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Gold/Mining/Energy : REX DIAMOND MINING TSE:RXD
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To: Mr. Oil who wrote (2247)1/14/2000 8:05:00 AM
From: Bob Fairchild  Read Replies (2) of 2522
 
OT : Talk about bad deals. For those of you outside of Canada, Churchill Falls is a massive hydroelectric site that is located in Labrador but the power it produces is the property of Quebec which in turn sells it to the United States. At the time Newfoundland and Quebec signed the deal, it was not feasible to build the power lines through Labrador and down to Newfoundland for economic reasons, hence it made more sense to utilize the site for other customers. The Government of Newfoundland signed a very long term agreement wereby Quebec would purchase the power at a fixed rate. Their was no consideration given to inflation or that energy prices would go up. It was a bad deal with no foresight for the future. Since then Newfoundland has done everything including temper tantrums to get Quebec to rewrite the deal. Quebec who sees a good thing is not interested in changing the agreement. In essence, Newfoundland is subsidzing energy transfers to Quebec as it is costing more to produce the power than what is being received. Quebec on the other hand is laughing all the way to the bank.
It is with this background that you see the art of dealmaking die and why Newfoundlanders are so steadfast in not giving up an inch ever again. Unfortunately, every deal requires some degree of compromise on both sides.
One problem with the Inco deal was that Newfoundland has not enough generation in the province to supply this Inco smelter and it was insisted that power come from expansion of the Churchill Falls project which would take at least ten more years to see a single megawatt make it to the Rock.
This would involve building a new generation station somewhere else on the watershed, power lines to Newfoundland and maybe a new agreement with Quebec because to make the project economic, excess power would have to go somewhere else and that means through Quebec as Newfoundland/Labrador are geographically isolated from the rest of North America.
Other forms of power could be developed on site but are not an option. from what I understand so Inco becomes hostage to more political footballs.
One question I have is where is hibernia oil refined ?
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