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NLIS 2
March 1, 2001
(Mines and Energy)

 

Minister announces signing of 130 MW recall sales contract

Mines and Energy Minister Lloyd Matthews announced today that Newfoundland and Labrador Hydro (NLH) has signed a three-year contract for the resale of the 130 MW recall block of power to Hydro-Quebec (HQ). The contract is a renewal of the 1998 contract which expires on March 8 of this year.

The minister explained that, in 1998, HQ waived the three-year notice period required to recall the remaining 130 MW of the 300 MW block available to the province from the Upper Churchill. At that time, the right to recall the power was exercised and NLH entered into a three-year contract to resell the power to HQ. Since 1998, NLH has earned profits of approximately $68.5 million from the sale of this power. 

"The profit over the next three years from the new agreement, based on current forecast requirements in Labrador, is projected to be $80 million," Mr. Matthews said. "The projected profit under the new contract is greater than the previous contract because the revenue cap is higher under this contract (approximately $98 million compared to $78.9 million under the previous contract). The price per Kwh is the same under the two contracts, however the maximum amount that can be paid has gone up."

Mr. Matthews said the actual profit to be realized from the contract will depend on the amount of energy to be produced, the amount used in Labrador and the line losses (the cost of the energy lost during transmission is borne by the vendor).

The $80 million forecast profit is based on gross revenue of $90 million and costs of $10 million," Mr. Matthews said.

The minister said the contract provides NLH with maximum flexibility to sell the power outside the province or to use it in Labrador, when it is required to meet domestic needs. This was a key consideration in the decision to renew with Hydro Quebec. Discussions were held with other interested customers; however, Hydro Quebec offered greater flexibility to meet future requirements in Labrador.

"This enables the people of this province to realize benefits from the recall block of power today and in the future when the power is needed in our province," Mr. Matthews said.

The minister also stated that NLH officials have advised him that because negotiations for the recall block have been concluded with HQ, the recall sales contract will now be released publicly by the Corporation.

Media contact: Gary Callahan, Communications (709) 729-4890.

2001 03 01                                10:10 a.m.


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