MANITOBA Hydro is renegotiating its 2006 profit-sharing deal with the Nisichawayasihk Cree Nation for the recently opened Wuskwatim generating station.
The reason? There won't be any profit until Hydro's fortunes turn around and it starts making money again on export power sales, the Crown corporation said Thursday.
Under the original agreement, Nisichawayasihk Cree Nation (NCN) would have contributed to Hydro's losses for the first 10 years of that agreement, a deal that sounded fine in 2006 but not now when Hydro -- according to its most recent financial report -- suffered a net loss on consolidated electricity and natural gas operations of $43 million for the first six months of this fiscal year, Hydro spokesman Glen Schneider said.
That compared to net income of $13 million for the same period last year.
"It isn't workable," Schneider said. "We're going to make it work. We have to reach a point where it's palatable for them and financially viable for them to continue with the partnership."
The deal with NCN was a first among Canadian utilities in that it gave the 5,000-member northern band a 33 per cent ownership stake in the $1.8-billion Wuskwatim project near Thompson. The deal was regarded as a way for Hydro to right past wrongs -- like the massive flooding caused by Hydro's Churchill River diversion project in the 1970s -- and instead use hydroelectric development to the advantage of aboriginal people.
The model is being used to negotiate a similar deal with four other northern bands in the development of the Keeyask generating station near Split Lake.
Schneider said a new deal will provide a better balance for NCN to defer the losses over a longer period.
"It'll mean less of a profit for them in the later years, but no suffering in the early years," he said.
Details of the renegotiation came out this week during a Public Utilities Board hearing into proposed rate increases requested by Hydro.
The Crown power utility wants a 3.5 per cent rate increase as of April 1 and a 3.95 per cent increase in each of the remaining 18 years of its 20-year financial forecast. That time period covers the building of the Bipole III transmission line down the west side of the province, the Keeyask and Conawapa generating stations and an overhaul of its older dams, transmission lines and substations. That includes the rebuild of the Pointe du Bois powerhouse, originally constructed in 1926.
Under the old agreement, NCN would have to contribute to Hydro's losses--$14 million in 2012 and $24 million in 2013-14.
"That is not going to happen," Hydro's chief financial officer Vince Warden said to the PUB. "I tell you right now that that is not -- we are not going to receive that $14 million, we are not going to receive that $24 million. The agreement is in the process of being renegotiated because of the conditions we're experiencing now with export revenues."
NCN Chief Jerry Primrose was unavailable for comment Thursday.
Conservative Opposition Leader Brian Pallister is scheduled to hold a press conference today on Hydro's rate application.