Case 4 Hydro Quebec And The Great Whale Project
A06-97-0020
Hydro-Quebec and the
Great Whale Project
In February 1992, managers at Hydro-Quebec were concerned about the possible cancellation of a major contract to export electricity to the New York Power Authority (NYPA).
The agreement, which was set to run for 21 years and was worth $17 billion in revenue, formed the backbone of a massive effort by Hydro-Quebec to further expand electrical generation in the north of the province. While a contract had been signed more than two years earlier, it was still subject to confirmation by both parties. At the request of NYPA, the original ratification deadline of November 30, 1991 had already been extended by one year.
Now, political pressures from environmental groups in the United States, along with reduced demand forecasts for Northeast U.S. power needs, were causing New York State officials to consider terminating the deal.
For Hydro-Quebec, cancellation of the contract would have a severe impact on the economics of the project named after the Great Whale River, a major waterway in northern
Quebec. Managers at Hydro-Quebec realized that as a government-owned utility, a decision to halt development could also have far-reaching effects on Quebec’s economy, as well as adversely influence the province’s economic leverage in ongoing Canadian constitutional talks. A decision to proceed would carry its own economic risks, namely whether the massive amounts of electricity generated could be sold at a price that would cover both fixed and variable costs. In addressing the trade-offs, managers at Hydro-Quebec realized that fixed costs were influenced in part by the nature and extent of concessions offered to expedite construction. How to proceed was anything but clear.
Hydro-Quebec And James Bay
Hydro-Quebec was created in 1944 by the Quebec parliament as a government-owned utility. Under its charter of incorporation, Hydro-Quebec’s mandate was to provide energy to industrial and commercial enterprises as well as to Quebec
Hydro-Quebec and the
Great Whale Project
In February 1992, managers at Hydro-Quebec were concerned about the possible cancellation of a major contract to export electricity to the New York Power Authority (NYPA).
The agreement, which was set to run for 21 years and was worth $17 billion in revenue, formed the backbone of a massive effort by Hydro-Quebec to further expand electrical generation in the north of the province. While a contract had been signed more than two years earlier, it was still subject to confirmation by both parties. At the request of NYPA, the original ratification deadline of November 30, 1991 had already been extended by one year.
Now, political pressures from environmental groups in the United States, along with reduced demand forecasts for Northeast U.S. power needs, were causing New York State officials to consider terminating the deal.
For Hydro-Quebec, cancellation of the contract would have a severe impact on the economics of the project named after the Great Whale River, a major waterway in northern
Quebec. Managers at Hydro-Quebec realized that as a government-owned utility, a decision to halt development could also have far-reaching effects on Quebec’s economy, as well as adversely influence the province’s economic leverage in ongoing Canadian constitutional talks. A decision to proceed would carry its own economic risks, namely whether the massive amounts of electricity generated could be sold at a price that would cover both fixed and variable costs. In addressing the trade-offs, managers at Hydro-Quebec realized that fixed costs were influenced in part by the nature and extent of concessions offered to expedite construction. How to proceed was anything but clear.
Hydro-Quebec And James Bay
Hydro-Quebec was created in 1944 by the Quebec parliament as a government-owned utility. Under its charter of incorporation, Hydro-Quebec’s mandate was to provide energy to industrial and commercial enterprises as well as to Quebec