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Moody’s voices concerns about Site C in credit opinion

An aerial view of the south bank at Site C in November 2017, with the powerhouse and spillway buttress and approach channel excavation. Photo by BC Hydro
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VICTORIA, B.C. — While the provincial government was quick to tout last week’s announcement by rating agency Moody’s that it was confirming B.C.’s triple-A credit rating, the firm did say the large cost of Site C was mentioned as a possible area of concern.

In their report issued on January 18th, Moody’s said that the increasing debt burden of Site C, especially after its budget was increased to $10.7 billion last month, was a potential problem for the Province down the line. The firm also brought up the debt of BC Hydro as a whole, which it says has risen from $8.1 billion in March 2008 to $22 billion last September.

“With the provincial government’s recent decision to move ahead with the construction of the project, the anticipated increase in debt continues to pressure the province’s rating since it increases the Province’s contingent liability,” said the report.

Moody’s did note that BC Hydro’s utility rates are low compared to its peers, which means that the Crown Corporation can, if approved by the B.C. Utilities Commission, increase rates to help continue operations and support its debt.

“However, some of the utility’s financial metrics are among the weakest of Canadian provincial utilities and the use of largely debt-financed regulatory asset accounts puts pressure on the balance sheet.”

Moody’s also mentioned that a rate freeze that has been proposed by the NDP government would negatively impact BC Hydro’s financial health.

The one good item that Moody’s noted about Hydro’s financial outlook was that the provincial government will be reducing the dividends paid by the Crown Corporation by $100 million each year until the amount reaches zero.

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