Here's to the crazy ones, the misfits, the rebels, the troublemakers, the
round pegs in the square holes... the ones who see things differently -- they're
not fond of rules... You can quote them, disagree with them, glorify or vilify
them, but the only thing you can't do is ignore them because they change
things... they push the human race forward, and while some may see them as the
crazy ones, we see genius, because the ones who are crazy enough to think that
they can change the world, are the ones who do.

Steve Jobs
US computer engineer & industrialist (1955 - 2011)

Sunday, November 21, 2010

Quebec INC vs Newfoundland and Labrador

Like their ancestors before them, the bedrock of Quebec's modern economic prowess pushes forward into the world to carve out their place. The push to overcome harsh environments, survival, linguistic challenges and a never ending need to prove themselves to the world may sound like the New France of old, but it equally reflects the corporate culture of modern Quebec. The need to master and conquer all before them. That leads us to today.
Power Corporation of Canada, Hydro Quebec, Casse de Depot et placement du Quebec, GDS Suez, Areva, Transcontinental Media, and so on. Massive corporations, operating on an international basis, and controlling more and more economies - strategically. They are also all French. They also all share members of their boards and often have a part ownership of each other with the exception of Hydro Quebec and the Casse which are controlled by the government of Quebec - although the government of Quebec is highly "influenced" in it's operation and makeup by these corporations. Total Oil of France, partially owned by Power Corp of Canada, will likely be a player in Quebec's offshore future - if it has one. It is already active in the Alberta oil sands - recently taking over a smaller Calgary competitor for a large ownership of a tar sands project. The Casse has taken over Hydro Quebec's Gas Metro, now Valener, freeing it of the costs of a gas industry in decline, and taxes. SNC Lavelin, another Quebec multi-national followed suit and sold it's shares this month to the Casse. Hydro Quebec, through it's subsidiary Hydro Quebec International, has bought controlling interest in distribution lines and power generating facilities in the US, Australia, South America, Panama, and China. Most recently, the day after Premier Danny Williams announced the Lower Churchill project, North East Utilities, the largest utility in New England (in the process of getting bigger by taking over NSTAR -Massachusetts largest utility) made formal application to build a massive transmission line from Windsor Quebec to New Hampshire. A message of sorts.
In the bigger picture, GDF Suez (France) is in the process of taking over International Power (Britain) with the assistance of an American corporation's 7% proxy vote. The new corporation will be easily the world's largest utility. Unfortunately, it will also be in a strategic partnership with Hydro Quebec - making an already monolithic Crown corporation even more monopolistic. The nimble, and seemingly well coordinated Quebec corporate class has shown itself to be world class players, and that must be recognized.
That brings us to the Lower Churchill deal. Newfoundland and Labrador, as represented by Premier Danny Williams, is bucking this trend. One could better describe it as a tidal wave. A brave stand by a brave man. A bravery that most people of the province don't fully understand, but should. Even though Danny is a wealthy man, his funds are coffee money for these other people. That is why Quebec scoffs at the government here and it's deal. However, that scoffing is superficial. A people that want to be the DeBeers of energy do not want any players in the market other than themselves. They cannot set the rate the market will pay if another is under selling them. If they cannot set the market then they cannot predict the serviceability of their debts. If their revenues decline, then their debt serviceability declines and their bonds get downgraded. If their bonds get degraded their debt servicing costs go up. Then the cycle keeps repeating itself to the point where the massive monolith collapses. Make no mistake, this is their main concern.
The problem for Newfoundland and Labrador, as illustrated by Hydro Quebec's alliances, is that it does not have a large enough strategic partner in this sector. It is not tied into the corporate circle if you will. The large oil corporations are willing to come in and develop the oil/gas resources, but have not been involved in developing the province's hydro power or it's distribution. Emera, Newfoundland and Labrador's strategic partner, is a small and publicly traded company. As such it would be an easy target for any one of Quebec's alliance to take over - hostile or otherwise. It would seem a logical move on Quebec's part to have any smaller power distributor, which agrees to do business with NALCOR, taken over by another larger friend. While Newfoundland and Labrador may have the resource, Quebec may have the friends to stop it's distribution rendering it useless. Do not be surprised to see a takeover attempt of Emera in the coming year or, even better for Quebec, after the deal is finalized. This is one of the reasons Hydro Quebec normally takes a controlling interest in it's distributors.
What Newfoundland and Labrador desperately needs is a very large friend in the jungle. An international corporation large enough to withstand the other alliance, and with access to the US market. An access that can be defended and guaranteed. Perhaps some of the oil corporations with large investments in the offshore might be a logical choice. After all, if you can learn one thing from studying Quebec's economic development, alliances are based on intertwined interests based in the province and projecting outwards.
Until then, I fear, Newfoundland and Labrador's government will be subjected to a covert, if not overt, campaign by those that wish to see Quebec's monopoly stay in place. By way of example, The Telegram has been assaulting the Premier, without balance in it's editorials. The Telegram is owned by the previously mentioned Transcontinental Media - Montreal. The Liberal Party of Newfoundland has recently signed on some major Conservative talent for it's public relations. The former Liberal premier of Newfoundland and Labrador, Roger Grimes, has suddenly come out of the woodwork to attack  Premier Williams. The aforementioned Power Corporation of Canada is publicly known to be the source of primary influence within the Liberal Party in Canada. Although, Jacques Parizeau's brother, and Bob Rae's brother have sat on it's board of directors. As does the Conservative's Don Mazinkowsky.
Then of course there is the CBC, with it's head office in Montreal, that has been at the forefront of attacks on the William's government on many fronts as of late.
In the end, Newfoundland and Labrador deserves to control and exploit it's resources without interference. The people here have suffered through the economic enslavement of the Upper Churchill contract for too long. If Quebec wants peace, and to carry on, perhaps it should recognize the imperialist approach taken toward Newfoundland and Labrador was a historical misjudgement. Perhaps they should re-open the Upper Churchill Falls contract and renegotiate the rate to at least a 50% share of the profits on that power. Such a gesture would go along way with the people here - and likely the Premier. After all, hydro is just one source of energy. This battle will rage through all parts of Newfoundland and Labrador's economy to the unnecessary detriment of many of Quebec's companies and interests. Perhaps Quebec should go to it's own perceived grievances and realize that we should "do unto others as you would have them done unto you."

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