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This will be a short column, an easy read. Most of it, in fact, is someone else’s words.

Here’s then-premier Kathy Dunderdale, talking about the largest project borrowing in Canadian history, the money borrowed by the provincial government and Nalcor to build Muskrat Falls.

“We just locked in $5 billion over a 40-year term at a blended rate of 3.8 per cent — that’s a historically low interest rate. The savings to electricity customers in this province, homeowners and businesses, is well over a billion dollars in today’s dollars.

“We extracted tremendous value today from the markets. Our offering was over-subscribed by the market. We had a very high level of interest and uptake and we achieved the highest possible credit rating. Many large infrastructure projects do not achieve this complete level of financing certainty until construction is completed, but the objective was to obtain this certainty early, which was possible with the benefit of the federal loan guarantee.

“The order of magnitude of this financing cannot be underestimated. This bond placement is one of the largest in Canadian history. TD Securities and Goldman Sachs were our co-lead arrangers and, along with a syndicate of financial institutions, raised the $5 billion required to fund the project.

‘A robust business case’

“I want to commend the financing team at Nalcor and the provincial government for their diligence and commitment during this process. Underlying all this work is the fact that we have a robust business case and the benefits of this project are exceptional.”

It’s an interesting spin, but what’s also interesting, when it comes to the robust business case, is that a business case was completely unnecessary.

Here’s Steve Halliday, the managing director and head of global credit trading and distribution at TD. Asked about the structure of the Muskrat Falls financing arrangements by The Financial Post, he had this to say:

“The benefit of the guarantee was that no one had to look at the merits of the underlying project. … That was a key consideration for us, not only in terms of how we rated the risk from a bank or underwriter perspective, but also in terms of making sure the investors agreed with our assessment, and counsel’s assessment, as to the strength of the guarantee.”

As The Post put it in its Jan. 31 story: “What financial institution would want to bear that much risk in a complicated construction project with that much potential for surprise? The strength of the federal guarantee put the bank at ease.”

Sending a message

Imagine: a deal so ironclad, you don’t even have to worry about looking at the project involved. You don’t even have to consider it.

Words fail me.

Except for this: it says lots about the single-mindedness of governments.

It says a lot less about confidence in the strength of the project.

Russell Wangersky is The Telegram’s editorial page editor. He can be reached by email at

Organizations: TD Securities, Goldman Sachs, Financial Post

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Recent comments

  • Corporate Psycho
    February 09, 2014 - 10:31

    Hey Smith, speak for yourself. As a ratepayer I want this project stopped NOW!

  • John Smith
    February 09, 2014 - 07:29 the guy said, the fact that the Feds are providing a loan guarantee made it easier for them to loan us money??? A shocking revalation? LOL Oh, Russell, I long for the days when you wrote grade 9 prose...about dew drops on dandelion leaves....I guess now that you have slain your dragon, Ms. Dunderdale, you have to set your sights more firmly on that other nemisis Muskrat Falls...sad....The rate payers are the ones who will backstop this project Mr. Wangersky. Just as they did for Bay D'Espoir, Cat Arm, Granit Canal and others. That's why they have no problem with the project, because rate payers, not tax payers, will pay for every last dime...Muskrat Falls is a well thought out, intelligent answer to our coming energy needs, and is 2.5 billion cheaper than the nearest alternative....that, in my opinion is what you sholud be talking about...alas, that doesn't sell papers, or satisfy the overlords in PQ, who own the Tely...ala Rupert Murdoch...LOL So we are your mercy Mr Wangersky...hey I think there's a song in that....

    • Tony Rockel
      February 10, 2014 - 13:42

      " the guy said, the fact that the Feds are providing a loan guarantee made it easier for them to loan us money??? " ...errrrr, no "John Smith", as anyone not as dim as yourself could readily tell, the loan guarantee made it easier for them to overlook what a rotten deal we're being shafted with.nunc

  • Jay
    February 08, 2014 - 13:34

    Well, be sure to remind the incoming premier, Mr. Ball to cancel the project as soon as he gets elected. I'm sure he'll get quite a laugh.

  • Maurice E. Adams
    February 08, 2014 - 11:05

    Nalcor's business case is for ratepayers to pay 100% of Nalcor's costs (no matter how much), and then Nalcor sells any surplus energy, no matter how much below production and transmission costs, and because Nalcor itself does not have to cover the cost, any revenue, no matter how small, it considers a profit..............Here is an excerpt from a DUNSKY Energy Consulting report posted on Manitoba's PUB website ( para. heading --- GETTING LOCKED IN TO CAPITAL PLANS) ---- "In theory, a plan is only a plan – it does not in and of itself lock in capital commitments beyond those immediately required. My concern, however, is that once a utility commits to new capital plans (as opposed to future DSM, PPAs, or other resources) , reversing those plans becomes exceedingly difficult, as momentum, expectations and interests align to push those plants forward, no matter what the alternatives. From our experience, the resulting fate is too often repeated, resembling a four-part act: 1. the utility commits to building (because it fails to fully account for alternatives and risk); 2. the utility proceeds to build in spite of new “facts on the ground” or alternative options (no matter how glaringly obvious they may become); 3. the utility finds itself awash in (needlessly expensive) surplus energy; and 4. the utility scrambles to find demand for its new supply – by selling at a loss (whether to similarly depressed export markets or to new loads through generous rate subsidies), and/or by reducing or eliminating its lower-cost DSM programs. I have watched this play out in my own province, where we are currently inundated with surplus power and selling it at a fraction of what it cost us to build (at tremendous cost to the economy)."

  • Just Sayin
    February 08, 2014 - 09:34

    One of these lending institutions makes loans to me, that is personal loans, at 2.25 percent. For several years I got it 1.75 percent. Now the rate can change, and is not fixed for 30 years. The loan is backed by shares in blue chip companies I own. For loans like this I can borrow and invest in say Bell Aliant at 7 percent dividend return, for a net 4.75 percent profit, plus any capital gain on the stock. And this bank is pleased with my business: preferred client , invites to this and that, and a Xmas gift by mail. Easy to see why these banks are so pleased with the Muskrat arrangement at almost 4 percent rate. Good rate for them , backed by Canada and the iron clad 50 year 50 percent hike on electricity rates on quiet , dumb Newfies, who know no better and could care less, who will just rant and roar when the bills come in, and wonder what happened.