Shifting nuclear scene prompts Ontario utility’s buying spree

TORONTO The chief executive of Ontario Power Generation Inc. says the company’s recent multi-billion-dollar shopping spree was undertaken with returns for its government shareholder in mind, but also with an eye to maintaining economies of scale ahead of the planned shutdown of its Pickering, Ont., nuclear station.

The provincially owned electrical company’s dealmaking culminated in a $2.87-billion agreement, announced late last month, to buy two Ontario gas plants — and half of a third plant in which it already held a 50-per-cent stake — from Calgary-based TC Energy Corp., the former Transcanada.

The acquisitions (expected to close in late 2019, pending regulatory approvals) are in addition to a $200-million deal to take full ownership of a fourth gas plant — this one in the Windsor, Ont.-area — in which it also previously held a 50-per-cent stake.

OPG is buying the stake from ATCO Ltd.-subsidiary Canadian Utilities Ltd.

“We think there’s a very good earnings stream off of the assets … all of which goes to the benefit of Ontario taxpayers,” said Ken Hartwick, OPG’S president and CEO. “Although not a direct offset to Pickering, it also factors into our thinking as to our relative size in the province and how we can use that to benefit ratepayers.”

Combined, the four gas plants possess nearly 2,700 megawatts of electricity-generating capacity, or about 14 per cent of the projected demand for electricity in Ontario as of noon on Tuesday.

One of the four, in Napanee, Ont., is still under construction.

Hartwick, who took over as OPG’S CEO in April after serving as chief financial officer for three years, said the company’s interest in buying the natural gas assets was influenced by its confidence as an operator and its knowledge of the Ontario market. OPG provides nearly half of Ontario’s daily power, making it the biggest electricity generator in the province.

OPG also announced a deal in June to buy an operator of hydropower facilities in the eastern United States, which had an enterprise value of US$1.1 billion and followed OPG’S acquisition of another U.s.-based hydroelectric operator last year.

The acquisitions come ahead of the planned commercial shutdown in 2024 of OPG’S Pickering nuclear power plant. The generating station, located in the eastern part of the Greater Toronto Area, “accounts for approximately 14 per cent of Ontario’s electricity needs,” the utility says.

OPG operates another nuclear plant further east of Pickering, the Darlington station, which is in the midst of a closely watched, multibillion-dollar reactor refurbishment. Another major rebuild is set to kick off next year at the nuclear station operated by Bruce Power L.P., a partnership of TC Energy.

All of the above have left Ontario facing a possible capacity crunch.