21 January 2006

Williams to double provincial debt?

The Lower Churchill project will nearly double Newfoundland and Labrador's already crushing provincial debt, if the province opts for the go-it-alone option of constructing the hydro mega-project.

As CBC news reported yesterday, the estimated cost of the project has risen from government's initial projection of $3.5 billion in 2005 to $9.0 billion. The current provincial accrual debt is $12.0 billion, on an economy of slightly more than $20.0 billion. Both Premier Danny Williams and his finance minister have described the existing provincial debt in dire terms.

If the Government of Newfoundland and Labrador were to develop the Lower Churchill on its own, the entire debt for the project would count against the provincial coffers using the accrual method currently in use for budgeting purposes. The project should be self-financing through a long-term power purchase agreement, however, the provincial government has revealed no details of its efforts to find possible buyers for the power and financiers for the project overall.

Danny Williams announced yesterday that Newfoundland and Labrador Hydro is asking Quebec to estimate the cost of wheeling power from Labrador across HydroQuebec transmission lines, through Quebec to markets in Ontario or New York.

Wheeling in this case would likely involve building new transmission towers and lines since the Quebec grid can't handle extra power from the as-yet unbuilt Lower Churchill. The costs of those added lines and towers would be borne largely by Newfoundland and Labrador in a go-it-alone option.

A proposal to build the Lower Churchill project and upgrade transmission systems in Quebec and between Quebec and Ontario was substituted jointly by Ontario and Quebec last year.

While it wasn't included in the original official short-list, Premier Danny Williams publicly announced the option of having Newfoundland and Labrador build the project entirely on its own. That seems to be his preferred, if not only option, based on yesterday's announcement.

Favourite quote from yesterday's newser:
"It's very strategic," Williams told reporters Friday, adding the application indicates Newfoundland and Labrador is prepared to develop the Lower Churchill on its own.
Williams takes a trip to the head and he'd call it strategic. "Strategy" and "strategic" are his favourite buzz words. They are typically overused or, as in this case, misused. Strategy doesn't have a variable intensity or a quantity. Something is either strategic or it isn't. It can't be less strategic, or very strategic.

Second favourite quote:
Williams added that the provincial government is using a "market approach" to avoid the pitfalls of the Upper Churchill contract with Hydro-Quebec. In the past, Newfoundland and Labrador has tried but always failed to launch the project as a partnership with Quebec.
As with any project of this type, the Lower Churchill can't be built without having a market.

The Upper Churchill market was Quebec. Efforts to find other markets failed due to cost problems and technical problems that couldn't be overcome. There were few companies capable of taking on the engineering work for such a massive enterprise.

Williams' comments on this, much like comments by previous premiers, capitalize on the mythology surrounding the Upper Churchill contract rather than on the facts then or now.