The commentary below highlights the key components of the MOU 2 with regard to the existing Churchill Falls plant. It compares MOU 2 to MOU 1 (December 2024) and outlines the failures of MOU 2 because of its similarities to the existing 1969 power contract.
The key components to consider are the volumes of energy, the pricing and present value of energy, the term of the contract, the new restrictions on NL, and the transmission access through HQ.
HQ was to receive 74.1% of the total energy over a period of 51 years from the existing CF plant, if all elements of the 2024 MOU had been implemented. That allocation is marginally reduced to 73.4 % under the MOU 2. The term remains 51 years to 2077 under MOU 2. MOU 2 imposes no conditions on the use of energy allocated to HQ but is highly restrictive over use of NLH’s much lower allocation of energy from the existing plant.
As majority owners of the CF plant (NL owns 65.8%) one would have expected NL to gain much more access to energy post 2041. Upon contract expiry at August 2041, NL would be entitled to any amount of energy, with no cap, as majority owners of the existing plant.
Our government claims it is getting more energy. That is not a fact. The government secures more energy from the Gull Island (GI) development, if HQ decides it is economical to develop GI. There is no extra power from CF for NL. In fact, if GI does not get built by HQ, then NL’s allocation of energy from CF will increase by only 300MW, to 825 MW. We will not get the additional energy to1630MWs government has been stating. This was reported by the IRC in its review to be “an unacceptable risk”. Government has done nothing to change our allocation of low cost CF energy under MOU 2.
2. Pricing of existing CF energy
The table below outlines the comparative pricing of energy and its present value for existing CF energy:
As shown above, MOU 2 has marginally higher prices earlier but less total dollar payments in nominal terms than MOU 1. From an economic valuation perspective MOU 2 provides the same value as MOU 1.
The MOU 1 pricing terms were targets not guaranteed payments but prices would vary based predominantly on the future replacement cost of energy in Quebec. There was no market-based pricing for energy; whereas MOU 2 payments from HQ are established, predetermined prices. They will be subject to annual variation only to the degree that an annual cumulative calculation of CPI in Canada varies outside of a range initially between 1.66% and 2.46%. On a go forward basis over the 51 years, these payments will be exactly as shown above.
The Independent Review Commission (IRC) noted in its report that the pricing under MOU 1 was complex , not defined and subject to much risk. It inferred that pricing could be much more simplified by being tied to other indices but it did not specify an index.
The problem sighted by critics of the MOU noted that there was no escalation of pricing related to changes in energy (electricity) pricing tied to market change over the 51- year term, a feature confirmed by the IRC. MOU 2 fails to deliver any change in market pricing over MOU 1. The problem remains that prices are established, or pre-determined without any reference to market price change over the entire term of the contract. Therefore, to the degree that electricity prices rise, or that the market value of energy is higher than the pre-established prices, virtually all of the benefit will accrue to HQ. This is the same problem that exists with the current 1969 contract.
The MOU 2 prices are established well below current market prices and that continues throughout the 51- year term. NL never gets the market value for the power we sell. For example, the current export value of electricity is approximately 16 cents/Kwh. Under MOU 1 we would not reach that price until 2054 and under MOU 2 that price will be reached in 2053. In either case, we are talking about 27-30 years for the price to reach the current market value. One can only imagine how high the actual price will be at that time.
If we assume that electricity market prices will increase at the average rate of 4.1% noted in the IRC report over the past five decades, then market prices will be in the range of 47.3 cents/Kwh in 2053. If this occurs as current trends indicate then NL will be selling electricity to HQ for over 30 cents/Kwh less than its market value. That is a staggering $10.4 billion loss of value in just one year to CF(L)co (the annual loss in present value terms is $2.3 billion). And that trend is present throughout the term to 2077. Our past financial losses under the 1969 contract will be minor compared to the losses we will experience into the future!
