Newspaper article The Christian Science Monitor

Ontario Hydro's Loss Puts New Pressure on Utility

Newspaper article The Christian Science Monitor

Ontario Hydro's Loss Puts New Pressure on Utility

Article excerpt

CANADA'S largest electric utility is in hot water.

Ontario Hydro, which serves 3.7 million customers in Canada's largest province, is in the midst of a radical restructuring that could make or break the company, many observers and critics agree.

"Ontario Hydro by its own admission is in critical condition," says Al Gleeson, assistant general manager at London Hydro, a utility in London, Ontario. "They're in what I would call survival mode."

Last week the company announced that it was facing an estimated $1.6 billion {Canadian; US$1.25 billion} loss for 1993. Many already knew, based on March estimates, that the company would be hit with a $1.3 billion "one-time" restructuring charge to pay severance to 4,500 employees and pay off uranium contracts. Officials say the move will take the company a long way toward a sound fiscal footing.

"Anytime you're doing restructuring there are some pretty substantial costs as you get your business ready for future challenges," says Terry Young, a Hydro spokesman. "It's not unforeseen, not unexpected."

But analysts were shocked last week when the June revision added $100 million to the restructuring charge and predicted a $200-million operating loss compared with previous estimates of a $261-million operating profit. It would be the first time the company has lost money on its operations since 1975.

The company was early held out as a model for hydropower generation and gained renown for "clean, cheap" hydropower spun from its vast network of hydroelectric dams. That reputation, however, was muted in recent decades as new supplies of cheap hydropower were exhausted. The utility first moved into coal, then poured billions into nuclear stations. Meanwhile, debt rose to dangerous levels - about $36.1 billion at present.

As a result of high debt service and continued costs from the nuclear program, company operating costs have risen and electric rates have shot up 33 percent in the last three years, analysts says. Rising rates, negative weather patterns, and an economic slump have combined to cut power demand and company revenues.

STRUGGLING to right itself, the company last year brought in a new chairman, Maurice Strong, who promised rate payers that 1994 rates would remain at 1993 levels, despite the restructuring. …

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