$6.2-billion hydro deal

Rob Antle
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'This is not only a great regional project; this is a great national project'

Two premiers heralded a new era of Atlantic co-operation Thursday, announcing a $6.2-billion power deal expected to see electricity flow via subsea cable from Muskrat Falls in Labrador to Newfoundland and Nova Scotia within six years.

“I guess we need to make it clear: this project is a go,” Newfoundland and Labrador Premier Danny Williams said at a media briefing Thursday.

“This is not only a great regional project; this is a great national project.”

Nova Scotia Premier Darrell Dexter said increased co-operation on energy issues will strengthen the economic foundation of the Atlantic region.

“I have always said that what is good for Newfoundland is good for Nova Scotia; what is good for Nova Scotia is good for New Brunswick,” Dexter told reporters in St. John’s.

“Having success on the East Coast benefits us all.”

In making the deal, Newfoundland and Labrador avoided Quebec — something Williams stressed was a priority.

The province instead found support — in the form of transmission assistance and bundles of cash — in its Maritime neighbour.

The deal will see the smaller of two dams developed on the Lower Churchill river.

Muskrat Falls has a capacity of 824 megawatts (MW). The larger Gull Island site, at 2,250 MW, is on the shelf — at least for now.

Officials said Muskrat Falls power is expected to be online by 2016.

About 40 per cent of the energy generated by the turbines will replace domestic needs on the island of Newfoundland.

The oil-burning Holyrood generation plant will be shuttered.

Emera Inc. will build a $1.2-billion subsea power link to Nova Scotia. In return, Emera gets 20 per cent of the power generated by Muskrat Falls.

The remaining 40 per cent of the power will be available for potential sale to other clients in Atlantic Canada or the northeastern U.S.

Emera — which has existing infrastructure throughout the region — will assist Nalcor with those sales, in return for a transmission tariff.

Emera will also pick up a portion of the cost to build the transmission line within Newfoundland and Labrador, along with a share of the profits it generates.

All told, Emera will foot $1.8 billion of the overall Muskrat Falls project cost.

Newfoundland and Labrador will be on the hook for the remaining $4.4 billion.

The province’s taxpayers will backstop that $4.4 billion, either through Crown-owned Nalcor Energy or borrowings by the provincial government.

Williams said recent reductions in the provincial debt give the government flexibility to pay for Muskrat Falls.

“The beauty is that the province does have the financial capacity in order to be able to undertake this, which is something that we could not have done (before),” he said.

Five years ago, Newfoundland and Labrador’s net debt ticked in at nearly $12 billion. Thanks mostly to booming oil revenues, the amount dropped to $7.9 billion in 2009, before creeping up again this year.

The two provinces are also looking to Ottawa for help, although Williams said the project is a go with or without that assistance.

An application is pending to a federal infrastructure program for $375 million. The cash would defray the costs of the subsea link between the provinces.

And Williams noted that a federal loan guarantee would mean hundreds of millions of dollars in reduced interest costs.

Williams suggested it’s a “no brainer” for Ottawa to provide the guarantee, but acknowledged that the Harper administration has not made a binding commitment on the issue.

And he rejected allowing the feds to take on any form of equity in the project in return for assistance.

“You’ve got to be kidding,” Williams said.

There are three separate aspects to the $6.2-billion megaproject:

‰ the first is construction of the Muskrat Falls generating station and transmission lines between the dam and the existing Upper Churchill facility. That is expected to cost $2.9 billion, and will be 100-per-cent owned by Nalcor.

‰ the second is a Labrador-to-Newfoundland transmission link, which will carry Muskrat Falls power to the island. That connection will span approximately 1,100 kilometres, running all the way to Soldiers Pond on the Avalon Peninsula, and cost $2.1 billion. Nalcor will take a 71 per cent stake in this line, with Emera owning the remaining 29 per cent.

“I have always said that what is good for Newfoundland is good for Nova Scotia; what is good for Nova Scotia is good for New Brunswick,” Nova Scotia Premier Darrell Dexter

‰ the final piece in the puzzle is a maritime link to hook up to the Nova Scotia grid. The line will run from Bottom Brook, near Stephenville, down to Cape Ray before going underwater to connect at Lingan, N.S. Emera will pick up the entire $1.2-billion price tag for that project. In return, the Nova Scotia company will get 20 per cent of the power generated by Muskrat Falls for a term of 35 years.

Developing the Lower Churchill has been a priority for a series of premiers since the 1970s.

