Photo by Whitehorse Star
Photo by Whitehorse Star
A $39.2-million loan from the previous Yukon Party government to the Yukon Development Corp. (YDC) has the current Yukon Liberal government raising a number of questions about its predecessor’s financial management and transparency.
The current Yukon Party opposition includes two of the former ministers responsible for the YDC portfolio.
The Yukon Party is denying any wrongdoing and countering the insinuations, calling them a “political stunt,” in a statement released today.
Last Thursday, the legislative assembly passed the second supplementary budget for the 2017-2018 fiscal year.
The largest appropriation in the budget is $39.2 million to refinance a loan of the same amount to YDC.
“This is a one-time impact,” Ranj Pillai, the minister responsible for YDC, told the house.
“If we had not done this, there would have been a loan for $40 million due this month.“
Currently, YDC can’t pay this amount on its own, Pillai explained, without going to external sources and impacting the government’s limited debt cap.
This is because the-then Yukon Party government provided YDC two loans totalling $39.2 million in 2013 and 2014.
The money was meant to help the Yukon Energy Corp. (YEC) finance construction projects, including the liquefied natural gas (LNG) facility it completed in 2015 in Whitehorse.
But in 2015, the government instructed YDC to restructure the loan and provide $22.4 million of the $39.2 million to YEC in the form of a grant, Pillai told the legislature.
This leaves YDC expected to repay the full $39.2 million loan to the government, while only recovering $16.8 million from YEC.
“This decision to change a portion of the loan to a grant was never communicated to the public by the previous government — never,” Pillai said.
The documents that would reveal the details of this decision are sealed to the current government, he noted.
“So who the $40-million minister is — I am not sure, but there were two ministers who had that portfolio at the time, and they are elected officials here in the Yukon today.”
“Maybe one of those previous ministers at some point will provide us with some insight into where the direction for this amazing financial misstep came from.”
The Yukon Party did not provide any explanation to the legislature.
In an interview with the Star this morning, Pillai explained that the issue is not the provision of a loan to YDC.
“We understand that; that’s something that happens to build projects.
The real concern, he said, is “the loan between the Yukon government and the Yukon Development Corporation, that shows the fact that that loan is going to be paid back by 2018.
“That shows that the Yukon government was in a much more healthier financial situation than they were.”
“Why would you keep a loan in place that you couldn’t pay?” Pillai asked.
“And if you had a plan ... that you were going to undertake in the future ... there was no plan left behind for me, there was definitely no blueprint for me to follow to fix the situation.”
He also reiterated the point that Yukoners were not informed about the decision to restructure the loan by the former Yukon Party government.
“Whether it was the standard protocol or not, I think something of this magnitude is something Yukoners want to know about.”
Yukon Party house leader Brad Cathers was one of the ministers responsible for YDC when decisions about the loan were made.
However, all of cabinet participated in these decisions, he told the Star at noon today.
According to Cathers, his government was following “a long-standing practice of government financing the construction of Yukon Development Corporation projects when it has the cash to do so.”
These projects, he emphasized, develop into assets “owned by the territorial government and the taxpayers.”
When YDC provided construction financing to its subsidiary, Yukon Energy, “a portion of that had to be structured as an equity investment, because the Yukon Energy Corporation, as a regulated utility, is required to always maintain the same debt/equity ratio by the Yukon Utilities Board as its regulator,” Cathers said.
“We were quite clear about this, I believe. In fact, it states the terms of the structure in the financial statements.
“The way that the government is framing it is either reflecting a lack of understanding or deliberate misstatement of the facts.”
As for how the government expected YDC to pay back $22.4 million it isn’t recovering, Cathers suggested his government was intending to eventually refinance the $39.2 million loan over a longer period of time – as this government has with its second supplementary budget.
He said the loan was structured to give “the government of the day” a number of options to choose from, “whether to require repayment of all $40 million or to wipe out a portion of that.”
As questions go unanswered regarding the current Liberal government’s 2018-19 budget, “We see this as a desperate attempt to change the channel,” Cathers said.
Pillai said Thursday the government, YDC and YEC will meet in the next 45 days.
The YDC posted a Request for Qualifications (RFQ) on the government tender management system last month
It’s establishing a Qualified Source list for a future procurement of a YEC financial review, according to the tender.
The review would develop financial options for YEC “within the context of Yukon Energy’s on-going debt and equity requirements and YDC’s current and projected debt obligations,” the RFQ reads.
“The intent of this review is to provide financial advice and recommendations to ensure Yukon Energy continues to meet its mandate, including: the ability to produce sufficient power reliably while maintaining a rate structure that is competitive with rates elsewhere in the country.”
With the $39.2 million refinancing provided for in the supplementary budget, YDC will now have to pay back the loan in full over a 40-year term.
By the end of the 2021-2022 fiscal year, the Yukon government will recover $7.1 million in principle and interest payments, Pillai told the house.
“We are going to clean this up for Yukoners,” he said.
“By extending the amortization period over a reasonable time frame, aligned with the actual infrastructure, Yukon Development Corporation is able to use internal cash flow to repay the full amount of the loan without impacting the Yukon government’s debt cap.”
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