March 16, 2004
(Executive Council )
New agreement on recall power from Upper Churchill
Premier Danny Williams and Ed Byrne, Minister of Natural Resources, announced today Newfoundland and Labrador Hydro (NLH) has reached agreement on a new five-year contract with Hydro-Quebec (HQ) for the resale of the 130 MW recall block of power.
The contract will realize $230 million to provincial revenues over its term, an increase of 64 per cent over the previous agreement. In addition to the increase in profitability, the contract maintains full flexibility to meet power requirements in Labrador, eliminates the revenue cap and ensures the sale of all available energy for the benefit of the province. The contract is the second renewal of the 1998 contract, which expires March 31, 2004.
"This new agreement is a tremendous benefit for the people of Newfoundland and Labrador," said Premier Williams. "The contract will continue to provide NLH with the 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 to renew the agreement with Hydro Quebec, as was the ability to optimize revenue from the sale of all available energy."
In 1998 Hydro-Quebec waived the three-year notice period required to recall the remaining 130 MW block available to the province from the Upper Churchill. At that time, the right to recall power was exercised and Newfoundland and Labrador Hydro entered into a three-year contract to resell the power to Hydro-Quebec. The original contract was renewed in 2001 for a further three-year term. Since 1998 Newfoundland and Labrador Hydro has earned approximately $155 million from the sale of this power. All profits generated are paid directly to the government for the benefit of all the people of the province.
Under the 2001 contract, the price to Hydro-Quebec was $23.9/MWh, with a revenue cap of $97.53 million. Under the terms of the new contract, the renewal price starts at $36/MWh, escalating annually by two per cent, and there is no revenue cap.
"Hydro, in consultation with government, set its sights on certain key principles that we felt were important for the benefit of Newfoundlanders and Labradorians. I am pleased to see that this agreement obtained our objectives," said Minister Byrne.
Premier Williams also indicated government has to take advantage of every opportunity to grow its revenues, particularly at a time when the province is facing a serious deficit situation.
"This contract is a step in the right direction in helping this government meet its financial obligations," said Premier Williams. "Yet, we know we cannot balance our books on revenue growth alone. This is an important but small part of the solution."
2004 03 16 3:35 p.m.