VZCZCXRO3602
RR RUEHGA RUEHHA RUEHQU RUEHVC
DE RUEHOT #0553/01 1121525
ZNR UUUUU ZZH
R 211525Z APR 08
FM AMEMBASSY OTTAWA
TO RUEHC/SECSTATE WASHDC 7730
INFO RUCNCAN/ALL CANADIAN POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEAEPA/EPA WASHDC

UNCLAS SECTION 01 OF 02 OTTAWA 000553 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR WHA, EEB, AND OES 
USDOC FOR 4320/ITA/MAC/WH/ONIA 
DOE FOR POLICY AND INTERNATIONAL AFFAIRS 
EPA FOR INTERNATIONAL AFFAIRS 
 
E.O. 12958: N/A 
TAGS: ENRG SENV CA
SUBJECT: MANITOBA HYDRO ANNOUNCES ELECTRICITY DEAL WITH 
WISCONSIN 
 
REF: OTTAWA 173 
 
¶1.  This message originates from U.S. Consulate Winnipeg. 
 
¶2.  Summary.  Following hard on the heels of a February 2008 
deal to sell 250 megawatts of electricity to Minnesota Power, 
Manitoba Hydro announced on April 17 that it had reached 
agreement with Wisconsin to sell up to 500 megawatts of power 
to utilities in that state, beginning in 2018.  The deal, 
announced publicly by both parties but not yet fully 
finalized, virtually guarantees further impetus for building 
hydroelectricity generating stations in Manitoba's far north, 
and will hasten the construction of new transmission lines to 
bring the power south.  Manitoba Hydro estimates the province 
has 5000 megawatts of hydroelectricity generation potential 
in the north, which could provide a reliable source of 
electricity to the upper Midwest.  End summary. 
 
¶3.  For decades, the government-owned hydroelectricity 
monopoly, Manitoba Hydro, has stared enviously at the large 
and lucrative electricity market in the upper Midwest, but 
had no way to get the electricity to market because of a lack 
of transmission capacity.  February's Minnesota sale (reftel) 
showed the way forward: Manitoba would have to get the 
electricity to the border, but the Minnesota utility would 
take it from there.  While details of the Wisconsin sale have 
not been released, it appears this deal will proceed in the 
same way. 
 
¶4.  The deal negotiated between Manitoba Hydro and Wisconsin 
Public Service - which serves customers in the northeastern 
part of the state - requires Manitoba Hydro to provide up to 
500 megawatts (mw) over 15 years beginning in 2018.  These 
electricity exports are expected to earn approximately C$2 
billion for Manitoba Hydro over the period.  The Manitoba and 
Wisconsin utilities have done business before: early last 
year, the two renewed a 100 megawatt export agreement. 
Electricity exports generated C$592 million in revenues for 
Manitoba Hydro last year, and projected earnings from 
electricity exports may reach C$5.5 billion over the next ten 
years.  Exports already account for around 40 percent of 
Manitoba Hydro,s revenues from the sale of electricity. 
 
Construction Opportunities in Manitoba's North 
--------------------------------------------- - 
¶5.  This sale, combined with the earlier sale to Minnesota, 
virtually guarantees the construction of the 600 mw Gull Lake 
and the 1250 mw Conawapa generating stations.  Construction 
continues on the 200 mw Wuskwatim project, which is projected 
to come on-line in 2012, but has been troubled by cost 
overruns, a labor shortage, and difficulties in finding a 
willing builder.  Manitoba Hydro will also need to build a 
C$1.1 billion converter station, and associated transmission 
infrastructure.  Construction costs in Manitoba have 
skyrocketed in recent years, largely due to rapid growth in 
the petroleum industry in neighboring Saskatchewan and 
Alberta.  Manitoba Hydro CEO Bob Brennan concedes, "Right now 
is definitely a bad time to build anything," but said the 
utility will space out the work to take advantage of the 
construction cycle.  With the strength of the Canadian 
dollar, there will be significant opportunities over the next 
10-15 years for U.S. companies with expertise in constructing 
hydroelectricity generating stations.  The U.S. Commercial 
Service may wish to make interested parties aware of the 
opportunities that will soon be available in Manitoba. 
Qopportunities that will soon be available in Manitoba. 
 
Exports Shift South Rather than East 
------------------------------------ 
¶6.  The Wisconsin deal is also further proof that the 
province is making more inroads into American markets than it 
is in the neighboring province of Ontario, long thought to be 
the most likely destination for Manitoba's excess 
hydroelectricity.  While Manitoba Hydro will continue to make 
spot sales to Ontario - and the construction of Gull Lake and 
Conawapa will leave the utility with plenty of excess 
electricity - there does not appear to be much interest in 
building the long and expensive transmission line necessary 
to get power from northern Manitoba to the highly populated 
areas of southern Ontario.  For now, Manitoba Hydro seems to 
be having more success selling smaller amounts of electricity 
to power utilities closer to them, and using less expensive 
transmission infrastructure to do so. 
 
Visit Canada,s Economy and Environment Forum at 
 
OTTAWA 00000553  002 OF 002 
 
 
http://www.intelink.gov/communities/state/can ada 
 
BREESE