Is NB Power for Sale?

Selling NB Power to Quebec

If you blinked you might have missed. Right around the time kids were getting out of school and many New Brunswickers were thinking about summer vacation, the Liberals announced they are in talks with Hydro-Quebec to take over NB Power.

On the surface this does appear to be a good match. Both companies are owned by their respective provincial governments. NB Power is 100% owned by the people of New Brunswick and Hydro-Quebec is 100% owned by the citizens of that province. Also, both corporations are broken into logical components with divisions for generation, transmission, distribution and shared corporate services. Both NB Power and Hydro-Quebec operate a nuclear power plant.

But while they appear to be mirror images of each other in terms of organization, there is one major difference that puts NB Power is a very weak position at the Liberal bargaining table. And it's not just a size issue because Hydro-Quebec is about 10 times bigger than NB Power.

The real weakness of NB Power is that it is so unprofitable. And because it makes no money it has accumulated a monstrous amount of debt. Just to compare, Hydro-Quebec last year had accumulated over $22 billion in shareholders equity and they have paid down a lot of their debts. NB Power on the other hand has only accumulated $351 million in shareholders equity versus 4.7 billion in debts. In fact, NB Power probably owes a lot more than it is worth. Ouch.

This is the equivalent situation to going to the car dealership because you know that it's time to get a vehicle that is more fuel efficient, better technology, safer, etc. However, all you have to trade in is an old clunker with more than 200,000 km on it, rust spots everywhere, leaking oil and bald tires. Guess how much the dealer is going to give you for a trade-in credit. You will be lucky if they offer to take it off your hands for you for free.

Now to give them credit, the Shawn Graham Liberals are slick operators and smooth talkers, so maybe they will be able to get something out of those negotiations with the Province of Quebec. But that certainly has not been proven by history, if Quebec's negotiations with Newfoundland over Churchill Falls are any guide.