Natural Resources Minister Jerome Kennedy said that with a federal loan guarantee in place, the government has crossed the final hurdle before it sanctions the multi-billion-dollar Muskrat Falls project.
Talk about Muskrat Falls and the loan guarantee dominated the House of Assembly Monday, with opposition parties pressing Kennedy for details on the terms of the deal.
Both the Liberals and the NDP are worried that the government has put itself in a risky spot, since the loan guarantee — potentially worth more than $1 billion in savings on financing costs — is not nailed down until Nova Scotia partner Emera sanctions its portion of the project.
Liberal Leader Dwight Ball called it a “huge risk” for the provincial government.
“We know that the conditions of the loan guarantee — the finalized loan guarantee — means that we have to have both Emera and Nalcor. We have to have their signatures,” he said. “They have to sanction this before the final loan guarantee is actually in place.”
On Friday, Prime Minister Stephen Harper showed up in Happy Valley-Goose Bay to sign a term sheet laying out the details of the federal loan guarantee for financing costs of the Muskrat Falls project.
Kennedy said what was signed Friday represents the final document.
“This 19-page document, which was signed on Friday, is a binding, legal document, Mr. Speaker. In fact, at the end of the document it states that it shall constitute an irrevocable legal, valid and binding obligation of the parties,” he said during question period in the House of Assembly.
Speaking to reporters afterwards, he explained that the term sheet represents a legally binding agreement, but bureaucrats will spend the coming months expanding it into more detailed legal language before any money gets borrowed.
“At that point there will have to be further documents to outline the agreements and how they apply to the moneys borrowed, but right now the actual term sheet is the federal loan guarantee,” he said. “Nalcor has been to the credit rating agencies and that’s all very confidential, but now they will go to various lending institutions and determine the best rates.”
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By being able to piggyback on the federal government’s triple-A credit rating, Kennedy said, borrowing costs for the province will be between one and 2.5 percentage points lower than if the province were going it alone.
The actual text of the term sheet hasn’t been made publicly available, but Kennedy said that would happen today.
The most contentious bit of the loan guarantee agreement seems to be the part that says the whole thing will only be valid if both Nalcor and Nova Scotia utility Emera sanction the project.
Emera has until 2014 to back out of the deal, but Kennedy said he expects it to make a decision and go all-in much sooner than that.
“Both Emera and Nalcor are looking at decision on sanction in the very near future, Mr. Speaker,” Kennedy said in the House. “And we expect that from our position as a province, and Nalcor’s position, we will be in a position to make a sanction decision before Christmas.”
New Democrat Leader Lorraine Michael said she worries that Emera will use its position to try to squeeze the government, and push for a better deal.
“They’re going to have a bargaining chip against this government because when it comes to looking at how much they’re going to pay when it comes to the rate that they’re going to pay, they’re going to be able to really bargain,” Michael told reporters. “They do have to do a final negotiation with regard to the maritime link, and how it’s going to change everything.”
The House of Assembly will spend about two hours on a private member’s debate Wednesday discussing the Muskrat Falls project.