Site C project awash with lack of due diligence

The hissing sound you may hear is the unmistakable sound of the air coming out of Site C’s tires.

As the B.C. Utilities Commission continues its inquiry into the project, it’s becoming increasingly apparent that B.C. Hydro has been playing a bit loose with telling the whole truth when it comes to Site C.

Case in point: In December 2014, when the B.C. government announced its decision to move ahead with Site C, B.C. Hydro boasted an independent analyst had reviewed its methodologies for future demand forecasts and found them to be “state of the art.” Which is true, but not the whole truth.

From this report: “The process will produce accurate forecasts about 10 years out. However, the process of producing peak forecasts and sales forecasts are not linked as directly as they could be, and could impact the second 10 years of the 20-year forecast.”

Due diligence also seemed to be in short supply when it came to awarding some Site C contracts.

In November 2015, B.C. Hydro announced its preferred proponent for the Site C main civil works contract was Peace River Hydro Partners, comprised of Acciona Infrastructure, Petrowest Corp. and Samsung C&T.

First raised in this space more than a year ago, all three were facing problems of their own at the time.

Samsung Group was under investigation for bid rigging and corruption in South Korea, Acciona was under investigation for corruption in Spain — two executives were arrested by Spanish authorities less than a month after the Site C deal was signed — and Petrowest was “living on borrowed time” from its lenders. There have been a few developments since.

In August, the head of Samsung, Jay Y. Lee, was sentenced to five years in prison for bribery after being found guilty of “offering bribes to the country’s former president and other crimes” and Petrowest finally succumbed to borrowed time and went into receivership.

As for “on time and on budget,” Site C is neither and likely never was, despite B.C. Hydro claiming otherwise.

Here’s what then-president and CEO Jessica McDonald told B.C. Business Magazine in a July 2016 interview: “We can look at our estimates and see where we are and that’s the best gauge on why we say that the project is very solidly on time and on budget.”

According to court documents filed in the Supreme Court of B.C., “Shortly after work commenced on the Site C project, it became apparent that various project components, including the dam, were over budget and behind schedule.”

Last month, PRHP told the utility it wouldn’t meet the 2019 river diversion deadline, adding an additional $610 million to the project’s costs.

No surprise that a report this year by accounting firm Ernst & Young — Spotlight on Canadian power and utility megaprojects: challenges in financing and delivery — found that Canadian infrastructure megaprojects on average run 39 per cent over budget and behind schedule by 12 months.

How did Site C get off the rails so fast and so early?

No one seems to have been entrusted with looking after the taxpayers’ interest, just each other’s interest.

In 2007, the utility looked to its boardroom for a consultant — former MLA and then B.C. Hydro director Jack Weisberger — to lead community consultations on Site C.

Catana Advisory Services was engaged “to negotiate (Site C) legacy agreements with municipal and regional district governments in northeast B.C.”

You won’t find it in any official biography, but as late as Dec. 16, 2013, McDonald was a partner at Catana.

In 2014, another board member — former Partnerships B.C. CEO Larry Blain — left the utility and landed at KPMG as its senior director of global infrastructure advisory, where he joined Gary Webster, a partner at the accounting firm who was advising B.C. Hydro on Site C, advice some might better characterize as cheerleading.

None of this bodes well for an on-time and on-budget finish of Site C, if there is a Site C to finish after the B.C. Utilities Commission sends its final report to the provincial government.

But no matter how it plays out, there are some tough questions that need to be asked. First among them: How did an $8.7-billion project get so far down the road without any independent oversight?

Dermod Travis is executive director of IntegrityBC.