New Brunswick said Friday it is going ahead with a $1.4-billion refurbishment of its Point Lepreau nuclear plant, and said Atomic Energy of Canada Ltd. will be the general contractor.

The decision from Premier Bernard Lord's government ends months of speculation over the fate of the aging power generating facility near Saint John that employs 700 workers and supplies more than a third of New Brunswick's power.

The deal with Crown corporation AECL is expected to extend the life of the plant, allowing its Candu reactor to keep operating for at least 25 years.

Point Lepreau nuclear plant

There will be substantial penalties for AECL if it fails to finish the overhaul by September 2009, according to the terms of the deal.

In announcing the decision, Lord said the project will help solidify Saint John's position as an energy hub for the region. But he also had a warning for taxpayers in his province.

"We acknowledge that New Brunswick is taking on more financial risk than we had originally intended," Lord said in Fredericton. "I think it's important for everyone to realize that."

New Brunswick Premier Bernard Lord. (CP File Photo)

Critics voiced their concern at the news.

Lawyer Rod Gillis, a long-time critic of NB Power, said refurbishment is too risky because it's never before been tried on the kind of Candu reactor operating at Lepreau.

"It has the potential to bring the province to its financial knees if it doesn't work out," Gillis told CBC News.

"It's a gutsy move," he said. "But who's going to be there to pay for the disaster if it does take place?"

Gillis suggested Friday's announcement keeping the plant open is simply politics.

News about the plant also affects neighbouring Prince Edward Island, which buys 95 per cent of its electricity from New Brunswick.

Point Lepreau began operating in 1983 and was set to be closed in 2008.

In going with AECL, the government rejected a competing bid from an Ontario company, Bruce Power. That deal would have seen Bruce Power assume more of the refurbishment risk in return for the right to sell electricity back to N.B. Power.

In the lead-up to this decision, New Brunswick had asked Ottawa to help cover costs of the pricey refurbishment.

But two weeks ago, the federal government refused to do so, saying it would set an expensive precedent given that other Candu reactors in Ontario are also approaching their twilight years.