The “DEFINITIVE COOPERATION AND IMPLEMENTATION AGREEMENT BETWEEN NEWFOUNDLAND AND LABRADOR HYDRO, HYDRO-QUÉBEC AND CHURCHILL FALLS (LABRADOR) CORPORATION LIMITED” signed on August 17th. 2026 follows the same pattern as the 2024 MOU regarding the bundling of several projects. In doing so, some key information on specific projects is partially obscured. However, analysis of some elements can reveal useful data on which to draw conclusions. For example, a focus on the treatment of CF(L)Co excluding any enhancements, reveals how insignificant the economic value of this stand-alone asset is in the document.
Many arguments and much analysis have been put forward to demonstrate, impartially, why the true economic value of the CF(L)Co facilities, as built, is around four and one half billion dollars annually. This valuation has been calculated by professionals, independently of each other, who are internationally respected in their fields of finance, economics, resource management and development of hydro resources.
Our history on this file has been to reap only a fraction of this economic value with the remainder accruing to Quebec. Since 1969 Quebec has resisted every request from our government to increase the meager rates that it pays for the energy that it purchases under the power contract. Court challenges from both sides have resulted in absolutely no improvement for our province. The contracted rate for power contract energy since 2016 and up 2041 is two tenths of one cent which results in most of our economic rent being transferred to Quebec. There are side agreements which benefit Quebec and CF(L)Co, but the power contract remains unchanged.
The Upper Churchill Lease Act of 1961 is the legal basis for the hydro resources to be developed. Among other things it established rates for economic rent which have not been increased since. The current MOU, if firmed up in contracts, will remove forever our province’s constitutional right to manage our hydro resources by barring future provincial governments from making any improvements for our people such as increased resource values or new or increased taxes.
By isolating the Upper Churchill facilities and without making any changes to them it is evident that the historically low rates, adjusted for past inflation, would be 2.6 cents per kilowatt hour. (After Hydro Quebec’s common dividends approximately 0.0182 cents). The current MOU Appendix D sets out the proposed energy purchases by Hydro Quebec for the next 51 years together with intended annual payments to CF(L)Co. It shows total energy purchases of 1,266 terawatt hours and total payments of $185 billion ($10 billion less than the discredited 2024 MOU). The net present value of these payments, after deducting the return of approximately one third to Hydro Quebec as common dividends, is 0.0213 cents, slightly higher that the historical “adjusted” rate.
If we consider for the moment the prospect that “other developments” might not materialize, and the CF status quo remains the only prospect, Hydro Quebec will have reached their objective; continuing massive energy purchases from a reliable, debt free and well-run facility for decades into the future for virtually the same low rates as before. Our province will be left with a vastly undervalued economic return with no possibility for increase, ever. Quebec will have brought, virtually, the Churchill watershed and river into its territory and there will be absolutely nothing, any government of our province will be able to do about it into the future.
Executing this poorly thought through deal will be a tragedy of major proportions. Why does it have to end this way?
Andrew Grant
Former V. P. Finance and C. F. O. of the
Hydro Group of Companies-(Retired 1997)