HQ shags Innu in new CF "reconciliation" deal
Everything New Dawn is Old Dawn Again
Former Clerk of the Executive Council Dave Vardy says Hydro-Quebec made about 16 cents a kilowatt hour from electricity it sold into the United States during the first three months of this year.
That makes the electricity it gets from Churchill Falls worth about $4.6 billion a year.
Andrew Furey, John Hogan, and the provincial Liberals will sell all that electricity to Hydro-Quebec until 2075 under Furey’s new deal with Francois Legault for an average of about 2.5 cents a kilowatt hour. Total of $33.8 billion in 2025 dollars, according to the deal announced last December. It’s practically a fixed price contract, just like in 1969. And the electricity HQ will pay just $33.8 billion for is worth $230 billion to HQ in 2025 dollars.
Back to the Innu.
Allow for Hydro-Quebec’s costs, including what it will pay to NALCOR for the electricity, and there’d be more than $3.65 billion in profit for HQ but let’s call it that for the sake of round numbers and easy math.
$3.65 billion a year works out to about $10 million a day in profit.
Remember that number: 10 million each day.
Last Friday, Hydro-Quebec and the Innu Nation announced that as a settlement of an Innu claim worth $4.0 billion in total, the Innu will accept about $5.4 million each year for the next 16 years.
$87 million in total or roughly about nine days profit in one year and then that’s it. Annually, it works out to only about one half of one day’s profit for Hydro-Quebec in any given year at the prices Vardy used.
One half of one day, each year, for the next 16 years. The other 364 and a half days belong to Hydro-Quebec.
That’s what the Innu Nation accepted.
Andrew Furey, John Hogan, and the provincial Liberals accepted one sixth of what the electricity is worth. The Innu are in good company in the contest to see who the biggest sucker was for Michael Sabia’s electric con job.
Then you have to look at the words of the HQ/Innu news release. Hydro-Quebec promised also to pay three percent of its dividends from Churchill Falls to the Innu Nation payment “for as long as Churchill Falls produces power.”
Wonderful stuff except that as its financial statements show, CF(L)Co has not paid any common dividends to either of the two shareholders -NALCOR or Hydro-Quebec - since 2008. If the partners have gone almost 20 years without paying themselves a dividend, they may not pay dividends again during the long construction of these expansion projects. No one knows when there’d be a dividend next or if there’d be one again.
No dividends to Hydro-Quebec means no dividends to the Innu Nation.
Three percent of nothing is nothing.
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In one sense, this new Innu deal looks a lot like the New Dawn Agreement between the Innu Nation and the Government of Newfoundland and Labrador that covered Muskrat Falls and Gull Island and gave the Innu a small pile of cash for their claim to Churchill Falls.
New Dawn promised the Innu the greater of $5.0 million annually or five percent of After Debt Net Cash Flow from Muskrat Falls and Gull Island. The Innu expected the five percent would produce billions in revenue from Muskrat Falls alone because they accepted the same bogus figures the government spewed out to fool itself into thinking Muskrat Falls made sense.
As it turned out, rate mitigation would rob them of the hoped-for cash windfall but to be honest, the Innu signed a dodgy deal anyway. Any agreement that ties payments to a net result leaves lots of room for the people paying to use creative accounting to reduce the payout to nothing or as near nothing as they can so they can keep as much cash as possible for themselves. Even spelling out the definition of what “after debt net cash flow” means, as New Dawn did, is no insulation since there’s always something - like the electricity rates that drove the cash flow in the first place - that someone left out. With this new deal with HQ, Innu Nation brought back the same lawyers to repeat their brilliant work again on the new New Dawn Agreement, or as your humble e-scribbler labeled the windy and elusive original deal, the Matshishkapeu Accord. The HQ deal looks a lot like Fart Man 2 and the results are not funny for Innu people.
The pathetically small amount of money is not the only weird thing about the Innu deal. Curiously, the Innu accepted a payment from Hydro-Quebec - as customer of the original power contract, not shareholder in CF(L)Co) - to settle the lawsuit but only let it last 16 years. That lines up with ending of the original power contract that expires in 2041 but since HQ is settling this claim as the customer and architect of the original deal, there’s no obvious reason to accept cash for only 16 years of a deal that carried on for a total of 41 years and will go another 34 beyond that for more than a century in total. Since HQ has accepted that it owes the Innu something in the first place, then 16 years is nowhere near enough.
The Innu settled for $87 million. The full 41 years of the original Churchill Falls deal at $5.4 million a year would come out to $221 million. If you wanted to cover just the 50 years of the second Churchills Falls deal you'd be looking at $270 million. Realistically, the Innu could expect an agreement that started in 1969 and carried on at least until 2075, the end of the second Churchill Falls deal. That would be $572 million. Now think of the principle that HQ will pay for as long as the plant makes electricity. That would make the Innu give-away infinitely large.
We don’t know much about this Innu deal but if it’s as bad as the one Andrew Furey signed then maybe the $87 million is the total valued in 2025 dollars. That means inflation will eat away at the $87 million making each successive payment smaller and smaller in value.
To give you a sense of how big that Furey-esque shag-up might be, understand that the Andrew Furey con job sets the price of electricity from Churchill Falls at an average of 2.5 cents a kilowatt hour from now until 2075 but the value is pegged to 2.5 cents in 2025 dollars. That’s only a little more than the original 1969 price adjusted for inflation (1.6 cents a kilowatt hour in 2025 dollars) when the retail price across New England is six times that.
