September 21, 2016
Manitoba Hydro Board Review Shows Corporation's Mounting Debt
– – –Situation Presents Significant Challenge but Government Prepared to Address with Commitment to Transparency, Accountability, Value for Money within Crowns: Ministers
Manitoba’s new government today accepted the findings of a review conducted by the Manitoba Hydro-Electric board that assessed the financial situation of the corporation and recommended the Bipole III transmission line project proceed, noting that rerouting the project is no longer considered a viable financial option, Crown Service Minister Ron Schuler said today.
Manitoba Hydro’s board announced that its review determined the utility faces significant financial strain related to the decision by the previous government to accelerate construction of both Bipole III and the Keeyask Generating Station to provide energy for export customers, in the absence of domestic demand for new generation.
“We had committed to having the Public Utilities Board (PUB) review the previous government’s decision to route the Bipole III transmission line down the west side of Manitoba based on the information available to us at the time,” said Schuler. “The board’s announcement earlier today indicates the Bipole III project is much further along than we were initially led to believe, meaning that a review, delay or contemplation of rerouting would only increase the costs levied on Manitobans.
“While we are of course disappointed that Manitobans will not have the opportunity to recoup some of the additional $900 million the previous government’s chosen route will cost, we understand the project must continue in order to avoid further losses associated with a delay in the completion of both Bipole III and the Keeyask Generating Station.”
Results of Manitoba Hydro’s board review also highlighted the corporation’s mounting and unprecedented levels of debt and the direct connection drawn by Manitoba’s credit rating agencies between the financial situation of Manitoba Hydro and the financial health of the province, Finance Minister Cameron Friesen noted.
Friesen was referring to the July 2016 decision by S&P Global Rating to downgrade Manitoba’s credit rating and cited Manitoba Hydro as no longer being considered self-supporting, thereby placing the province at risk for further credit rating downgrades.
“The board’s review indicates that both Bipole III and Keeyask are behind schedule, expected to be over budget and the corporation’s debt is expected to nearly double to $25 billion within the next three or four years. The previous government’s decision to have Manitoba Hydro pursue simultaneous capital spending on projects of this size and scope now threatens the bottom line of the province of Manitoba and our relationship with bond rating agencies across North America,” said Friesen.
“The debt of Manitoba Hydro is the debt of all Manitobans. While we have much work ahead to restore financial stability to our province, our government is up to the challenge. We are confident that our creditors recognize our government’s commitment to pursuing a reasonable approach to Manitoba’s finances and to balancing our province’s budget.”
Key findings from the Manitoba Hydro board’s review include:
• neither Bipole III nor the Keeyask Generating Station are on track to meet their target completion dates, with Manitoba Hydro now projecting delays of between 12 and 15 months for Bipole III and between 21 and 31 months for Keeyask;
• the cost for Bipole III is also expected to rise to between $4.9 and $5 billion from the current budget of $4.65 billion, whereas Keeyask is expected to rise to between $7.2 and $7.8 billion from the current budget of $6.5 billion;
• Manitoba Hydro has signed export contracts worth $4.5 billion that are dependent on the completion of the Keeyask generating station, a 695-megawatt hydroelectric project being developed by the Keeyask Hydropower Limited Partnership that is a joint venture between Manitoba Hydro and four Manitoba First Nations;
• Bipole III is essential to fulfilling the export contracts associated with the Keeyask Generating Station;
• Bipole III is also essential to reducing the risk of blackouts and service disruptions should there be a failure of the existing Bipole I and II transmission lines that carry over 70 per cent of the electricity produced in Manitoba; and
• Manitoba Hydro’s debt is expected to grow to $25 billion from its current level of $13 billion within the next three to four years.
“Manitoba residents, ratepayers and taxpayers are the ultimate shareholders of Manitoba Hydro,” stated Schuler. “Manitoba Hydro’s implementation of the previous government’s decision has done significant damage to our province’s financial stability. Our government is committed to ensuring transparency, accountability, strategic investment and value for money across government including within Manitoba’s Crown corporations.”
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