One may claim that energy inflation will be lower than in the past but that is currently not the recent experience. If inflation averages only 2%, then current market prices will rise to 27.3 cents/Kwh in 2053, and the loss of value to CF(L)Co would be $3.8 billion annually. Still a very significant annual loss of value.
This is exactly the same pricing problem we have today with the 1969 contract.
There is only one reasonable proposition for NL, the pricing has to be market-based for any exported electricity to HQ. If we are not able to obtain market-based pricing then we must keep the energy in the Province for our own domestic use. This is the clear conclusion of the IRC review, it advised our government to take the time to complete an in-depth analysis to determine what portion of CF energy it wanted to export for financial value or maintain the energy for our own use. The Government failed to undertake this necessary value-based analysis and failed to secure any additional energy for our own use. MOU 2 provides NL with the same value for CF energy as MOU, 1which falls well short of NL becoming the principal beneficiary of the energy we currently own at CF. We would be better off economically staying with the old contract to expiry and getting market-pricing post 2041, or, in the alternative, re-patriating all the energy post-2041 for use within our Province.
3. Term of CF contract
A summary of the contract term attributes is described in the following table:
Both MOU 1 and2 failed to address establishing a reasonable term power contract for existing CF energy. The IRC review confirmed that in situations like CF, where there is no debt to service, that a long contract for energy is up to 25 years. There are no contracts beyond 25 years and even the contracts with less than 25 years have provisions for interim review and adjustment (such as every five years).
It is illogical for NL to be considering a fixed term contract for CF energy for 51 years with no provisions for exit, review, or renewal. Particularly, when the contract is not market -based. There is enormous financial risk to our people from this term because there will be no means to resolve the shortfalls described earlier between market value and the established annual payments agreed in the contract. All of the market upside (the difference between the established prices agreed and the real market value) over the entire 51 years will be all to HQ’s benefit, just as it is today.
4. New Contact Provisions
Our government has made a very substantial concession in MOU 2. MOU 2 has a new contractual provision that is noted in Exhibit C, something undisclosed by our government. The new provision of the contract prevents NL over the course of 51 years, to 2077, from changing any law or regulation that would increase any tax, any royalty, or any economic rent on energy. Therefore, it prevents our government from exercising our constitutional powers to increase any fees, taxes, or royalty tariffs on energy. This is legislative power we currently have which allows our government to levy taxes, rents or royalties on extraordinary profits that can arise from electrical energy production. The new provisions of MOU 2 will place HQ in an even stronger position today than under the current 1969 contract.
5. Transmission Access
Government claims it has secured transmission access to sell energy up to 985MW at export market pricing. This claim is not borne out by MOU 2. There are many restrictions on the export of energy through HQ. First, HQ will manage all new access to export markets. NL maintains the export right it has currently for 265MW of energy. The additional access is limited to current contracts and customers of HQ. Therefore, NL does not get to sell energy to new customers or offer energy for competitive bids to its own external customers. The pricing is as already established by HQ under existing contracts. Furthermore, in any case, NL has to give three years notice to HQ to use or withdraw from the transmission access noted.
In addition, NL has not secured 985 MW of energy to even sell to HQ. The MOU 2 limits the secured energy to only 300MW above its existing allotment. Additional energy is contingent on GI development. GI energy when and if it is developed will very expensive new energy higher than low cost CF energy.
Summary
In summary:
- the new MOU 2 offers the same value as MOU 1;
- it does not offer any new access to energy from the existing plant; and
- it gives up our constitutional control over the entire Churchill River.
Is it a better deal overall? My conclusion is that it is a worst deal because:
- it obtains no more value;
- it fails to take into account the instructive analysis and recommendations of the IRC report; and
- it fails to unbundle the CF plant from other unsecured developments, which are but a distraction to the aim of NL getting to be the principal beneficiary of resources that we own today- the Churchill Falls plant.
MOU 2 should be resoundingly rejected by the people of our Province.
August 17, 2026
Updated September 5, 2026