09 May 2006

Ready for a better tomorrow

If the past is used by politicians like Danny Williams as a demon to frighten small children and the politically naive, the future is the great hope that will deliver the answer to all our prayers.

In the political religion of Newfoundland and Labrador, Tomorrow fills the role of Heaven: it is the place when all will be milk and honey and the travails of living in this place will be gone. Salvation cannot be achieved today - in this life - but we can be prepared for the time when we are taken up to Heaven and our great reward.

Yesterday's announcement on the Lower Churchill fits the bill perfectly.

Danny Williams and natural resources minister Ed Byrne invariably trotted out the spectre of the Upper Churchill "give-away" - the hardships of this life - as a contrast with the promise of riches and peace Tomorrow will bring now that Newfoundland and Labrador has decided to "go-it-alone" on an energy megaproject that would effectively double our provincial debt.

Other premiers have held out the Lower Churchill nirvana to distract from their short-term political hells. Frank Moores started the pattern. It was taken up more recently by Brian Tobin and Roger Grimes and always set against the pledge that what will be done tomorrow will not be as bad as what happened yesterday.

When Danny Williams announced the start of the Lower Churchill development process in early 2005, he predicted that right now would be Phase Three. This would be the time when the short-list of development options would be turned into detailed negotiations that would lead to Phase Four, more negotiations and finally Phase Five, that is the signing of a development deal and the start of work. Option 1 of the proposal submitted by Ontario, Quebec Hydro and SNC Lavelin followed that timescale. It anticipated construction would start in 2006 or 2007 with first power flowing to market by 2011.

But what Danny Williams announced yesterday was really the resetting of the clock to the beginning again. Now we will not see a decision about the viability of the chosen option until 2009 and first power will be achieved in 2015 at the earliest. Tomorrow is a day that apparently is hard to reach.

What is most remarkable about the most recent Lower Churchill promise is that the provincial government clearly does not have have a business case or a business plan to carry it forward. Most of the preparatory work on the Lower Churchill is done. Some work needs to be done to bring those older plans up to date, but what needs to be sorted is the financing. There must be a power purchase agreement, the consequent decision on delivery methods and then the negotiation of the considerable borrowing - likely double or more than double the provincial accrual debt load - that will let digging start on the first hole.

But there is no business plan to move this project forward. The go-it-alone option was inserted into the overall process in August 2005, at the last minute and apparently by the Premier himself. In the meantime, it has never been discussed publicly so that we can see the evident advantages, assess the risks and see why doing the Lower Churchill the Danny Williams way, in which the provincial government assumes the lion's share of the risk, is actually better - demonstrably better - than any other approach.

If there was a provincial government business plan, Williams and his minister would be speaking to it. They would be able to map out exactly the basis on which they have made their decisions. Yesterday's announcement would have been about getting into the heart of the challenge of developing the Lower Churchill's considerable hydro potential. Danny Williams, the self-described successful businessman would be talking like a businessman; that is, he'd about the "metrics" by which risk and reward are assessed in the real world where results and money count.

Instead, we got the usual rhetoric of Danny Williams the politician: masters of our domain, of the virtues of "going-it-alone", righting the wrongs of the Upper Churchill and how this decision confirms the Premier's previous judgments that the province is not afraid to be self-reliant:
- "...but the big message here is that we are masters of our own destiny, that Newfoundlanders and Labradorians are in control of this project for the benefit of Newfoundlanders and Labradorians."

- "By taking the lead we are in full control of the project, unlike the circumstance with the last government; that project, basically, was going to be controlled by Quebec..."
Hydro president and chief executive officer Ed Martin talked about the next steps for what they are: Hydro will take three years - 36 months! - to develop the go-it-alone option that we have already been told is better. Something we have not seen yet is better? How can anyone make such a judgment?

The reality of Newfoundland politics is typically very different from the promises of its clergy. The Lower Churchill announcement is no different. Newfoundland and Labrador has always been in total control over development of the Lower Churchill. In the early 1990s, when a deal was close, the provincial government was not prepared to accept a key condition of the project partner, Quebec Hydro. The Wells administration would not accept an extension of the Upper Churchill deal as a condition of signing a Lower Churchill agreement.

More importantly, though in every single discussion - bar none - Quebec Hydro was seen as a partner in the development, bringing its deep financial pockets and expertise in hydro megaprojects. This is exactly the same position Danny Williams mapped yesterday. Newfoundland and Labrador is seeking partners for its supposedly go-it-alone project:

- The federal government must provide loan guarantees. Danny Williams believes he has those already. Prime Minister Stephen Harper has made no such commitment publicly. Loyola Hearn, Harper's Newfoundland and Labrador representative, made no such commitment.

- Equity partners - that is co-owners of the project - are welcome to join in. Williams needs their deep pockets. Of course, in exchange for risking their capital and their credit, these equity partners will demand a return. Altius talked of a share of gross sales; others will put similar conditions on their investment. That too is identical to every other proposal, even the Upper Churchill contract. The party that puts its cash at risk expects to reap the financial rewards.

So what is different about the Danny Williams Lower Churchill compared to all that has gone before?

Precious little, in the final analysis. The outstanding issues are the same issues facing every other Lower Churchill negotiation. The financial issues are still to be settled. The project hinges on firm markets, guaranteed sales and the ability to raise huge amounts of capital. It depends on a balancing of risk and reward for all those involved. This is a project that we simply will not be doing on our own, no matter what Danny Williams claims. If it happens at all, there will be many partners. The rewards for Newfoundland and Labrador will obviously be very different from the Upper Churchill contract but they will not be - they can likely never be - as phantasmagorically wonderful as the vision Danny William laid before us.

And that, most of all though, is the key to understanding Danny Williams latest version of the Lower Churchill. At the very least, and like Brian Tobin before him, Williams has attacked past deals of any kind so vigorously and relentlessly that only a perfect Lower Churchill deal could survive political attack. Perfection is impossible in this life and so Williams' Lower Churchill is a deal he can never sign.

The function of the Lower Churchill is to serve as a distraction from the very real and very difficult problems in front of government. It is supposed to take our minds - and our media coverage - off the hardships of this life and fix them instead on the promise of our reward manana.

In the meantime, as preacher Tobin used to say, we must be ready for that better tomorrow when the rapture comes.