Premiers Shawn Graham and Jean Charest recently unveiled a proposed agreement on energy, under which Hydro-Québec would acquire most of the assets of NB Power.

New Brunswick would benefit from lower rates, says the news release, a
vastly reduced provincial debt exposure as well as a secure and
reliable source of energy and its development as an energy hub. At the
same time, Hydro-Québec would acquire quality assets, an additional
base of more than 370,000 customers and would benefit from New
Brunswick’s strategic geographic position in the Northeast region of
North America. This transaction would be profitable for Hydro-Québec
from year one, the release continues, with an expected return on equity
(ROE) of more than 10%.

Speaking in Fredericton, N.B., the premiers outlined the results of
discussions announced in June to explore further cooperation on energy
issues. A memorandum of understanding (MOU) setting out the terms and
conditions of the proposed transaction was signed.

Under the terms of this MOU, Hydro-Québec would acquire most of the
assets of NB Power for an amount equivalent to NB Power’s debt: $4.75
billion. The utility’s debt would thereby be completely eliminated.

NB Power would continue as a separate, New Brunswick entity,
headquartered in Fredericton, and use the existing name and corporate
identity. Hydro-Québec would offer employment to all employees of NB
Power at the time of closing, and respect the collective agreements in
place.

The nuclear generating facility at Point Lepreau (after the completion
of the plant’s refurbishment), hydro facilities, peaking power plants
and transmission and distribution assets of NB Power are part of the
proposed transaction. Hydro-Québec would not assume any liabilities
with respect to the Point Lepreau refurbishment project.

Thermal generation facilities at Coleson Cove and Belledune would
continue to be owned and operated by the Province of New Brunswick, and
would supply electricity to Hydro-Québec under the terms of tolling
agreements. Hydro-Québec could direct the Province to shut down such
facilities on one year’s prior notice and all emissions allowances
would accrue to Hydro-Québec. The thermal generating facility at
Dalhousie would be phased out.

“This proposed agreement is an exciting opportunity for New Brunswick,
and in the public interest,” Graham said. “Homeowners will see rates
much lower than under the status quo, and we will now share Quebec’s
competitive industrial rates which, coupled with our plan for lower
taxes, positions us for significant economic growth. Moreover, the
elimination of NB Power’s massive debt will help us attain
self-sufficiency and relieve our children and grandchildren of this
burden.”

“This agreement creates an unprecedented energy partnership in Canada.
Through it, Quebecers will acquire quality assets, while over the
medium term, our partners will benefit from a clean energy supply that
will reduce green house gas emissions in Eastern Canada. It will also
provide Québec with a strategic geographic position with regards to the
markets of Atlantic Canada and New England. All Quebecers will benefit
from this agreement,” Charest said.

Speaking for NB Power, president David Hay said, “Hydro-Québec is a
highly respected and well-managed world-class, reliable organization.
Under the new regulatory framework, our customers would benefit from
lower rates than NB Power can provide in its current configuration,
while our employees will continue providing the excellent service to
New Brunswickers that they have become known for.”

“Hydro-Québec is very aware of the importance of New Brunswick’s
electrical infrastructure to its citizens, businesses and
institutions,” said Thierry Vandal, president and CEO of Hydro-Québec.
“We will operate, maintain and develop this infrastructure with the
same diligence and care that we apply to all our activities. We know
that we can count on the employees of NB Power, its network of
suppliers and its partners to help us fulfill a vital mission: provide
excellent service to New Brunswick customers.”

The MOU sets a closing date for substantially all the assets involved
on or about 31 March 2010. The closing date for the Point Lepreau
nuclear generating facility would follow on or about 01 January 2011,
after the completion of the refurbishment project now underway. In
addition, a package of regulatory reforms, aimed at harmonizing New
Brunswick’s regulatory system with that of Québec, will be presented to
the New Brunswick Legislature in the upcoming session.