Hydro-Québec CEO hails Labrador projects as examples of Canada getting stuff done
?As domestic governments prepare to rework their economic relationships with U.S. president-elect Donald Trump’s incoming administration, the CEO of Hydro-Québec is pitching last week’s launch of a $33-billion renewable power project as an example of why Canada should be considered a serious business partner.
Last Thursday, the premiers of Quebec and Newfoundland and Labrador set aside decades of acrimony to announce an agreement ([url]https://www.theglobeandmail.com/canada/article-churchill-falls-quebec-newfoundland-labrador-hydroelectricity/[/url]) to develop three massive hydroelectric facilities on the Churchill River. The developments will produce 9,190 megawatts of electricity under a pricing regime that will put $1-billion annually into Newfoundland’s coffers while providing Hydro-Québec with power at half the cost of alternative projects.
“These projects are clear statements that Canada has the ability to do big things,” Michael Sabia, chief executive officer at Hydro-Québec, said in an interview on Friday.
Hydro-Québec is a major player in the U.S. electrical grid after striking a 20-year agreement to sell electricity to Massachusetts in 2018 and a similar deal with New York City in 2020. Mr. Sabia, who served as deputy minister of finance prior to joining Hydro-Québec in 2023, said Canada will build its credibility with U.S. politicians by increasing its ability to be a reliable partner in areas such as energy, critical minerals and emerging industries such as electric vehicles and data centres.
“There’s a reset in attitudes taking place in the U.S., with Trump’s election one symbol of that reset,” said Mr. Sabia, who also served as CEO of the Caisse de dépôt et placement du Québec, a global asset manager, and Bell Canada parent BCE Inc.
“Canada needs to reposition our relationship with the United States, and part of that reset comes from showing the Americans we are serious partners who can do big things right,” Mr. Sabia said.
Last year, Hydro-Québec completed a 1,550-megawatt power facility on the Romaine River – the utility’s largest project in 50 years – for $7.4-billion, 14 per cent less than the initial estimate of the project’s cost.
Electricity is already part of the border battle between Canadian leaders and the incoming U.S. president. In a recent social-media post, Mr. Trump threatened to levy 25-per-cent tariffs ([url]https://www.theglobeandmail.com/world/article-trump-tariffs-canada-mexico/[/url]) on all Canadian exports to the United States. In response, Ontario Premier Doug Ford said the province would consider cutting electricity sales to U.S. border states such as Michigan, New York and Wisconsin.
Ontario exported 13.9 million megawatt-hours of electricity to the U.S. in 2023, about 13 per cent of Canada’s overall power exports ([url]https://www.theglobeandmail.com/business/article-hydro-rich-canada-has-traditionally-exported-power-to-the-united/[/url]) to American customers that year, according to Statistics Canada.
Last Thursday’s agreement will see Hydro-Québec develop a long-discussed 2,250-megawatt project at Gull Island on Churchill River with a $20-billion budget. The utility will also build a new 1,100-megawatt plant at Churchill Falls ([url]https://www.theglobeandmail.com/canada/article-quebec-newfoundland-and-labrador-reach-agreement-on-churchill-falls/[/url]) and refurbish existing facilities at the site to add 550 megawatts of capacity.
Newfoundland will have access to 1,990 megawatts from the new plants, four times the capacity it has today, while the remaining 7,200 megawatts will be sold to Hydro-Québec. The average cost of electricity from new and existing plants in Labrador will be six cents a kilowatt-hour, which would allow Quebec Premier François Legault to continue shifting to a low-carbon economy while providing residents and businesses with power at some of the lowest rates in the industrialized world.
“There are deep pools of value for all parties in the agreement between Quebec and Newfoundland,” Mr. Sabia said. He said Hydro-Québec is unlikely to strike new export deals to U.S. utilities, as soaring demand for electricity from customers in the province is expected to account for all the new power coming from the Labrador River.
Negotiations over the price Newfoundland receives for power – the province currently only gets about $20-million annually from the Churchill Falls contract signed in 1969 – and development at Gull Island have played out for years.
Discussions got serious over the past 12 months, in part because Newfoundland Premier Andrew Furey appointed Karl Smith, former chief financial officer at St. John’s-based utility Fortis Inc., as a negotiator with a mandate to strike a deal. Mr. Sabia said: “This is a well-balanced agreement where both parties can be satisfied because they got what they needed.”
Newfoundland’s credit rating is expected to rise as the province begins to receive new revenue from Churchill Falls next year, according to Morningstar DBRS. In a report on Saturday, the rating agency said the agreement with Quebec “is likely to lead to gradual improvement in financial risk metrics, but the magnitude of the improvement will depend on how proceeds are used (for program spending, tax relief, or savings/debt repayment).“
In August, Morningstar DBRS upgraded Newfoundland to a single A rating from single A-low, the first upgrade for the province in 12 years. On Saturday, the rating agency said: “Any improvement in critical ratings factors is likely to be modest and gradual.”
Hydro-Québec can pay for the three new power plants by borrowing on its own balance sheet. Morningstar DBRS said that “we do not anticipate any material impact on Québec’s credit ratings” out of Thursday’s agreement with Newfoundland.
“Hydro-Québec has the capacity and expertise to undertake these projects, as evidenced by the recently completed Romaine Complex development, which was delivered under budget,” Morningstar DBRS said.
