Ontario Power Generation makes money, pursues power projects

Ontario Power Generation said Nov. 16 that due to strong financial instrument performance, its third quarter net income was C$139m compared to a net loss of C$154m in the third quarter of 2011.

Net income for the nine months ended Sept. 30, 2012, was C$336m compared to C$108m for the same period in 2011.

“I want to note that the improved bottom line at OPG resulted from better returns on our invested funds that are held on a long-term basis to fund the eventual decommissioning of our nuclear stations, not from increases in prices,” said Tom Mitchell, President and CEO at the company. “In fact, for the first nine months of this year OPG received, on average, less for every kilowatt hour that we generated than we did in the first nine months of last year. This year we received an average of [C]5.1 cents per kilowatt hour. Last year we received [C]5.3 cents.”

Mitchell noted that OPG generates about 60% of the electricity used in Ontario. “Fully 95 per cent of that electricity is free of emissions that contribute to smog and climate change,” said about a program that in recent years has seen a continuing phase-out of coal-fired capacity. “Our generation will move closer to 100 per cent free of these emissions, when we shut down our remaining coal-burning units by the end of 2014.”

Total electricity generated by OPG during the third quarter was 20.6 terawatt hours (TWh) compared to 21.4 TWh for the same period in 2011. Total generation for the nine months ended Sept. 30, 2012, was 63.1 TWh compared to 64.3 TWh in 2011. The decrease in electricity generation for the three and nine months ended September 30, 2012, compared to the same periods in 2011 was primarily due to a decrease in hydroelectric generation resulting from below normal water levels.

Nukes perform well in early part of this year

The Darlington nuclear station continued to perform well with capability factors of 92.4% and 91.2% for the three and nine months ended Sept. 30, 2012, respectively. These capability factors decreased compared to the same periods in 2011 primarily due to an increase in unplanned outage days. The capability factors for the Pickering stations for the three and nine months ended Sept. 30, 2012, were 90.1% and 82.1%, respectively, compared to 78.1% and 76.1% for the same periods in 2011. The significant improvement in the capability factors was due to a decrease in planned outage days.

The availability of OPG’s regulated and unregulated hydroelectric stations remained at high levels. The Start Guarantee rate of the thermal generating stations for the three and nine months ended Sept. 30, 2012, improved compared to the same periods in 2011, reflecting the ability of these stations to respond to market requirements when needed.

OPG is undertaking a number of generation development projects to support the province’s long-term electricity supply requirements. The status of these capacity expansion or life extension projects is as follows:

Nuclear:

  • Engineering deliverables critical to the current phase of the Darlington refurbishment project continue to progress on schedule. An Environmental Assessment (EA) public hearing scheduled to be held in November is now rescheduled to December. The decision on the EA is expected by the second quarter of 2013.
  • Work is substantially complete on the initiatives to evaluate the continued safe and reliable operation of Units 5-8 at the Pickering stations for an additional four to six years beyond their nominal end of life. In June, OPG submitted documentation related to the extension of the pressure tube service life to the Canadian Nuclear Safety Commission (CNSC). In the third quarter of 2012, the CNSC agreed that OPG will, through continued specified monitoring, the successful completion of ongoing research and development, and specified station improvements, be capable of confirming fitness-for-service of Pickering fuel channels for the duration of the proposed continued operations period to 2020. During the fourth quarter of 2012, OPG said it expects to confirm its plans for the continued operation of the Pickering station.
  • In August, the CNSC approved the application for the Power Reactor Site Preparation (License to Prepare Site) for new nuclear units at Darlington. A notice of application for judicial review of the License to Prepare Site was then filed by third parties on the grounds that the CNSC’s issuance of the license is invalid and does not comply with the Canadian Environmental Assessment Act. OPG is preparing its response to the application.

Hydroelectric:

  • The Niagara Tunnel project continues to progress. The installation of the permanent concrete liner was completed in the fourth quarter of 2012 while other lining and grouting activities continue. The tunnel is expected to be completed within the approved budget of C$1.6bn and the approved project completion date of December 2013. The contractor, Strabag, has informed OPG that it expects to advance the completion date to mid-2013 and is developing options to further advance the schedule. As at Sept. 30, 2012, the life-to-date capital expenditures were C$1.3bn.
  • The Lower Mattagami River project continues to progress. During the third quarter of 2012, concrete work was ongoing at the Smoky Falls, Harmon and Kipling sites. The powerhouse steel superstructure was completed at the Little Long site. The project is expected to be completed within the approved budget of C$2.6bn and the last unit is planned to be in service by June 2015. As at Sept. 30, 2012, the life-to-date capital expenditures were C$1.2bn.

Thermal:

  • OPG and the Ontario Power Authority (OPA) have executed the Atikokan Biomass Energy Supply Agreement for the conversion of the Atikokan coal plant to biomass fuel. The project is now in the execution phase. The project is expected to cost C$170m and be completed in the first half of 2014. OPG is suspending further work on the Thunder Bay coal-to-biomass conversion, pending a review by the OPA of electricity needs in northwestern Ontario. OPA has informed OPG that it needs time to explore other options for electricity supply in the northwest part of the province. Costs of C$9m were incurred for the conversion during the definition phase.
  • As outlined in Ontario’s Long-Term Energy Plan and Supply Mix Directive to the OPA, OPG is also exploring the possible conversion of some units at the Lambton and Nanticoke coal plants to natural gas, with an option for co-firing with biomass, if required for Ontario’s system reliability. Without an indication that conversion will proceed, the units will continue to be made available to the system until the mandated halt of coal consumption.

Gas-fired project being worked on for Lennox site

As of Sept. 30, OPG’s electricity generating portfolio had an in-service capacity of 19,051 MW. OPG operates three nuclear generating stations, five thermal generating stations, 65 hydroelectric generating stations, and two wind power turbines. In addition, OPG and TransCanada Energy Ltd. co-own the Portlands Energy Centre (PEC) gas-fired combined cycle station. OPG and ATCO Power Canada Ltd. co-own the Brighton Beach gas-fired combined cycle plant. OPG also owns two other nuclear stations, which are leased on a long-term basis to Bruce Power LP.

OPG said it is working with TransCanada Energy and OPA for an arrangement to sell a parcel of land at the Lennox station site at fair market value and other site-specific arrangements for the development of a combined cycle, natural-gas fired station. OPG does not have an ownership interest in this gas-fired project.

Beginning in 2012, the Pickering stations are managed as a six-unit site through the operational amalgamation of the Pickering A and B stations. OPG successfully combined the Pickering stations’ work management, maintenance and operational planning departments during the first half of 2012. During the third quarter of 2012, the CNSC staff reviewed the Sustainable Operations Plan, which describes the strategy for safe operation of the Pickering site in an integrated fashion for the balance of this decade. OPG has applied to the CNSC for a single operating license for the Pickering generating stations for the license renewal effective in 2013.

During the third quarter of 2012, OPG continued to execute a number of hydro projects, including overhauls at Unit 3 of the Sir Adam Beck station and Unit 1 of the Des Joachims station, refurbishment of headgates at the Arnprior and Alexander Falls stations, and a penstock replacement at the the Matabichuan station.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.