“Nav, I am nearly finished ‘Why Nations Fail’ and
I suggest that you take it with you when you leave here this evening. But do you fancy something a little stronger
than a coffee?”
a question of a rhetorical nature. We
began the walk to Erin’s, one of Uncle Gnarley’s preferred watering holes.
put ‘on airs’ about being an open and transparent company. They produce an annual transparency report,
hold public meetings and they even have an annual general meeting for their
but once you scratch the surface they spew an awful lot of baffelgab. Combined with their subsidiary, known to most
as the Premier’s office, they have worked to undermine the pre-existing
democratic institutions such as the Public Tendering Act, the Public Utilities
Board, and also the fiscal governance responsibilities of the House of
The maturation of Nalcor is nothing more than the
development of state socialism.
It has quietly happened under our noses,
because it is being presented to the public as a great capitalistic venture,
with Ed Martin branded as the captain of industry. ”
last drop of wetness from the old economist.
the cash flow and the debt to equity ratios have improved. To the casual observer this is all true, but
once you scratch the surface and review the annual reports, you realise that
the picture is not as rosy as we are lead to believe.”
you must explain this; you must remember I am not an economist”
been built on this elementary assumption.
2005. Since that time the people of
Newfoundland and Labrador have given Nalcor over 1 billion dollars in the form
of equity investments or deferred earnings. We are also about to give them a whole lot
more equity for the Muskrat Falls and Hebron investments. All in, the Newfoundland taxpayer will have
invested some 3 billion dollars in Nalcor.
Martin promotes the improved debt to equity ratio for the company, it is because
of the largesse of the provincial taxpayer, and not the improved financial
performance of Nalcor.
earnings are essentially unchanged. When
you look at the earnings results for the past 10 years, adjusted for inflation,
they are not substantially better than what they were in 2004. To make matters worse Nav, their return on
equity has degraded substantially over the past decade.”
pulled up a graphic for me to view. “Nav,
once you go over the past 10 years of annual reports you can get a long term
view on company performance. That
performance is not as robust as what Ed Martin would want us to believe”.
marginally better than what it was 10 years ago, there is no indication as to
when they will ever pay back, to the people of
the Province, this 3 billion dollar investment”.
Fail’, it is clear that Government and Nalcor are working to a plan. And that plan may have some merit. However, they are not communicating the
required detail for what should be demanded in a democracy, especially when public funds
are being employed. The level of public
governance is simply not there. We must
have a blind faith in government and Nalcor.
And blind faith is not where I want to be, when it comes to a 7 billion dollar
may call it an epic example of a make work project. But to be clear, any business availing on tax
payer funds through ACOA, or other government agency, would have to present a long
term business plan. Well, why is Nalcor
any different? To use a political phrase,
where is the due diligence?”
term business plan during the 2013 AGM.
He discussed 5 phases of development for Nalcor, with plans stretching
out to 2030. It really was a memorable
speech, for which unfortunately there is no written record. He presented his vision of using the revenue
from Muskrat Falls, and other regulated activities, to fund the growth of
Nalcor in areas such as Gull Island, and other oil and gas opportunities”.
messaging of Nalcor and the provincial government leading up to the sanctioning
of Muskrat Falls, last Fall. At that
time they were talking about the annual $400 million dollar return to the
spend that money. It is exactly the
point I am trying to make. Where is the
public debate on this evolving strategy.
Most importantly, where are the numbers? What will it cost, who will pay, and what are
the real returns? These are all valid
questions for a crown corporation, whose growth plans to date have been entirely
subsidized by the taxpayer!”
sanctioned, Uncle Gnarley was not ready to forget about Nalcor.
Meeting is an opportunity to review the results, and provides the stakeholders
an opportunity to challenge the leadership on these types of questions.”
the annual report until a mere 6 days before the AGM. This was hardly enough time for any concerned
shareholder to review the results and to grade the performance of the
AGM. There were many of the known
critics at the event, who really challenged Ed Martin.”
Martin, but there was not always answers.
This was correctly identified by the High Chieftain of the Known Critics himself.
“But Nav, non-answers are one thing; incorrect answers
are even more troubling.”
Uncle Gnarley reached for his drink, clearly disturbed
by the words he was about to utter.
back. An old fishing buddy of mine, Jim
Morgan, was on a real interrogation of Ed Martin. Believe you me, Jim Morgan is no
pushover. His first lot of questioning
was on that Quebec Company, SNC Lavalin, which seems to be making a good lot of
money from this project.
a very straight forward question.
