27 February 2009

Use power profits for region: Pike

Former Abitibi public relations executive Roger Pike is suggesting the provincial government create a fund using the money generated by the hydroelectric assets seized by government in December. There’s a front page story accompanying Pike’s opinion piece in the Friday Telegram.

The money would be used to promote further economic development in central Newfoundland.  Pike believes the annual revenues generated by the assets could be as much as $35 million annually. After borrowing and other costs are considered, the net profit would be $15 million.

Pike also suggests that the provincial government will be entering a partnership with other operators at Star Lake and in a project on the Exploits even though the expropriation bill in December seized all assets and cancelled all rights held by any companies involved.

With Nalcor Energy now taking 50 per cent ownership positions (through expropriation) in Star Lake and the Exploits River Hydro Partnership (previously held by Abitibi) the profit from these two projects would be an enduring benefit to the province, and under the existing agreements the province would be the sole owner of these projects in 2022-2033 respectively, thus doubling their benefit.

The benefit from the 54 megawatts directly associated with the manufacturing of newsprint should be set aside to now provide the economic stimulus for our region.

Merely setting aside the energy from the 54 megawatts to attract a big industrial customer is not wise for one principal reason. An incentive based on energy alone is simply too restrictive in scope. Remember, AbitibiBowater had an energy subsidy but left.

The benefit from the 54 megawatts must be contained in a vehicle that stimulates our region. From what I understand, the energy produced by the 54 megawatts should be worth at least 7.5 cents per kilowatt/hour (KWH) to the island electrical system. At 7.5 cents, the annual revenues would amount to approximately $35 million. This is a fair chunk of change (a conservative estimate) being generated out of our small community.

The Telegram story rightly notes the controversy in central Newfoundland over the power assets and government’s plans. Bond Papers readers are already familiar with that.

One sign of the mounting public concern is a new website – municipalmatters.ca – that gives an online forum for people in central Newfoundland to discuss economic and other issues affecting the region.