Brascan Power eyes expansion in Ontario

Focused on hydro and wind projects
Future of OPG remains wild card

Toronto Star - May 20, 2004
by John Spears

Fresh from swallowing a clutch of generating stations in New York, Brascan Power Corp. has its eye on further expansion in Ontario, possibly including deals involving Ontario Power Generation assets.

In an interview the day after Brascan made a deal to buy 72 New York generating stations for $1.25 billion (Canadian), Harry Goldgut, chief executive officer of Brascan Power, said the company is keeping a close eye on hydro-electric and wind-powered generation opportunities in Ontario.

Ontario remains Brascan Power's biggest market: In 2003, the company's Ontario hydro generators produced almost as much power as the company's combined generating facilities in Quebec, British Columbia and the United States.

In a return to the company's roots as Brazilian Traction Light and Power Co. Ltd. — a company founded in 1899 when Canadian investors turned a mule-drawn tram company in Sao Paolo into a transit and energy-utility company — Brascan is developing three hydroelectric sites in Brazil.

Closer to home, it is pursuing wind generation in Ontario, with a 51 per cent stake in Superior Wind Energy, which wants to develop a site near Collingwood.

Brascan Power has done "a significant amount of work" in mapping out other wind-power sites in the province, Goldgut said.

But hydroelectric power remains the core of the Ontario operations, and Brascan is looking for more. A potential source is Ontario Power Generation Inc., which sold Brascan its generating facilities on the Mississagi River in 2002.

"If there were opportunities that came available through OPG's future restructuring or planning, we'd be very interested in pursuing those as well," Goldgut said.

Brascan Power doesn't expect Niagara Falls to come up for sale, he said. But "there's a lot of non-major hydro plants which typically could use capital to reinvest in," he noted.

The Ontario government, which owns OPG, is pondering the future of the company.

Private investors have been reluctant to build generators when they have to compete with OPG, which generates 70 per cent of the province's power.

"Clearly, its market dominance needs to be dealt with," Goldgut said. Private companies could work with OPG as a "partner, joint venturer, (or) co-participant" if there's a reluctance to sell outright.

The previous Tory government had pledged to cut OPG's market share to 35 per cent by 2012. Asked if that's still an appropriate target, he replied: "Those are all good numbers."

OPG isn't the only possible source of growth.

"There's still megawatts and energy that can be generated out of facilities that exist today in this province, just through enhancing them, increasing the flexibility of dealing with your water-management regime," he said.

But the province needs to clarify the rules of its new market, Goldgut said, because private power companies need to raise some of their capital from lenders.

"The private sector should take risks in making this investment, and we're prepared to do that in making these investments," he said. "It's striking that balance where a developer has at least a floor of revenue that he can expect to underpin a piece of financing that's essential to get these projects built."

The province still needs to clarify the role and powers of the new Ontario Power Authority, Goldgut added. The authority will forecast power demand and match it with supply — signing long-term contracts with generators if appropriate. Legislation is expected next month.

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