Manitoba Hydro's burgeoning debt surpasses $19 billion
Public utility also reports a nearly 50 per cent drop in net income
Manitoba Hydro's debt load now exceeds $19 billion as the provincial Crown corporation grapples with a shrinking net income amid ongoing efforts to slay costs.
The utility's annual report, to be released publicly on Tuesday, also shows its total consolidated net income slumped from $71 million in 2016-2017 to $37 million in the last fiscal year.
It said efforts to restructure the utility and reduce costs are partly to blame for the $34 million drop in year-over-year income.
These earnings come nowhere close, however, to alleviating Hydro's long-term debt problem. The figure is pegged at $19.2 billion this fiscal year, up from $16.1 billion the previous year and $14.2 billion in 2016.
The utility projects its debt will grow to about $25 billion in the next five years. Its largest expenses include finishing the Bipole III line, working on the Keeyask Generating System that is halfway done and rebuilding aging wood poles and substations, the report said.
Risk to customers
"This level of debt increases the potential financial exposure from risks facing the corporation and is a concern for both
the corporation and our customers who may be exposed to higher rate increases in the event of rising interest rates, a prolonged drought or a major system failure," outgoing president and CEO Kelvin Shepherd wrote.
The income drop is primarily a result of the $50 million spent in the form of restructuring charges associated with the utility's efforts to streamline the organization and drive down costs.
Those efforts included the implementation of buyouts for employees through what the utility dubbed its "voluntary departure program."
Among the changes, Manitoba Hydro reduced its workforce by 800 employees, which is expected to save the utility over $90 million per year. It also reduced its management positions by 26 per cent, a Monday news release said.
To improve its financial situation, Hydro has applied for rate increases. The Public Utilities Board offered a 3.6 per cent average rate hike, instead of the 7.9 per cent jump the utility asked for.
In May, when the PUB rendered its decision, it made several recommendations as an alternative to raising rates, including receiving a share of carbon tax revenue and asking the government to help pay for Bipole III.
Hydro is projecting a net income of $70 million for 2018-2019, which includes the impact of the recent rate increase. That total reflects an approximately 20 per cent reduction in net income from 2017-18 after restructuring costs are calculated.
With files from Sean Kavanagh