Getting the Right Deal
When Dean MacDonald accepted the chair of Newfoundland and Labrador Hydro from Premier Danny Williams, (BA'69), in 2004, he did so with a commitment to harness the potential of hydropower to benefit Labrador.
MacDonald, B.Comm.(Hons.)(Co-op)'81, had resigned from the same position three years earlier, frustrated by what he saw as a poor deal for the province: Quebec Hydro's proposal to develop the Lower Churchill. Among his concerns was a sense that Labrador was being marginalized. Quebec would get all 2,800 megawatts of power while Labrador's recall rights were severely restricted. Industrial development under that deal was impossible. "If Labrador wanted a smelter," said MacDonald, "that agreement would not allow it to happen." We're seated in a small boardroom in the marble and oak St. John's head office of Persona Communications. MacDonald is president and CEO of this private national cable company. Dressed casually in a long-sleeve sweater and dark pants, he sipped coffee from a bowl-sized "Movie Network" mug.
Although he grew up in St. John's, MacDonald spent many childhood summers in Labrador with his father who managed seasonal businesses there. At seven years of age, he flew with his father in a small Otter airplane over the unharnessed Churchill Falls. He still recalls the water's awe-inspiring power. "Now, having gone back as chair of Hydro, and seeing how the Falls have been harnessed, it drives home what an amazing piece of engineering the Upper Churchill project is," said MacDonald.
Asked about his role in hydro development in Labrador, MacDonald is silent for a moment. "I feel Labrador has enormous potential and I feel somewhat," he paused again, "I feel a lot of responsibility The legacy of the Upper Churchill deal, in which the province sold rights to 5,400 megawatts of power until the year 2041 for a fraction of the market price, hangs like a shadow over any new deal. Because of the provincial government's historic failure, MacDonald understands that the watermark for success on the Lower Churchill is higher than it might otherwise be. "We need to be boringly successful," he said. "If that means we do a deal this year, in five years or in 10, that's okay MacDonald approached aboriginal claims pragmatically as another step in the business of developing clean, secure energy. He said the Innu are very articulate about their needs when they sit at the table. "From their perspective, it's a business negotiation that can benefit their nation."
As the value of hydropower climbs, patience becomes a key negotiating skill for Hydro. In 2005 utilities are willing to pay twice as much as Hydro Quebec offered in the proposal that so outraged MacDonald. "Every single day the North American grid is sucking air for energy," said MacDonald. "They're running out and we're standing on the sidelines with enough energy to service one and a half million homes. That's a good place to be."
It was that insight that led Hydro and the province to think outside Quebec for partners to develop the Lower Churchill. Last January they issued an international call for expressions of interest. MacDonald's only regret is that they didn't do it sooner. "The breadth and depth of the 25 proposals we received proves that was the right decision," he said.
His bottom line? Fair market value for the resource. Only research will determine whether the province should take it in cash, or opt for cash plus other benefits, like jobs or a subsea cable to Newfoundland. But whatever the terms, MacDonald is clear on the province's best approach. "We own it. We control it. We sell it. We make money from it, and we don't settle for less."