The elevator pitch

I finally got to hear the elevator pitch on the NB Power sale yesterday.  Mike Murphy was at a Chamber of Commerce event and was quite convincing.  He says the MOU is only a roadmap and there will definitely be clarifications and outright changes if necessary.  He says all of the paper work – the investment bank valuation of the assets, the energy consultant out of NYC that confirmed this was a good deal for NBers, etc. will be made public.  He also said that NB suppliers will have first crack at supply work for NB Power just as always.

I sat with a guy from the Association of Manufacturers and Exporters and he is very supportive of the deal.

The Chamber of Commerce guy read questions from the Chamber membership and all but one or two were “what’s in it for me” questions.  I guess that makes some sense but in the end sometimes we need to think about the greater good too.

The moderator equated this thing to equal opportunity in the 1960s. He didn’t say it was the biggest public policy issue since the 1960s – he said this was the same as the 1960s.

Bull crap.  Excuse my language but this is silly.  We are talking about selling the electricity company.  Most New Brunswickers won’t even notice.  Equal opportunity nearly tore NB apart and has led to dramatic and very positive societal changes.  This will hardly be a footnote in history.

Do we notice that our telephone company is private?  Our cable company?  Isn’t Moncton’s water even delivered via a PPP?  Our garbage disposal is a private contractor.  Many of the public services we take for granted are operated by either private firms or those based elsewhere. I’m not a rabid private sector guy – I see a strong role for the public sector and am a big believer in the role of the state in the development of strong and successful societies.

But not at all costs.

34 thoughts on “The elevator pitch

  1. Just a liiiiiittle hypocritical to berate guys for saying ‘whats in it for me’ right after posting a blog saying “hey, I”m going to save this much…why WOULDN”T I support it?”

    We DO notice that all those public utilities are all private, and NONE of that privatization was supported by the population. It was one thing when Aliant was simply a merger between the four utilities, another when it was bought by Bell. Now, as we see, there is virtually NO economic development advantage to New Brunswick in telephony, in fact, its a big problem just getting affordable high speed internet to rural customers.

    But the big issue here is that a New York consultant has no more idea what will happen in ten years than anybody else, and this emphasizes that it comes down to ‘trust’. And again, who in their right mind would trust Shawn Graham to manage a billion dollar deal? Even the energy minister didn’t even have data from his own department. But again, nobody knows the future, so nobody knows whether its a ‘good deal’ or not, it depends how you define a ‘good deal’. We KNOW that Irving thinks its a GREAT deal, and if all a person cares about is the probability of saving 3% a year for 5 years, yes, it MAY Be a good deal, but other issues are involved.

    I agree that this is nothing like equal opportunity, thats just a silly thing to say, and I think you may have misunderstood. How can anybody say ‘this is just like the 60’s’-he is aware that our society is NOTHING like the sixties?

    I seriously doubt this will just be a ‘footnote’, THAT is just silly. It is VERY likely that this will demolish the liberals in the next election, they weren’t even elected by most New Brunswickers last election, and they haven’t set themselves apart on ANY file. Selling off a public utility is no small thing, and the only people that would consider it a footnote would be VERY bad historians. There’s almost a hundred year history already to build up energy infrastructure in NB, NBPower has been the single most important public entity in NB. To try to brush it off as inconsequential is foolish, as can be seen, anythign that &^%$es off the population this badly is certainly not inconsequential.

  2. I’m still on the fence about the deal and have found that the Liberals aren’t doing a great job of selling me the deal. From an economic development standpoint, how will this be any better for us to bring in new heavy industrial? It sounds like anything new would be over the heritage pool amount and would have to be negotiated at market rates. That doesn’t sound like anything more than the status quo.

  3. Now we know why campbell started this spin blog! Hope the check doesn’t bounce David. There are phrases for your kind!
    Thinking about ending this blog eh? lolol
    Probably do as your told! Obviously.

  4. Graham should have had his ducks in a row before going public. Ministers have made confusing statements, and looked confused in the process. They don’t have a handle on the numbers, which certainly does not help the sales pitch.

    The big demo is set for next week; I wonder if a massive crowd would play into Graham’s hand. An uprising might help him get a better deal if HQ is really interested in making deals with PEI and NS.

