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Newfoundland and Labrador and Quebec have signed an important Memorandum of Understanding (MOU) for hydroelectric generation in Labrador.
The resulting proposed partnership will create a significant and immediate increase in value for Newfoundland and Labrador and make a substantial contribution to Quebec’s energy security.
The non-binding memorandum has two components: new contracts with Churchill Falls (Labrador) Corporation (CF(L)Co) and both Hydro-Québec and Newfoundland and Labrador Hydro for existing Churchill Falls generation at a new price; and the development of new generation projects in Labrador. Over time, total generation will reach 9,190 MW of which 7,200 MW will be purchased by Hydro-Québec and 1,990 MW will be available to Newfoundland and Labrador Hydro.
“Today represents a significant milestone for every Newfoundlander and Labradorian. Over the life of the agreement, we will generate dividends to the province of more than $200 billion by 2075, have access to nearly four times the electricity we do today to support industrial growth in Labrador, and realize the development of Gull Island without the financial and construction risks. We have brokered the terms of an agreement that will bring full and fair benefits to the province of Newfoundland and Labrador and unlock the true potential of the Churchill River for the benefit of generations to come,” said Dr. Andrew Furey, Premier of Newfoundland and Labrador.
“I am very proud to announce a historic new agreement between Quebec and Newfoundland and Labrador. In addition to securing a favorable price until 2075 and adding 2,400 megawatts of capacity — a 50 per cent increase — this agreement will generate savings of over $200 billion over 50 years. This allows us to secure a major energy block for several generations while ensuring a price far lower than the alternatives. It will help us keep electricity rates as low as possible for Quebecers. It’s a win-win!” said François Legault, Premier of Quebec.
Hydro-Québec will also pay Newfoundland and Labrador Hydro an option payment of $3.5 billion net present value for the right to co-develop new projects in Labrador. The combined option payments and the resulting provincial dividends and water rentals will result in approximately $1 billion in annual payments to Newfoundland and Labrador starting in 2025. The average cost of power from Churchill Falls under this agreement will be approximately 6 cents/kWh. Hydro-Quebec will direct dividends from its ownership to reduce the impact to its customers to 4 cents/kWh.
“This memorandum secures access for Quebec to a large quantity of renewable energy for 50 years at the lowest possible price. We have taken a meaningful step toward ensuring Quebec’s energy security for generations to come. The agreement advances our decarbonization efforts and is a valuable contribution to our collective wealth,” said Michael Sabia, CEO of Hydro-Québec.
“The powerful Churchill River, the Mishta-Shipu as it is known by our Innu partners, is a world-class source of renewable energy, critical to addressing climate change and is an important economic enabler. Together with our partners in Quebec, with today’s announcement, we are building a prosperous energy-driven future,” said Jennifer Williams, CEO, Newfoundland and Labrador Hydro.
Existing Generation from Churchill Falls
The memorandum provides for the termination and replacement of the current contract for the existing generation from Churchill Falls. The MOU forecasts payments from Hydro-Québec to CF(L)Co of $33.8 billion net present value between 2025 and 2075. According to the terms of the MOU, Hydro-Québec will pay CF(L)Co energy prices that are forecast to increase over time depending on markets in Quebec and elsewhere as pricing will be linked with various market indices.
New developments
Gull Island: The Gull Island hydroelectric power generating facility project will be constructed along the Churchill River and will generate 2,250 MW.
Churchill Falls Expansion: A second facility will be constructed near the current Churchill Falls site. The new facility will contribute 1,100 MW of installed capacity.
Churchill Falls capacity increase: The capacity of the existing Churchill Falls facility will be increased, adding 550 MW to the total installed capacity.
Newfoundland and Labrador Hydro will lead the project to increase capacity at the existing Churchill Falls facility. Given its proven track record with major projects, Hydro-Québec will act as the project lead for Gull Island and the new facility at Churchill Falls and will manage the financial and construction risks associated with them. Each utility will lead the construction of new transmission in their respective jurisdictions enabling the transfer of the increased electricity generated in Labrador.
Prices for the production from the new developments will be based on actual construction and operating costs and will escalate over time. On average, the price is expected to be 11 cents/kWh.
Partnership with Indigenous Communities
This memorandum will fully respect existing agreements with the Indigenous communities of Labrador. Both Governments and utilities commit to meaningful engagement with Indigenous peoples right from the start of projects and at every step in their development. We will engage in this dialogue in a spirit of openness, transparency and collaboration. Newfoundland and Labrador Hydro and Hydro-Québec will work together to this end.
The non-binding MOU signed today is an important step towards a new Newfoundland and Labrador – Quebec partnership on hydroelectric generation in Labrador. Over the coming months, signatories will continue their analysis of new projects with a view to reaching a definitive agreement. Until such an agreement is reached, the existing contract remains in force. |
