New Flash: Bruce Refurb Over Budget

Ok. It’s not a news flash. Nuclear refurbs and projects go over budget so often it is hardly even news. The report I saw was in the Star – I haven’t seen it in the Globe and Mail yet. But as over budget goes, this is a big one.

The original cost estimate was $2.75 billion. They have spent $3.8 billion so far. And they expect the total to be $4.8 billion by the time it is completed. That’s 75% over budget. And you know, sometimes the budget on nuclear projects is subject to future revision – almost always upward. We haven’t heard the last of this.

The project is a refurbishment of Bruce A, units 1 and 2. When completed, it will bring the capacity of the Bruce Plant back by about 1500 MW. The cost to bring the capacity of an existing facility back works out to $3200/MW, which is huge. This is higher than the cost of capacity from coal, natural gas, wind, and most waterpower. Imagine what a new nuclear plant would cost.

This refurbishment project is a joint venture between Ontario Municipal Employees Retirement System (OMERS), TransCanada, with a small interest owned by an employee group – Power Workers Union and Society of Professional Engineers. The first part of the cost overruns were partly paid for by ratepayers – everybody who buys electricity in Ontario. But now the added costs will be paid by the shareholders of Transcanada (how long until this starts to really hurt their results?), the municipal pension fund, and the workers. Cost overruns like this would be added to the capital cost, and depreciated over a long period of time. It would act as a drain on cash today, and a long term drain on profitability or pension reserves.

Interestingly, the other Bruce Power partner, Cameco, isn’t participating in this project. Cameco is the large supplier of uranium to the nuclear industry. They will get the customer without taking the huge refurbishment risk. Smart.

There is one other smart party in this transaction. And that is the Province of Ontario, who is buying the power. Their contract doesn’t allow the price of electricity from the project to go up once the project exceed $3.4 billion – which has long since passed. This is the way to do nuclear procurement contracts. The only way. Good on you, Ontario.

And may you always act this way.

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