New Brunswick and Hydro-Québec reach impasse and cancel acquisition of NB Power

New Brunswick Premier Shawn Graham announced today that his province will no longer be proceeding with the sale of NB Power's assets to Hydro-Québec. The parties were unable to agree on the allocation of new risks identified by Hydro-Québec. The announcement caps months of back and forth negotiation between the province and its neighbour's dominant utility and of vocal opposition to the deal from rate payers and other provinces.

The original deal announced last October would have seen virtually all of NB Power assets sold to Hydro-Québec for $4.8 billion. Critics were quick to object. Danny Williams, the Premier of Newfoundland (who does not hestitate to criticize Hydro-Québec) was particularly vocal, warning NB that the deal would cost the province the ability to control access to the lucratice power markets of the Northeast U.S. Members of the public in New Brunswick expressed concern ceding control over rates to a utility outside of the province. Members of Premier Graham's cabinet and other MLAs joined the fray, threatening earlier this year to block the deal.

In light of the heavy criticism, Premier Graham went back to the table with Hydro-Québec. A new memorandum of understanding was annouced in January under which Hydro-Québec would acquire most of the generating assets of NB Power for $3.2 billion. It would also provide power to the province on a long-term wholesale basis at prices intended to diffuse the concerns of rate payers. NB Power would retain ownership of the transmission and distribution infrastructure, allowing it to serve as a gateway for Canadian power sales to the U.S.

Converting the memorandum of understanding to a definitive agreement apparently proved impossible. Hydro-Québec discovered previously unaccounted for risks during its due diligence. The changes it proposed to the deal to account for these new risks proved to be unacceptable to NB Power. Having reached an impasse, the parties decided to walk from the deal.

Quebec Premier Jean Charest was circumspect. "The deal didn't work out, and that's too bad, we hoped it would, and I think we all were in this with good faith." Premier Graham quickly put the emphasis on the future, acknowledging, that New Brunswick "may have closed the door on an energy agreement with Hydro-Québec. But I know that new doors of opportunity have opened before us."