Go a step further. Find a utility company to come in and execute the whole thing. Cause we can’t have the government running stuff. Every time they try, taxpayers end up with a massive bill. Warren Buffett energy company, for example, delivers power to 13M people. No government involved. Works way better. Way more efficient. And doesn’t drown out grandchildren in debt.
Brilliant idea Ed! Predictably, the minority shareholder might claim a remedy as an oppressed minor shareholder under the Corporations Act, but in the context of the past 60 years, the majority shareholder shouldn't worry too much about that. The big question is whether the Premier is open to proceeding along your suggested route. Just imagine, we could be independent of Quebec, and finally cast off the financial yoke.
Ed, ........I had considered the matter of buying HQ shares a few months ago, but not this approach, or this time, but starting in 2041.
The fair value you suggest by 2 approaches is about 1/2 billion or 6 billion. I would value CFs assets as about 100 billion, suggesting HQ share at 33 billion. A very different situation. If a fair value for electricity produced is what is called market value, and that market is the NE USA instead of HQs market, ( industrial and residential), that is two way different valuation. If fair value for the CFs plant and assets, is market value , then it seems the 33 billion for HQ 's share may be fair.
The value of 0.5 Billion for HQ share is a accounting trick,I suggest, using depreciation, and the 6 billion not much different as to the true share value, the condition of the assets, and its replacement cost, and increasing value as green energy. Here in the town of Logy Bay I bought 1 acre of land in 1975 for 6,000 dollars, and now it is appraised and I pay a property tax on that for a value of 100,000 dollars. Which is closer to the true value, or market value today?
MFs cost about 14 billion, (Plant and transmission), and produces relatively little power compared to CFs, and it's power reliability to Nfld very poor compared to the the CFs system.
Can the courts endorse a fire sale of the HQ shares as you suggest? It seem to simple to have value, to me anyway. Not the idea of purchasing HQ shares at some time if they want to sell, but to force this as you suggest, I can see it being unrealistic, and doesn't pass the smell test?
So what smart lawyers do we have to make this happen? Name three, or two, or one.
The partners have decided a fair value for the electricity is no more than two and a half cents a kilowatt hour, at best. In the current contract, it is not merely worth less, it is worthless. Hence my point about QC being effectively barred from squawking about consideration of the value of the product given their own valuation of the electricity in 1969 and again in 2024. You ignore this repeatedly.
Quebec is not entitled to market value of the plant and electricity without paying market price for the electricity, even once.
Thierry Vandal put the $20 billion price on it. That's one bound. The other is the fixed asset valuation in the financial statements. The latter is again one the parties have already accepted as a fair market valuation.
Replacement cost based on the original cost plus inflation gives you only $9 billion. $20 billion is a fair guess at a replacement cost but since Quebec has recovered all of its costs, been handsomely compensated for its risk and, in effect been paid whatever it might be entitled to for its loss in 1927 (effective nil anyway), then settling up somewhere between a few hundred million and $6 billion is good enough.
MF was overpriced due to bugling and incompetence so it cannot be used as a fair estimate of replacement cost. Ditto the absurd idea it will cost $24 billion for Gull.
But regardless of the price, the principle drives all, and the principle is that Hydro-Quebec has no right of any kind to any shares in Labrador electricity plants, full stop.
If the situation were reversed, the Newfies would have been tossed out of Quebec long ago, with no money at all. My proposal is fair and reasonable.
I will admit my estimate of 100 billion is on the high of other estimates, but I seem to recall one other at about 90 billion. I look at this from an engineering perspective, both with Nfld Hydro, 230 kv grid, and some work on the CFs construction in the 1960s, and : the nature of the 80 or so dykes to last 200 years or more, the excavated powerhouse at 1000 feet deep giving this site the most MW capacity vs reservoir area in the world, the low risk of major power outages compared to the LIL, it's capacity to benefit from low cost wind additions of some 5000 MWs, and pumped hydro, and other upgrades and more features.
