Posted: 08/13/2018 6:51 PM
Winnipeg Free Press
In its latest annual report to be posted online Tuesday, Manitoba's largest Crown corporation reveals a paltry net income compared with its burgeoning debt load.
Manitoba Hydro made $37 million in net income for the fiscal year ending March 31, down from $71 million the previous year.
Hydro also cited $19.2 billion in long-term debt – $2.8 billion higher than its last annual projection of $16.4 billion – which will also mean more interest to be paid. The company expects its amount owing to climb to about $25 billion within the next five years, said president and CEO Kelvin Shepherd.
"This level of debt increases the potential financial exposure from risks facing the corporation and is a concern for both the corporation and our customers who may be exposed to higher rate increases in the event of rising interest rates, a prolonged drought or a major system failure," Shepherd wrote in the annual report.
We’ve taken a balanced approach to addressing this financial risk that includes management restructuring and a 15 per cent workforce reduction, pursuit of additional sales of surplus electricity outside of Manitoba and regulatory filings with the Manitoba Public Utilities Board (PUB) seeking annual electricity rate increases.
In May, the PUB approved a 3.6 per cent average rate increase for Hydro customers starting in June, which was substantially lower than Hydro’s requested 7.9 per cent bump.
Major construction projects, including finishing Bipole III and continuing work on the Keeyask Generating Station, were significant factors contributing to Hydro’s overall debt this year.
Its annual report also mentions $50 million in "restructuring" charges, stemming partly from the voluntary departure program announced in April 2017.
The program saw close to 820 employees opt to leave Hydro by the end of January 2018, amounting to more than $90 million in savings annually, according to the company.
In an interview Monday, outgoing CEO Shepherd – who previously announced his plans to retire in November – said Hydro is unlikely to get back in the black without significant contributions from ratepayers.
"The working assumption I think by everybody is ultimately customers will have to pay the cost for their service and the cost for the service will include the cost of the debt. The question is going to be over what time frame will those costs be required (and) how quickly rates will go up," Shepherd said.
Manitoba’s Minister of Crown Services Colleen Mayer was not available for an interview Monday or Tuesday, her press secretary said. Mayer picked up the portfolio less than two weeks ago and would be tied up with briefings on the file, he said.
In a prepared statement sent by email, she thanked Hydro’s executive team and board of directors for their work over the last year.
"Reducing operational and administrative costs through avenues such as the voluntary departure program are good first steps in repairing the financial damage left by the previous NDP government," Mayer said.
Manitobans will continue to pay for the NDP’s mismanagement and political interference for years to come, and we know that there is more work to do to rebuild Manitoba Hydro’s financial position.
Meantime, NDP leader Wab Kinew said Hydro and the current government seem too keen to hike customer fees.
"This Crown corporation exists to provide Hydro to Manitobans at low rates. So keeping Hydro rates affordable, to me, is always the most important priority," Kinew said.
I’m a little concerned looking at what’s released today… that doesn’t seem to be as high a priority for the current government and the board of Hydro.
Manitoba Liberal Party leader Dougald Lamont blamed the former and current governments for Hydro’s financial predicament.
"For years, the NDP and the PCs have been taking hundreds of millions a year from Hydro - basically shifting government debt to Hydro’s books," Lamont said.
Hydro’s debt is going to be equal to the Province of Manitoba, and it is not only from building dams, it is because the PCs and NDP have been using Hydro as an ATM.
On-line comment on this article by Dennis Woodford:
Consider Keeyask generating station now under construction for $8.7 billion along with the $1.1 billion new transmission line to the US. The interest and costs on this portion of debt is over $400 million/year. Hydro claims Keeyask is not needed for Manitoba until 2040.
Now since 2010, the average price Hydro gets for its exports is 4 cents/kwh. When you take the energy Hydro says Keeyask will generate in a year and sold at 4 cents/kwh with little likely hood of increasing, then the revenue from the US is just about $160 million/year. The cost to generate all this export revenue is over $400 million. Hydro expects us to make up the difference with increased rates such as the 7.9% they asked for.
This is the biggest financial blunder in Manitoba's history. A detailed public inquiry is called for. What about it Mr. Premier?
To put things into perspective, Hydro Quebec raised their electricity rates by 0.3% on 1 April 2018, while stating that Manitoba's residential rates were 22% higher than Quebec's. Then on 1 June, residential rates in Manitoba went up 4.04% so that our residential rates are now 27% higher than Quebec's. No longer is Manitoba's electricity rates the cheapest in Canada.