Variations on a theme —questions and non-answers

Russell Wangersky
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Here’s a little something to think about as the Muskrat Falls project soldiers on: put simply, there are things about the project that we’re just not supposed to know.

These are questions and answers submitted before the recent Nalcor annual general meeting. While they’re not all the questions or all the answers, there’s an interesting tone to these ones. That tone? Asking a question doesn’t always guarantee an answer.

Question: “Please provide a schedule showing the province’s proposed contributions to the Muskrat Falls project annually over each of the next five years. What is the estimated total contribution from the province over the construction period?”

Answer: “The government of Newfoundland and Labrador is committed to fund equity for all project expenditures that are not covered by debt under the federal loan guarantee. Prior to financial close, all of the project expenditures will be funded by equity. As a result, a significant portion of the total equity requirement will be injected in the project prior to the end of 2013.”

(To recap: how much will the province pay? Answer: no answer.)

Question: “Is the federal loan guarantee conditional upon Emera’s agreement to participate in the Maritime Link? What will happen if the Nova Scotia Utilities and Review Board does not approve the application from Emera’s subsidiary?”

Answer: “At Nalcor’s AGM, Ed Martin addressed questions posed about the UARB and Emera’s Maritime Link. Mr. Martin noted that Nalcor Energy and Emera are committed to the Maritime Link as outlined in the sanction agreement. This is a regional project and building the Maritime Link will bring tremendous value to the Atlantic region. There are no conditions precedent requiring UARB approval of the Maritime Link in the federal loan guarantee. The UARB is an ongoing regulatory process in Nova Scotia and Nalcor won’t speculate on the outcome of the UARB hearings. We will consider appropriate steps upon release of a decision.”

(Recap: what happens if there are problems in Nova Scotia? Answer: we won’t say.)

Question: “What is SNC Lavalin charging for project engineering, management and procurement services on the Muskrat Falls project? How does their service fee compare with the project fees paid by Nalcor on other projects and with the project management rates paid by government for major transportation, hospital and public building construction?”

Answer: “SNC-Lavalin (SNC) was retained after completion of a public expression of interest call and a request for proposal process. SNC was awarded an engineering, procurement and construction management services contract and is a consultant to Nalcor Energy for the Lower Churchill project. … As noted at Nalcor’s AGM, details of the agreement are commercially sensitive.”

(Recap: how much is SNC being paid, and how does it compare to similar contracts? Answer: none of your business.)

Question: “Is the service fee (for SNC) based on the concept of cost plus and does the rate increase or decrease with the size of the project? How much money has been earmarked for SNC Lavalin’s project management fees?”

Answer: “At Nalcor’s AGM, Ed Martin addressed questions regarding the contractual services between Nalcor Energy and SNC-Lavalin. Mr. Martin noted that the detailed commercial and financing arrangements of the … contract

are commercially sensitive and could not be released. However,

he noted that expenditures to date for the (engineering, procurement and construction management services) contract are over $100 million.”

(Recap: will SNC make more if the project is overbudget? Answer: SNC has made over $100 million so far. No other information to be provided.)

What about those credit ratings?

Question: “Please advise if federal loan guarantee conditions precedent 3.5 A (i) and (ii) have been executed and provide the reports from the credit rating agencies (i) confirming that the credit rating agencies have supplied indicative credit ratings for (the project) (prepared on a non-guaranteed basis) equal to or higher than investment grade and (ii) confirming that the credit rating agencies have supplied indicative credit ratings for the Maritime Link (prepared on a non-guaranteed basis and based on information provided in the application to the UARB) equal to or higher than investment grade. Advise if these reports have been accepted by the guarantor.”

Answer: “As noted by Ed Martin and Derrick Sturge at the AGM, this condition has been met to the satisfaction of Canada; however, due to the confidentiality requirements of the credit rating agencies relating to indicative ratings, these reports cannot be disclosed.”

(Recap: can we see the credit reports? Answer: no.)

Request: “Please provide a copy of all reports submitted by the independent engineer including revised capital cost estimates, reviews of the revenue requirements and their recovery through rates, reviews of technical aspects of the project, including engineering, stabilization of the North Spur, and a technical due diligence report confirming that the project execution plans are commercially reasonable and consistent with Good Utility Practice, required by FLG 3.5 B (ix).”

Answer: “These reports are commercially sensitive as a requirement of Nalcor’s arrangements for the federal loan guarantee.”

