Before Nalcor Energy health and safety manager John Hollohan could offer a pre-meeting “safety minute” at the Crown corporation’s annual general meeting in St. John’s Tuesday, the questions began.
It was asked whether more time than what was allotted for the meeting might be provided — should questions from the floor and from those watching the live webcast push the event past its scheduled 11 a.m. close.
“We are going to try to steward to the time frame that we have,” replied Mike Roberts, Nalcor’s human resources manager. He offered responses after-the-fact for additional questions.
Objections were shouted and the room noise was rising.
“We’ll take some extra time,” interjected president and CEO
Ed Martin. “Sounds like a good idea.”
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“The level of expertise and the approach to project planning and execution at Nalcor is truly world class and has positioned the company as a true leader in the global energy sector,” said director of the Nalcor board, Ken Marshall, formally opening the meeting.
“Support from our shareholder (the provincial government) gives Nalcor the ability to succeed in the energy sector and advance new energy opportunities for the benefit of Newfoundlanders and Labradorians.”
Presentations by Martin and chief financial officer Derrick Sturge followed. They touched on what was contained in Nalcor’s annual Business and Financial Report. As The Telegram previously reported, that document states a more than $125-million profit for the Crown corporation in 2011.
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It was noted Nalcor is currently putting millions into upgrading and replacing existing energy generation and transmission infrastructure.
While capital expenditures were in “the $60 million range” in 2006, the total for 2011 has grown to more than $200 million.
“I’d be very surprised if 2013 wasn’t higher again,” Sturge said.
Age is a main reason for the spending, particularly with Newfoundland and Labrador Hydro assets.
“The majority of our assets are in the 40-45 year timeframe,” Martin said, adding the longer the infrastructure remains, the greater the risk for additional downtime, outages and costly repairs.
Hydro’s capital expenditures have jumped from $30-40 million a year in 2006 to the $80-million range as of 2011, Sturge said.
“We’re probably at the highest re-investment level we’ve ever had in our system.”
Despite these costs, the corporation has been improving its bottom line in terms of its debt-to-capital ratio. Nalcor managed to drop that ratio from 42.5 per cent to 38.5 per cent year over year, in preparation for the Lower Churchill project.
As spending increases, Nalcor’s debt is expected to rise to 60-65 per cent debt, Martin said.
Looking 10 years down the road, the corporation is expecting its oil and gas arm to bring in “hundreds of millions” of dollars to help support its bottom line.
The Telegram will have more on Nalcor Oil and Gas in the coming days.
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Meanwhile, Daniel Escott of the Canadian Youth Federation asked Martin about the goal of the Lower Churchill development, reading out a statement made by Premier Kathy Dunderdale.
“I’ve heard that quote from the premier and I’m not seeing a change (in reasoning) in my mind,” Martin replied.
He pointed to the province’s 2007 energy plan and the potential in wind and small hydro projects to follow Muskrat Falls hydro.
“It’s a matter of understanding the overall context,” he said.
Asked about energy markets, he spoke about the potential to export Lower Churchill power through the Maritime link, through an Emera partnership.
“I’ve heard too much of this business of there’s no market out there,” he said, walking through the basics of the U.S. clearing market.
“There are markets. We’ve protected ourselves from a cash flow perspective. (Lower Churchill development) stands alone without that money. And it’s the right thing to do,” he said.
The subject of natural gas energy from offshore Newfoundland was raised. Martin said Nalcor staff had reviewed recent assessments released on natural gas, finding they had not taken into account several factors that would increase costs.
For example, he said, operating costs for farming the gas were not considered and there would be a need to drill additional subsea wells.
“The costs are just too high,” he said.
Nalcor will post video of the annual general meeting on its site Monday, June 11.