For the first time since 2006, Newfoundland and Labrador Hydro is heading to the financial markets to help fund planned capital projects.
There had been notice of the decision to go to the markets issued by Derrick Sturge, the chief financial officer for Hydro parent Nalcor Energy. Sturge spoke of the planned borrowing during the Crown corporation’s annual general meeting, held June 4 in St. John’s, but it was not clear exactly when the plan would be implemented.
Today, Hydro filed an application to the Board of Commissioners of Public Utilities (PUB) for the approval to borrow $200 million in longterm debt.
“Significant capital investment is critical to ensuring a safe and reliable electricity system for the people of this province,” Rob Henderson, vice-president of Newfoundland and Labrador Hydro, said in a statement.
“The additional funds will help finance the required refurbishment and maintenance of the existing electrical system and will also help finance recently announced projects including the 100MW combustion turbine generator, the third transmission line from Bay d’Espoir to Western Avalon and the new transmission line in Labrador West — all to benefit the overall electricity system and service to customers.”
As reported, Hydro is expecting to spend about $120 million on the new backup turbine, $300 million on the power line from Bay d'Espoir to the western Avalon Peninsula and another $300 million for the line in Labrador West.
The utility has also revealed an intention to significantly increase its yearly spending on the existing system, for maintenance and upgrades.
At the annual general meeting, Sturge said Hydro's capital spending is expected to run about $245 million in 2014. He said it should be expected, for the next five years, that Hydro’s costs will be covered through a mix of equity and debt financing.
“This is a favourable time for Hydro to return to the market, as interest rates for long-term debt are very attractive relative to historical levels,” notes the statement issued today.
Hydro has pulled its 2013 general rate application from the PUB, but an updated rate application incorporating costs faced by Hydro — from which that utility’s power rates will be determined — is expected to be filed by the fall.