In 2006, Williams announced the province would “go it alone” on the project after rejecting a series of other proposals.

He dismissed the suggestion that Thursday’s deal fell short of that.

“There’s nothing wrong with a good partnership,” Williams noted. “It strengthens us.”

The Muskrat Falls project is expected to hit peak employment levels in 2013, creating 2,700 direct jobs in Newfoundland and Labrador that year alone.

There are, however, several hurdles remaining.

The leadership of the Innu supports the project, but a final ratification vote on the so-called New Dawn agreement has been delayed several times.

The various aspects of the project must also pass environmental reviews.

The premier said he hopes Thursday’s announcement will exorcise the demons of the disastrous Upper Churchill contract, which runs until 2041.

 “It’s a huge milestone,” Williams said. “It’s the day, hopefully … when Newfoundlanders can finally let go of the Upper Churchill and say, ‘Done. It’s over.’”

Newfoundland and Labrador officials have contended the province nets only $63 million a year from the lopsided arrangement, while Quebec receives an estimated $1.7 billion annually.

Williams added that the province continues to push legal action in Quebec seeking redress for that contract.


Organizations: Shuttered.Emera, Nalcor Energy, New Dawn

Geographic location: Newfoundland and Labrador, Falls, Nova Scotia Quebec New Brunswick East Coast Gull Island Island of Newfoundland.The Ottawa Atlantic Canada Northeastern U.S.Emera Stephenville Cape Ray

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Recent comments

  • Patrick Dunn
    November 19, 2010 - 22:43

    DANNY why aren't you running the country?

  • John G
    November 19, 2010 - 11:38

    If you look at the graph the government has on its website of Muskrat Falls vs Isolated Island Cases it looks like the price of electricity is going to double between 2010 and 2016. If a $50.00 electricity bill in 2010 is going to be over $100.00 by 2016 none of us will be able to afford to use the electricity if and when it comes on stream.

  • political watchdog
    November 19, 2010 - 10:11

    King Danny is said to have stated that this project is solid enough that he would even put his own money into it; nice...wish he had put his own money into the Abitibi expropriation fiasco and not yours and mine! Let me get my thoughts around this current proposal: let's say I draw this analogy...I want to buy a Cadilac to go into the taxi business, (my prefererance is to develop Gull Island); however, I re-think it and can only affordably see the feesabilty of purchasing a Chevette; (settling on Muskrat Falls). So, I announce that I'm ready to open a taxi stand; but wait now...I haven't arranged any financing yet with my bank; (no commitment from Feds); geez, might this be a little premature to announce a business opening when I haven't even gotten a permit to operate yet (land claims settlements with Aboriginal groups; or environmental assessments), much less financial backing? All of this might be a case of the cart before the horse; good luck with that Danny; hope you haven't burnt too many bridges up along and that Stevie and the boys have short memories. Taxi, taxi......

    • gerard
      November 19, 2010 - 14:42

      Actually, Danny done quite well on the expropriated hydro from Abitibi. If he is willing to pay out 4.5 billion dollars or more for 600mwatts of power, and says it is a good deal, then the 100plus mwatts of power produced by Exploits River Hydro should be worth almost a BILLION DOLLARS.And all Danny had to do to get it was to run a 100 year old forest industry out of GFW and destroy the good livelyhoods of 700 workers. But we must not forget that he is giving GFW a 800,000 dollars a year grant, and as for the 700 exworkers, well, good luck out west boys. So, you see, Danny is great, lol...

  • Mark Aubere Morrissey
    November 19, 2010 - 08:49

    Honourable Premier Danny Williams, Instead of going back 30 years to show how unaccommodating Quebec is and was maybe you should go back some 83 years… How accommodating was Newfoundland in 1927 and 1949 when Labrador was sectioned off? How much did Newfoundland pay and how much did Quebec get for the disputed land? When did Quebec agree to the boundaries? There are always two sides to a story. Respectfully Mark Aubere Morrissey

    • Roll eyes
      November 19, 2010 - 11:22

      To M.A.M. - Prehaps you and people like you, who speak of things that every person in NL should know if they do not already, should read a history book. Old news that was settled long ago. Also that side of the two sided story has nothing to do with the reasons Qeubec was not willing to treat NL fearly one this particular deal.

  • Colin P.
    November 19, 2010 - 08:02

    Liberals and NDP wouldn't know a good deal if one struck them in the mouth. The Liberals are jealous and want the deal to fail, simply because it was their party that signed that horrible Upper Churchill deal. They don't want Williams to succeed where their party failed.