A nearly-$40 million loan between the Yukon government and the Yukon Development Corporation has led to sparring between the Liberals and the Official opposition.
The Yukon Liberals are questioning why the previous government would issue a loan to the corporation that it was not in a position to repay in time.
The Yukon Party says it always intended to refinance the loan, similar to how the Liberals are now, and accuses the current government of trying to distract from other issues.
Meanwhile, the Yukon NDP says the whole situation raises enough questions that it’s time to call in an independent auditor.
At issue is a $39.2 million loan approved in 2013 and 2014 from the Yukon government to the Yukon Development Corporation. The corporation in turn loaned the money to help Yukon Energy, in part, with the construction of the new LNG facility.
In 2015 the loan between the development corporation and the energy company was restructured so that $22.4 million became a grant. But the loan between the government and the development corporation remained at the full $39.2 million.
“This would have meant that YDC owed $39.2 million to the Yukon government, but would only be recovering $16.7 million of that from the Yukon Energy Corporation and would have had to make up the difference,” The minister responsible for the development corporation Ranj Pillai told the legislative assembly March 8.
A timeline provided by the Yukon Development Corporation and cabinet shows a repayment plan was extended three times, twice before and once after the $22.4 million was made a grant. Yukon Energy at one point repaid the development corporation $8.4 million. That money was later loaned back to the energy company for other projects.
The $39.2 million was due March 31, something that both Pillai and former Yukon Party cabinet minister Brad Cathers acknowledge would not be possible for the development corporation.
The Liberals are now restructuring the loan to be paid back over 40 years.
In a statement, the Liberal caucus called the details of the loan “shocking” and accused the former government of misleading the public.
Cathers, who for a time was the former government’s minister responsible for the development corporation, said when the Yukon Development Corporation provides money to Yukon Energy, “some of it has to be debt and some of it has to be equity and ultimately that has to result in Yukon Energy corporately maintaining a 60/40 debt-to-equity ratio.”
Cathers criticized the current government for feigning shock, pointing out that the premier’s current chief of staff David Morrison is the former president of the energy company.
“It shouldn’t be a surprise to them that the investment was going to be a mix of debt and equity.”
Cathers said details of the loan — including the March deadline — were part of multiple financial documents.
Yukon Development Corporation spokesperson Geoff Woodhouse confirmed the money was made a grant in order to meet YEC’s obligations to the utilities board.
Not making the money a grant would have lead to a rate increase, he said. “Somebody at the end of the day has to pay for it and the government would have had the alternative to ask ratepayers to shoulder that burden.”
In an interview, Pillai said his main concern is the former government’s decision to set a deadline of March 2018 for the development corporation to pay back the entire loan when that wouldn’t be possible.
“There was no plan in place, there was no direction, there was no briefing notes prepared on why it was that way or … where the decision was being looked at,” he said.
According to Cathers, the original loan was structured that way to help with construction.
“It’s quite common during the construction phase to have it structured as a construction loan and then convert that into a different instrument, whether a longer-term loan or some other structure after the construction period is done and the total numbers are in.”
Had the Yukon Party been re-elected it would have re-financed the loan similar to how the current government is, he said. He said the current government is trying to distract from other issues using a “desperate attempt to change the channel.”
Pillai suggested that the former government may have been trying to paint a better picture of the territory’s finances by making it appear as though $40 million was going to be paid back in March.
While YDC converted a portion of Yukon Energy’s loan to a grant, that did not translate to the Yukon Party forgiving a portion of the loan it made.
If a portion of the YDC loan had been forgiven, the government’s non-consolidated surplus would have been reduced by $22 million and it likely would have forced it to deliver a deficit budget in the year the loan was forgiven.
The Liberals are not forgiving the development corporation’s loan, either.
With the refinancing agreement, $1 million of the principal will be repaid each year, along with owed interest, according to the development corporation.
Pillai said that the 40-year repayment plan still “puts a real crunch on cashflow inside of YDC.”
“Right now it looks like we’re OK,” he said. “It’s just a really slim delta right now on what we have for available cash flow and what we have for debt on the books.”
The new funding deal will be reviewed every five years.
The government has put out a request for qualifications to find someone to do a review of Yukon Energy.
Pillai said the review will look at the financials of the development corporation and the “long-term sustainability” of Yukon Energy.
Pillai said the fact that the government is working on this review is a sign it’s not using this issue to distract from other concerns, like the opposition claims.
The NDP has tabled a motion urging the government to appoint an independent commission to conduct a forensic review of all transactions related to the loan.
NDP MLA Kate White told the News she still has questions about how the decision to issue the loan was made and how those terms were settled on.
“It’s so much more complicated than it appears. You have the Yukon Party and the Liberal’s pointing fingers at each other,” she said. “Of course they are both putting their spin out, so it’s really hard to get a clear situation through that spin.”
Contact Ashley Joannou at ashleyj@yukon-news.com