Premiers Shawn Graham and Jean Charest unveiled today a proposed agreement on energy that would benefit New Brunswickers and Quebecers.
Under the agreement, Hydro-Québec would acquire most of the assets of NB Power. New Brunswick would benefit from lower rates, a vastly reduced provincial debt exposure as well as a secure and reliable source of energy and its development as an energy hub. At the same time, Hydro-Québec would acquire quality assets, an additional base of more than 370,000 customers and would benefit from New Brunswick's strategic geographic position in the Northeast region of North America. This transaction would be profitable for Hydro-Québec from year one, with an expected return on equity (ROE) of more than 10 per cent.
Speaking in Fredericton, the premiers outlined the results of discussions announced in June to explore further cooperation on energy issues. A memorandum of understanding (MOU) setting out the terms and conditions of the proposed transaction was signed by the Premiers today.
Under the terms of this 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 all New Brunswickers. It is estimated by New Brunswick to have a value to ratepayers of approximately $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 to 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 the 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.
Hydro-Québec could direct the Province to shut down such facilities on one year's prior notice and all emissions allowances would accrue to Hydro-Québec. The thermal generating facility at Dalhousie would be phased out.
“This proposed agreement is an exciting opportunity for New Brunswick, and in the public interest,” Graham said. “Homeowners will see rates much lower than under the status quo, and we will now share Quebec’s competitive industrial rates which, coupled with our plan for lower taxes, positions us for significant economic growth. Moreover, the elimination of NB Power’s massive debt will help us attain self-sufficiency and relieve our children and grandchildren of this burden.”
"This agreement creates an unprecedented energy partnership in Canada. Through it, Quebecers will acquire quality assets, while over the medium term, our partners will benefit from a clean energy supply that will reduce green house gas emissions in Eastern Canada. It will also provide Québec with a strategic geographic position with regards to the markets of Atlantic Canada and New England. All Quebecers will benefit from this agreement," Charest said.
Speaking for NB Power, President David Hay said, “Hydro-Québec is a highly respected and well-managed world-class, reliable organization. Under the new regulatory framework, our customers would benefit from lower rates than NB Power can provide in its current configuration, while our employees will continue providing the excellent service to New Brunswickers that they have become known for.”
"Hydro-Québec is very aware of the importance of New Brunswick's electrical infrastructure to its citizens, businesses and institutions," said Thierry Vandal, President and CEO of Hydro-Québec. "We will operate, maintain and develop this infrastructure with the same diligence and care that we apply to all our activities. We know that we can count on the employees of NB Power, its network of suppliers and its partners to help us fulfill a vital mission: provide excellent service to New Brunswick customers."
The MOU sets a closing date for substantially all the assets involved on or about March 31, 2010. The closing date for the Point Lepreau nuclear generating facility would follow on or about Jan. 1, 2011, after the completion of the refurbishment project now underway. In addition, a package of regulatory reforms, aimed at harmonizing New Brunswick’s regulatory system with that of Québec, will be presented to the New Brunswick Legislature in the upcoming session.
The MOU is available at www.lowerratesnb.ca and at www.hydroQuébec.com/media