Perhaps Postmedia has not reported accurately on BC Hydro’s financial affairs because their newspapers do not employ anyone with inclination and skills needed to to do more than rewrite press releases.
In the article B.C.’s credit rating at risk as Hydro’s debt grows, Rob Shaw identified Moody’s as “a top investment firm.” That is an inaccurate portrayal of a company that describes itself as a “provider of credit ratings.” Whether it can be described as a “top”company of any sort is doubtful.
Last week, Bloomberg News reported that Moody’s agreed to pay over $1.1 billion (CAN) in penalties to the U.S. Justice Department and 21 states because of inflated ratings on American securities. In 2016, Bloomberg reported Moody’s had been hit with a $1.9 million (CAN) penalty after Hong Kong regulators found the rating agency had failed to provide sufficient explanations for its judgments and had not ensured the accuracy of its claims.
The Council on Foreign Relations reported that Moody’s, with two other American agencies, was accused of:
…exacerbating the financial crisis and defrauding investors by offering overly favorable evaluations of insolvent financial institutions and approving extremely risky mortgage-related securities.
In Europe, the Big Three garnered further controversy over their sovereign debt ratings…
Critics believe that because issuers of debt pay the rating companies, rather than the users of reports, there is a built-in conflict of interest. From 2011 to 2016, the BC Government and BC Hydro paid Moody’s at least $2.9 million for services. Can a company with questionable ethics, directed by deceitful politicians, be trusted to put public interest before private?
Vancouver Sun readers get no accurate information about Moody’s and its relationship with the Liberal government. They do though get happy talk quotes from the Premier, the Jobs Minister and the Finance Minister. Shaw provides further good news with this misinformation:
…Hydro been forced to borrow $3.8 billion since 1992 to pay government a mandatory annual dividend that it was unable afford, and is expected to borrow another $852 million over the next three years as well.
The government has promised to start weaning itself off the dividend in 2018, a move that Moody’s noted would be positive. The corporation’s 10-year rates plan will help pay off much of its regulatory account as well, said Moody’s…”
One problem with repeating government talking points is that they are often inaccurate. For example, from Shaw’s words, one might assume that BC Hydro paid $3.8 billion in dividends to the province since 1992. In fact, dividends total $6.6 billion since 1990. In addition, during that time, the utility paid a further $12.2 billion to governments (primarily the province) for water rentals and grants in lieu of taxes.
Since 1990, while the electric company was writing cheques to governments, its term debt increased $12.7 billion. Even a middle school student could calculate that BC Hydro would be almost free of debt had it not been required to pay a total of $18.8 billion as taxes and dividends.
I suspect that Shaw and his Press Gallery colleagues would be unwilling to wager real money on the promise of the Liberal Government “weaning itself off dividends” or BC Hydro comfortably expensing its $7.3 billion of intangible assets and deferred costs. (Note: the province has already required a dividend accrual of $259 million in the first half of fiscal year 2017.)
With mounting losses, declining consumption, soft markets for surplus power, $58.3 billion committed to high cost private power and a massive capital spending plan, only BC Liberals and their minions can see anything positive on the horizon for BC Hydro.
Categories: BC Hydro