ST. JOHN'S, N.L. — During Nalcor Energy’s first quarter financial update, chief financial officer Derrick Sturge said the Crown corporation recorded less income from its energy marketing arm, year over year, by about $12 million.
Energy marketing is the division responsible for power sales. Right now, it largely works with a block of power from Churchill Falls, but it will be expected to also handle sale of excess power from the Muskrat Falls Project, when that project is online.
Sturge said the year-over-year difference is mainly attributable to two things.
First, there is the fact some of the power that might have been sold to outside buyers was fed from Labrador to the Island this winter, over the Labrador-Island Link. In other words, it was used domestically instead of for export.
The second reason is, for the power remaining, outside market prices are down.
Year-over-year, prices are down by about 14 per cent, Sturge said.
Referring to a graphic showing Nalcor Energy’s exports by volume and price since 2015, Sturge noted prices have moved up and down over the last five years. “So you’re seeing normal variation in the export market,” he said.
Nalcor Energy president and CEO Stan Marshall was asked if he agreed with the comment. He said, “yes,” while going on to note some variables that can affect prices in the markets.
The realized export price, excluding sales of Churchill Falls power at the border to Hydro-Québec, was $42 per megawatt hour in the first quarter of 2019. That’s compared to $49 for the same power in the first quarter of 2018.
The realized price has been lower within the last five years. For example, it stood at $30 in the first quarter of 2016. It has also been higher, standing at $57 per megawatt hour in the same period of 2015.
Export revenues have been pegged by the provincial government as one means of reducing the burden of Muskrat Falls Project costs on local ratepayers.
While exports were one consideration in the latest financial update, the use of recall power domestically did lower Newfoundland and Labrador Hydro’s energy supply costs. In part as a result of this, Nalcor Energy reported company profit overall for the three months ended March 31, 2019, was $92 million compared to $78 million for the same period in 2018.
There were also benefits from interim rates awarded to Newfoundland and Labrador Hydro, and the Nalcor oil and gas arm reported increased production, with lower exploration and evaluation costs.
Asked about progress on the Muskrat Falls Project — accounting for 74 per cent of Nalcor Energy assets – Marshall said work continues with contractor GE Grid Solutions on getting the Labrador-Island Link to full operation; and the second and third turbine and generating units are being assembled for installation at the dam site.
He said the project remains on schedule for first power in 2019, and on budget per the last update in June 2017, with an anticipated cost of $12.7 billion (including interest).
(NOTE: This is a corrected version. The realized price specifically excludes Churchill Falls power sold at the border to Hydro-Quebec under contract governing Churchill Falls power.)
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