Financial assessment of project still to come before loan guarantee finalized
The heavy media presence and the appearance of federal and provincial cabinet ministers, along with loads of energy industry players, seemed somewhat over-the-top Friday morning for what amounted to a reaffirmation of the federal government’s interest in supporting the $6.2-billion Lower Churchill hydro project. Few new details were provided on the financing arrangements.
Federal Natural Resources Minister Joe Oliver signed a memorandum of agreement in the main lobby of Atlantic Place in St. John’s alongside his provincial counterparts from Newfoundland and Labrador and Nova Scotia, Shawn Skinner and Charlie Parker, respectively, before a large gathering of onlookers.
“The Government of Canada will provide or purchase a loan guarantee for the Lower Churchill River hydroelectricity projects,” states the memorandum document.
Oliver said the agreement in principle requires the hiring of financial experts to advise the federal government on how to structure a loan guarantee. The federal government could elect to purchase a loan guarantee from a financial institution.
“We have made a decision, and the decision is yea,” said Oliver, who took questions from the media for six minutes once the document was signed.
“The financial advisers will give us advice about how to implement the decision in a way that reduces the risk for all the parties.
“The policy decision to support the project has already been made, and this agreement manifests that commitment.”
Oliver said the federal government has an overall understanding of the project, but reiterated that important details relating to short-term and long-term debt need to be addressed.
Echoing Oliver’s words, Skinner said the deal will need to be structured in such a way that protects Canadian taxpayers.
When asked if the protection of taxpayers’ interests could threaten the agreement — say, if the federal government’s financial advisers reviewed the numbers and they were not to their liking — Skinner was quick to respond.
“No. The numbers, in terms of the analysis that has been done and the numbers that have been provided to the federal government, they’ve made the commitment that they want to move forward with the federal loan guarantee. Now it’s how it’s going to be structured.”
Nalcor Energy has said a loan guarantee will mean lower interest rates and savings for consumers.
Provincial New Democratic Party Leader Lorraine Michael was quick to brand the announcement as meaningless in a news release sent out mid-day Friday.
“Both the federal and provincial governments led us to believe that real progress was being made on this important development issue,” she said.
“All we learned today was that work we assumed had been going on for three and a half months is yet to be started.”
The Liberal party’s newly-minted leader, Kevin Aylward, was also on the offensive following the announcement, focusing on Prime Minister Stephen Harper’s history with the province.
“This is another soft commitment by the Harper government to the Dunderdale government,” he said by phone en route to St. Anthony.
“This project has so many questions already, and now we have the Harper memorandum of agreement where there’s due diligence required before there’s a loan guarantee. That is a way for them to back out of the loan guarantee commitment, and we’ve seen that before with the Harper government when it came to equalization revenues.”
Premier Kathy Dunderdale was in Happy Valley-Goose Bay on Friday for the official opening of a family resource centre.
When asked why the premier would not be in attendance for what the province was touting as an important announcement, Skinner said it was simply a scheduling conflict, adding that attempts had also been made to bring in Harper for Friday’s event.
The premier spoke with media during the funding announcement in Labrador.
“I said some time ago, that when the repatriation and reburial of the Inuit ancestors took place, that I would be there. While I was in Labrador, we were able to spend time in the communities, especially on the coast and I took the opportunity to do that.
“With regards to the announcement for the loan guarantee for Muskrat Falls, I still have important work to do here in Labrador.”
Dunderdale will be taking two New England governors on a Churchill Falls tour tomorrow.
“We’re going to have a look at what we’re doing there and a look at the Churchill River and our part in that. New England is an important market for us and it’s really important that I be there as well,” she said.
The visit between the governors and the premier was planned at a meeting between the Atlantic premiers and New England governors in July.
“As the governor of Vermont said, when the premiers and governors met in July, ‘If you’ve got the power, we need it.’ And we do have the power.”
The governors will get an aerial view of the proposed falls sites during their tour.
National Defence Minister Peter MacKay was originally scheduled to be in St. John’s for the announcement, but was delayed in Iqaluit, Nunavut.
Skinner said any arrangement on a loan guarantee with the federal government will not cover cost overruns.
The project includes the hydroelectric generation facility in Muskrat Falls and three transmission lines. It will produce 4.9 million megawatt hours annually.
In his opening remarks Friday, Oliver spoke at great length on the scope and significance of the project, which will create clean energy for Newfoundland and Labrador and Nova Scotia, as well as energy markets along the U.S. eastern seaboard.
“Our government has made it a priority to support significant clean energy projects that are economically viable and help reduce greenhouse gas,” he said.
“The Lower Churchill River project represents an unprecedented opportunity for Newfoundland and Labrador, and indeed the entire Atlantic region, to produce clean energy.”
According to Nalcor, the Lower Churchill development will generate 18,400 person-years of employment in this province and up to $3.5 billion in jobs and economic development.
It also estimates the project will reduce up to 4.5 megatonnes of greenhouse gas emissions. It will replace oil-fired electricity generation in Holyrood.
As part of the memorandum, a committee with representatives from Nalcor, Nova Scotia energy company Emera, the federal government, and provincial governments in Newfoundland and Labrador and Nova Scotia will be formed to share information.
An agreement on terms for a loan guarantee or equivalent financing is expected by Nov. 30, eight weeks after the federal government gains access to relevant financial data.