It is estimated that the Upper Churchill Hydro project has created roughly 22 billion dollars for Hydro Quebec to date. Newfoundland's share is about 1 billion. Not exactly a balanced deal. Let's face it, not even close. What is the real cost of this deal?
If you consider that Newfoundland is 11 billion dollars in debt, and a mere 50% share of the Upper Churchill would have Newfoundland without any debt, then you start to get the idea. The biggest problem with the Upper Churchill is not the damage that it has done so far, which is huge to Newfoundland's development, but where it leaves us for the future. Consider that the Lower Churchill development is estimated to cost 7 billion - without the underwater cable transmission system. Then consider that the province is already 11 billion in debt. Then consider that there are only 500,000 souls in Newfoundland. Then consider that the population is aging faster than almost anywhere else in Canada. Then try not to consider the number of people that are leaving for the rest of Canada. Makes you wonder how Danny Williams copes!
The deal with Quebec has left Newfoundland starved of the revenue it needed to build the province up, and retain, if not grow, it's population. Yes oil has been developed, which has added to the provincial coffers, but likely won't undue by itself the damage of the last 40 years. Hard to get those years back.
Here's the kicker. Frankly, we aren't hearing the truth and the whole truth regarding the Lower Churchill development. The province of Newfoundland will likely not be able to do this project on it's own. Approaching financiers at this time, and in the state of our books, well let's just say we would not be the most attractive investment out there. The international bankers would view Newfoundland much the same as an extremely in debted family seeking a million dollar loan to start a business. Our largest resource is in the clutches of our biggest competitor for the foreseeable future. Oil is a good, but highly volatile resource given its cyclical nature and environmental concerns (the least of not being off shore drilling right now). They would likely say "we see where your going with this ...but, you have too high a debt to income...sorry". We need to prepare ourselves for this reality should we choose to let Hydro Quebec continue with its shabby deal.
Things are starting to look like they did in 1969 when Brinco, out of desperation, signed the deal with Hydro Quebec that sunk the province financially. We now have a Premier who is desperate to industrialize the province, but is stuck without a major backer/customer. The thought actually scares me, but recent media reports seem to imply a flirtateous eye is winking at Hydro Quebec. Surely, and I haven't heard the ice forming below, it would be a cold day in hell before we would do that to the province again.
If we hope to get financing from the international community, or at home in Canada for that matter, the financial fundamentals of the province must be sound. Sound means reducing debt, rationalizing spending, a Newfoundland-first procurement policy, but just as importantly increasing revenues. Not by way of taxing whats left of the economy to death, but recapturing what is otherwise bleeding away to push up Quebec's economy. This isn't being anti-Canadian. This is becoming masters in our own house. Not as separatists or radicals, but in self-defence of the Newfoundland way of life.
Simply put, we need to take back the Upper Churchill - period. Without it we won't get a cent. If we are to be a Hydro Power in the international sense, then we need to utilize what we have. Hydro Quebec, by whatever means, must be convinced to rip up the Power Contract and renegotiate the power of the Upper Churchill. No other province, and I've lived in alot of them, would tolerate the raping that Newfoundland is recieving at the hands of Hydro Quebec. Nor should they. Even Alberta unilaterally changed its oil royalty program with the big boys, although I believe they have been convinced to change that policy. There is, however, a big difference between Hydro Quebec and say Esso. The bottom line is that if Newfoundland must throw the switch on the Upper Churchill, and deny Hydro Quebec any power from that point, then so be it. To carry on with the Power Contract of 1969 is economic suicide for Newfoundland, without question, the results of which will be seen when Newfoundland tries to raise the money to develop the Lower Churchill. All that evil needs to grow is for good men/women to turn a blind eye.
Showing posts with label Brinco. Show all posts
Showing posts with label Brinco. Show all posts
Saturday, May 29, 2010
Monday, May 24, 2010
Quebec - It's time for a new deal for Newfoundland
Hydro Quebec, the two words that have become synonimis with Newfoundlander's sense of their place in Canada. Although I personally believe that is not an accurate statement of the relationship, it is easy to understand why such feelings have developed over the years.
