A recent report from a private equity analyst firm cautions investors that Northern Pass will not be completed by 2017 as the company is saying and will face continued opposition and delays if it does not bury the lines.
The report was released Nov. 11 by analysts Rob Rains and Tim VandenBerg, of the Washington, D.C.-based Washington Analysis. In it, they point to Northern Pass' opposition by residents as well as concerns by Gov. Maggie Hassan and U.S. Sen. Kelly Ayotte, R-NH.
"We caution investors that Northeast Utilities' Northern Pass transmission project, which would transport 1,200 megawatts of hydro power supplied by Hydro-Quebec from Canada into New England, likely faces significant delays and cost increases.
"Regulatory hurdles and substantial political headwinds will likely prevent the project from going into service before 2018, at the earliest with delays until 2019-2020 very possible as well," they said.
"We simply disagree with Northeast Utilities' past statement that it expects Northern Pass to be in service in 2017 and that it will receive state siting approval in 2015," said Rains and VandenBerg.
They also said, "We also expect the firm to succumb to overwhelming political pressure from Hassan and Ayotte and state lawmakers calling for them to bury more of the project underground in the northernmost portion of the state ... This will significantly increase the already $1.4 billion price tag of the project and the time to completion."
The analysts included several points for investors to consider. After more than two years, the U.S. Department of Energy (DOE) closed its comment period on the scope of a draft Environmental Impact Statement (EIS) for Northern Pass that they said is unlikely to be published before the second quarter of 2014.
The DOE will likely make a decision on the final EIS in 2015 or 2016, they said. "Given opposition to the project, this decision will likely be appealed in federal court, further increasing the uncertainty about the project's federal permits," said Rains and VandenBerg.
In addition to a lengthy review for the DOE permit, approval from the New Hampshire Site Evaluation Committee (SEC) is also needed, and while Northeast Utilities said this process will take one year to complete, it will likely take at least two years from the time of submission, they said.
Northern Pass said it intends to file its application with the SEC in 2014. "In light of landowner and stakeholder opposition, a SEC decision is almost certain to be followed by requests for rehearing and then by appeals to the New Hampshire Supreme Court, which could easily take more than a year," said the analysts. They also said the SEC has no authority to exercise eminent domain.
"We view this as material because there is a persistent legal question about whether or not Northeast Utilities must purchase any additional rights of way to fully complete construction," said Rains and VandenBerg. "We note that the Society for the Protection of New Hampshire Forests is likely to challenge this assertion in state court, fueling uncertainty about the completion of this project."
Their reports states, "Unlike interstate natural gas pipelines that SEC has reviewed in the past, which carry federal eminent domain authority, this is not an option for Northern Pass. The New Hampshire Legislature closed that option in 2012 specifically for non-reliability projects like this."
According to its LinkedIn web page, Washington Analysis advises investment firms in the U.S. and abroad.An overview of the company, founded in 1973, is listed in Bloomberg Businessweek.
On Friday, Northern Pass spokesman Mike Skelton declined to address the specifics in the report and called Washington Analysis "a D.C. firm of which so little is known." He instead provided statements from UBS Financial, a firm that regularly follows Northeast Utilities and which stated in its Nov. 4 report, "We believe the Northern Pass project will continue to move forward given the desperate need for an expedited solution to the region's supply crunch ... We continue to see Northern Pass as the most credible regional project."
In terms of specifics, however, Skelton declined to answer how a project the size of Northern Pass intends to obtain by 2015 the more than two dozen federal, state and other permits the company, in its federal filings, states it will need. He also did not say if Northern Pass is factoring into its 2015 construction date and projected 2017 completion any delays, foreseen or unforeseen, and lawsuits and appeals.
In addition, he declined to answer if Northern Pass has contacted any New Hampshire agencies to determine the feasibility of burying the lines along state transportation corridors as some state senators and representatives are calling for.