In order to save a sinking partnership, Manitoba Hydro has thrown Nisichawayasihk Cree Nation (NCN) a $50-million line. But it is a tangled line cast over troubled waters.
Critical details of the deal have not been made public and, as former NCN chief Jim Moore notes, the lawyer handling negotiations for NCN, Valerie Matthews Lemieux, is married to provincial cabinet minister Ron Lemieux.
The deal relates to the $1.8-billion Wuskwatim dam which began generating power in 2012.
In the 2006 Project Development Agreement (PDA), NCN consented to the dam in exchange for the chance to purchase a 33 per cent share in the project. The dam was to bring NCN a financial windfall, but the recession and competition from shale gas in the export market have jeopardized the partnership.
Hydro estimates that NCN's one-third share of Wuskwatim losses will total $134 million over 10 years.
Since 2012, Hydro and NCN have been negotiating PDA Supplement No. 2, which seeks to redeem the partnership, building on Supplement No. 1 from 2010. According to a recent NCN newsletter, the supplement includes Hydro's offer of a $2.5-million annuity. A Hydro spokesperson told me annuity payments will extend for 20 years, thus adding up to $50 million. The newsletter does not mention the 20-year limit.
Hydro said the annuity is intended to honour the utility's commitment to ensure that NCN is better off with the project than without. The money will come not from Wuskwatim but from Hydro's general revenues, shouldered by Manitoba ratepayers.
Supplement No. 2 will also see Hydro claw back 36 per cent of NCN's annual Wuskwatim revenue beginning once NCN's dam-related debt ($92 million) is paid off.
Hydro refused my request for a copy of the agreement. I'm not alone. "Our people have not seen a copy of it," Moore said.
Hydro said the supplement is still being drafted though some details have been published in NCN newsletters and NCN members were to vote this week on a related agreement pertaining to investment in the dam, but that vote was postponed.
Like the first supplement -- which is also not public -- the second will be finalized behind closed doors, without a vote.
Current NCN chief Marcel Moody responded sharply to my April 24 column, Dam deal loses shine, in which I suggested Hydro's "new era" of Aboriginal partnerships is in trouble (This Hydro partnership is working, May 3, 2014). He said dams must be considered over the long term, but the fact is Wuskwatim is doing much worse even than Hydro's original predictions for a low export-price scenario.
Despite this, an NCN newsletter from May says payments to the community are projected to be $10.3 million this year, $8.3 million next, about $7 million annually from 2016 to 2048, and between $10 million and $30 million per year thereafter.
How can so much money be wrung from such an underachieving project? Five sources are listed:
1) The $50-million lifeline.
2) Compensation related to Wuskwatim transmission, listed elsewhere at between $200,000 and $300,000 per year.
3) Water-rental rebates from the province, listed elsewhere at roughly $27 million over 25 years. This is not revenue per se, but a refund of part of the water-use tax paid by the Wuskwatim partnership.
4) Money will also be borrowed from future profits. Hydro told me NCN will receive a $4 million "advance" this year, $2 million next, and smaller amounts beyond that, to be deducted from future profits. Community newsletters do not specify this, referring to "payments" instead of "advances."
5) Finally, about $1.7 million will be paid to NCN annually in interest on a $40-million trust fund that was part of a 1996 compensation deal not related to Wuskwatim. Ironically, Hydro guaranteed a return of about $4 million per year on that trust until 2013, so the $1.7 million is a reduction of about $2.3 million annually.
The only net-benefit money not borrowed from future generations NCN can expect related specifically to Wuskwatim between now and 2048, when its debt is projected to be paid off, is the transmission compensation and the $2.5-million annuity, which coincides all too closely to the simultaneous $2.3-million reduction in the amount NCN will receive from its 1996 trust.
Aside from the $50 million, NCN is dependent on Hydro's projections decades into the future.
First Nations elsewhere in Canada have better deals.
The Innu Nation of Labrador negotiated a five per cent royalty payment from the $7.7-billion Muskrat Falls dam, currently under construction. The Innu didn't have to invest a penny.
While one NCN newsletter refers to the supplemental agreement as a matter of "smoothing the cash flow," it could also be seen as smoothing over a potential fiasco for Mr. Lemieux's cabinet colleagues who are expected to soon grant licences for the Keeyask dam which is predicated on NCN-like partnership agreements with four other First Nations.
Will Braun writes on behalf of the Interchurch Council on Hydropower, which advocates for fair treatment of people and lands affected by dams. He also works for Pimicikamak on hydro-related matters.