    “That doesn’t sound like anything more than the status quo.”

    I guess the argument is that NBP is in such bad shape that power rates will increase significantly; much more than would occur under this arrangement. An independent NBP would have to buy additional power to supplement the current supply and this would cost more than than power supplied via HQ under this deal. At least, that’s what we’re being told. If true, its a good deal.

  5. Funny, the CEO of Hydro Quebec spoke in Fredericton this week and said this was a done deal; no changes were expected.

    Now, who should we beleive?

  6. “Funny, the CEO of Hydro Quebec spoke in Fredericton this week and said this was a done deal; no changes were expected.”

    Statements like that are usually an indication that changes are to be expected. Negotiate much?

  7. Strange that the inference that NBP is a similar utility to telephone, cable garbage collection is just that- garbage! Electricity is an essential service that is require for our day to day existence. Should we go back to oil lamps,hand pumps for water. We can take our garbage directly to the dump if need be, we can get alternative phone service, where else will we get our power. We are victims in this deal. No voice even from the very people who promised not to do it a couple of years ago, we have been betrayed by Graham. Just how much of our tax dollars has he spent on this deal? An expert from NYC, what stake would he have in this other than collect a hefty pay cheque? An appraisal was already done? The MOU is just a blueprint changes can be made? Did he ask Mr Vandal politely if this was possible? WHAT ARE THE DEFINITIVE AGREEMENTS?? Yes business people may like this deal. They are being promised all sorts of things, however with the record this government has for keeping promises, I would be very cautious about taking their word!

  8. Only with honest people. Probably find some, across the Border!
    Like what happened to all that cheap new green energy, those fuel economy cars! Anyone mention the real monkey wrench AECL? Could AECL do such a lousy job without advice? PHEWW!

  9. New Brunswick Premier Shawn Graham faced some tough queries from members of his own party Saturday about the proposed sale of NB Power to Hydro-Québec.

    Graham hosted a question-and-answer session during the New Brunswick Liberals’ annual convention in Fredericton.

    ‘I have concluded that it is a poor deal fraught with uncertainty, and whatever its short-term benefits, it is not in the long-term best interests of New Brunswickers.’
    —Liberal Drew Speight Many of the Liberal Party members present were clearly skeptical of the deal, including Drew Speight of Fredericton.

    “I have concluded that it is a poor deal fraught with uncertainty, and whatever its short-term benefits, it is not in the long-term best interests of New Brunswickers,” he said.

    Speight contended NB Power’s hydro dams, transmission lines and other assets are worth more than the $4.8 billion the province will get and questioned whether the government did a proper appraisal.

  10. Until I see the changes in writing, or at least hear some official statements from Graham that they are looking into modifying the deal in specific ways, I will continue to take the deal as it is stated in the MOU. And right now, I’m not a big fan of it. I think there is great potential here for a mutually beneficial deal with Quebec, but we aren’t there yet.

  11. Good to see the CBC hammering the assessment of one of the world’s largest and most credible investment banks and quoting the world export on energy asset evaluation, Drew Speight, of Fredericton. According othe CBC, Speight “contended NB Power’s hydro dams, transmission lines and other assets are worth more than the $4.8 billion the province.” I am sure that CBC checked out Mr. Speight’s bonafides and he in, in fact, credibly able to contend NB Power’s assets are worth more than the investment bank.

    Come on, folks. We have to wrap this discussion in some frame of credible reference. When we start questioning the motives of the third party, independent experts and taking solace from anybody – as long as they agree with our opinion – what is the point?

    We can disagree with the deal and I have said several of the sub-points like power outside the Heritage Pool are concerning to me but when we reduce the debate to dismissing the experts like a few of you are doing here I am not sure how to proceed. We don’t even have the same basic frame of reference from which to have a debate.

  12. David is right. We are missing facts and cannot possibly make an informed judgement on this deal with what is available.

    After years of satisfaction with NB Power performance, so much so that the government recently gave a 3 year contract extension to the CEO, the government declares there is a crisis and we have to do something in 4 months or else. It just so happens this is in sync with an offer they received from Quebec Hydro.

    Now people are saying we should accept this offer because there is no better alternative on the table. Tough to argue against because a) no one told us there was ever a NBP crisis, and b) no one else was given a year for behind-closed-door negotiating for alternate deals.

