Summary of Understandings Leaves Many Questions Unanswered
In October 2003, Manitoba Hydro published a Summary of Understanding (SOU) between the Nisichawayasihk Cree Nation (NCN) and Manitoba Hydro regarding the Wuskwatim Power Limited Partnership. The SOU is an 82-page overview of the Wuskwatim Generation Project (the “Project”), and the proposed legal and economic relationship between NCN and Manitoba Hydro.
While the SOU does outline the project and suggest several financial arrangements between NCN and Manitoba Hydro, the document raises more questions than it addresses.
NCN and Hydro concluded negotiations in March 2001 on an Agreement in Principle for the Wuskwatim and Notigi Power Projects. The SOU indicates that NCN Members ratified the Agreement in Principle and it was signed in September 2001. According to the SOU, the parties have continued their planning activities while the Wuskwatim Project is being assessed and licensed. The SOU proposes that construction might begin in 2004, with the final project scheduled to come into service in 2009 at the earliest.
The Project is estimated to cost $756 million, and it is proposed that NCN will be a limited partner in the investment. Unfortunately, though the SOU does set out and outline the proposed financial structure should the partnership come into existence, it does not identify the key players in this partnership. This omission raises concerns of accountability and transparency. Given that the fact that the Wuskwatim project is the largest public project in Manitoba’s history and the NCN/Hydro partnership is the first of its kind in the province full disclosure should play a greater role in the document than is presently the case.
NCN’s role as a limited partner is to review and assess the work done by the Environmental Management Team, develop training and employment opportunities and provide input (when necessary) to Project development. The SOU makes it clear that Hydro will retain full control over the operation and administration of the Project and seemingly has veto power in virtually all aspects of the development.
According to the SOU, the overall arrangements for the development of the Project will be documented in a legally binding Project Development Agreement (PDA). The parties hope to conclude the PDA in 2004. The PDA will include an agreement by the parties for a date for the establishment of the limited partnership. This will occur after the PDA is formally ratified and approved and prior to the commencement of construction. These steps will occur once the outcome of the environmental review is known. In other words, the SOU is an agreement to agree. The SOU does not at this stage have any binding legal force.
Although NCN has not yet been officially identified as a proponent (based on the guidelines in the Environment Act), the SOU states that Hydro is working together with NCN as a co-proponent for all necessary licenses. Based on the information provided in the SOU there is not a clear distinction between NCN as a limited partner and NCN as a co-proponent.
Although this Project is being analyzed in a public forum, the financial structure and implications of this Project have are still rather vague. For instance, it is still unclear whether the Project will be viable, so it is difficult to ascertain whether NCN stands to profit from this venture. There is no clear indication as to how NCN will receive its financial revenues or share in the profits. It is evident from the SOU that Hydro owns all the electricity from the Project, however it is not clear what this means for NCN.
The SOU outlines that most of the equity being put forward on behalf of NCN is through a loan given by Manitoba Hydro. Financially, NCN seems to be a minority partner, but in reality Hydro has proposed to front money that will be reinvested in itself. The exact amount of this investment/loan has not been stated.
Consistent estimates have indicated that NCN needs $75 Million to invest in Wuskwatim. There is no reference in the SOU confirming this amount. Given the significance of the funds under discussion and negotiation, clarification is necessary to ensure that the public has a complete grasp of what is at stake.
Though the SOU is not legally binding, it does form an important aspect of the public’s perception of the Project in general. If NCN stands to profit from this arrangement it should be well documented and explained. Ultimately it is the public who is paying for this venture and NCN’s participation in the Project is being relied upon heavily by Hydro in the current public hearing as support for the Project. This support and partnership on the part of NCN is political capital that should not be underestimated, when considering the overall contribution of NCN. All of this dictates that full clarity and disclosure should be the rule and not the exception.
