Provincial equity injection a possibility for debtburdened Manitoba Hydro, executives say


Staff reductions at Manitoba Hydro, substantial rate hikes and even a provincial equity injection are being considered to cover off billions in debt, Manitoba Hydro executives told a public meeting Tuesday evening.

The event at the Victoria Inn near Richardson International Airport, the first of four planned around the province, drew close to 100 people.

<p>About 100 people attended Tuesday”s Manitoba Hydro public meeting at the Victoria Inn near the airport.</p>
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About 100 people attended Tuesday”s Manitoba Hydro public meeting at the Victoria Inn near the airport.

These are the meetings the Pallister government promised when it released the devastating financial findings of a Hydro review the new premier ordered after the election in April.

“It”s great to see so many people and I guess that”s an indication of the interest in this issue,” Manitoba Hydro board chairman Sanford Riley told the crowd.

Higher rates, restructuring at Manitoba Hydro and a major equity injection from the province have to be considered as part of a multi-pronged approach, Riley warned. There were no figures disclosed.

Manitobans have already been primed to swallow annual four per cent rate hikes over the next 20 years.

Staff layoffs aren”t on the table but cuts through retirements and attrition are very likely and unions can expect tough talk at the bargaining table from now on, Manitoba Hydro president and CEO Kelvin Shepherd told the crowd.

An equity stake in Hydro wouldn”t constitute a bailout, Shepherd added in an interview.

It”s an investment, the CEO said. And it would help the utility balance its books, easing pressure from creditors and eventually Hydro would pay the province back, he said.

With the review”s finding last month that Hydro”s debt will almost double to $25 billion in the next four years, many from the crowd expected the earlier modest rate hikes to rise.

“Basically we”ve built a bunch of dams for which we have no use, for the next 25 to 50 years,” Riley told the crowd.

“We cannot understand how a decision that put such a strain on the province was made,” Riley said of fiscal findings by the U.S.-based Boston Consulting Group.

“This is the decision that will affect the interest rates for the province… and we will pay our way out of it but it will create some pain,” Riley said.

The Hydro board set up the meetings as information sessions to discuss the results of its recently completed review of Manitoba Hydro.

The sessions are to provide details on the board’s decision to complete Bipole III, the financial challenges facing the Crown corporation and what steps are being taken next in opening presentations. Each event wraps up with a queston-and-answer session involving the public.

Ratepayers initially offered a wait-and-see attitude but by the time the question-and-answer session got underway, a few tempers flared.

“To make the question real simple: what is the good news?” said one man at the open microphone. He called for a public inquiry into Manitoba Hydro”s controversial decision to locate Bipole III west of Lake Manitoba.

Bipole III critics filed forward one by one, angry over land expropriations.

“Will this new government at least treat landowners fairly?” one landowner demanded.

A man who identified himself as a unionized worker suggested Hydro turn over the utility to the workers and turf the executives.

“We couldn”t screw up worse than you guys did,” he said, injecting a brief note of levity into the sombre meeting.

Scott Blonsky drove with three friends from St. Geneviève, about 40 kilometres south of Winnipeg, for the meeting.

He said he understood the frustration over Bipole III but expressed outrage Manitobans weren”t steamed up enough over the massive Hydro debt.

“I”m stunned the people of Manitoba are so passive. They”re staying quiet and they”re not speaking out about this,” Blonsky said.

He and his friends said they were worried the utility will keep bleeding money; a transmission line to Duluth, Minn., projected to cost yet another $1 billion, is still on the drawing board at Manitoba Hydro. Nobody”s talking about the Minnesota line yet, said Blonsky and his friends.

“It”s all part of the same project,” said Blonsky”s friend, Jim Teleglow. “Whatever Hydro does to the people on the Bipole III, they”ll do to us,” he warned.

Blonsky predicted ratepayers will carry the freight in the end.

“We”ll go from having some of the cheapest hydro rates to some of the most expensive. It”s projected our hydro rates are going to go up 300 per cent over the next 20 years. People like us who rely on hydro for heat won”t be able to afford electricity,” Blonsky said.

The next public meeting takes place Oct. 25 in Winkler, followed by Nov. 3 in Thompson and Nov. 9 in Brandon.

More information is available on the Hydro website at



Read more by Alexandra Paul.

Hydro review findings

The Pallister government released the findings of the Manitoba Hydro review Sept. 21, wrapping up the financial fallout from years’ worth of construction overruns for the mega projects and in delivering the report, the new provincial government didn’t mince words.

The review was carried out by the U.S.-based Boston Consulting Group.

The review found it was too late to halt construction on Bipole III or the Keeyask generating station and Manitoba was warned the cost of building them would haunt taxpayers to the tune of $900 million right now, and as much as $25 billion, in mounting hydro debt for years to come.

The Manitoba Hydro board was appointed by Premier Brian Pallister”s government after the April election.

The review found the decision to simultaneously pursue two enormous capital projects — the Bipole III transmission line and Keeyask generating station at the same time — put the utility on pace for a dangerous level of debt that could — given the right circumstances — undermine the fiscal stability of the entire province.

At the time the review was released, Finance Minister Cameron Friesen warned that taxpayers will have to cover Hydro’s debts.

“The debt of Manitoba Hydro is the debt of all Manitobans,” Friesen said. “While we have much work ahead to restore financial stability, our government is… confident our creditors recognize our commitment to purse a reasonable approach to Manitoba’s finances and to balance our province’s budget.”

The board’s review indicated both Bipole III and Keeyask were behind schedule and dangerously over budget. Hydro’s corporate debt was expected to nearly double to $25 billion within the next three or four years.

The decision to route Bipole III down the west side of Lake Manitoba, instead of east of Lake Winnipeg, had been a hotly contested and highly politicized lightening rod for years and one that would cost Hydro an additional $900 million on a $4.6-billion project, the review found.

“ The previous government’s decision to have Manitoba Hydro pursue simultaneous capital spending on projects of this size and scope now threatens the bottom line of the province of Manitoba and our relationship with bond rating agencies across North America,” Friesen said in September.

Key findings of the review included:

• neither Bipole III nor the Keeyask generating station are on track to meet their target completion dates, with Manitoba Hydro now projecting delays of between 12 and 15 months for Bipole III and between 21 and 31 months for Keeyask;

• the cost for Bipole III is expected to rise as high as $5 billion from the current budget of $4.65 billion, whereas Keeyask is expected to rise as high as $7.8 billion from the current budget of $6.5 billion;

• cancelling the current Bipole III plans and starting over on the east side of Lake Winnipeg would cost a projected $7 billion;

• Manitoba Hydro has signed export contracts worth $4.5 billion that are dependant on the completion of the Keeyask generating station, a 695-megawatt hydroelectric project being developed by the Keeyask Hydropower Limited Partnership that is a joint venture between Manitoba Hydro and four Manitoba First Nations;

• Bipole III is essential to fulfilling the export contracts associated with the Keeyask generating station;

• Bipole III is also essential to reducing the risk of blackouts and service disruptions should there be a failure of the existing Bipole I and II transmission lines that carry over 70 per cent of the electricity produced in Manitoba;

• Manitoba Hydro’s debt is expected to grow to $25 billion from its current level of $13 billion within the next three to four years.