    Well, first of all, let’s see some analysis that NB Power is “unsustainable” and “crippling” so we can verify there is an NB Power emergency that we must resolve within 4 months.

    Then let’s develop options. We have one on the table, the HQ offer. We have no idea if Graham has approached anyone else to discuss cooperation; only speculation that no one else would want to talk to us. Even if there is no one else interested in talking to us, we for certain have at least two alternatives.

    1) Status Quo NB Power: How about a plan that presents what costs and associated rates are projected by the experts rather than a meaningless assumed increase and fear mongering about where rates may go. NBP has experts in house that could be working this plan.

    2) A revamped NB Power plan with the options for change that the government has extended to Hydro Quebec (such as closing questionable facilities, eliminating government fees and taxes and deferring maintenance and increased generation costs for 5 years).

    Once we have these facts and analysis presented, we would be able to make an informed decision. Right now, we are being treated like a cheap used car salesman. After having good reports on our annual check ups, the mechanic declares, with no data to back it up, that our car is about to blow up and we better buy this car he has for sale or else.

    It very well may be the HQ offer is the best thing for NB but we should not be accepting it without some more facts and analysis on the table.

  13. David, could you post up the assessment from the (real) investment bankers?

    I was only familiar with the one commisioned by the Convservatives prior to the Coleson Cove and Lepreau refurbishments.

  14. You have some credible bona fide reference? Besides mckennas bulk emails? Or is it a crime, as in the mckenna years to question the king of oz? You don’t seem to realize how slim your backing is? How empty your threats if what hasn’t, yet been sold to Quebec, fails to get sold. Northern NB forest land, Milk system, cheese system, transportation system, service centers, telephone, Internet, TV, RCMP. In fact, what does NB or NBer’s own? I will never understand sellouts!

  15. We DO have different frames of reference. You stated that these experts opinions WILL be made public. All you know is that these unknown people ‘think its a good deal’. If it hasn’t been made public yet, then how are WE supposed to use that as a frame of reference?

    The point isn’t who says what, the CBC just looks for somebody to mention the angle they are looking for…namely, the valuation. There are various ways of valuing things, but I don’t think the “this guy is smart and so we should listen to him” is a particularly good argument. Particularly when we don’t know who it is or what he actually said.

    More to the point, I’m not surprised at the support by the Canadian Manufacturers and Exporters, I couldn’t find a membership list, but on the Board of Directors is Irving, McCain, Bowater, Noranda, Fraser Papers and PCI Chemicals. Those are the guys who are ECSTATIC about the deal. It’s also a little bit of a misnomer to state that THESE guys support it, but the chamber of commerce was just saying ‘whats in it for me?” Don’t you think the manufacturers are only interested in ‘whats in it for them’?

    But a couple of posters are getting snippy and there’s no need for that. Mr. Campbell is not a policy maker and its a free country. I can understand the conditions under which somebody would agree with the decision. I just spoke to a few diehard active members of the provincial liberal party-and they are going to be at the protest on tuesday, the first time they’ve been to a protest in their entire life. Some of them are even staunch Irving supporters. So again, its not comments at blogs that is going to have any effect on policy.

  16. One more – go to the CBC website and read the comments of NB’s Auditor General. He’s got an MBA and an accounting designation-and he’s got some interesting things to say.

  17. “Strange that the inference that NBP is a similar utility to telephone, cable garbage collection is just that- garbage! Electricity is an essential service that is require for our day to day existence”

    So what? What exactly is your point? There is a wide variety of electricity service providers in the world; private, public, regulated, unregulated.

  18. NB’s auditor general has stated the sale won’t help the debt, and explains why, but he doesn’t say the deal is bad. He says,

    “It’s a very complex deal. It’s the largest deal that’s ever occurred for the province of New Brunswick and it’s not the type of deal you can assess or decide the merits of without seeing the detail of the numbers.”

    In the CBC story re: NB Liberals being critical of the deal, it reads:

    “Energy Minister Jack Keir insisted the appraisal was sound, but said releasing the details publicly would undermine the province’s position as it negotiates toward a final deal.”

    It goes on with, “Graham told Liberal Party members the NB Power appraisal will be released after a final deal is signed, likely at the end of March.”