And if that wasn’t bad enough, HQ’s promise to give the Innu money as long as the plant makes electricity assumes HQ will get all the electricity out to even 2075 let alone for all eternity. If a future Government in Newfoundland and Labrador changes that, there’d be a real question about whether HQ would still owe the Innu anything. After all, this deal is between HQ as the main customer for the electricity from Churchill Falls, not the power plant’s owner. HQ may not be a co-owner of the plant in the future, either .
Bear in mind, too, that this deal settles a claim that *pre-dates* the mitigation fiasco. The provincial government and Innu Nation settled that dispute quietly last fall without disclosing any details of the agreement. Meanwhile, neither Innu Nation nor Hydro-Quebec released a copy of the agreement-in-principle. Nor has either NL Hydro or CF(L)Co issued any statement on the 2020 lawsuit since Friday’s announcement even though CF(L)Co was the first respondent in the 2020 lawsuit and Newfoundland and Labrador Hydro is the majority shareholder in CF(L)Co. This deal is likely a whole lot worse than it looks even in the skimpy details we’ve got so far, just like Andrew Furey’s deal.
Aside from the way this agreement apparently shags over the Innu yet again and they’ve agreed to it, yet again, that HQ is talking nationally about a project and a plant HQ does not own while NALCOR is silent should be enough to raise eyebrows across Newfoundland and Labrador. It fits, though, with the unmitigated giveaway of the deal Andrew Furey signed with Francois Legault.
As of Tuesday afternoon, no other news media in the province have reported on this story except AllNL. Meanwhile, the Globe and Mail is peddling six month old myths about how this deal came about even though we’ve know since the beginning that this deal has exactly nothing to do with Francois Legault’s performative acknowledgement that Newfoundland and Labrador got screwed in 1969. Well, nothing to do with the deal except in the way all con jobs rely on the gullibility of the mark. And in that sense, the Innu are apparently pure Newfie just like Andrew Furey, John Hogan, and the Liberals.
Agree with your take Ed, and that Innu leadership has a lot of responsibility. But I wonder, how do they and their advisers or many in our province really understand the long term impact of how inflation erode values? Some Canadian Indian treaties, out west, still has the Mounties, for the Crown, pay out 5 dollars a year, as agreed to in the 1800's, and no allowance for inflation.
And the immense cost and delay of challenges to the Supreme Court, on any issue as to Indigneous rights.
As to this MOU planning to pay 1/6 the value compared to present, today's replacement power costs.......but what of future fair value allowance?
Export rates since 1969 has gone up 6 or 7 fold, for both residential/ commercial and industrial. And this when, in the past 50 years, fossil fuel as the alternative, has been plentiful and climate change for that period not a factor.
Going forward for 50 years, oil supply will be less, and much more expensive to extract in most of the world, and fracking has even more envirmental risks than conventional oil extraction.
World consumption is now about 100 million barrels per day, such that the original reserves of Hibernia, of 600 million barrels, would last the world for only 6 days!
Now we are faced with the need to reduce consumption big time as to climate impacts, while these fuels still supply by far most of the worlds electricity, and for transportation etc.
Unless by some miracle of factory produced modest cost modular nuclear power plants, one could expect power rated to increase 6 fold or much more over the next 50 years, whereas hydro, is the golden goose or jewel, as Vardy says.
HQ is by FAR the powerhouse of hydro generation in Canada, with CFs being about 15 % of their total. This will keep their province relative low power rates. To be agreeable, as Nalcor and our government is, to be tied 90 % to their domestic rates is foolish indeed.
I suggest Vardy, or you, need to do more media, with a board and a Trump like marker, to show the public the real value of this MOU is mere crumbs for NL. A picture is worth a thousand words. Erin Burnett on CNN uses that technique, with good effect to illustrate the true impact of tariffs.
Winston Adams
In 1939 when war broke our, my father, Capt Esau Adams, had 50 Nfld men at his fishing and saw mill operation near Hopedale. He barely managed to get his crew home late in the season, before freeze up. He stayed in Labrador all that winter with the Eskimos who then were engaged at the sawmill, 50 miles inland from the coast.
That winter an extended family of Innu, both adults and children visited for weeks, seeking assistance. They were poorly dressed, in a starving condition, having found no caribou.
Later he wrote his journal (still unpublished) about their plight. He stated that the Indians had been robbed by people of his generation and their forefathers. That the Indians in Labrador were little known to the outside world, were very much deserving of help, but neglected , despite considerable aid being sent from Canada and the USA overseas. The Eskimos were only marginally better off.
I have seen this neglect continue in my generation, and of all coastal Labrador. Now, most still without roads nor connected to the electricity grid, and impacted by the high rates from diesel fuel plants.
The Furey CFs version 2 (which he said "changes everything"), does nothing to change that.
And the MOU, as assessed by Vardy, Hollett, Danny Williams and others, exposes the flaws from the hype, of another one sided deal no better than that of 1969.
As a engineer in training, I worked on the construction of CFs for two summers, under the oversight of an engineer from California, and others from Quebec alongside many Nlfders. I then wondered whatever happened to the Indians my father had written about, as none worked there.
Your piece shows how these people, the Innu Nation, continues to be robbed, as never before seen, by these contracts, apparently by incompetent lawyers or issues of conflict of interest.
To the extent that Nflders feel shortchanged from benefits by the value of the vast natural provincial resources brought by Confederation, we do even worse by this highway robbery of the Innu, Inuit and settlers of coastal Labrador.
Shame on our province, the Premiers, and other politicians, institutions and businesses who turn a blind eye to this ongoing travesty.
Winston Adams