NB Power sale a terrific deal for the province
Published Friday November 6th, 2009
Letter of the day
To The Editor:
Some people believe that all governments are the same. I disagree.
There are governments which during their term make changes that benefit society for years to come. The Robichaud government was one.
The Graham government has made many important changes. We may agree with some, disagree with others. There is no government that we will agree with all the time. But the most important change made by the Graham government, and the one which will benefit the province the most in the future, is getting rid of NB Power. It is a big change and it required a lot of guts. But it is needed.
There is a lot of opposition to this deal, but nothing compared to the opposition that existed when Robichaud presented the Equal Opportunity program. And today nobody would go back. The same will happen with the sale of NB Power. In time, nobody will ever want to go back.
NB Power has a horrible record. They started going downhill with the construction of the original Lepreau. It was supposed to cost $350 million and the feds were paying $175 million, leaving the net cost to NB Power of $175 million. However, it ended up costing $1.4 billion with a net cost to NB Power of $1.2 billion instead of $175 million. This brought NB Power's debt at the time to approximately $3 billion. Twenty-five years later, with Lepreau was at the end of its useful life, NB Power still owed approximately $3 billion.
There were mistakes made in between. There was Belledune and the Orimulsion fiasco. Now there is the refurbishment of Lepreau, which would bring their debt to $5 billion, 40 per cent of the total debt of the province just for NB Power. Is it any wonder that the population and government have lost confidence in the management of NB Power? Their debt kept going up and the rates kept going up, with no end in sight.
This deal is a saviour for the people of New Brunswick. We get rid of 40 per cent of our debt, or $5 billion, and we get frozen rates for five years. If we do not sell it, we get stuck with the debt and we get rate increases of at least five per cent a year for the next 30 years.
Some people have reservations and that is understandable.
What happens to rates after five years? According to the memorandum of understanding, rates would increase with the rate of inflation which has been between one and three per cent in the last several years. What if inflation is higher? The rate of inflation does not depend on who owns NB Power and we would have to pay increased rates no matter who owns it.
How much is NB Power worth? I'm told that an independent company has evaluated NB Power's assets at $4 billion. From that, substract the debt of $4.75 billion. In fact, NB Power is bankrupt, owing three quarters of a billion more than it is worth.
What about transmission lines? They are worthless to us since we cannot produce electricity at a competitive price for export. However, they are worth money to Hydro-Quebec since they can produce electricity at a competitive price. Hydro-Quebec has 242 hydro dams.
If instead of building Lepreau, on the advice of the management of NB Power, we had built a series of small dams, we would be in a far better position today. But the ego of the senior management of NB Power was to build grandiose projects.
Our plants are at the end of their useful lives, such as Mataquac, or else burn dirty oil. There is very little value left in those.
All in all, this is a terrific deal for all New Brunswick.
Jean-Guy Richard
Notre Dame
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Comments (10)
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A deal this large that affects every taxpaying voter needs to be put to a vote. Have a series of live debates with public questions and let NB decide what they want.
“According to the memorandum of understanding, rates would increase with the rate of inflation which has been between one and three per cent in the last several years. --Unless Hydro-Quebec goes to the board and says we need to increase more than the ROI because of this..or that…and we see 5% or more every year anyway.
This is the same group that made the education cuts and believed that was a good idea as well. It was going to save money too.
The sad part of this deal; PNB will lose in the long term!! Had there been an immediate rate reducton to ALL NBers including a 'freeze' I might have been swayed-maybe!!
Had PNB leased the system to HQ to manage for a few years (40-50) until NBP got squared away, all the while receiving a fair value for our transmitting capabilities, I might have been okay with that!
However presumptuious-Shawn errored in believing NBers would agree to such a 'fire-sale'!! Really there is noting in it for most NBers other than 'heritage industury'.
Why did Shawn just renew CEO Hay's contract when he had been secretly negotiating to give NBP away? Hay's management team is one of the main reason's NBP is in trouble. Even Management's "guaranteed' bonus pale in comparison but still a total waste vs their performance.
To Allen H, Lincoln. The logic of your argument is astounding.
"NB Power has a horrible record." NB Powers record is directly related to the interference and awful decision making by the politicians in power at the time. The head on NB Power didn't decide to build Lepreau, it was the Premier at the time. The same is true for Coulson Cove and Belledune. Politically motivated decisions that are coming back to haunt us.
The sale of NB Power will come back to haunt us to.
We want a vote on this deal!
Strange the end of the articles name is cut off.
It should read "NB Power sale a terrific deal for the province if your last name is Irving."
To you or I the debt is humungous, actually most of us can only shudder with numbers in that stratosphere!!
NBPower is not being 'foreclosed upon' by the actual creditors; NBPower still has a good credit rating in the eyes of investors (at least the Public has seen nothing that would indicate otherwise)! So the 'debt ratio' (between assets and actual debt) must be very acceptable in terms of finances!!
Day-to-day debt is not being serviced by the PNB; taxpayers are not paying from the Provincial Treasury. NBPower is a corporation responsible for its own debts directly. That is why PNB years ago changed the 'set-up' of NBP to keep the debt directly off the governments books. Could this debt come back to haunt taxpayers directly, possibly but it's legal question!!
http://www.cbc.ca/canada/new-brunswick/story/2009/11/05/nb-nbpower-industry-figures.html
This is a very interesting developing by PNB's Auditor General; further food for thought. Shocking that Minister Keir questioned the figures, from his office, when presented to him only to agree the following day these numbers were indeed correct!!
Gawd, this proposed sale gets better-and-better as each day stretches out!!
I would like to say Graham will be out of a job next election, but we all know he will more than likley be sitting on Irvings board of directors somewhere. From the forest to the power, he has sold NB out to please them.