I feel that HQ would value this at my estimate or higher, as it's ability to supplement the high reliability of their grid, and especially to the overall PQ economy ( low industrial and low residential rates). I would like to know Vardy's and May's opinion if the true market value of this asset, though they have limited expertise of the unique engineering aspects of this world class resource, which Vardy calls the Jewel of all NL resources.
HQ will low ball the asset value as you suggest, but just try and buy their shares at cheap prices and evaluation , and see what happens, as to the value then........ my opinion.
As for Warren Buffett, he has at times donated 25 billion of so to non profit causes, but buys into existing companies he calls value investing. CFs is at present not a good buy in, and not based as the last MOU. He would have to see a good path that green source of electricity can get market value for that energy, and if mostly through export or industrial use within Labrador or a combination of that. That requires an industrial plan for Labrador and will take 10 or 15 years or longer to develop and implement. Buffett no longer is in charge, but he promoted a Canadian who has long worked with him, given Buffet is now in his 90s, but still much engaged.
You say my estimate is absurd, and I thinks so is yours, but we look at this with different lens. You say all depends on principle . You have quoted Danny Millions as saying "all principle converts to dollars"! Which probably says more about Danny's Principles, but not for all.
With due respect Ed, , I think you are on the right track, but not the best road to get there. How do others feel on this approach?
This is a political question, not an engineering problem.
The value of the shares is a matter of debate.
Think of it as being similar to the "value" of the Furey capitulation. Furey and his people literally made up a value of hundreds of billions of dollars that could not stand up to even casual scrutiny. It was deliberately exaggerated.
The nationalization law would contain a simple way to set the value. We could copy Quebec's approach to compensating the companies expropriated to create HQ. The PQ would look like hypocrites for opposing when someone else does what Quebec government's did before it.
If Quebec wanted to sue at that point, they could do so, understanding that making the relationship difficult risks an enormous asset to *their* electricity system that they cannot replace easily.
Ultimately, this enormous asset, as you describe it *ours* already. we are simply removing Quebec's small and entirely accidental shares that have caused enormous political problems for decades. The shares have poisoned what would otherwise be a healthy mutually beneficial relationship. Rather than have Newfoundland and Labrador capitulate to Quebec, which is what the Furey mess does, this is the alternative solution in which Quebec leaves Labrador and treats Newfoundlanders and Labradorians with the respect we should not have to beg for, cap in hand.
Quebec loses nothing. It can still buy the electricity up to 2041 and potentially beyond. The only difference is that Quebec would have to pay a reasonable price for the electricity that they have been unwilling to pay even now under the new deal. Newfoundlanders and Labradorians would simply insist, quietly, on the same respect and regard that Quebecois(e) are due and which they nationalized their hydro system to attain 60 years ago.
I suggest it's political , engineering and and economics problem.
Go back in time when HQ designed a AC system at 735 kv when their max was then 315kv and our island 230 kv, and the max world wide was 400 kv. This was a massive engineering achievement for many components and one 735kv line could transmit as many as 4 lines at 315kv. So, as to land space reduction and structures heavily built etc, to handle that 735 kv lines; DC systems then was not economic and a bigger risk than the 735 KV AC
Why would their 33 % ownership be a fluke, and they also paid the full cost of this project?
I may have estimated values of CFs with the adds on of 1100 Mw at about 125 B, on your prior posts before.
So I just tried Gemeni AI for an opinion of market evaulatoin and it says your range would be a non starter for PQ.
For further inputs I get his from Gemeni as to Market Values
1. CFs generation alone > 76 to 86 B
2 adding the value for the dykes etc > then totals 90 B
3. Revenue Value at energy sales at 8 cents per kwh > 41-51 B
4. Market Value > 45 to 90 B depending on the replacement costs or Revenue capability
5. Adding Gull Island , the Market Value increases to about 130 B for HQ
6. Adding the 1100Mw to existing CFs and then their ability to add 5000 mw of wind to this > Market Value is huge, of 140 to 160 B. This whole scheme enables HQ to store hydro, and so that wind and hydro together allow exports to the NEUSA at their peak rates with rates of about 20 cents per kwh, instead of now about 15 cents per kwh.
