Transport Committee on April 11th, 2024

[Leslyn Lewis, Conservative, Haldimand—Norfolk, ON]

Have they told you what rate the loan would be at?

[Matt Pawlowski]

We have just started those discussions, so we have not even gotten to that phase of the discussion at this point. That is going to be subject to negotiation with the CIB.

[Leslyn Lewis, Conservative, Haldimand—Norfolk, ON]

Do you know what rate the Fortis loan was at?

[Matt Pawlowski]

I do not.

[Leslyn Lewis, Conservative, Haldimand—Norfolk, ON]

A multi-billion dollar corporation gets a taxpayer-funded loan from Canadian taxpayers at a low interest rate, probably around 3%, because that's usually the rate that I've seen so far. Canadians are paying interest rates of 7% on their mortgages, and a $120-billion company needs a taxpayer-funded loan, when Canadians can barely afford food.

Does that seem fair to you, sir?

[Matt Pawlowski]

When we look at our financing partners, we look at them from the standpoint of making the right investment on the right project. The way I really look at this is that a partnership with the CIB, if we reach an agreement, would benefit both parties. That is the way we are looking at it.

Interest rates are certainly one part of it, but, again, there are multiple levels of what a financing partner brings to the table. We do financing with many different entities across our entire portfolio, whether with infrastructure banks such as the CIB or with the Department of Energy in the U.S.

[Leslyn Lewis, Conservative, Haldimand—Norfolk, ON]

I have very limited time, Mr. Pawlowski, so thank you for your answer.

Your company seems to be involved in some legal disputes in the U.S., involving a fight over the hydro power electricity line that would have Hydro-Québec supply clean electricity to New England. NextEra is opposing the deal.

Why is NextEra opposing a deal that would benefit Quebec and Canada?

[Matt Pawlowski]

We have been on the record about the reasons we are opposed to that line. However, I am not involved in that project. I am really here to talk about the reliability and resiliency benefits of the Lake Erie connector.

[Leslyn Lewis, Conservative, Haldimand—Norfolk, ON]

Isn't it hypocritical that you are promoting the Lake Erie connector project, yet you are opposing the Hydro-Québec deal with New England, which would bring money to Quebec and Canada? Is that because this is your competition?

[Matt Pawlowski]

It is not that at all. Every one of these transmission projects is a little bit different. For example, when you look at the Maine project, it really relies on generation on one side going into the U.S. The Lake Erie connector project is very different. It is truly a tie between Ontario and PJM, giving access to both regions and providing a critical link to prevent things like, for example, what happened in Alberta a few weeks ago, where there were significant brownouts. Transmission connections and resiliency connections are what the IESO needs in order to make the system as reliable as possible.

[Leslyn Lewis, Conservative, Haldimand—Norfolk, ON]

In order to do that, do you have to oppose the project that would benefit Quebec and Canada? It seems a little bit rich, sir, to Canadian taxpayers, that your company is self-interested in promoting one project, but opposing another project that would benefit Canadians, and that your $120-billion company, the biggest energy company in the world, needs Canadian taxpayer money in order to get a project off the ground. It seems very self-interested.

What would you say about that?

[Matt Pawlowski]

I really think that the aspects of this.... The really important thing around the CIB is not just focusing on the financing, but focusing on the partnership that the CIB relationship brings. We will work with CIB, as we work with any other financing partner, in order to move the project forward.

[The Chair, Liberal, Peter Schiefke]

Thank you, Mr. Pawlowski.

Next, we will go to Mr. Rogers, for six minutes, please.

[Churence Rogers, Liberal, Bonavista—Burin—Trinity, NL]

Thank you, Chair, and welcome to all of our witnesses today.

Mr. Pawlowski, I will go to you for some questions around this project, and the concept of due diligence. We have heard some commentary about money being spent to assess the value of the project and whether it is beneficial going forward. All the arguments that came back said, why would you spend...? The CIB spent like $900,000, which represents a very tiny portion of a $645-million project, should it proceed.

Do you think there was value in the work that was done, and will that be beneficial to your group moving forward?

[Matt Pawlowski]

Thank you very much.

I absolutely think the efforts that the CIB made on due diligence will benefit the project going forward. If you look at this, we have lots of different partners that we work with. If we were to start with a fresh partner, they would have to start their due diligence efforts from scratch. What we are looking at with the CIB is that we are not starting from scratch. We are starting from a very different place. Yes, different system changes have taken place and economic changes have taken place. There are lots of other moving pieces, but at the same time, not starting from scratch is really important, so I believe there is a reuse for some of the due diligence that has taken place.