    So we’re left with a conundrum. On one hand, the AG says we need the detail to determine the merits and on the other the government says it can’t be revealed till after the deal is made in order to not undermine our negotiating position. Both statements are likely true. But it leaves us with the problem of making a decision without the necessary information and fumbling around with a great deal of speculation.

    While I generally support the deal I think the government needs to pull a rabbit out of its hat to solve this one. I can’t fault anyone for saying no in this situation.

    As an aside, having one position or the other does not make someone a Tory or Grit lackey. As Mikel said, there is no need for some of the silly and unhelpful comments.

  19. I suspect her point is about the ‘importance’ of NBPower. There ARE similarities in all those, for example, you CAN live ‘off the grid’ if you so choose-just like you can take your own trash to the dump. Electricity and telephone developed very similarly, and like I said, people were furious when telephone service left public hands. NBTel in the 90’s was very much ahead of its time,in academic journals I”ve found numerous international articles talking about the NBTel experience.

    NOW, who is really happy with Bell? Their only saving grace is that at least they are a public company, but thats really not much, we’ve essentially lost control of our telephone system and a recent OECD report showed canada with the largest telecom bills and fewest choices-plus the onerous contracts in the industrial world. Yet there are no calls for any regulation changes.

    The comment seems to come down to “this is important dammit”, and that’s a good point to make in a blog where David has made comments that historians won’t see it as much of an issue, where its seemingly just ‘business as usual’.

    For the garbage model, IF there were conditions where you didn’t have to pay the tax on garbage removal and energy production was as ‘easy’ as garbage removal then perhaps people would feel differently. For telephone, the deal is ESPECIALLY bad because if you look at the telephone market we see an oligopoly, much like insurance, where REAL alternatives don’t exist. But its true, with phones there are at least SOME choices, and you can easily do without a land line, and with garbage its easy to ‘opt out’ of system collection. Hydro is MUCH more difficult. If government said “as a part of your buyout is also $15 grand for every NBer who wants to set up ‘off the grid'” then that would be different, people could ‘opt out’ of the hydro system altogether….but thats not an option for most people.

  20. Are we a victim of Fire-Ready-Aim?

    A sensible approach to change our energy strategy would be:

    1) Get Ready. Complete a market evaluation of your assets. Complete a long term projection of your business (projected costs, rates etc)

    2) Aim. Identify goals and targets where you would like to be. Develop options. Evaluate the various options. Focus on the one that meets your objectives.

    3) Fire. Negotiate a deal.

    So, we are doing this just about the opposite way. Negotiating a deal we had no intent of making (and in fact propmised not to). Aiming a billion dollars in subsidies at pulp mills with no debate or strategy development. Getting ready by preparing spin to defend that this is a good deal.

    Seems backwards to me.

  21. I have to say the Auditor-General’s credibilty trumps the NB Power’s “crippling debt” assertion. Selling my car which I use to earn income because I maxed out my credit cards isn’t the most logical way to solve my debt problem.

  22. “he’s got some interesting things to say.”

    His main concern seems to be the possible future revenue loss, should NBP return to profitability. The AG noted that NBP is losing money due to the rate cap. In other words, NBPs debt is not an issue for him because the debt will be paid off by power consumers. That sounds like rate increases higher than the 3.5% for next year are needed by NBP. That is consistent with statements made by a number of critics of NBP. I guess the question is how high will rates charged by NBP will have to rise in order to service the existing debt, maintain and / or expand power generation and distribution, plus provide revenue to GNB? Any good guesses out there re rate forecasts for the next 5-10 yrs that would achieve the above?

    It would be easier to answer those questions if we had more data. Its ironic that Keir is saying that a full appraisal of NBP won’t be released until after the sale. We have more details on what will happen after the sale than we do re what will happen should the status quo remain in place. If GNB and NBP execs had been more honest with NBers over the past two decades, there would a much clearer picture of the current scenarios.

  23. I guess that makes some sense but in the end sometimes we need to think about the greater good too.

    Meech Lake was a top down proposal/deal, cooked up by insiders, for the “greater good” of all Canadians (behind closed doors to boot I might add). I guess it’s fitting that a former Mulroney Tory is involved in this same type of unaccountable process. I guess some people learn from those mistakes of the past, but those who don’t, are definitely doomed to repeat them. Tis the nature of our democratic process.

