The Canada Growth Fund (CGF) and Building Ontario Fund (BOF) have agreed an equity commitment to finance the small modular reactor (SMR) project under construction at Ontario Power Generation’s (OPG’s) Darlington New Nuclear Project (DNNP). CGF and BOF have committed to invest up to CAD2bn ($1.4bn) and CAD1bn, respectively. OPG remains the majority owner and operator of DNNP, with CGF and BOF acquiring minority stakes of up to 15% and 7.5% respectively.
DNNP will see the construction of four grid-scale commercial SMRs that are expected to deliver up to 1,200 MWe of reliable, affordable, and low-carbon electricity, enough to power 1.2m homes. OPG announced its selection of GE Vernova Hitachi Nuclear Energy’s (GVH’s) BWRX-300 reactor for deployment at DNNP in December 2021. The BWRX-300 is a 300 MWe water-cooled, natural circulation SMR. OPG applied for a licence to construct first reactor in October 2022.
Early site preparation work at Darlington has been completed and in April the Canadian Nuclear Safety Commission granted OPG a licence to construct the first unit. In May, Ontario and OPG approved construction of BWRX-300 SMR, clearing the way for construction to begin.
Both CGF and BOF are offering innovative financial arrangements to temporarily share certain risks that currently limit private sector interest. As a result, this transaction is paving the way to spur private sector and Indigenous investment in the project.
“The Darlington New Nuclear Project will help meet growing demand for low-carbon energy, and provide significant economic benefits for Ontarians and Canadians, creating jobs and securing contracts across the province’s robust nuclear supply chain,” said OPG President & CEO Nicolle Butcher. “Other Canadian provinces and global jurisdictions are seeking our expertise to deploy SMRs as a solution for their energy security needs, making this project a platform for further growth.”
CGF’s and BOF’s capital will be made available to OPG, subject to the satisfaction of conditions, in two tranches: initial capital funding for units 1&2; and additional capital to fund units 2-4, once the project meets certain milestones.
OPG expects to complete construction of SMR 1 by the end of the decade and connect it to the grid by the end of 2030. Construction on units 2-4 is expected to be completed in the mid-2030s.
As a first-of-its-kind project, DNNP has a higher risk profile that limits access to traditional financing. In line with their mandates, CGF and BOF are investing at a stage where the project is exposed to certain construction and technological risks. Their investments aim to de-risk DNNP and advance it to a point where private sector participation can be efficiently catalysed.
According to the Conference Board of Canada, DNNP will create up to 18,000 Canadian jobs annually through the construction phase, while adding CAD38.5bn to Canada’s GDP over the next 65 years. The current estimate to construct four SMR units at DNNP is CAD20.9bn, including interest, escalation, and contingency.
About 80% of project spending will go to some 80-plus companies across Ontario and construction of the SMR fleet is expected to drive CAD500m a year into the province’s supply chain. To ensure a successful buildout, OPG will be leveraging more than 7,000 lessons learned from its Darlington Refurbishment project, which remains on track to be completed in early 2026. The company will also incorporate lessons learned from the construction of the first SMR for the rest of the fleet.
Canada Growth Fund (CGF) is a CAD15bn arm’s-length investment vehicle designed to attract private capital to build Canada’s clean economy. Building Ontario Fund (BOF) is a board-governed Crown agency with a mandate to catalyse investment in revenue-generating infrastructure projects across Ontario. It is backed by CAD8bn in funding from the province.
Blake, Cassels & Graydon LLP acted as legal advisors to CGF for the investment, while McCarthy Tétrault LLP acted as legal advisors to BOF and Torys LLP acted as legal advisor to OPG. RBC Capital Markets acted as financial advisor to CGF and BOF, while CIBC World Markets acted as financial advisor to OPG.
OPG noted that, since getting the go-ahead from the Province of Ontario in May to begin building, the project team has achieved several major milestones. This included the arrival in July of all components for a massive tunnel boring machine named Harriet Brooks after Canada’s first female nuclear physicist.
In addition, OPG and its partners have been fabricating the structural components of the reactor building. Construction of the on-site pre-assembly building is now complete and ready for use as well as the fabrication building, where final assembly of modular building components will take place, and foundation work for the radiation waste building and control and service buildings.
“OPG and Ontario are now building the foundation for not just Canada’s first SMR, but also future SMRs in this country and beyond,” said Dragan Popovic, OPG’s Senior Vice-President of SMR Execution. “We are doing this with the help of skilled Ontarians and local communities. Our team, our people, and our partners are now building the capacity and the model for new reliable, low-carbon nuclear power for our future.”
