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 email@example.com