{"id":55240,"date":"2020-10-08T06:43:08","date_gmt":"2020-10-08T11:43:08","guid":{"rendered":"https:\/\/olduvai.ca\/?p=55240"},"modified":"2020-10-08T06:43:08","modified_gmt":"2020-10-08T11:43:08","slug":"bc-hydro-bets-on-interest-rates-and-loses-1-billion","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=55240","title":{"rendered":"BC Hydro Bets on Interest Rates \u2014 and Loses $1 Billion"},"content":{"rendered":"
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BC Hydro Bets on Interest Rates \u2014 and Loses $1 Billion<\/a><\/h3>\n

A hedging program was supposed to protect the corporation from rising rates. Instead, it\u2019s creating major liabilities.<\/strong><\/p>\n<\/div>\n<\/header>\n

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\"SiteCDiversionTunnelsSiteAerial.jpg\"
The Peace River was dammed and sent through these diversion tunnels this week to allow work on Site C to continue in the dry riverbed.\u00a0Photo via BC Hydro.<\/span><\/figcaption><\/figure>\n<\/div>\n<\/section>\n
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Critics are calling it another BC Hydro scandal. The Crown corporation, already beset by burgeoning costs and geotechnical difficulties at the controversial Site C dam, has racked up $1 billion of liabilities betting on interest rates.<\/p>\n

BC Hydro revealed the losses in its\u00a0first-quarter report<\/a>, released in June.<\/p>\n

Marc Eliesen, former CEO of BC Hydro and Ontario Hydro, said the corporation\u2019s gamble that it could predict future interest rates has backfired. \u201cBC Hydro took a trip to the casino and played roulette and lost big time,\u201d he said.<\/p>\n

The interest rate hedging program began in 2016 with the goal of protecting ratepayers from higher future borrowing costs if rates rose.<\/p>\n

Under the program, BC Hydro bought investment vehicles that would increase in value if interest rates rose. The corporation\u2019s managers believed the profits could be used to offset higher borrowing costs if, as they predicted, interest rates went up.<\/p>\n

\u201cThey thought they would make money on interest rate hedges and put it in a default account which would help offset borrowing costs in the future,\u201d explained Richard McCandless, a former civil servant who wrote about the loss on his\u00a0blog<\/a>.<\/p>\n

Instead, interest rates fell, and BC Hydro has lost money on the hedging program.<\/p>\n

\u201cIt is a scandal,\u201d said McCandless. \u201cThey took a gamble and lost.\u201d<\/p>\n

BC Hydro, which carries $23.3 billion in debt, anticipates the need to borrow another $10 billion between 2017 and 2024, partly to pay for the over-budget Site C dam and about $2 billion a year in other capital projects.<\/p>\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n<\/article>\n","protected":false},"excerpt":{"rendered":"

BC Hydro Bets on Interest Rates \u2014 and Loses $1 Billion A hedging program was supposed to protect the corporation from rising rates. Instead, it\u2019s creating major liabilities. The Peace River was dammed and sent through these diversion tunnels this week to allow work on Site C to continue in the dry riverbed.\u00a0Photo via BC […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[5549,7724,30390,431,23884],"class_list":["post-55240","post","type-post","status-publish","format-standard","hentry","category-economics","tag-andrew-nikiforuk","tag-bc-hydro","tag-hedging-bets","tag-interest-rates","tag-thetyee-ca"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/55240","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=55240"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/55240\/revisions"}],"predecessor-version":[{"id":55241,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/55240\/revisions\/55241"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=55240"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=55240"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=55240"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}