  24. “I have to say the Auditor-General’s credibilty trumps the NB Power’s “crippling debt” assertion”

    Except that the AG is confirming that the debt is paid by power consumers. As NBP is running at a loss, that means rate increases. The ‘crippling debt’ assertion simply says that rates will need to be much higher than is currently the case. The AG is not disagreeing; he is saying that consumers pay, not taxpayers directly.

  25. Regarding debt servicing and that impacting NBP rates, Hydro Quebec has about the same ratio of debt as NBP so if NBP’s rates are projected to go up due to debt servicing costs, Hydro Quebec’s will (only we wait 5 years then pay interest and service charges).

    That is the problem with this “deal”. Quebec Hydro takes absolutely no risk. They are locking us into to rates nearly twice as high as they are offering their Quebec customers with a special exception for pulp mills and other high power users. Any additional costs (transmission, generation, tolling etc) are charged back to us after 5 years. There is no “deal” here. Unlike the spin doctors are suggesting, the MOU clearly spells out that the rate payers will be charged addititional costs as they become necessary.

    For this to be a deal, we should all be getting the rates Hydro Quebec charges their clients in Quebec.

  26. I think its good that there does at least seem to be a consensus that there isn’t enough information. So I don’t think anybody can say they support a deal IF they don’t have the information. But its easy to say you DON”T support a deal without information. Would you sign a car lease without the information? Its easy to be ‘against it’ but not ‘for it’, unless you happen to REALLY trust a third party who says “its really great, just sign it, trust me”.

    Keep in mind that while David has posted the rate increases for some of the years, they weren’t there for ALL the years, and again, its easy enough to make the political decision to subsidize the rates with taxes so they DON”T need to rise at all, IF that is so important (given the protest I suspect its not). We do have SOME information, we know for example that rates in New Brunswick ARE ‘competitive’ and we know that there has been far less of an increase compared to MOST other jurisdictions.

    Also, again, the future variables are unknown, seasons with lots of snow and rain produce record amounts of hydro, wind hasn’t even been tapped seriously and it has been shown to pay off faster than expected in other jurisdictions. Oil prices COULD drop further, depending on the world recession, which makes that part of the operating cost cheaper. So its NOT simply the case that power rates will increase to service debt.

    And again, on the savings front, the government could EASILY start a program subsidizing conservation measures. One study I found showed that a hot water heater blanket cut heating costs by 9%. Thats the first THREE years of this deal, and a blanket can cost as little as $20.

  27. ” Hydro Quebec has about the same ratio of debt as NBP so if NBP’s rates are projected to go up due to debt servicing costs”

    The problem there is that it seems highly likely to me that NBP is facing a number of renovation and power supply issues that HQ is not facing. HQ can probably afford to take on much more debt and get that money at lower rates than NBP will be able to do. NBers are going to have to pay for two decades of mismanagement; that is one of the reasons why we cannot expect HQ rates. Remember that NBP has had its rate increase capped by govt fiat – that is a sure sign of big problems down the road.

    Many are complaining about the relative risks being taken here. Its my opinion that HQ has been a well-run organization; predatory actions now or in the future are being greatly exaggerated to the point of fear-mongering. HQ is not only constrained by regulation, it is constrained in its behavior by the US marketplace. NBers face a much higher risk of paying higher rates to the current NBP than being cheated by HQ. As a business person, I’d take the HQ risk more willingly than the NBP risk.

  28. That is where the ‘faith’ comes into it again. But what evidence is there that HQ is ‘well run’ while NB Power suffers from ‘mismanagement’? I’ve heard that argument a couple of times, but really, are people spending their time reading analysis of Quebec’s power utility and doing in depth study of NB’s? That is another place where people are generally at the mercy of the media. The ‘experts’ that David references at Energy Probe dont agree with that, and they are perhaps most critical of NB Power. They DID state that NB Power should NOT have undertaken the retrofit of Lepreau and like others, said as far back as 2002 that the utility should embark on ‘green’ initiatives. They pointed out financial concerns, but they certainly didn’t talk about ‘mismanagement’. In fact, virtually ALL energy utilities were criticized in the late 90’s as not being financially sustainable (yet they are still around, and with good credit ratings).

