Manitoba Hydro's burgeoning debt surpasses $19 billion

ManitobaHydro's debt load now exceeds$19 billion as the provincial Crown corporation grappleswith a shrinking net income amid ongoing efforts to slay costs.

The utility's annual report, to be released publicly on Tuesday,also shows itstotal consolidated net incomeslumpedfrom $71 million in 2016-2017 to $37 million inthe last fiscal year.

It said efforts to restructure the utility and reduce costsare partly to blame for the $34 million drop in year-over-year income.

These earnings comenowhere 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. Itslargest expenses include finishing theBipole III line, working on theKeeyask Generating System thatis halfway done and rebuildingaging wood poles and substations, the report said.

Risk to customers

"This levelof 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 ofbuyoutsfor 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 newsrelease said.

To improve its financial situation, Hydro has applied forrate 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 alternativeto raising rates,including receiving a share of carbon tax revenue and asking the government to helppay for BipoleIII.

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.