Auditor general expresses serious concern over NB Power’s ongoing debt challenges and its failure to meet legislated targets23 February 2021
FREDERICTON (GNB) – Auditor General Kim Adair-MacPherson tabled her report today commenting on NB Power’s debt challenges, as well as identifying the impact on the Province of New Brunswick. Of note, NB Power’s debt is $4.9 billion as of 2020.
Beyond existing debt, NB Power also has planned future capital expenditures at an estimated cost of $3 billion to $4 billion dollars.
The report also highlights that NB Power’s debt level is very high compared to other government-owned peer utilities in Canada.
“NB Power has the highest debt-to-equity ratio, at 94 per cent, and the worst 10-year average interest coverage ratio compared to peer utilities in Canada. No other peer utility has reached a debt-to-equity ratio as high as 90 per cent,” said Adair-MacPherson.
Because all of NB Power’s debt is issued by the Province of New Brunswick, its performance has a significant impact on the province overall. For instance, the report identified various credit rating agencies signalling that NB Power is the province’s largest contingent risk.
“There is an impact to all New Brunswickers when NB Power financial targets are not met,” Adair-MacPherson said.
The auditor general also expressed concerns of sustainability, given NB Power has not been able to make progress toward achieving the legislated debt to equity target and failed, year after year, to meet its own net income target forecasted in NB Power’s 10 Year Plan.
“NB Power’s inaccurate financial forecasts have impacted the utility’s ability to meet its own debt reduction target,” Adair-MacPherson said. “The current optimistic forecasts lead to inaccurate projected net income and capital expenditures, creating discrepancies between projections and actual earnings for the Crown corporation.”
She noted NB Power’s 10 Year Plans constantly move the target date for reaching the legislated debt equity level into the future, thereby postponing efforts at debt reduction.
The report makes two recommendations: to prioritize debt reduction efforts and to improve financial forecasts.
The full report is available online.