Bruce Power, the Canadian power plant operator which is 85 per cent owned by British Energy plc, announced over the weekend that it had secured an 18 year agreement with Ontario Power Generation (OPG), to lease and operate the Bruce A and Bruce B nuclear power stations. The news will be very welcome to British Energy, whose results will be announced this Wednesday. These are expected to show a sharp deterioration from last year’s profits of £225 million ($319 million).

Bruce Power has entered into a lease agreement with OPG to operate the Bruce A and B nuclear generating stations. The lease is for a period of 18 years, with an option to renew it for up to a further 25 years. The total value of the transaction is more than C$3.2 billion ($2.1 billion), representing one of the largest public/private transactions in Canadian history.

“Today’s transaction is positive news for employees, the community, the electricity consumer and the nuclear industry,” said Ron Osborne, OPG President and Chief Executive Officer. “This agreement injects private equity into the Bruce facilities and represents a major step towards opening the Ontario electricity marketplace to competition.”

“The successful conclusion of this transaction is a tribute to the many people who have worked to see this historic agreement through to completion,” said Robin Jeffrey, Chairman Designate of British Energy and Chairman of Bruce Power. “Bruce Power looks forward to playing a vital role in the success of nuclear power in Canada.”

“This transaction represents a major step forward in our North American strategy, enabling us to deploy both our existing nuclear operating skills and our experience of trading in competitive markets,” said current British Energy Chairman, Sir John

Robb.

There are eight nuclear reactors on the site: four at Bruce A, commissioned between 1977 and 1979; and four at Bruce B, commissioned between 1984 and 1987.

The four nuclear reactors on Bruce B are capable of producing enough electricity for a city the size of Toronto. Bruce A is not currently operational. Bruce Power has begun a programme to restart two of the four Bruce A reactors; these could be operational by summer 2003.

The transaction includes an initial payment of C$625 million, before various closing adjustments, paid in three installments, as well as annual lease payments. The lease payments include monthly fixed payments and periodic variable payments. The variable payments include a net revenue-sharing arrangement and supplementary payments for the management of used fuel. In total, fixed and variable payments are estimated to be about C$150 million in calendar year 2002.

Bruce Power is a partnership among British Energy, the UK’s largest electricity generator, Cameco Corporation (15 per cent), the world’s largest uranium fuel supplier and the two main unions representing employees on the Bruce site, the Power Workers’ Union (up to 4 per cent) and The Society of Energy Professionals (up to 1.2 per cent). British Energy’s current interest of 85 per cent will reduce progressively to 79.8 per cent as the unions take up their full equity interest in Bruce Power by May 2003.

Analysts are anticipating anything from a loss of £4 million to a profit of £32 million for British Energy. The company had to halve its dividend last year due to unexpected shutdowns at two of its power stations and falling electricity prices.