[url]https://www.theglobeandmail.com/business/article-hydro-quebec-ceo-hails-labrador-projects-as-examples-of-canada-getting/[/url]
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?As domestic governments prepare to rework their economic relationships with U.S. president-elect Donald Trump’s incoming administration, the CEO of Hydro-Québec is pitching last week’s launch of a $33-billion renewable power project as an example of why Canada should be considered a serious business partner.
Last Thursday, the premiers of Quebec and Newfoundland and Labrador set aside decades of acrimony to announce an agreement ([url]https://www.theglobeandmail.com/canada/article-churchill-falls-quebec-newfoundland-labrador-hydroelectricity/[/url]) to develop three massive hydroelectric facilities on the Churchill River. The developments will produce 9,190 megawatts of electricity under a pricing regime that will put $1-billion annually into Newfoundland’s coffers while providing Hydro-Québec with power at half the cost of alternative projects.
“These projects are clear statements that Canada has the ability to do big things,” Michael Sabia, chief executive officer at Hydro-Québec, said in an interview on Friday.
Hydro-Québec is a major player in the U.S. electrical grid after striking a 20-year agreement to sell electricity to Massachusetts in 2018 and a similar deal with New York City in 2020. Mr. Sabia, who served as deputy minister of finance prior to joining Hydro-Québec in 2023, said Canada will build its credibility with U.S. politicians by increasing its ability to be a reliable partner in areas such as energy, critical minerals and emerging industries such as electric vehicles and data centres.
“There’s a reset in attitudes taking place in the U.S., with Trump’s election one symbol of that reset,” said Mr. Sabia, who also served as CEO of the Caisse de dépôt et placement du Québec, a global asset manager, and Bell Canada parent BCE Inc.
“Canada needs to reposition our relationship with the United States, and part of that reset comes from showing the Americans we are serious partners who can do big things right,” Mr. Sabia said.
Last year, Hydro-Québec completed a 1,550-megawatt power facility on the Romaine River – the utility’s largest project in 50 years – for $7.4-billion, 14 per cent less than the initial estimate of the project’s cost.
Electricity is already part of the border battle between Canadian leaders and the incoming U.S. president. In a recent social-media post, Mr. Trump threatened to levy 25-per-cent tariffs ([url]https://www.theglobeandmail.com/world/article-trump-tariffs-canada-mexico/[/url]) on all Canadian exports to the United States. In response, Ontario Premier Doug Ford said the province would consider cutting electricity sales to U.S. border states such as Michigan, New York and Wisconsin.
Ontario exported 13.9 million megawatt-hours of electricity to the U.S. in 2023, about 13 per cent of Canada’s overall power exports ([url]https://www.theglobeandmail.com/business/article-hydro-rich-canada-has-traditionally-exported-power-to-the-united/[/url]) to American customers that year, according to Statistics Canada.
Last Thursday’s agreement will see Hydro-Québec develop a long-discussed 2,250-megawatt project at Gull Island on Churchill River with a $20-billion budget. The utility will also build a new 1,100-megawatt plant at Churchill Falls ([url]https://www.theglobeandmail.com/canada/article-quebec-newfoundland-and-labrador-reach-agreement-on-churchill-falls/[/url]) and refurbish existing facilities at the site to add 550 megawatts of capacity.
Newfoundland will have access to 1,990 megawatts from the new plants, four times the capacity it has today, while the remaining 7,200 megawatts will be sold to Hydro-Québec. The average cost of electricity from new and existing plants in Labrador will be six cents a kilowatt-hour, which would allow Quebec Premier François Legault to continue shifting to a low-carbon economy while providing residents and businesses with power at some of the lowest rates in the industrialized world.
“There are deep pools of value for all parties in the agreement between Quebec and Newfoundland,” Mr. Sabia said. He said Hydro-Québec is unlikely to strike new export deals to U.S. utilities, as soaring demand for electricity from customers in the province is expected to account for all the new power coming from the Labrador River.
Negotiations over the price Newfoundland receives for power – the province currently only gets about $20-million annually from the Churchill Falls contract signed in 1969 – and development at Gull Island have played out for years.
Discussions got serious over the past 12 months, in part because Newfoundland Premier Andrew Furey appointed Karl Smith, former chief financial officer at St. John’s-based utility Fortis Inc., as a negotiator with a mandate to strike a deal. Mr. Sabia said: “This is a well-balanced agreement where both parties can be satisfied because they got what they needed.”
Newfoundland’s credit rating is expected to rise as the province begins to receive new revenue from Churchill Falls next year, according to Morningstar DBRS. In a report on Saturday, the rating agency said the agreement with Quebec “is likely to lead to gradual improvement in financial risk metrics, but the magnitude of the improvement will depend on how proceeds are used (for program spending, tax relief, or savings/debt repayment).“
In August, Morningstar DBRS upgraded Newfoundland to a single A rating from single A-low, the first upgrade for the province in 12 years. On Saturday, the rating agency said: “Any improvement in critical ratings factors is likely to be modest and gradual.”
Hydro-Québec can pay for the three new power plants by borrowing on its own balance sheet. Morningstar DBRS said that “we do not anticipate any material impact on Québec’s credit ratings” out of Thursday’s agreement with Newfoundland.
“Hydro-Québec has the capacity and expertise to undertake these projects, as evidenced by the recently completed Romaine Complex development, which was delivered under budget,” Morningstar DBRS said.
[url]https://www.theglobeandmail.com/business/article-hydro-quebec-ceo-hails-labrador-projects-as-examples-of-canada-getting/[/url]
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