He asked if Emera were looking for more than 167 MW of power, as was
being suggested from the UARB hearings in Nova Scotia”? (Footnote 1)
question. It is well known to anyone who
was watching the UARB hearings that the consumer advocate John Merrick has been pretty keen at trying to get
confirmation that all this cheap surplus power, that Emera are promoting, will
cheap surplus power is what will bring the blended cost of Muskrat power, to
where it is the lowest cost option. But
as the consumer advocate has correctly identified there are no assurances, from
Nalcor, that this power will be available”.
Nova Scotia, the issue of surplus power has been the lightning rod of the
proceedings. Emera are selling the loose
juice, which Nalcor will not commit as to being available. Emera were very clear during the UARB
hearings that they had engaged Nalcor about the possibility of a firm contract
for more power from Muskrat Falls, beyond the 20% currently under the Nova
“This is what is most troubling, because when Jim
Morgan asked whether Emera have approached Nalcor about getting more than 167
MW, Ed Martin responded:
“I have not been approached by Emera with respect to that. With respect to more power. I believe that we have a great product, and I
am sure they would like to have more power.
No need to consider it as I have not been asked1”
days earlier Mr. Martin sent a letter to Emera on the very same subject. A letter regarding the availability of
surplus power, which was tabled in the UARB hearings”.
the transcripts from the UARB hearings, do not appear to correlate with what
was told to the shareholders as part of the 2013 AGM. Maybe it was nothing more than a simple
mistake. Maybe it was tailoring the
messaging to suite the audience. But one
thing is clear, it is not a consistent message when it comes to surplus power.”
this type of inconsistency coming from Nalcor and/or the provincial government
on the Muskrat Falls Project. Whether it
was the availability of gas from the Grand Banks2, the availability of Upper Churchill power in
20413, the amount of power available to Labrador mining4,
or the final cost of power to the residents of Newfoundland5, there
has been many inconsistent messages”.
confused about this project. But are we
expected to support the project based upon blind faith only? Should we be content with living in state
when it comes to Muskrat Falls. Lake Michikamau
this week may be the first crack in the dam.”
Editor’s Note: This Post was written by “JM”, the anonymous researcher, writer and
presenter, to the PUB and in local Blogs, on the Muskrat Falls Project. JM has written a
number of Uncle Gnarley pieces, most recently, Why Projects Fail. He has also written Gnarley’s Theory of Political Devolution, Annus Orndatra and The Quest for McLeod’s Deep Throat, as well as others. His latest Paper is entitled: Muskrat Falls Revenue Stream: Fact or Fiction.
to 1 hr. 23 minutes into the Q and A session of Nalcor’s 2013 AGM. Jim Morgan asks the question about Emera and surplus power.
an interview with Dave Vardy in preparation for his Action Canada paper, Ed
Martin indicated that all the natural gas presently produced on the Grand Banks
is used for either reservoir maintenance or power on the facilities. The use of natural gas for power generation
was said to be taking away from the economics of oil production. See page 13 of Vardy’s Paper.
not correct as the White Rose field, for which Nalcor are a partner, are
presently re-injecting gas for storage only, and has no impact on production.
Kennedy has on several occasions indicated that there are no assurances that
Upper Churchill power would be available for use in Newfoundland in 2041. Yet in the UARB hearings Emera were very
clear that the Upper Churchill power could be used for Nova Scotia’s (Page 34
of the Emera application ) post 2041.
The final rate to the Newfoundland consumer has always
been a difficult question to answer.
When Nalcor did provide a rate calculator for the DG3 decision (Power in
Our Hands website) there was no backup to the numbers. However within the PUB hearings, Nalcor did not provide guidance on the blended rate within PUB-Nalcor 5 and on a stand alone basis within
RFI-KPL-Nalcor-27. For both of these the rates appear to be based on the
increased demand all being residential.
But in fact about 40% of the immediate requirements for Muskrat Falls
(about 700 GWhr) is required for the Vale facility, and not for residential
use. Power will be sold to Vale at
industrial, and not residential rates.
It therefore appears as if the final rate to the consumer will be ~2
cents/kwhr more than previously advised by Nalcor. It is impossible for the public to verify
this, as insufficient data has been released.
It should be confirmed with Nalcor.
Reference to “Lure of Labrador Wild” which was the
rallying call for Hubbard, Wallace and Elson in the search for Lake Michikamau. This great lake was latter absorbed into the Smallwood
Reservoir as part of the Upper Churchill development.