Tuesday, 18 December 2012


Given all the pomp and ceremony yesterday evening, you might have been left with the impression that Muskrat Falls was sanctioned. I have bad news.  Premier Dunderdale has less of a “sanction” agreement with Emera than she has a “Loan Guarantee” with the Federal Government.  In truth, she has neither!

What should have been a paragraph of unqualified consent, Emera’s Sanction Agreement runs 29 pages plus a Schedule.   
What did we get last evening? Essentially, a statement that Emera would play along with the NL Government if it wanted sanction now but only if NL was prepared to pay a big price AND only if they could still be permitted to walk away.  The sanction ceremony was a big charade.

Let’s look at some of the ‘conditions’ of the Sanction Agreement. It includes, in part:  quote

Recovery of costs on the Maritime Link project from NS customers remains subject to regulatory approval in Nova Scotia. The project partners have committed to ensure that the Maritime Link is built under the terms of The Sanction Agreement. These terms include:

•Agreement on a mechanism for dealing with adjustments to rate of ROE

In other words, “Recovery of costs” on Maritime Link (ML) must be recovered regardless what the NS UARB decides.  The sanction agreement requires that Nalcor subsidize Emera if the NS UARB sets a “regulated rate” that is less than that required to support the cost of the ML. Emera wants a “mechanism” for dealing with “adjustments to rate of ROE” (return on equity).  In short, this  process is one that removes any need for the UARB to set a rate high enough to pay for the ML.  Why? Because any amount, less than that, will be subsidized by the NL taxpayer.

The following “conditions” are also stipulated in Emera’s Press Release as being part of the deal.  They are not covered in the Sanctioning Agreement.  Therefore, they are covered in a secret side agreement which they will, no doubt, try to protect under Section 13A of the Sanction Agreement.  Section 13A is included, by the way, to mop up anything they missed in Bill 29. These are three more important conditions and Emera brags about them, in its Press Release.  Because they are not part of the Sanctioning Agreement, this is proof that there are secret Nalcor/Emera Agreements out there…somewhere. These three Conditions of Sanction are:

•Settlement mechanism for payment on the 80/20 true up 

•Agreement on the conditions under which Emera’s investment in the Labrador Island Transmission Link is assured

•Agreement on cost sharing of the Federal guarantee payment

What is the 80/20 true up?

What additional concessions does Emera want in order to feel safe about its investment in the Labrador Island Link?  Undoubtedly, Emera’s shareholders are concerned about their investment if the Federal Loan Guarantee evaporates. But, how much more does NL have to give away in order to get Emera to join the party?
Emera also put the cost sharing of the “break” fee, contained in the FLG, back on the table. How much more will that little trick cost us? Emera will dance with Dunderdale, but only on its terms and at our expense. There’s more…

4(c ) Nalcor Equity Investment – If Nalcor is required to make an equity investment it shall be done by purchasing Shares in Emera “or some other entity controlled by Emera”. 

What is Nalcor doing buying shares in Emera?

We are going to subsidize the rate payers of Nova Scotia.  Now, we are going to buy shares in Emera too.  Where is this going?

Part 7. Undertakings, contains three sub sections. It is worth reading because all it says is that Emera agrees, essentially, to talk to people.  Emera agrees to talk with the credit rating agencies.  It agrees to “initiate discussions” with the Federal Government about the FLG.  It agrees to use “commercially reasonable efforts to complete a System Impact Studies…”. This is fluff, better suited to an account’s and engineer’s calendar, to get done on time, rather than the stuff of a final agreement for “sanctioning”.

Then there is Part 3(h) in which the two CEOs of Emera and Nalcor give themselves dispute resolution powers…not their Boards; Ed Martin need not defer to the Government.

OH My, Oh My!

While Emera, for a very high price, permitted Dunderdale to have her ‘Show and Tell’ in the foyer of Confederation Building last night and even begged His Honor, the Lieutenant Government, to come along to lend it some shred of credibility, few, having read the so-called Sanction Agreement, will be impressed with Emera’s commitment to the MF Project or with the negotiating skills of Nalcor. 
Emera’s shareholders may feel better but the people of this Province should be livid.

Now, we are left to ask, is this contrived pseuo-sanction going to be a sufficient fig leaf to allow Mr. Harper to hold his nose and say, yes, this is ‘regional’ even though he knows Emera is really not yet in?
How much more will Nalcor give away to get Emera to spend its own money?

Even more, we need to ask, what is driving this process?  What is the hurry that Nalcor and the Provincial Government will do or give anything to get the cash freed up, to award those MF contracts?
After I finished writing, last night, I went to bed and dreamed.  I usually don’t remember dreams.  I did this one. I was at a restaurant where I discovered there were cockroaches in my stew.  Next time I see him, I must ask Uncle Gnarley, if it had any significance for the Muskrat Falls Project.