Monday, 26 July 2021

STAN MARSHALL'S TENURE SAYS AS MUCH ABOUT US AS IT DOES HIM (PART 2)

The Report of the Commission of Inquiry named the chief culprits of the Muskrat fiasco as Ed Martin, Gilbert Bennett and the PMT. Some of the originals, including Bennett and Harrington, were permitted to keep their positions. The Commissioner’s conclusion evokes a number of questions including whether Stan Marshall was the right person for the job.

Last week’s piece concluded that he was not. 

More important for this conversation, is the Government’s relationship with Marshall, the public’s reaction to their hands-off approach, and the worry that our expectations of  politicians and public servants remain low.

Let’s start here.

What is Muskrat’s status five years after Marshal’s arrival? 

Monday, 19 July 2021

ASSESSING STAN MARSHALL'S TENURE AT NALCOR (Part 1)

As Stan Marshall headed for the exit at Nalcor Energy on June 10th – the Annual General Meeting completed, and the media given something akin to an oratorio on his own tenure – he might have been expecting public applause for a job well-done. After five weeks there is no echo to be heard – there having been not a sound!

Marshall reminded us that he arrived at Nalcor at a time of crisis – which is true.

He also suggested that after five years of giving the Crown Corporation his guiding hand, everything about the Muskrat Falls project is under control – which is not true.

Nor does his claim hold water that Nalcor’s expertise is something the province can’t do without.

Monday, 12 July 2021

RATE MITIGATION: FOOL ME TWICE…

Throughout the Nation’s Capital and beyond, the loud drumbeat of an impending General Election is heard. The pundits forecast that the new GG will be asked to dissolve Parliament around the end of August. That may leave as little as six weeks for PM Trudeau to stop dithering over “rate mitigation” and address the Muskrat Falls debacle.

Newfoundlanders are doing themselves no favours ignoring the fact that such an agreement remains outstanding.

The public are witnesses to Premier Ball’s failed attempt but have learned little from the experience.

Ball’s good intentions are echoed by Premier Andrew Furey who seems content if a deal is done by November though he has no proof such an outcome is assured.

By then, Ottawa will have forgotten – again - that this place exists.

Monday, 5 July 2021

BLOCKCHAIN MINING AN ALTERNATIVE FOR LABRADOR POWER WITH GREATER PROFIT

PlanetNL38: Large Pent-Up Demand For Power in Labrador

An Alternative to Export With Greater Profit

Ready for some eye-popping news?  NL Hydro has received more than enough requests in a relatively short period, to not only sell out all Muskrat Falls energy but they also have enough demand to sell all Churchill Falls energy if they had it available.  Yes, every watt generated would go just to meeting this backlog of power requests and its all in Labrador – potentially nothing would have to flow through Hydro-Quebec.  If only this year was 2041!

This must be great news for rate mitigation then?  Not in the slightest really.  You see, all this demand is focused on solely the Labrador Interconnected System (LIS), home to the cheapest utility rates in North America.  Current rates are set so low, Government would be unwise to allow the connection of any new customer in the area.  There is more money to be made selling the power out of province.

How messed up is that?

Monday, 28 June 2021

DAVID VARDY'S TEN COMMANDMENTS FOR RATE MITIGATION

Guest Post by David Vardy

THE DECALOGUE: THE TEN COMMANDMENTS FOR RATE MITIGATION

Introduction

The silence on rate mitigation is too deafening. The public needs to know what is happening and what objectives are front and center in the negotiations, now led by former Nalcor Chair Brendan Paddick. We need to adopt a set of principles or criteria, which can both guide the negotiations and measure their success. This post is an attempt to propose ten “commandments” for successful rate mitigation. Because the “misguided” Muskrat Falls project and its impacts on the province are of such “Biblical” proportions it is appropriate to invoke the Mosaic law of the Decalogue, The Ten Commandments.

Premier Andrew Furey was first sworn in as Premier of Newfoundland and Labrador on August 19, 2020. He appointed Brendan Paddick as chair of the Rate Mitigation Team on September 25, 2020. This signalled that the rate mitigation plan announced on April 15, 2019 by Premier Dwight Ball remained unfinished. It also signalled that the progress reported by Premier Ball and regional Minister Seamus O’Regan at a press conference on February 10, 2020 had not advanced as planned and needed a “reset” and a new Team.

Thursday, 24 June 2021

EVER WONDER ABOUT THE VALUE OF GULL ISLAND AND CHURCHILL FALLS?

