Private sector to fund, run nuclear plant: a consortium would sell the power

Globe and Mail - SHAWN MCCARTHY - February 8, 2008

OTTAWA: AECL plans a new model of ownership for a proposed reactor in New Brunswick. A consortium of private sector companies is teaming up with Atomic Energy of Canada Ltd. to finance a $5-billion ACR1000 reactor in New Brunswick in a test of a new ownership model for nuclear plants that could boost AECL's international sales.

The project at Point Lepreau, N.B., would mark the first time in the global marketplace that a reactor consortium financed the construction of a plant and continued to own it while selling the power to the utility customer.

The province is eager to see the construction of the 1,200-megawatt reactor, which would supply both domestic and export markets, New Brunswick Energy Minister Jack Keir said in an interview Thursday. The government is still deciding whether to participate with the companies in the financing and ownership of the reactor.

Mr. Keir said his confidence in the Candu design has been heightened by the willingness of AECL's partners to take ownership of the nuclear facility. The proposed reactor is an updated version of AECL's heavy-water Candu reactor and is still in the design stage.

The current 630-megawatt reactor at Point Lepreau is now undergoing a $1.6-billion refurbishment

"I'm listening to the private sector, and the private sector says. `Here's the cheque, when do we start,'" Mr. Keir said. "It's up to us to decide whether we want it to be purely a merchant project, or whether we want to take an equity stake, and if so, how much."

In the global competition between nuclear power and electricity fired by fossil fuels, reactors are considered to be competitive over the long-term operation of a power plant. But they face a major challenge in the enormous upfront construction costs. The high costs, coupled with safety concerns, resulted in a lack of North American reactor sales.

Nuclear companies have traditionally sold reactors and built them for utilities - such as New Brunswick Hydro, or Ontario Power Generation, or their counterparts in the United States - which in turn took on billions of dollars in debt to finance them.

Increasingly, global reactor vendors are turning to the so-called merchant model.

The merchant model involves negotiating long-term power purchase agreements with utilities and then using those agreements to raise debt from hedge funds, pension funds and other capital pools.

For the New Brunswick reactor, AECL would not take an ownership stake. Its so-called Team Candu partners - SNC-Lavalin Group Inc., General Electric Co., Hitachi Ltd. and Babcock & Wilcox Co. - would retain ownership and finance the project by concluding long-term contracts with New Brunswick Power and other customers.

Ottawa is reviewing the ownership structure of the Crown corporation, and is considering whether to sell it to foreign competitors. Mr. Keir said he wants to ensure that the federal government remains committed to the future of struggling AECL and its heavy-water Candu design before the province signs on.

Patrick Lamarre, president of SNC-Lavalin Nuclear, said companies like his and the other Team Candu partners have long been taking equity stakes in power plants, but this would be a first for a nuclear reactor. He added AECL would be responsible for providing performance guarantees. (AECL said financing from Ottawa would not be required.)

"On the equity side and financing side, we see it as just another power investment and a power project, and on the construction side, we're comfortable with the execution of such a project from the previous track record we've had internationally," he said.

AECL boasts that it has completed construction of Candu 6 projects in China and elsewhere on time and on budget. It is now looking to sell several of its new ACR reactors - which are designed to be larger and more efficient than the Candu 6 - in Ontario, Alberta and Britain.

Ontario is a key market, and the provincial government has not yet determined whether it will go with the AECL design, or buy from one of its foreign competitors, such as French-based Areva Group. Like New Brunswick, the Ontario government said it wants to be sure that the federal government remains committed to AECL for the long term before committing to that design.

The New Brunswick government this week released a feasibility study from Team Candu, which said there is solid business case for a second reactor, which would complement the 630-megawatt one at Point Lepreau that is now undergoing a $1.6-billion refurbishment. That view was backed up by the government's independent review.

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