Without Debt There Would Be Little Capital At All: A Valuation of NB Power

Crown Corporations, Ian Madsen, Valuation

Nearly every province in Canada has its dubiously cherished government-owned power utility. Rarely in this country has there been one as hobbled by debt as NB Power, ‘NBP’. The fundamental business is relatively sound and appears to be resilient. However, its capital structure is over 90 percent funded by debt, which is hampering its ability to invest and adapt to the future. As a result of this heavy debt load, the valuations in this study attempt to estimate the value of the company as is, and also without any debt at all. In reality, it is nearly unavoidable that the taxpayers of New Brunswick will have to assume much or most of the debt of NBP if it is to prosper in the future, whether or not it is divested to private individual, institutional, or strategic investors. This analysis will show it cannot reasonably service more than about one quarter of its current short- and long-term debt load of nearly seven billion dollars.

View the entire valuation: VS12_NBP-Valuation_DC1518_F1