Guest Post by PlanetNL

PlanetNL37: Market Valuations for Gull Island and Churchill Falls

Plus The Atlantic Loop and A Curious Re-Analysis of Muskrat Falls

PlanetNL36 provided an analysis of the fair market value of Muskrat Falls based on prevailing wholesale electricity rates.  The analysis concluded that the project would be completely incapable of generating any net earnings to put toward return on debt or equity. Worse again, like a true boondoggle it could continue losing money after it is put into operations.  The Muskrat project should never have made it beyond round one of screening alternatives, let alone been sanctioned and built.  That Nalcor and Government sanctioned a project that forced ratepayers to pay ten times greater than market price, and with cost overruns more than twenty times market price, is an obscenity.

The same methodology for economic worthiness is used to consider the market value of the potential Gull Island project and the Atlantic Loop.   In addition, it will be used to put an estimate on the 2041 market value of Churchill Falls.  Plus, one final look at Muskrat will consider whether the project in a lesser form might have been more viable.

To better understand the methodology, be sure to read PlanetNL36 first.

Monday, 21 June 2021

THE HARD TRUTH ABOUT THE VALUE OF THE MUSKRAT FALLS PROJECT

Guest Post by PlanetNL

PlanetNL36: A Market Value Estimate of the Muskrat Falls Project

Simple Calculations Reveal Hard Truths

Have you wondered what the $13.1B Muskrat Falls project would be worth if it were treated as a business that had to fairly compete on the wholesale energy market?  Was it even worth the original cost estimate of $7.4B indicated by Nalcor at the time of sanction?

This post uses a simple economic analysis method useful for determining the fair market value of most any business or to determine if a project concept may be viable.  The accuracy of the method mainly relies on inputting honest numbers. 

This is the analysis Nalcor would not do and still refuses to acknowledge.  You will see why.

Monday, 14 June 2021

TERRA NOVA - IS THERE ANOTHER WEAPON IN OUR ARSENAL?

 Guest Post by Ron Penney

We’ve been told that the drop dead date for the sanctioning of the refit for the Terra Nova FPSO is June 15th and that the decision must be unanimous among the partners. Every indication is that there isn’t unanimity and that the likely result will be that the refit will not go ahead and the field will be decommissioned and abandoned. 

The Official Opposition has disclosed a briefing note from provincial officials on the possibility of the province taking an equity position in the project. This would have been a mistake given our dire fiscal situation. We can’t afford to take any more risks. Muskrat Falls, I rest my case. 

I’m pleased that the government just announced that they aren’t going to go down that road.

Taking an equity position would require even more borrowing,  exposing ourselves to further  credit rating downgrades, already trending downwards. Once the ratings get to the point that they are no longer investment grade, they would be junk bonds attracting higher rates of interest, assuming anyone would lend us more money. 

Friday, 11 June 2021

NALCOR ANNUAL REPORT: THE BAD NEWS STAN MARSHALL FAILED TO RAISE

Guest Post by PlanetNL 

PlanetNL35: Nalcor 2020 Annual Report Released

A Document in Search of Good News

It was a foul day outside so what is a dog to do but read the Nalcor Financial Statements and catch up on the latest numbers as Stan Marshall says farewell at the morning press conference.  This short post delivers two notable items of public interest that went unacknowledged by the executive team at the event.

Big Losses in Oil and Gas

Somehow the loss of $49M in 2020 on “settlement of commodity swap contracts” did not get much attention.  Nalcor did talk at length about oil prices tanking and recovering but not this item.  To do so would be to admit management error. 

The power of déjà vu says we have been here before.  Uncle Gnarley rightly chastised Nalcor for the loss of $66.9M in 2017 on a pure financial gambit after receiving $1.8B in funds through the second Federal Loan Guarantee to keep the Muskrat Falls project going.  That was reckless and ugly.  Parking the cash safely was not good enough.

Tuesday, 8 June 2021

Government Accountable for $1B+ Giveaway to the Iron Ore Mining Sector (Update)

 PlanetNL34 Addendum: Additional Information On Labrador Industrial Rate Policy

On the same day as PlanetNL34 was posted on the Uncle Gnarley blog, some pertinent information was discovered while researching for future postings.  The query into Government inaction on the Labrador Industrial Rates Policy (LIRP) is no longer a mystery: It was indeed implemented. 

An evidentiary trail of breadcrumbs led to finally finding the LIRP revenue stream in an unexpected place.  This means some key errors were made in PlanetNL34 that will be corrected and clarified here.  At the same time, Government is by no means absolved as they substantially failed to capitalize on the opportunity, and they appear to have committed to the deed until 2041.