NB Power behind on plan to pay down $1 billion in debt

NB Power's seven-year-old plan to pay down $1 billion in debt is so far behind schedule it will require cumulative rate hikes to customers of 22.3 per cent over the next five years — more than double the expected rate of inflation —  if the utility is to meet debt reduction levels it is supposed to by 2025.

The utility says it has not made any decision to push for rate hikes of that size to meet its 2025 financial goals, but documents filed with the Energy and Utilities Board hint that dual corporate objectives of low debt and low rates are beginning to conflict and may soon force a choice.

"NB Power still believes that these (2025 debt targets) are appropriate financial objectives but must be balanced against the objectives of low and stable rates," it wrote in explaining the size of rate hikes that would be required to keep to its current debt repayment timetable.

NB Power has been committed since 2011 to paying down $1 billion in debt and building a 20 per cent equity cushion into its financial structure. It initially picked 2021 as a target date but made almost no headway in early years and eventually switched the deadline to 2024 and then again to 2025.

In 2012 the utility incorporated debt reduction into its strategic plan as one of  "three pillars" that would guide its future direction. NB Power president Gaetan Thomas promised there would be steady improvement once the Point Lepreau nuclear generator finished renovations and came back online later that year.

"Following refurbishment, net debt levels are forecasted (sic) to begin a gradual decline to meet the $1 billion reduction target by 2020/21," Thomas wrote in his "message from the president" in the utility's 2012 annual report. 

After peaking at $5.06 billion in March of 2013 the utility laid out a plan to reduce its net debt to $3.95 billion by 2021 but various problems, including poor performance by Lepreau, vicious storm damage and other unexpected expenses laid waste to those commitments.

New estimates show NB Power's debt is now forecast to settle at $4.98 billion in 2021, almost $1 billion higher than managers originally planned, and will not improve significantly by 2025 without major rate hikes or substantial internal cost reductions.

A third option is to delay debt reduction goals for a third time to 2026 or 2029, depending on the size of rate increases in future years.

NB Power spokesman Marc Belliveau said in an email no course of action has been chosen.  The utility has applied for a 2.5 per cent increase in rates this year and decisions on whether to favour debt reduction over low rates or the other way around in future years will not be made soon.

"The figures presented in the report aren't options — they are presented merely as a sensitivity to show how fiscal pressures have affected the utility in the past year, and the various scenarios should not be interpreted as either/or options," wrote Belliveau.

"Any applications made beyond 2019-2020 would take in new information, in order to provide stable rates, meet our costs, and pay down debt."