New Brunswick

Lepreau refurbishment non-capital costs to hit $989M

The Point Lepreau nuclear generating station refurbishment's non-capital expenses, which are being deferred until the plant starts operating again, are expected to reach $989 million by the end of March, according to NB Power officials.

In addition to $1.3B it cost to rebuild the reactor

The refurbished Point Lepreau nuclear generating station is expected to be running at full power by the end of September. (CBC)

The Point Lepreau nuclear generating station refurbishment's non-capital expenses, which are being deferred until the plant starts operating again, are expected to reach $989 million by the end of March, according to NB Power officials.

That's in addition to the $1.3 billion it cost to rebuild the reactor, which means the delayed project is now about $1 billion over budget.

The newly renovated plant is expected to be fully operational by Oct. 1, three years behind schedule, and last for 27 years, evidence filed with the Energy and Utilities Board (EUB) on Tuesday shows.

The EUB had ordered NB Power to give a full accounting Tuesday of how much money has piled up in the Lepreau deferral account during the past four-and-a-half years.

In December, the EUB will be holding hearings to untangle all of the financing issues around Lepreau, including the total cost of the refurbishment and how much NB Power will have to charge its customers to retire the plant's debt.

The deferral account, which was set up in 2008 for non-capital costs associated with the refurbishment, such as replacement power, is money that has already been spent by NB Power, but has not yet been accounted for on its income statements, thereby allowing the utility to record huge profits over the past couple of years, despite the cost overruns with the delayed project.

Interest alone on the deferral account is about $105 million and is accumulating at $123,000 a day, the NB Power documents show.

Still, because the job was debt financed and interest rates are at record lows, Acting Energy Minister Craig Leonard says the overruns are manageable.

"While the extra costs are certainly not something that we’re too keen on, it still shows that the decision to go ahead with Lepreau — today, when you look at a 650- megawatt base load plant of clean non-emitting energy that we’re getting in the range of $2.4 billion, there simply isn’t another option out there at that low of a cost," he said.

"So over the long term, it’s still  a very good facility for New Brunswick and will certainly help us to remain competitive."

The refurbishment ran into a series of problems that caused it to pass its original 2009 restart date, including the installation of the reactor's calandria tubes, which initially failed air tightness tests.

Attempts to recover costs

The New Brunswick government is attempting to get the federal government to cover the cost overruns.

Atomic Energy of Canada Ltd. (AECL), which handled the refurbishment, was a Crown corporation when the problems with the project started. AECL was sold last year to SNC-Lavalin.

Prime Minister Stephen Harper has said repeatedly the federal government would only cover its contractual obligations.

Earlier this year, NB Power and AECL also started legal action against an insurance company for some of the costs related to the delayed refurbishment. NB Power is seeking $320 million in damages and AECL is after $204 million in damages.

NB Power and AECL, which teamed up on the refurbishment project in 2005, allege their insurance policy with Lloyd's of London covers the reactor tubes that were damaged during the rebuild.

All 380 new tubes were inserted in the reactor between December 2009 and April 2010. But dozens of the tubes failed air tightness tests after being fused with special inserts designed to hold them in place.

The tubes, which are about six metres long and 13 centimetres in diameter, contain the reactor's fuel channels and fuel bundles.

NB Power and AECL also claim that the insurer should pay for hundreds of millions of dollars in extra costs caused by delays. The insurance company denied a previous claim by NB Power and AECL last year.

Point Lepreau, Atlantic Canada's only nuclear reactor, is still not fully producing power.

The Canadian Nuclear Safety Commission announced last month that Point Lepreau could increase reactor power above 0.1 per cent of full power.

The utility still requires regulatory approval before upping reactor power above 35 per cent.

Once operating, the refurbished Lepreau is expected to last two years longer than it did when it was new — 27 years, up from 25.

The Point Lepreau project was the first time AECL had refurbished a Candu-6 reactor.