(Recap: can we see the independent engineer’s reports? Answer: no.)

To sum up: it’s a big project that, as taxpayers, we supposedly own. We just can’t always know what we’re paying to whom, or see what reports on the project say.

The truth? You can’t handle the truth.

Russell Wangersky is The Telegram’s

editorial page editor. He can be reached by email at

Organizations: Maritime Link, SNC Lavalin, Nova Scotia Utilities and Review Board

Geographic location: Newfoundland and Labrador, Nova Scotia, Atlantic Canada

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Recent comments

  • Winston
    July 04, 2013 - 08:51

    Russell, was my question so embarrassing that they wouldn't even post it? I watched Ed Martin online for 2 or 3 hours and wished I was there to ask a question. I realized I could post a question on line that would get answered later ,so I did so. It went like this: The rationale for MF is that we need more energy for electric heat in the winter, as you claim that efficiency gains for houses is approaching saturation. Yet new housing codes passed in 2012 reduce energy needs by 27 percent and is very cost effective. Add cost effective heatpump heating and the winter reduction for new houses is another 27 percent. For older houses, the cost effective heatpump heating reduces winter time heat energy by 60 percent. Is not the suggestion of efficiency saturation for housing wrong, and therefore the rationale for MF wrong? Is it not a substancial risk to the forecast energy need of about 1 percent per year for the island? Is this question so embarrassing that it should not be asked, as Nalcor has not posted it? Is it important enough for some journalist at the Telegram to demand an answer from Nalcor? Or does the Telegram too find it embarrassing? Russell, you highlighted a number of questions in your article that are not being answered, but they filter mine so it is not even asked! Is it a silly unworthy question?

  • Cyril Rogers
    June 29, 2013 - 21:21

    Surely, the lack of information forthcoming from NALCOR and being denied due to "commercial sensitivity", is simply a smokescreen to deflect us away from the truth. The ugly truth is that this project is vastly over-priced for the value it will give to us, the ratepayers. Yet, this NALCOR monolith is doing a complete snow job when it comes to getting at the truth. Let me warn Mr. can only hide the truth so long, sir, and you will eventually be called to account for your decision to proceed with this uneconomic and unneeded project. You will have to cough up the truth some day and neither you nor the current PC administration will be able to hide behind secrecy laws.

  • concerned
    June 29, 2013 - 19:46

    during the 2013 agm ed martin spoke at length about the future of nalcor. There was no powerpoint to go with the discussion, and no written script of the speech. Ed martin talked about using revenue from the regulated business ti fuel growth, especially GULL island. there was no talk of the 400 million which will be returned to the government from muskrat alone. Ed Martin said alot in this speech and it was not covered by the media. but it was clear to me that it will be a long time before the taxpayer ever see a dividend from nalcor. In a OECD country there should be a much higher standard for transparency. where is the public discussion? what are we getting for the billions of taxpayer money which is being invested? how did this happen?

  • Corporate Psycho
    June 29, 2013 - 12:57

    The truth? We are being taken advantage of big time and the government is getting away with it.

  • crista
    June 29, 2013 - 11:01

    Reading your article interesting article like to know who you are talking about when you spoke of when you said the truth?and when you said you can't handle the truths????-referring to the title of you article????

    • david
      June 29, 2013 - 11:46

      Well Crista, that's clear as mud. But brief, so kudos for that. And you really should get that keyboard checked out....if you're worried about electricity costs, those excess ???s eventually add up.

    • Laughable
      June 29, 2013 - 19:10

      Sticky keyboards must be contagious. Whether it's Christa's "????" or David's with the "....".

    • david
      June 29, 2013 - 20:48


  • JM
    June 29, 2013 - 08:06

    During the pub process Nalcor's line was that equity was the most expensive form of financing. It is why in their weighted discount rate they assigned 10% to equity and 6% to borrowed money. Why then is the province putting more equity for any overruns not covered by the loan garuntee? The debt to equity ratio will fall below the 65 to 35 ratio they have been maintaining to date. Why would more equity be used, if this could be financed outside of the loan garuntee and built into the rates. The reason is very likely due that without the loan garuntee this project can not be financed. Putting more equity into the project will only increase our rates even further as nalcor are looking for a ROE which exceeds the borrow rate. Another piece of info that nalcor are not fully explaining. Excellent column russel.