You have to go back to the early days. The devisive debates and then the vote on joining Confederation. A Premier desperate to prove to Newfoundlander's the wisdom of that decision. A province that was economically and industrially empoverished in comparison to the rest of the country. Newfoundland gave a monopoly, not unlike the monopoly Hudson Bay Company once enjoyed to develop the great unknown wealth of Canada, to Brinco - a private consortium to develop Newfoundland and Labrador's water and power potential. While the government in St John's saw the potential to begin the industrialization of Newfoundland, it is clear that Brinco was seeking only to convert the monopoly to profit.
The development of the Upper Churchill, to provide hydroelectric power, became the sole focus of Brinco, and Hydro Quebec it's sole partner. No other potential business partners were available to finance the project and, unlike say Hibernia, the federal government did not step forward with any loan guarantees. That left Brinco at the mercy of Hydro Quebec, and of course Newfoundland at the mercy of Brinco. At a time when Newfoundland needed a hand up to join the more industrialized ranks of provinces, Hydro Quebec turned on her.
The nationalistic Quebec government, using Hydro Quebec as it's instrument of choice, dictated terms to Brinco. Hydro Quebec even came back after the intial agreement was signed and added further prejudicial clauses that essentially left the people of Newfoundland without the benefit of their own resources. The basic hi-lites of the deal being: an extremely low price for the power - even by 1969 standards; automatic renewal clause of the agreement in 2016 that does not even require further signatures; a 37.5% stake in the Corporation that runs the Upper Churchill; construction of almost all the equipment used in the project done in Quebec; transmission lines designed to meet Hydro Quebec's specifications; a 99 year renewable lease on the Upper Churchill; and so it goes. In other words, if you want us to use our money, our loan guarantees, and you want us to buy the power we will take everything. The kind of deal you find abhorant if it were conducted between separate countries, let alone fellow provinces. The irony is that even if Newfoundland chooses not to renew the deal in 2041, Hydro Quebec still gets 37.5% of the profit from any new deal Newfoundland may find.
If that didn't make your blood boil consider this: Quebec has earned approximatley $22 billion on the deal to date. Newfounland has seen $1 billion. Consider that Newfoundland's current debt is $11 billion dollars. If Newfounland would have been even 50 - 50 partners with Hydro Quebec on the Upper Churchill, and recieved half of that 22 billion, Newfoundland would be debt free today. Conversely, the Upper Churchill agreement made Hydro Quebec into the player it is today - doubling its corporate size.
Several Premiers have since tried to undo this "deal with the devil" in the Courts. The lawyers of the day apparently ensured they had every angle taken care of - including a clause stopping Newfoundland from raising taxes on the power until atleast 2016. And, just to cover all their bases, the Quebec government has filed a complaint over the border between itself and Labrador which, if successful, would see Newfoundland lose the Upper Churchill - plant and all. Oh brotherly love.
The answer lies in politics. During the sixties and seventies Quebec sought to become "masters in their own house". Instruments like Hydro Quebec assisted in that effort, but it was politics that allowed the instruments to be deployed. Quebecers instinctively, and through substantial practise, have mastered the art of wedge politics within Canada. Their biggest success in this regard is their ability to not have those same politics used against them. One of the only successful attempts to do so was the recent failure of Hydro Quebec to take over New Brunswick's power utility - a move that some might say eerily resembles the nationalistic expansion policies of Gazprom in Russia.
If the answer lies in politics, then the silver bullet lies in the Constitution. The Government of Newfoundland might as well forget pursuing the Americans for help, as they will likely turn the whole matter on its head for their economic advantage - if they even choose to get involved, which is unlikely. Newfoundland's best hope lies in the Constitution, and more specifically the "notwithstanding clause". Both documents were not even envisioned in 1969. The not withstanding clause allows a province to override legislation, or create legislation, that is within its jurisdiction, but contrary to certain constitutional principles. Ordinarily, I would not advise, nor approve of such a measure. However, the Government of Quebec, as represented by Hydro Quebec, has stepped way over the line in it's treatment of Newfoundland, and by association the good people of Newfoundland and Labrador.
