operational performance improved in 2008 with electricity production and gross margin increasing compared to 2007," company president and chief executive Jim Hankinson said yesterday.
"However, these favourable increases were more than offset by the negative impact that the capital markets had on the market value of the investment funds that have been established for nuclear fixed asset removal and nuclear waste management."
OPG's power generation income soared to $1.03 billion last year, excluding interest and income taxes. It was a dramatic jump compared with 2007, when equivalent income was $594 million.
Electricity generation rose 2.5 per cent, primarily because of higher output from the company's hydroelectric and nuclear facilities, which more than offset falling fossil-fuel generation.
Revenue climbed 7 per cent to $6.08 billion in 2008 from $5.7 billion the previous year.
OPG's "nuclear funds" include a fund earmarked for future management of nuclear fuel waste and a fund to pay for future decommissioning of existing plants. Liabilities to date exceed $11 billion, but OPG doesn't expect the first payouts from the fund will be required for another 50 years.
The decommissioning fund has been hit hardest by the market.
The waste management fund, on the other hand, has a provincially guaranteed rate of return of 3.25 per cent annually above inflation.
Meanwhile, OPG restarted the coal-fired Nanticoke-5 power plant and shut Unit 7, according to a posting on the Independent Electricity System Operator's website.