Saturday, 9 August 2014

ED MARTIN’S UNFETTERED SPIN MAKES NALCOR ONE BAD SOE

When Governments run State Owned Enterprises (SEOS) the public have a right to be confident they will be operated professionally.  There are many ways to measure credibility, including Nalcor's.

One might be to count the number of residential style generators installed since DARKNL. Just recently, I saw one group of workmen lift a monster version onto a concrete platform for a private dwelling.  It was attached to a 146 gal. fuel tank!  Is this the low point of confidence in Nalcor? I pondered the question doubtfully.

Another benchmark might require the evaluation of how Nalcor’s senior management treats the public. Are they respectful? Do they treat the public like the the shareholders they truly are? 

Off the top, I suggest SEOS should be more than non-partisan; any politics ought to be minimal. In the same way you never hear of the CEO of the Newfoundland Liquor Corporation bolster any but the policies of that Agency, so, too, has that been the case for CEOs of Newfoundland Hydro; until now. 


Photo Credit: CBC
Nalcor CEO Ed Martin likes to ‘gild the lily’; his style is less that of a bureaucratic Head of an SEO than of a Cabinet Minister, an elected politician. He hasn’t learned the discretion required of his role. Hubris may be the root cause; another possibility is that he is compensating for politicians, who aren’t up to the job.

Certainly, former Premier Dunderdale, Natural Resources Minister Jerome Kennedy, Premier Tom Marshall and current Minister Derrick Dalley, deferred most questions on Muskrat Falls to Nalcor.  Each one relied upon scripted phrases like “we need the power” or “it’s the lowest cost option”. Martin seems not to mind; he is content to meet the media and put unfettered ‘spin’ on his dialogue. 


Martin noted: “When the Muskrat Falls Project was sanctioned…in December 2012, the estimated capital cost of the development was $6.20 billion… (e)xternal market pressures, combined with strategic investments to enhance system reliability, operation and productivity throughout construction, have resulted in an updated capital cost forecast for the project of $6.99 billion…..extremely competitive construction industry locally, nationally and globally, have increased the facilities capital costs on the project… Nalcor has also made several design enhancements to improve system quality and reliability...”

What is wrong with that narrative?  

In the first place, the $6.99 billion figure is incorrect. The amount of $1.2 billion must be added to reflect ‘interest costs during construction’. 

Unfortunately, the media often repeats Martin’s assertions without qualification.  In so doing, they assist him in perpetuating “untruths” regarding the project. 

Of course, the original construction figure, like the number $6.99 billion, had no independent authentication either; the public and the press accept the numbers are ‘real’ because Nalcor says so.  Were they compiled using good engineering practice? Was the original figure just a ‘plug’ to facilitate project sanction? Some very well placed people worry that is the case.

Martin never explained why the “design enhancements” occurred so late in the design phase of the project; the PUB warned him about an under-designed Labrador Island Link (LIL) at the DG-2 stage. Then, too, he was warned by a good many critics of the cost pressures on all megaprojects; that he was compounding local inflation by untimely adding to the work at the Vale and Hebron projects, among a plethora of smaller ones.  The Nalcor politician does not get asked: why has he not listened?

On April 15, 2014 the CBC quoted Martin saying “the hydroelectric mega-project also might not deliver first electricity by 2017 as planned”.  The comment wasn’t squared with those of the Emera CEO, Chris Huskilson, who a few weeks later who commented to the effect that Muskrat is still on schedule.  Nalcor simply concurred. When Ed Martin makes a statement he is right; when he contradicts himself he is still right.  Ostensibly, when Martin is wrong, he is right.  Who would notice? Perhaps more people than you think.

The piece de resistance was spoken on July 26th "Update" in this line of Nalcor’s Press Release:

“Over the life of the Muskrat Falls Project, significant value and cash flows in excess of $30 billion will be generated by the project. This will provide a substantial benefit for all Newfoundlanders and Labradorians,” said Martin.

Why, after just acknowledging project cost increases of $800 million would Martin raise the issue of “cash flow”, except to impress an uninformed press that any cost increases are still good for the public?  It’s not as if “cash flow” is “profit” though you are forced to wonder if such confusion was exactly what was intended.  Neither is it the case that a large share of that “cash flow” will arise from the sale of power to the export market.

Exported power will be sold (to Nova Scotia) for a mere fraction of its development and transmission cost.   

Hence, the lion’s share of Muskrat “cash flow” is flowing out of island ratepayers’ pockets and into Nalcor’s pocket, on its way to the Bondholders or to pay back the Province for supplying the increasing amount of borrowed equity required to fund the project. Are you feeling richer yet?

Martin says the $800 million represents only another $8 per month on residential power bills.  He offers no reminder that rates are artificially kept low in the early years following Muskrat's commissioning.  He hopes you won't mind that both you and your kids will get whacked later. 

It’s not a good feeling watching electricians busily installing the domestic generators that will make Nalcor’s management practices irksome rather than painful for those who can afford a “back-up” power system. Then, too, when so much money from the public purse is being used to fuel ‘bafflegab’, you know that Nalcor ought to be headed, not by a PR man, but by someone who can keep the lights on.

Nalcor’s CEO might get more respect if he were more candid and behaved less like he is fighting the next election.


That shouldn't be too much to expect; but it is.

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