    So while it may be a ‘business decision’ of who to trust, I’ve yet to see specifics that show that Quebec’s utility can be ‘trusted’ more than New Brunswick’s, and its not facile to state that Quebec has a VERY different relationship with those outside its borders than within.

  29. While I have not seen the facts and analysis to back up his claims, Richard may very well may be correct with his risk assessment.

    So, if that is true, where do we stop? Should we let Quebec manage our liquor commision? Perhaps business New Brunswick? How about our health care system? Could they move our eductaion system from last place?

    All of these have been ‘mismanaged’ to some extent. Isn’t the easy answer just to give up and hand them over to another government to run?

  30. “Should we let Quebec manage our liquor commision? ”

    I’d go along with that, provided the laws are changed here to allow corner stores and groceries to stalk beer and wine :).

    ” How about our health care system? Could they move our eductaion system from last place? ”

    I’m not sure I’d agree that those systems are particulary badly managed. In any case if they went on sale, would anyone make an offer?

    “but they certainly didn’t talk about ‘mismanagement’.”

    Perhaps you could search the net for the Betts report of the mid-90s. An early warning sign for NBP that was disregarded. There is a high risk that the cost of NBP mismanagement will hit power users here in the pocket book for years to come.

  31. For certain Richard. Political decisions to build Belledune cost NB Power. Political Chairmen like Doucett, Wilson and McGuire have resulted in political hires and political decisions. It was not run like a business, it was run like a government entity and I agree it could not go on that way as both a political football and political punching bag.

    That is why selling NB Power to a company so it can be managed as a business is an idea worth investigating. However, selling the business to another government will merely shift the political antics to another government. Furthermore, the freedom provided to Hydro Quebec to abandon the fossil facilities and other options was certainlty not extended to NB Power so we really do not know what the non-political NB Power projection might look like. Do you think there a reason the government is not presenting that model to us?

  32. “Do you think there a reason the government is not presenting that model to us?”

    NB is not known for its transparency or inquisitive press. Most corporate bodies (public or private), IMHO, need to be pushed to disclose, and, in NB, there has been very little pushing. In this particular case, I think it comes down to a lack of pressure on GNB and NBP to disclose. Without that the public is left in the dark. Now we are being presented with a sale to ‘resolve’ a crisis that did not publicly exist a few months ago. [although, to be fair, there have been rumblings for several years; the press has fallen down on the job here] I would guess they feel that the ‘non-political’ model would entail large annual power rate hikes that would cause them even more grief than the current scenario. In the end, the heat over that might very well force an Emera-type solution.

  33. This explains speaks for itself:

    Francis McGuire appointed chair of NB Power board
    on 05-09-2007

    Premier Shawn Graham announced the appointment of Francis McGuire as chair of the board of NB Power. McGuire assumes the role from Norman Betts, who had been serving as interim chair since June 2007.

    “I am very pleased that Mr. McGuire has agreed to lead the board of directors at NB Power,” Graham said. “The corporation is directly involved in some very important projects including the refurbishment of the Point Lepreau Generating Station, the construction of the International Power Line and the focus of our government on transforming New Brunswick into the energy hub for the Eastern Seaboard. His considerable business and government experience will be very valuable as we move through this critical phase.”

    Graham also expressed his appreciation to the board of directors and staff of NB Power.

    “NB Power is a key player in our drive towards self-sufficiency,” the premier added. “I am very proud of the work of both staff and the board of directors and I want especially to thank Norm Betts for his contributions over the last few months.”

    Francis McGuire is currently president and chief executive officer of Major Drilling Inc. Prior to joining Major Drilling, he served as vice-president of business development for MITI Information Technology Inc. from 1998 to August 2000, identified by Profit magazine in 1999 as the fastest growing company in Atlantic Canada. McGuire has also served as deputy minister of the Department of Economic Development and Tourism of New Brunswick. He holds a Masters of Arts in International Studies, Trade and Economics from Johns Hopkins University, a diploma in European Politics from the Institut d’Etudes Politiques in Paris and a Bachelor of Arts from Dalhousie University. He recently served as co-chair of the Self-Sufficiency Task Force.

    McGuire’s appointment is effective Monday, Sept. 10, 2007.

    and some other thoughts here:

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