NALCOR, the provincial government’s energy corporation, is paying a loan on behalf of the Exploits Partnership, one of the entities affected by the expropriation fiasco in December 2008.
In its 2010 first quarter financial statements (2010 Q1) released on Friday, Fortis, one of the partners in Exploits River Hydro Partnership, said that NALCOR is making the “scheduled repayments” under the terms of the loan.
As of March 31, 2010, $59 million remained outstanding on the loan. The statement reads in part:
As the hydroelectric assets and water rights of the Exploits Partnership had been provided as security for the Exploits Partnership term loan, the expropriation of such assets and rights by the Government of
Newfoundland and Labrador constituted an event of default under the loan. The term loan is without recourse to Fortis and was approximately $59 million as at March 31, 2010 (December 31, 2009 - $59 million). The lenders of the term loan have not demanded accelerated repayment. The scheduled repayments
under the term loan are being made by Nalcor, a Crown corporation, acting as agent for the Government of Newfoundland and Labrador with respect to the expropriation matters. [Emphasis added]
Newfoundland and Labrador-based Fortis noted in 2009 first quarter financial statements that the unidentified lender had not sought “accelerated repayment” following government’s expropriation. The Exploits Partnership (51% Fortis/49% Abitibi) made the scheduled term loan payment in 2009.
The expropriation bill passed by the House of Assembly in December 2008 seized all the generating assets and transmission assets of the partnership and cancelled all leases and contracts related to it. The assets were used to secure the loan.
Under a contract with Newfoundland and Labrador Hydro, the Exploits partnership sold surplus power not needed for the Grand Falls mill to Hydro for sale to its other commercial and residential clients. The 30 year power purchase agreement would have expired in 2033.
There is no indication in the 2010 Q1 statement that NALCOR and Exploits Partnership reached an agreement on all issues related to the expropriation.
The loss of income from the the Exploits Partnership as well as the expiration of a water rights contract in Ontario on another project combined to reduce gross revenue for Fortis Generation 73% from $19 million in 2008 Q1 to $5.0 million in 2010 Q1. Fortis Generation is the subsidiary through which Fortis partnered in the Exploits project with Abitibi.
Contacted by Bond Papers in early 2009 to clear up confusion created by comments by the Premier and the text of the expropriation bill on the Fortis aspects of the expropriation, a spokesperson for the province’s natural resources department refused any comment on the process as there was a process in place to discuss the expropriation and any compensation.
In answer to questions in the House of Assembly last month about negotiations with Fortis and ENEL - another company affected by the expropriation - natural resources minister Kathy Dunderdale said only that talks were continuing and that “a number of arrangements had been made” in the meantime.
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