Manitoba Hydro board says it has "no choice" but to move forward with Keeyask hydropower plant, associated transmission line

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A review requested by the Manitoba government has determined that utility Manitoba Hydro has no choice but to proceed with construction of the 695-MW Keeyask hydropower plant and the Bipole III transmission line, despite being significantly over budget and behind schedule.

Manitoba Hydro began the review in May with the assistance of the Boston Consulting Group to determine "whether the Bipole III project should proceed as planned, or if the corporation's current fiscal situation warrants the immediate delay, rerouting or cancellation of the project."

Manitoba Hydro-Electric Board chair Sanford Riley said the investigation "quickly expanded in scope to include the Keeyask Generating Station… and ultimately, the overall financial situation and operation of the utility corporation."

Riley continued in a statement, saying, "Manitoba Hydro's mounting and unprecedented levels of debt, the decision by the previous government to exclude Bipole III from the Public Utilities Board's Needs For and Alternatives To (NFAT) hearings and the direct connection drawn by Manitoba's credit rating agencies between Hydro's financial situation and the province of Manitoba's bottom line were all cause for significant concern and a broader, more intensive review."

Bipole III is a 500 kV transmission line that would stretch more than 1,380 km from northern Manitoba to the southern Winnipeg area.

Rerouting the line to follow a straighter route on the east side of Lake Winnipeg is "no longer an option", according to the utility, with 95% of all contracts and CAD$2.9 billion associated with Bipole III's construction having been committed.

Likewise, cancelling the line at this point would result in a loss of $7 billion to Manitoba ratepayers, the report said, while making it impossible to transmit power from Keeyask that has already been committed in export contracts worth about $4.5 billion.

Bipole III's pricetag has ballooned from a current budget of $4.65 billion to up to $5 billion, with a completion delay between 12 and 15 months.

"Rerouting the Bipole III transmission line down the west side of the province was obviously a wrong decision, one forced on Hydro by the previous government, and has cost Manitobans an additional $900 million," Riley said. "However, the review concluded that if construction is not completed, Keeyask's export contracts will not be filled, making the new generating station an asset incapable of generating revenues for many years.

"The board has been left with no choice but to move forward."

According to a statement from the board released yesterday, Manitoba Hydro will:

  • Focus on the completion of Keeyask and Bipole III with "minimal delay and the least possible incremental cost";
  • Find "significant cost savings" from within its own operations;
  • Complete a revised financial forecast, to be filed with the Manitoba Public Utilities Board as part of its next General Rate Application; and
  • Develop a plan to set the company on a path toward financial stability.

While the future of Keeyask has never been much in question since construction began, Manitoba Hydro said the project is now between 21 and 31 months behind its original completion date, raising costs from the current $6.5 billion to as much as $7.8 billion.

The Keeyask hydropower station is to be developed by a partnership consisting of Manitoba Hydro and the Keeyask Cree Nations-Tataskweyak Cree Nation, War Lake First Nation, Fox Lake Cree Nation and York Factory First Nation.

HydroWorld.com reported in May 2011 that former Manitoba Premier Greg Selinger had signed agreements for power generated by the plant to be exported to Minnesota Power and Wisconsin Public Service.

Keeyask and the now suspended 1,485-MW Conawapa hydroelectric plant were pitched as being significant sources of income for Manitoba Hydro, but their development has now been blamed for much of the company's current financial problems.

"This imprudent, some would say, reckless, capital spending program has created a severe debt load which is not just placing an incredible strain on the financial stability of Manitoba Hydro but also threatening the bottom line of the entire province," Riley said. "Going forward, the new board will work on a plan that will allow us to confront the significant financial challenges Manitoba Hydro faces and put the utility back on a solid foundation, rather than continuing down its current path of huge financial risk."

For more news from Canada, visit here.

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