I'm not really familiar with exactly what due diligence the CIB has done, but I feel very comfortable saying that at least a portion of that could be redone and not started over again when we move the transaction forward.

[Churence Rogers, Liberal, Bonavista—Burin—Trinity, NL]

The CEO of the CIB was at our last meeting and talked about a lot of the work done by the bank on due diligence and the importance of doing that. It's so we don't have a financial disaster like the one I referenced in Newfoundland and Labrador, in Muskrat Falls, for example.

This is my second question for you. In your intention to develop the Lake Erie connector project, you're seeking to collaborate with stakeholders, including regional grid operators, indigenous communities and so on. How do you think this will improve the project going forward, and are you taking a different approach from the last proponents of the project?

[Matt Pawlowski]

That's a great question.

We are certainly taking a very different approach, because there have been a lot of system changes that have taken place. I don't want to speak for the IESO, but even the generation resources on the system have changed since the project was essentially suspended. For example, there is much more battery storage in the province of Ontario. There are significant changes in the PJM interconnection, with a tremendous renewable queue that's waiting to be interconnected. We are certainly looking at that and engaging with all the stakeholders we have, including the first nations and the IESO, to make sure that we fully vet out what the true benefit is going to be, and that's how we're going to move it forward.

I think the approaches may be somewhat similar, but there are a lot of changes that have taken place in the last few years. I will tell you that one of the most significant changes, which I think is happening all across the North America area, is the significant load growth. Huge topics of discussion in pretty much any setting with any utilities are the data centres and the AI, artificial intelligence, load growth. All of those things are creating a massive influx of electricity load, and that is creating a need for projects like Lake Erie.

We have to engage all stakeholders, including load customers, to make sure that we understand how the system will look and where this project fits in with all the other resources the IESO has.

[Churence Rogers, Liberal, Bonavista—Burin—Trinity, NL]

I guess it's fair to assume, then, that the focus on clean energy going forward—electricity, wind, solar and so on—is a big part of what your company is focused on.

[Matt Pawlowski]

Yes, absolutely. NextEra, as a company, is the largest wind and solar developer in the world. We pride ourselves on the fact that our projects are clean, and we develop those projects for our customers who need them.

Absolutely, this type of project is, again, another resource that's added on to all the clean energy and other resources that are coming in.

[Churence Rogers, Liberal, Bonavista—Burin—Trinity, NL]

Thank you very much.

Mr. Farmer, I'll ask you this question. Why was CIBC financing needed for this project? Is it absolutely necessary, and how is it helping the people of Ontario?

[Chuck Farmer]

I would stress that the IESO's relationship was with ITC, and that we were negotiating an arrangement to pay for an availability payment for the line. We were not involved in how ITC would then finance the project. It is up to any proponent to determine how it will do that.

I will say there is a lot of infrastructure that needs to be built over the next number of years, and we would certainly welcome any way to reduce the cost of that infrastructure for Ontarians.

[Churence Rogers, Liberal, Bonavista—Burin—Trinity, NL]

Thank you.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Rogers.

Thank you, Mr. Farmer.

Mr. Barsalou‑Duval, you have the floor for six minutes.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Thank you, Mr. Chair.

Mr. Pawlowski and Mr. Farmer, thank you for being with us today.

Mr. Pawlowski, you represent an American company headquartered in the United States that focuses on energy production. The connector under Lake Erie you're interested in would link part of the U.S. Midwest to part of Ontario.

I can imagine that it would be worthwhile for you to seek out funding partners for projects, for example. That way, you can limit your investment and, as my colleague mentioned, get favourable interest rates that will help you expand your infrastructure to export the energy you produce.

I understand why you're interested in a project like this. It's a matter of potentially carrying it out in a cost-efficient manner, mathematically speaking.

Why should Canadian and Quebec taxpayers, among others, contribute to funding infrastructure owned by an American company so that it can increase its sales by exporting more energy to our country? What's in it for Canadian taxpayers if they fund your infrastructure?

[Matt Pawlowski]

Thank you very much.

I think the real partnership that we look at with CIB, again, is not just on the financing front. There are other aspects of the CIB relationship that we look at: our relationship and involvement with first nations and other aspects. We look at CIB as one of the investment vehicles that we could use for this type of transaction. We certainly do a lot of work to make sure that we vet out who the partners are going to be and then show those partners that there's value for them to be involved in the project.

I think that the due diligence the CIB does and the efforts they go through really ensure that it's the right investment for the bank, just like any other investment they would make, and that it makes sense for them to be an investor in this project. Again, we look at it as a partnership, not just as a financing deal.