17. Finance lease obligation
BPLP holds a long-term lease with OPG to operate the Bruce nuclear power facility. The initial term of the lease expires in 2018, with options to extend the lease for up to an additional 25 years. The interest rate associated with the lease is 7.5%. The future minimum lease payments are as follows:
| Future minimum lease payments |
Interest | Present value of minimum lease payments |
|
|---|---|---|---|
| Less than one year | $25,596 | $9,259 | $16,337 |
| Between one and five years | 109,336 | 22,594 | 86,742 |
| More than five years | 29,072 | 1,138 | 27,934 |
| Total | $164,004 | $32,991 | $131,013 |
| Future minimum lease payments |
Interest | Present value of minimum lease payments |
|
|---|---|---|---|
| Less than one year | $25,280 | $10,428 | $14,852 |
| Between one and five years | 106,492 | 28,728 | 77,764 |
| More than five years | 57,512 | 4,294 | 53,218 |
| Total | $189,284 | $43,450 | $145,834 |
Included in finance costs is $10,428,000 related to the finance lease obligation for the year ended December 31, 2012 (2011 - $11,376,000).
The lease agreement includes supplemental payments which are classified as contingent rents. Annual supplemental rents of $31,000,000 (subject to CPI) per operating reactor are payable by BPLP to OPG. Should the hourly annual average price of electricity in Ontario fall below $30 per megawatt hour for any calendar year, the supplemental rent reduces to $12,000,000 per operating reactor.
BPLP leases the Bruce A nuclear generating plants and other property, plant and equipment to BALP under a sublease agreement. In accordance with the sublease agreement, BALP will participate in its share of supplemental rent and any subsequent adjustments. There were $35,866,000 in supplemental lease payments to OPG recognized in 2012 (2011 - $58,302,000). Of this amount, $20,698,000 was reimbursed to BPLP from BALP during 2012 (2011 - $19,434,000). The net amounts have been recognized in cost of products and services sold.
In addition, the base rent payments during the renewal periods have been classified as contingent rents. The calculation of the renewal base rent payments is based on the proportion of operational BALP units versus BPLP units, contingent on the extent of use of the respective stations. These base rents will commence in 2019.