Maritime Link already sanctioned, Nalcor V-P stresses

James McLeod
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Nalcor vice-president Gilbert Bennett says it would be really “unfortunate” if people thought there’s only a 50 per cent chance that the Maritime Link between Newfoundland and Nova Scotia would proceed.

Nalcor’s Lower Churchill Project VP, Gilbert Bennett, says the Muskrat Falls project is on schedule and on budget.

A flurry of news reports this week cast doubt on the Nalcor/Emera partnership to develop Muskrat Falls, and the future of the Maritime Link after a BMO Capital Markets paper included a line saying “50% probability of sanctioning” when it comes to the Lower Churchill project.

The full sentence in the BMO report is a good deal more complicated, though: “Our target price now represents a forward P/E of 17.0x (vs. 18.5 previously) our blended two-year forward EPS estimates plus $1/share of risked upside from the Lower Churchill project (50% probability of sanctioning).”

The research paper was primarily focused on Emera’s move to buy three natural gas power plants in the United States; the analysis looked at the planned Lower Churchill development as one piece of that picture.

Speaking to The Telegram, Bennett explained that assigning a 50 per cent probability of sanctioning is part of a larger calculation market analysts routinely do.

“For the purposes of (the Emera) earnings per share forecast, (BMO is) going to assume that there’s a 50 per cent probability that that contribution of earnings will show up in Emera’s share price. That’s different from saying there’s a 50 per cent probability that the project will proceed,” Bennett said. “There’s a distinction between the technical analysis that the analysts have used to forecast earnings per share compared to project reality and what we’re doing with Emera.”

The reality of the situation is that a 50 per cent probability of sanctioning the project is lowballing it a bit, since in actual fact there’s a 100 per cent chance of the project being sanctioned.

In December 2012, Emera issued a news release titled “Emera Inc. Approves Sanction of the Maritime Link Project.”

Since the project was sanctioned in 2012, there is no indication that Emera has ever considered unsanctioning it. Despite that, in public discourse, people have been talking about the possibility of Emera pulling out of the project for months, and speculating that the project could fall apart at any moment.

Bennett said he’s used to that kind of talk.

“What can I say? People have been saying that about the project for a long time. And I think what I’d say in my response is that systematically, since our DG2 decision back in 2010 and even before then, we’ve been addressing issues and dealing with them and resolving those issues as we move forward,” he said. “We’ve heard these comments before, and we continue to move them forward. I look at that as the exact same thing happening today.”

Bennett acknowledged that the ruling by the Nova Scotia Utility and Review Board creates some challenges for Emera to find more power at market prices, but he said that’s something they’re talking about.

The issue could be resolved by Nalcor providing more Muskrat Falls power at market rates, or by getting the power from somewhere else.

“We’ve shared a few ideas, but ultimately, the objective is theirs. They have to solve this condition, and they can do it themselves without us, or we can find if there’s a way we can participate with that, we’ll do that,” Bennett said. “Negotiations is a strong word. We have an ongoing dialogue.”

Twitter: TelegramJames

Organizations: Emera Inc., BMO, Maritime Link Capital Markets Nova Scotia Utility and Review Board

Geographic location: United States

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Recent comments

  • Prescient
    September 13, 2013 - 11:35

    Mr. Bennett should note that clause 5(a) of last December's sanction agreement is in effect. This says that if the UARB does not approve the link (or only does so with material conditions - which is what happened) then Emera and Nalcor will "attempt to reach a mutually satisfactory resolution of such issues". "Each party shall be free to make its own decisions...". In other words, given a conditional UARB approval Emera is free to walk away from building the link. The analyst is saying that there is about a 50% chance that Emera will ultimately walk away.

  • John Smith
    September 13, 2013 - 08:44

    The bottom line is that Muskrat Falls will be completed, with, or without the Maritime link. This project is an answer to the coming power needs of our province...and no other.MHI and Navigant stated that Muskrat is the lowest cost option, by 2.5 billion, even without the link or the guarantee. Like bay D'espoir, Cat arm, Grand Falls, or any other NL hydo facillity, it will be built for, and paid for by rate payers.

  • david
    September 13, 2013 - 07:50

    That the real world of adult investors knows how to rationally handicap the likelihood of an event that will affect the value of their financial investment is not "unfortunate" ----- that Newfoundlanders don't know how to see reality without a prism of partisan, opportunistic, mind-numbing politics is. Ooops, gotta go get my lotto tickets...

  • Jon Smith
    September 13, 2013 - 07:40

    The last paragraphs sound like we are capitulating to the demands for more cheap power subsidized by the NL ratepayer. Sound a lot like the Upper Churchill fiasco-history repeating with BIll 29 covering the tracks-way to go open and transparent government.