Newfoundland and Labrador and Québec Sign Historic Memorandum of Understanding--A Powerful Step Forward

On December 12, 2024, the Province of Newfoundland and Labrador (Newfoundland, rated "A" with a Stable trend by Morningstar DBRS) and the Province of Québec (Québec, rated AA (low) with a Stable trend by Morningstar DBRS) announced the signing of a historic memorandum of understanding for a new long-term energy purchase and development initiative between Hydro-Québec and Newfoundland and Labrador Hydro (the MOU). The MOU provides for increased compensation to Newfoundland for electricity, related to the controversial 1969 Upper Churchill contract, and future hydroelectric development on the Churchill River. While the MOU is nonbinding and subject to final agreements, it has the potential to provide significant benefits to Newfoundland while also providing Québec with long-term access to much-needed hydroelectricity for the long term.

Key Highlights:
-- Québec and Newfoundland signed a new long-term energy purchase and development agreement.
-- The MOU has the potential to increase Newfoundland's fiscal capacity, while providing Québec with long-term access to hydroelectricity.
-- Any benefits from the MOU are subject to the parties reaching a definitive agreement.

"The MOU has the potential to materially increase Newfoundland's fiscal capacity with an estimated average annual increase in revenues of $1.0 billion over the next 17 years," says Travis Shaw, Senior Vice President, Global Sovereign Ratings. "This would have material impacts for employment, incomes, and economic output that would have added fiscal benefits for the province."