Any of those values multiplied by 1/3 would be HQ Share Market Value framework , I sugest.
Politics: that the Innu holds immense statuary rights and ability for all this and should be compensated to the 100s of millions per year, or this gets hung up long term in the courts. Meanwhile Tony and crew says Innu only have a history there for 300 years!!! Sound strategy?
And you suggest a Market Value of 0.5 to 9 B for HQ fair share.
As to politicians and lawyers and hiprocracy.........for most , that is their trademark, is it not?
Yes Furey's glowing statements of over 200 B for NL that all our problems would be solved, from that MOU, ............didn't pass the smell test. Your assessment of worse than 1969 seems dead on.
I suggest your idea of a Strategy of a Plan for transition of PQ use of that power to mostly Labrador development and power use is the correct one. That is PQs plan for both Quebec and Labrador hydropower, and they took risks and expertise, and financing.
So , where is NL' Plan as an alternative to mostly exports? Otherwise HQ will maintain it's stranglehold, as if the 1927 boundary was in their favour, That's harsh business and politics and economics and their superior world class engineering capabilities.
read my puece from last Monday, which explains how they got the 34%. It had absolutely nothing to do with their participation in the construction of the plant. They got the 34% because the nationalized the private sector company that had bought into Churchill Falls when HQ didn’t even exist.
HQ has no business owning any part of Churchill Falls and the easiest way to solve the considerable political problems that have resulted from that 1964 accident or to simply chuck them out with appropriate compensation.
Was that strategy of them to get it that way, or a fluke? And appropriate compensation is the 100 billion dollar question. And for half a century seem PQ and HQ has been better that chucking and chuckling too. Certainly is is doable, but not easily or quickly is my guess. The aim is sound. but seems a bit of a Hail Mary, as to the method. time will tell, (Des Sullivan says we have the time) or Tony easily caves. Was Leveque around then with that expropriation resulting in 34 % ?
Go a step further. Find a utility company to come in and execute the whole thing. Cause we can’t have the government running stuff. Every time they try, taxpayers end up with a massive bill. Warren Buffett energy company, for example, delivers power to 13M people. No government involved. Works way better. Way more efficient. And doesn’t drown out grandchildren in debt.
You go Ed!
A sensible, low cost, great benefit solution!
Now if only Tony could have an epiphany.
Brilliant idea Ed! Predictably, the minority shareholder might claim a remedy as an oppressed minor shareholder under the Corporations Act, but in the context of the past 60 years, the majority shareholder shouldn't worry too much about that. The big question is whether the Premier is open to proceeding along your suggested route. Just imagine, we could be independent of Quebec, and finally cast off the financial yoke.
Possibly.
CFL Co is registered as a federal corporation if I remember correctly.
Ed, ........I had considered the matter of buying HQ shares a few months ago, but not this approach, or this time, but starting in 2041.
The fair value you suggest by 2 approaches is about 1/2 billion or 6 billion. I would value CFs assets as about 100 billion, suggesting HQ share at 33 billion. A very different situation. If a fair value for electricity produced is what is called market value, and that market is the NE USA instead of HQs market, ( industrial and residential), that is two way different valuation. If fair value for the CFs plant and assets, is market value , then it seems the 33 billion for HQ 's share may be fair.
The value of 0.5 Billion for HQ share is a accounting trick,I suggest, using depreciation, and the 6 billion not much different as to the true share value, the condition of the assets, and its replacement cost, and increasing value as green energy. Here in the town of Logy Bay I bought 1 acre of land in 1975 for 6,000 dollars, and now it is appraised and I pay a property tax on that for a value of 100,000 dollars. Which is closer to the true value, or market value today?
MFs cost about 14 billion, (Plant and transmission), and produces relatively little power compared to CFs, and it's power reliability to Nfld very poor compared to the the CFs system.
Can the courts endorse a fire sale of the HQ shares as you suggest? It seem to simple to have value, to me anyway. Not the idea of purchasing HQ shares at some time if they want to sell, but to force this as you suggest, I can see it being unrealistic, and doesn't pass the smell test?
