July 15, 1999
(Mines and Energy)

Minister Grimes responds to requests for public disclosure of the GWAC

Mines and Energy Minister Roger Grimes today responded to recent requests for public disclosure of the Guaranteed Winter Availability Contract (GWAC) and Churchill Falls (Labrador) Corporation (CF(L)Co) Shareholders' Agreement, approved by the boards of Newfoundland and Labrador Hydro (NLH) and Hydro-Quebec in June.

"GWAC is a commercial contract between CF(L)Co and its customer, Hydro-Quebec," said Minister Grimes. "The parties have agreed not to release the contract at this time because it contains commercially confidential information. This is a normal and usual business practice."

GWAC and the CF(L)Co Shareholders' Agreement were included in the framework outlined on March 9, 1998. At that time Hydro-Quebec agreed it would contract for excess capacity from CF(L)Co from November 1 through March 31 each year over the life of the contract. In total, GWAC will provide about $1 billion for Newfoundland and Labrador over the next 40 years. The contract terminates concurrently with the 1969 Power Contract.

"The GWAC is not related to the 1969 Power Contract," said Grimes. "It is a separate contractual arrangement whereby CF(L)Co will make available to Hydro-Quebec additional capacity, in excess of that provided under the existing power contract. The GWAC is not part of and does not affect the 1969 Power Contract."

Hydro-Quebec and NLH also agreed to negotiate the terms of the CF(L)Co Shareholders' Agreement as part of negotiations for development of the Lower Churchill. The Shareholders' Agreement does not affect the original 1969 Power Contract, but it does provide two significant benefits for Newfoundland and Labrador:

• The 1969 Power Contract granted Hydro-Quebec the right to make good any cash deficiencies incurred by CF(L)Co by purchasing more shares in CF(L)Co. Hydro-Quebec could have gained voting control of CF(L)Co through this process. The Shareholders' Agreement gives NLH a similar right. Hydro-Quebec can never gain control of CF(L)Co as along as NLH is prepared to make additional investments in the company, in accordance with its 66 per cent share holding.

• The CF(L)Co Shareholders' Agreement also ensures a power supply at reasonable rates for Western Labrador. Under the 1969 Power Contract, Hydro-Quebec had the right to acquire, at 1969 Power Contract prices, the 225 MW block of power dedicated to Labrador West when the current arrangement expires in 2014. With this new agreement, Hydro-Quebec no longer has that right. Instead, CF(L)Co will distribute the power in Labrador West at reasonable commercial rates. This means a secure power source for Labrador West and the profits will stay within CF(L)Co.

"An update on the Churchill River Power Project will be given in the coming weeks," Grimes added.

Media contact: Jennifer Lilly, (709) 729-2183 .

1999 07 15 5:20 p.m.