It was the last question at Fortis’s annual shareholder meeting Friday morning and it was a doozy — why isn’t the “most spectacularly successful enterprise ever borne and bred and grown in Newfoundland” involved in the Lower Churchill hydroelectric project?
Stan Marshall, president and CEO of Fortis, said it came up, but the company said no thanks.
Fortis prefers a controlling interest in projects with government partners.
“In the early days, we were invited — or inquiries were made whether we’d be interested in a minority situation — and we said no. Very straightforward,” replied Marshall.
“Without going into the merits of any project, we wished them well, but we do not get involved with minority situations with Crown corporations.”
The question came from shareholder Bill Callahan, a former journalist and provincial cabinet minister in the Smallwood government.
“I’ve been coming here for nearly 20 years and a question I always asked (former Fortis chairman) Angus Bruneau and Stan Marshall was, why is it that this marvellous, wonderful company … is not involved in the single, major, renewable resource of this province?
“I think everybody will understand I refer to Churchill Falls.”
The $6.2-billion Muskrat Falls project is the latest in a long line of attempts to develop the Lower Churchill over the years.
“And there is certainly no assurance that that’s going to work,” said Callahan.
“Why is it that Fortis, which is so successful in this business, has not been in the Churchill Falls business because I personally don’t believe it will ever work for us as long as it’s mired in politics.”
Until now, Callahan said it’s a question he has posed privately to Fortis executives.
A controlling interest
Marshall, who has been at the helm of Fortis since 1996, said the company has adhered to fundamental principles for its long-term success.
“One of those principles is that we will not get involved in minority situations with governments. That is an absolute rule I have observed.”
Fortis is currently partnered in the Waneta hydro project with a pair of power companies owned by the B.C. government to build a $900-million power plant.
“You’ll note we own 51 per cent,” said Marshall. “We would not have gotten involved with less than … 51 per cent.”
Following the shareholder meeting, Marshall was asked why the company avoids minority stakes.
“Simply when things go wrong we’d like to be able to rectify them,” he told reporters.
“If you’re going to go in with a partner you’ve got to know that partner very, very well, have a lot of commonality.
“Governments … their agenda can be very, very different than a private enterprise.”
Exploits River talks
Fortis is a majority partner in another project with the province, though not by choice.
The Williams government expropriated AbitibiBowater’s minority stake in the Exploits River Partnership in 2008.
With it, went Fortis’ 51 per cent in hydro plants in central Newfoundland that generate 36 megawatts of power.
Nalcor Energy is managing that hydro asset and making payments on the project loan, which stood at $58 million as of Dec. 31, 2010, according to Fortis’ annual report.
Last month, the province announced a $32.8-million settlement with one of the Exploits partners, Enel Green Power North America.
Fortis is in similar talks.
“We’re having ongoing discussions with Nalcor,” said Marshall. “The fact that others now have settled, and we’re the last ones left, hopefully we’re talking about months rather than years.”
Asked if Fortis would remain a partner in Exploits River, Marshall said it’s difficult to predict.
“Things can change, but we don’t see that there’s going to be a lot of opportunity for private hydro developments in the province right now.
Does that mean there’s no possibility of a partnership with Nalcor in Exploits River?
“If we were invited to do so, we’d certainly consider it.”
But, he said, only for a majority position.
Fortis finances
Fortis said it delivered record earnings for the 11th consecutive year — $285 million in profits on revenues of almost $3.7 billion in 2010.
For shareholders, those earnings work out to $1.65 per common share.
In 2009, Fortis posted earnings of $262 million on revenues of $3.6 billion — $1.54 per share.
“Platts, a leading global provider of energy information, named Fortis a top 250 global energy company in 2010,” Marshall told shareholders.
“Fortis was ranked 11th in the top 50 fastest growing companies.”
Fortis Properties posted profits of $26 million last year on revenues of $226 million — up from net earnings of $24 million and revenues of $219 million in 2009.
Newfoundland Power generated net earnings of $35 million last year on revenues of $555 million — up from profits of $32 million and revenues of $527 million in 2009.
Headquartered in St. John’s, Fortis has almost $13 billion worth of assets — and 92 per cent of them are regulated electrical and natural gas utilities.
The rest of the company’s assets include hydroelectric generating facilities in Canada, the U.S. and Belize; 21 hotels in eight provinces; and about 2.7 million square feet of commercial retail and office space mostly in Atlantic Canada.
