NB Power Need To Prioritize Debt Repayment: Auditor General

New Brunswick’s auditor general is expressing serious concerns over NB Power’s ongoing debt challenges.

Kim Adair-MacPherson tabled her latest report Tuesday before a standing committee of the provincial legislature.

Adair-MacPherson said the utility’s debt stands at $4.9 billion as of 2020, an increase of $2 billion since 2002.

She said much of the increase has been driven by capital projects, including the Point Lepreau and Belledune generating stations.

Adair-MacPherson warned there is potential for NB Power’s debt to double in size over the coming years.

“On the horizon, NB Power has planned major capital projects estimated to cost at least $4 billion,” she said.

According to her report, the utility plans to spend between $2.7 billion and $3.7 billion at Mactaquac, $93 million at Coleson Cove, and $84 million at Belledune.

Adair-MacPherson said the Crown corporation’s $4.9-billion debt is very high compared to other government-owned peer utilities. She said the utility also has the highest debt-to-equity ratio at 94 per cent.

“All debt that NB Power holds is issued by the province of New Brunswick, so the province essentially carries the risk for NB Power’s debt,” she said.

Adair-MacPherson said while NB Power failed to meet a 2011 commitment to reduce $1 billion in debt by 2021, the utility has reduced its debt by an average of $20 million per year since the completion of the Point Lepreau refurbishment in 2013.

But she said the utility will have to boost that to $65 million to reach its debt-to-equity target of 80 per cent by 2027.

“It’s important to do it at this point in time before they start to make major capital investments again in 2027,” said Adair-MacPherson. “There’s a window of opportunity here,”

In addition to developing a “firm and well-defined debt management plan,” the auditor general said the utility’s 10-year plan forecasting methodology also needs to be improved.

Adair-MacPherson said the utility has been able to forecast revenues with “reasonable accuracy,” but fuel and purchased power expenses are, on average, $87 million higher than projected.

“Even though there is uncertainty, there is forecasting modelling tools to improve the accuracy with their forecasts with respect to fuel prices, hydro flow, the Point Lepreau capacity factor and weather events,” she said.

In its response, NB Power said it remains committed to meeting its mandated debt to equity target by 2027.

“As part of its planning process, NB Power will adjust annually its debt management plan to meet these targets using the best information available to achieve the key performance indicators that include debt reduction amount and debt-to-equity ratio,” it said.

The utility said it will also look at any additional options to “quantify the impact of significant future cost uncertainties outside management’s control and to include this information in its planning process.”