So what smart lawyers do we have to make this happen? Name three, or two, or one.
$100 million is absurd.
The partners have decided a fair value for the electricity is no more than two and a half cents a kilowatt hour, at best. In the current contract, it is not merely worth less, it is worthless. Hence my point about QC being effectively barred from squawking about consideration of the value of the product given their own valuation of the electricity in 1969 and again in 2024. You ignore this repeatedly.
Quebec is not entitled to market value of the plant and electricity without paying market price for the electricity, even once.
Thierry Vandal put the $20 billion price on it. That's one bound. The other is the fixed asset valuation in the financial statements. The latter is again one the parties have already accepted as a fair market valuation.
Replacement cost based on the original cost plus inflation gives you only $9 billion. $20 billion is a fair guess at a replacement cost but since Quebec has recovered all of its costs, been handsomely compensated for its risk and, in effect been paid whatever it might be entitled to for its loss in 1927 (effective nil anyway), then settling up somewhere between a few hundred million and $6 billion is good enough.
MF was overpriced due to bugling and incompetence so it cannot be used as a fair estimate of replacement cost. Ditto the absurd idea it will cost $24 billion for Gull.
But regardless of the price, the principle drives all, and the principle is that Hydro-Quebec has no right of any kind to any shares in Labrador electricity plants, full stop.
If the situation were reversed, the Newfies would have been tossed out of Quebec long ago, with no money at all. My proposal is fair and reasonable.
I will admit my estimate of 100 billion is on the high of other estimates, but I seem to recall one other at about 90 billion. I look at this from an engineering perspective, both with Nfld Hydro, 230 kv grid, and some work on the CFs construction in the 1960s, and : the nature of the 80 or so dykes to last 200 years or more, the excavated powerhouse at 1000 feet deep giving this site the most MW capacity vs reservoir area in the world, the low risk of major power outages compared to the LIL, it's capacity to benefit from low cost wind additions of some 5000 MWs, and pumped hydro, and other upgrades and more features.
I feel that HQ would value this at my estimate or higher, as it's ability to supplement the high reliability of their grid, and especially to the overall PQ economy ( low industrial and low residential rates). I would like to know Vardy's and May's opinion if the true market value of this asset, though they have limited expertise of the unique engineering aspects of this world class resource, which Vardy calls the Jewel of all NL resources.
HQ will low ball the asset value as you suggest, but just try and buy their shares at cheap prices and evaluation , and see what happens, as to the value then........ my opinion.
As for Warren Buffett, he has at times donated 25 billion of so to non profit causes, but buys into existing companies he calls value investing. CFs is at present not a good buy in, and not based as the last MOU. He would have to see a good path that green source of electricity can get market value for that energy, and if mostly through export or industrial use within Labrador or a combination of that. That requires an industrial plan for Labrador and will take 10 or 15 years or longer to develop and implement. Buffett no longer is in charge, but he promoted a Canadian who has long worked with him, given Buffet is now in his 90s, but still much engaged.
You say my estimate is absurd, and I thinks so is yours, but we look at this with different lens. You say all depends on principle . You have quoted Danny Millions as saying "all principle converts to dollars"! Which probably says more about Danny's Principles, but not for all.
With due respect Ed, , I think you are on the right track, but not the best road to get there. How do others feel on this approach?
This is a political question, not an engineering problem.
The value of the shares is a matter of debate.
Think of it as being similar to the "value" of the Furey capitulation. Furey and his people literally made up a value of hundreds of billions of dollars that could not stand up to even casual scrutiny. It was deliberately exaggerated.
The nationalization law would contain a simple way to set the value. We could copy Quebec's approach to compensating the companies expropriated to create HQ. The PQ would look like hypocrites for opposing when someone else does what Quebec government's did before it.
If Quebec wanted to sue at that point, they could do so, understanding that making the relationship difficult risks an enormous asset to *their* electricity system that they cannot replace easily.
