Rob Linke, Telegraph Journal OTTAWA - Published November 4th, 2009

Hydro-Quebec's $4.75-billion proposed purchase of NB Power would have no impact on New Brunswick's burden of net debt and would not be expected to change its credit rating, Moody's Investors Service said Tuesday.

Moody's is now the third credit rating agency to conclude the proposed transaction will not have a direct impact in improving the province's credit rating.

Both DBRS and Standard & Poor's drew the same conclusion last week shortly after the Oct. 29 announcement of the pact by Premier Shawn Graham and Quebec Premier Jean Charest.

The proposed purchase price will mean NB Power's debt will be erased.

Graham has stressed erasing what he called a "crippling" debt as one of the agreement's biggest benefits.

But any erasing of NB Power's debt isn't going to have any immediate impact on the province's creditworthiness, according to Moody's.

NB Power's debt - although guaranteed by the provincial government - is excluded from Moody's calculation of the province's net debt.

That's because NB Power's debt is considered self-supporting - it is repaid from the money collected from the utility's customers, not from government coffers.

DBRS and Standard & Poor's treat NB Power's debt the same way.

Moody's says the impact of the proposed deal is "potentially a credit positive, but uncertainties remain."

The uncertainties include the near-term risk related to the behind-schedule, over-budget refurbishment of the Point Lepreau nuclear plant.

Moody's already took into account those risks assumed by NB Power in fixing its rating at Aa2 in August, but "uncertainties still surround the exact cost of the delays and how these will be financed prior to transferring the refurbished (plant) to Hydro-Quebec."

Under the terms of the agreement, the Quebec utility does not take control of the Lepreau plant until the plant is up and running and tested.

Moody's is the same firm that had lowered the province's credit rating in August.

It cited concerns about the amount of borrowing and debt the province expected to incur over the next four years.

It was the first time in 12 years Moody's had downgraded a province's credit rating.