You have to go back to the early days. The devisive debates and then the vote on joining Confederation. A Premier desperate to prove to Newfoundlander's the wisdom of that decision. A province that was economically and industrially empoverished in comparison to the rest of the country. Newfoundland gave a monopoly, not unlike the monopoly Hudson Bay Company once enjoyed to develop the great unknown wealth of Canada, to Brinco - a private consortium to develop Newfoundland and Labrador's water and power potential. While the government in St John's saw the potential to begin the industrialization of Newfoundland, it is clear that Brinco was seeking only to convert the monopoly to profit.
The development of the Upper Churchill, to provide hydroelectric power, became the sole focus of Brinco, and Hydro Quebec it's sole partner. No other potential business partners were available to finance the project and, unlike say Hibernia, the federal government did not step forward with any loan guarantees. That left Brinco at the mercy of Hydro Quebec, and of course Newfoundland at the mercy of Brinco. At a time when Newfoundland needed a hand up to join the more industrialized ranks of provinces, Hydro Quebec turned on her.
The nationalistic Quebec government, using Hydro Quebec as it's instrument of choice, dictated terms to Brinco. Hydro Quebec even came back after the intial agreement was signed and added further prejudicial clauses that essentially left the people of Newfoundland without the benefit of their own resources. The basic hi-lites of the deal being: an extremely low price for the power - even by 1969 standards; automatic renewal clause of the agreement in 2016 that does not even require further signatures; a 37.5% stake in the Corporation that runs the Upper Churchill; construction of almost all the equipment used in the project done in Quebec; transmission lines designed to meet Hydro Quebec's specifications; a 99 year renewable lease on the Upper Churchill; and so it goes. In other words, if you want us to use our money, our loan guarantees, and you want us to buy the power we will take everything. The kind of deal you find abhorant if it were conducted between separate countries, let alone fellow provinces. The irony is that even if Newfoundland chooses not to renew the deal in 2041, Hydro Quebec still gets 37.5% of the profit from any new deal Newfoundland may find.
If that didn't make your blood boil consider this: Quebec has earned approximatley $22 billion on the deal to date. Newfounland has seen $1 billion. Consider that Newfoundland's current debt is $11 billion dollars. If Newfounland would have been even 50 - 50 partners with Hydro Quebec on the Upper Churchill, and recieved half of that 22 billion, Newfoundland would be debt free today. Conversely, the Upper Churchill agreement made Hydro Quebec into the player it is today - doubling its corporate size.
Several Premiers have since tried to undo this "deal with the devil" in the Courts. The lawyers of the day apparently ensured they had every angle taken care of - including a clause stopping Newfoundland from raising taxes on the power until atleast 2016. And, just to cover all their bases, the Quebec government has filed a complaint over the border between itself and Labrador which, if successful, would see Newfoundland lose the Upper Churchill - plant and all. Oh brotherly love.
The answer lies in politics. During the sixties and seventies Quebec sought to become "masters in their own house". Instruments like Hydro Quebec assisted in that effort, but it was politics that allowed the instruments to be deployed. Quebecers instinctively, and through substantial practise, have mastered the art of wedge politics within Canada. Their biggest success in this regard is their ability to not have those same politics used against them. One of the only successful attempts to do so was the recent failure of Hydro Quebec to take over New Brunswick's power utility - a move that some might say eerily resembles the nationalistic expansion policies of Gazprom in Russia.
If the answer lies in politics, then the silver bullet lies in the Constitution. The Government of Newfoundland might as well forget pursuing the Americans for help, as they will likely turn the whole matter on its head for their economic advantage - if they even choose to get involved, which is unlikely. Newfoundland's best hope lies in the Constitution, and more specifically the "notwithstanding clause". Both documents were not even envisioned in 1969. The not withstanding clause allows a province to override legislation, or create legislation, that is within its jurisdiction, but contrary to certain constitutional principles. Ordinarily, I would not advise, nor approve of such a measure. However, the Government of Quebec, as represented by Hydro Quebec, has stepped way over the line in it's treatment of Newfoundland, and by association the good people of Newfoundland and Labrador.
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