Ultimately, this enormous asset, as you describe it *ours* already. we are simply removing Quebec's small and entirely accidental shares that have caused enormous political problems for decades. The shares have poisoned what would otherwise be a healthy mutually beneficial relationship. Rather than have Newfoundland and Labrador capitulate to Quebec, which is what the Furey mess does, this is the alternative solution in which Quebec leaves Labrador and treats Newfoundlanders and Labradorians with the respect we should not have to beg for, cap in hand.
Quebec loses nothing. It can still buy the electricity up to 2041 and potentially beyond. The only difference is that Quebec would have to pay a reasonable price for the electricity that they have been unwilling to pay even now under the new deal. Newfoundlanders and Labradorians would simply insist, quietly, on the same respect and regard that Quebecois(e) are due and which they nationalized their hydro system to attain 60 years ago.
.
I suggest it's political , engineering and and economics problem.
Go back in time when HQ designed a AC system at 735 kv when their max was then 315kv and our island 230 kv, and the max world wide was 400 kv. This was a massive engineering achievement for many components and one 735kv line could transmit as many as 4 lines at 315kv. So, as to land space reduction and structures heavily built etc, to handle that 735 kv lines; DC systems then was not economic and a bigger risk than the 735 KV AC
Why would their 33 % ownership be a fluke, and they also paid the full cost of this project?
I may have estimated values of CFs with the adds on of 1100 Mw at about 125 B, on your prior posts before.
So I just tried Gemeni AI for an opinion of market evaulatoin and it says your range would be a non starter for PQ.
For further inputs I get his from Gemeni as to Market Values
1. CFs generation alone > 76 to 86 B
2 adding the value for the dykes etc > then totals 90 B
3. Revenue Value at energy sales at 8 cents per kwh > 41-51 B
4. Market Value > 45 to 90 B depending on the replacement costs or Revenue capability
5. Adding Gull Island , the Market Value increases to about 130 B for HQ
6. Adding the 1100Mw to existing CFs and then their ability to add 5000 mw of wind to this > Market Value is huge, of 140 to 160 B. This whole scheme enables HQ to store hydro, and so that wind and hydro together allow exports to the NEUSA at their peak rates with rates of about 20 cents per kwh, instead of now about 15 cents per kwh.
Any of those values multiplied by 1/3 would be HQ Share Market Value framework , I sugest.
Politics: that the Innu holds immense statuary rights and ability for all this and should be compensated to the 100s of millions per year, or this gets hung up long term in the courts. Meanwhile Tony and crew says Innu only have a history there for 300 years!!! Sound strategy?
And you suggest a Market Value of 0.5 to 9 B for HQ fair share.
As to politicians and lawyers and hiprocracy.........for most , that is their trademark, is it not?
Yes Furey's glowing statements of over 200 B for NL that all our problems would be solved, from that MOU, ............didn't pass the smell test. Your assessment of worse than 1969 seems dead on.
I suggest your idea of a Strategy of a Plan for transition of PQ use of that power to mostly Labrador development and power use is the correct one. That is PQs plan for both Quebec and Labrador hydropower, and they took risks and expertise, and financing.
So , where is NL' Plan as an alternative to mostly exports? Otherwise HQ will maintain it's stranglehold, as if the 1927 boundary was in their favour, That's harsh business and politics and economics and their superior world class engineering capabilities.
read my puece from last Monday, which explains how they got the 34%. It had absolutely nothing to do with their participation in the construction of the plant. They got the 34% because the nationalized the private sector company that had bought into Churchill Falls when HQ didn’t even exist.
HQ has no business owning any part of Churchill Falls and the easiest way to solve the considerable political problems that have resulted from that 1964 accident or to simply chuck them out with appropriate compensation.
Was that strategy of them to get it that way, or a fluke? And appropriate compensation is the 100 billion dollar question. And for half a century seem PQ and HQ has been better that chucking and chuckling too. Certainly is is doable, but not easily or quickly is my guess. The aim is sound. but seems a bit of a Hail Mary, as to the method. time will tell, (Des Sullivan says we have the time) or Tony easily caves. Was Leveque around then with that expropriation resulting in 34 % ?