29 October 2009

The NB Power/Hydro-Quebec Memorandum of Understanding

The Governments of Quebec and New Brunswick unveiled the deal today that will see Hydro-Quebec buy most of the assets of NB Power.

The full text of the memorandum of understanding is available online.

Key points of the deal (quoted from the official news release):

  • Under the terms of the MOU, Hydro-Québec would acquire most of the assets of NB Power for an amount equivalent to NB Power's debt, $4.75 billion. The utility's debt would thereby be completely eliminated.
  • As a pre-condition to the negotiations, New Brunswick has established a revised rate structure to benefit New Brunswickers. It is estimated by New Brunswick to have a value to ratepayers of about $5 billion. The proposed transaction would have no impact on Hydro-Québec's electricity rates in Quebec.
  • NB Power would continue as a separate, New Brunswick entity, headquartered in Fredericton, and would use the existing name and corporate identity. Hydro-Québec would offer employment to all employees of NB Power at the time of closing, and respect the collective agreements in place.
  • The nuclear generating facility at Point Lepreau (after completion of the plant's refurbishment), the hydro facilities, the peaking power plants and the transmission and distribution assets of NB Power are part of the proposed transaction. Hydro-Québec would not assume any liabilities with respect to the Point Lepreau refurbishment project.
  • Thermal generation facilities at Coleson Cove and Belledune would continue to be owned and operated by the Province of New Brunswick, and would supply electricity to Hydro-Québec under the terms of tolling agreements.

The upside for the New Brunswick provincial government appears to be that it offloads a debt pig while guaranteeing stable rates for residential consumers and lower- and hence more attractive  - rates for industrial consumers.

The one curious part of the MOU is that Hydro-Quebec continues to operate the company as if it were a Crown corporation in that it will pay no taxes of any kind to the provincial government. 

Interestingly, Premier Shawn Graham acknowledged the role played  by his predecessors Frank McKenna and Bernard Lord in laying the ground work for the disposal of NB Power. 

Lord’s successor as Tory party leader has been opposed to the deal since before he knew what it was about.