29 January 2007

Lower Churchill: old news makes news

CBC Radio is quoting a mainland analyst that exporting Lower Churchill power will likely mean an upgrade (expansion) of the electrical power grid in Quebec.

Nothing new in that.

As Bond Papers noted in August 2006, the joint Ontario/Quebec proposal to work with Newfoundland and Labrador on the Lower Churchill included upgrading the transmission capacity across Quebec as well as upgrading the inter-provincial connection. The latter cost, in particular, was to be borne by Ontario and Quebec.

As noted by Bond at the time, all those costs - known and predictable at the time the Premier decided to "go-it-alone" - will now be borne by Newfoundland and Labrador Hydro.

The other option - the $2.0 billion plus underwater route - is apparently also under consideration, as CBC reports in a comment from provincial natural resources minister Kathy Dunderdale.

About the only way to deal with this issue and thereby allow the Lower Churchill power to get to market at competitive prices is to get the federal government to underwrite the costs somehow. In October 2006, Bond Papers pointed out that the federal government wasn't interested in loan guarantees for the Lower Churchill, despite what the Premier claims. Rather, the federal interest- if they have any at all - would be in taking an equity stake.


Kyle G. Olsen said...

Since they had a fully viable deal set up, and rejected it, I think it is unlikely for the federal government to want to take any stake in the project.

To my knowledge it would be the first federal government equity stake in a power project ever. If the project is to make money, and not supply its own citizens I am not surprised by the lack of federal money as a grant, even if it would be unusual for a utility project to begin with.

Dunderdale seems like she should be shuffled out of cabinet. (from an outsiders perspective anyways)

Edward G. Hollett said...

Hibernia: 8.5% equity position, acquired in 1992.

The feds established a policy some time ago that they won't provide loan guarantees but will take equity. That way there is some value for money and the accounting is better. (Policy requires money be set aside to backstop the guarantee, thereby tying up billions).

It's happened before.

The problem in this case is the idea of the feds holding an equity position (ownership stake) in a project Danny insists must be "go-it-alone for the province.