Our Plan to Restore Manitoba and Protect Manitobans · • 10‐year plan to restore Manitoba Hydro...
Transcript of Our Plan to Restore Manitoba and Protect Manitobans · • 10‐year plan to restore Manitoba Hydro...
1
H. Sanford RileyChair, Manitoba Hydro‐Electric Board
December 1, 2017
Manitoba Chambers of Commerce
Our Plan to Restore Manitoba Hydro and Protect Manitobans
2
• Review of Manitoba Hydro’s financial challenge
– Cash‐flow negative operations
– Growing debt
• Review of Manitoba Hydro business risks
• 10‐year plan to restore Manitoba Hydro
• There are no easy answers
Overview
3
The Power in our Province• Core generation is from water power
- 15 hydropower stations • 5,200 MW developed• 5,000 MW remaining potential
• 99% of electricity generated in Manitoba is renewable
• Two thermal generating stations primarily for backup and reliability
• US import capability critical to meet seasonal peaks and provide backup in event of failure or prolonged drought
4
• Manitoba Hydro‐Electric Board represents a talented and diverse cross‐section of Manitobans
• Deep experience with operating businesses that have large balance sheets like Manitoba Hydro
• Strong experience from perspective of Hydro stakeholders and community members
• All committed to building a Manitoba where future generations enjoy the same opportunities we enjoyed
Board Perspective
5
• $5 billion
• 100% of right of way clear
• Over 2,200 towers (75%) installed
• Critical for power system
Need to Finish Bipole
6
• $8.7 billion
• 45 per cent of control budget spent
• Export contracts already signed
Need to Finish Keeyask
Slide 6
bo1 Keeyask with spillway in upper left. Targeted in-service date is August 2021.bowen, 2017-11-15
bo2 Keeyask Oct. 2017. Spillway in upper left. Targeted in-service date August 2021.bowen, 2017-11-15
7
The Challenge ‐ Cash Flow Deficiency
(296)(228) (242)
(306) (294) (278)
(467)
(559)
(660)
(835)(913)
(1,000)
(900)
(800)
(700)
(600)
(500)
(400)
(300)
(200)
(100)
‐
2017 2018* 2019 2020 2021 2022 2023 2024 2025 2026 2027
FISCAL YEAR ENDING
Millions of D
ollars
No Rate Increases, 20 Year WATM
ACTUAL
*2018 reflects the 3.36% interim rate increase effective August 1, 2017 approved in Order 80/17
First full year Bipole III in service
First full year Keeyask in service
8
The Challenge – Too Much Debt
9
33 90 65
(101) (128) (152)
(447)
(701)(768)
(946)(1,016)
(1,200)
(1,000)
(800)
(600)
(400)
(200)
‐
200
2017* 2018** 2019 2020 2021 2022 2023 2024 2025 2026 2027
FISCAL YEAR ENDING
Millions of D
ollars
No Rate Increases, 20 Year WATM
ACTUAL
*2017 net income before $20 million non‐recurring gain
**2018 reflects the 3.36% interim rate increase effective August 1, 2017 approved in Order 80/17
Manitoba Hydro Net IncomeNo further rate increases
1010
Manitoba Debt to GDP RatioHydro debt included, total debt‐to‐GDP ratio forecast will increase to 65%
0%
10%
20%
30%
40%
50%
60%
70%
80%
0
10
20
30
40
50
60
Provincial Debt* MH Debt** Debt‐to‐GDP***
MH CONSIDERED SELF‐SUPPORTING TO 2016
*From RBC: Canadian Federal and Provincial Fiscal Tables September 26, 2017**3.95% Rate Increases, 20 Year WATM***Assumes 2% growth in 2018 on
Net deb
t (billion
s of dollars)
1111
15% 14% 13% 13% 13%11%
9% 8%6% 5% 4% 4% 4% 5% 6%
8%11%
14%18%
15% 14% 13% 13% 13%12% 12% 11% 10% 10% 10% 10% 10%
11%13%
16%
19%
22%
27%
0%
5%
10%
15%
20%
25%
30%
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036
FISCAL YEAR ENDING
Downside Case: Base Case with 2023‐2027 Drought Base Case: 3.95% to 2036, 20 Year WATM Minimum Target
Target Equity 25%
Equity Challenge and RisksManitoba Hydro Equity Ratio
1212
• Low water levels
• Increasing interest rates
• Construction risks
• Domestic demand
• Export markets
Business Risks at Hydro
13
• Annual 7.9 per cent rate increases each year from 2019 to 2024
• 4.54 per cent rate increase in 2025
• A return to inflationary (or lower) rate increases by 2028
• Over 800 employee reductions by Jan. 31, 2018
• 30% of senior management and 25% of middle management reduced
Our Plan – Balanced, Prudent
1414
Average Retail Cost of Electricity
6.48 6.81
8.31 9.22
9.88 9.89 10.30 10.48 10.84 11.01
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
Manitoba
Quebec
B.C.
Louisianna
Saskatchewa
Wash
ington
New
Oklahoma
Wyoming
Kentu
cky Ce
nts /
kW
.h (C
anad
ian)
Source: US Dept of Energy (June 2016) & Edison Electric Survey (June 2016)(Exchange rate as of February 13, 2017: 1 US$ = 1.3071 Cdn)
15
• Stop construction of Keeyask and Bipole?– Too far along; least worst choice
• Sell more power to export markets?– We don’t set the spot price; transmission limitations
• Cut more costs?– Capital problem, not operating costs
• Do nothing?– Hope is not a strategy
Why Don’t You Do This?
1616
Equity Ratio
17
• Plan for 7.9% increases is a responsible, balanced approach for Manitoba’s future
• Flexibility after MH returns to financial health
Benefits in the End
44%
108%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036
FISCAL YEAR ENDING
Cumulative Ra
te In
crease
PUB/MH II‐21b: Rates to Maintain 25% Equity in 2027 On 3.95% to 2036
18
• Critical Public Utilities Board review process underway
• Extensive scrutiny of rate application and major capital projects
• 220 minimum filing requirements
• 2,139 information requests answered by MH staff
• 26,000 pages of of documents filed
• This process is crucial to the future of Manitoba
Regulatory Process
19
Manitoba Hydro committed to a strong future for our customers and for all Manitobans