Dalley says no penalties to N.S. for Muskrat Falls delay

James McLeod
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Nalcor fails to clarify financial impact of missed construction targets

Natural Resources Minister Derrick Dalley assured people Wednesday that even if the Muskrat Falls project is delayed, the province won’t have to pay Nova Scotia any sort of financial penalties as a result.

Dalley was responding to a story by The Canadian Press which quoted Nova Scotia Energy Minister Andrew Younger saying that project delays won’t hurt his province because either they get the electricity, or they get financial compensation.

“Whether Mr, Younger is aware of the full details of the contract, I don’t know,” Dalley told reporters. “The arrangement that we have with Emera is that we would provide them with power for 35 years, and that starts when first power is available.”

Since Nalcor released a broad report by the independent engineering firm tasked with project oversight, Muskrat Falls has once again dominated question period in the House of Assembly.

When he released the report, Nalcor CEO and president Ed Martin hinted that when Nalcor eventually updates the public on cost estimates, the numbers will be higher than originally forecast. Moreover, to help save money, Nalcor may try to space out the work more evenly to avoid tight time crunch, and so first power may be delayed past 2017 as originally planned.

Dalley was adamant that a delay wouldn’t cause financial penalties.

The Telegram requested a comment from Younger about his comments on the matter, but didn’t get a response by deadline.

Emera, the Nova Scotia utility partnering with Nalcor on the project, confirmed there are no financial penalties if first power doesn’t come in 2017.

But the situation was much less clear when it comes to the financial impacts of interest during construction.

Nalcor has borrowed $5 billion to cover construction costs, and once the dam starts producing power, the Crown corporation will begin paying down that debt.

But during construction, before Nalcor can start making payments, the interest will pile up. An auditor general’s report released in January seemed to put the cost of interest during construction at $700 million.

However, the independent engineer’s report released this week says interest during construction will total more than $1 billion.

Confronted with that discrepancy, Dalley told The Telegram to ask Nalcor to provide an explanation.

Nalcor spokeswoman Karen O’Neill sent an email late Wednesday afternoon saying, “The figures in the chart on page 89 of the independent engineer's report includes both capitalized interest/IDC and the equity portion for Allowance For Funds Used During Construction (AFUDC).”

When The Telegram requested clarification on what exactly that means, O’Neill refused to provide any additional information.

Redirecting question

The Telegram also asked Dalley how much additional interest during construction will be incurred if the project is delayed. Again, he said the question should be referred to Nalcor.

“Some of the numbers around that, some of the technical aspects, I’ve asked Nalcor to provide you with an answer on that, and I’m sure they will,” Dalley said.

Nalcor did not provide an answer to the question by The Telegram’s deadline.

Liberal Leader Dwight Ball has been leading the push for more information about the costs associated with building the Muskrat Falls dam and power lines.

He said it’s comforting to know there won’t be any penalties if Nalcor misses its 2017 target for project completion.

But when it comes to the details on interest during construction, Ball said he can’t see any reason why Nalcor would withhold that.

“There’s absolutely nothing commercially sensitive about that,” he said. “There’s no question as you extend the timeline to complete the project, the interest during construction will go up and will cost the ratepayers of this province.”


Twitter: TelegramJames

Organizations: Canadian Press

Geographic location: Nova Scotia

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Recent comments

  • Tony Rockel
    April 16, 2014 - 23:07

    Well isn't that nice and reassuring! But those penalties will be nothing compared to the multigenerational penalty we'll all be paying for the MF abomination.

  • JB
    April 16, 2014 - 21:38

    Who signs 35 year deals anymore? Didn't we learn enough from Churchill Falls contract? Guess our gov is a little slow remembering facts.