In the details

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It was already strange: Prime Minister Stephen Harper calling a news conference that, apparently, his provincial counterpart here knew nothing about.

Harper was going to be in Happy Valley-Goose Bay to announce a loan guarantee for the Muskrat Falls project, but in St. John’s, Premier Kathy Dunderdale wasn’t aware of what Harper had in mind for his Labrador travels. It was not the most auspicious way to herald one of the last pieces needed for this province to launch a multi-billion-dollar hydroelectric venture. Usually,

Friday afternoon announcements are saved for the issues politicians want to bury, not trumpet.

Still, there they all were: Dunderdale, Harper and Nova Scotia Premier Darrell Dexter, safely ensconced behind security on the Goose Bay airbase, announcing another important step towards a project that already looks like it’s fully underway.

The nuts and bolts? The governments have worked out the terms under which the federal government will provide a guarantee to cover up to $6.3 billion of what is at this point a $7.4-billion project. The governments involved say that, during the 35 to 40-year term of the borrowing for the project, that will mean a savings for electrical customers of something like $1 billion. The governments also took the time to claim that the project shows that economics can work with the environment — a claim that might well be challenged by those concerned about the direct environmental impacts of the project.

Of course, no political announcement would be complete without a little bit of political stumping for the local member of Parliament — Conservative Labrador MP Peter Penashue has been at the centre of controversy over election spending allegations, so it’s probably no surprise that the prime minister took the opportunity to talk about how important Penashue’s input has been to moving the loan guarantee forward.

What’s left? Well, perhaps to see just what it is the loan guarantee contains, and what real effect it will end up having on the interest rates when the province and Nalcor make their case to the bankers who will put up the necessary cash.

The news release from the Prime Minister’s Office says “the governments of Canada, Newfoundland and Labrador, and Nova Scotia have agreed on the terms for a federal loan guarantee for the Lower Churchill projects,” and that “the Government of Canada continues to work with the financial advisor to ensure that the support provided to the projects is financially responsible to Canadian taxpayers. … The term sheet agreement has been signed by the governments of Canada, Newfoundland and Labrador and Nova Scotia, as well as the utilities, Nalcor Energy and Emera Inc. It sets out the terms and conditions of the loan guarantee which will be formalized in detailed agreements.”

This guarantee has been the subject of a year and a half of back-and-forth negotiations and analysis, so chances are there’s something more in its terms and conditions than a simple “here’s a guarantee.” As we know from this project already, there’s often a long time between term sheets and legal agreements.

And, like the power purchase deal that will see this province’s residents pick up the full cost of the project — in exchange for 40 per cent of Muskrat Falls’ power — there are many details that have yet to be made public.

On the face of it, Harper has started to deliver on an election commitment to back the project. Just exactly what has been delivered remains to be seen.

Organizations: Nalcor Energy and Emera

Geographic location: Nova Scotia, Goose Bay, Muskrat Happy Valley Canada Newfoundland and Labrador

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Recent comments

  • Max Edwards
    December 04, 2012 - 02:14

    Muskrat Falls does not make sense. Newfoundland has a population of only around 500,000 people, give or take. I believe some of our medium sized cities in Canada has the same number of people as the entire province of Nfld. Is it possible that one of these cities could take on a SEVEN TO EIGHT BILLION dollar debt to build a hydro plant? I don't think so. What's missing in this picture?

    • david
      December 05, 2012 - 12:52

      What is missing from your analysis is the completely farcical politcal climate of Newfoundand. Voters are rubes who can be completely mesmorized by a slick talking snake oil salesman.. in fact we demand it in our 'leaders'. We are doing this because it is our destiny. Muskrat Falls makes up for the bit of obscenely dumb luck that was NOT our "destiny": oil, and the gibs of money that comes with it. Poverty and hardship is our destiny...just look at history. So taking that money and burning it in the MF incinerator simply gets us back on track toward our true destiny. It's just kharma. Fate.

  • Scott Free
    December 03, 2012 - 07:36

    There is no real deal; the devil is in the details. Prorougie Steve ensured that there are conditions and stipulations tied to the guarantee that the province will never be able to meet or satisify; thus, giving the Feds numerious options for outclauses. There are more loopholes in the non-guarantee than you'd find at a hoola-hoop competition.

    • a business man
      December 05, 2012 - 07:04

      I am happy about the outclauses. It will give the Federal government (and federal taxpayers) an opportunity to walk away if the project goes south. Make no mistake, if it goes south, it is NL's problem. Harper is right to have these is perfectly logical to negotiate the walk away terms

  • Maurice E. Adams
    December 02, 2012 - 13:37

    John, government is leading island ratepayers to believe that we need more power. Holyrood has a 'firm' capacity of 3,000 GWh annually --- a fully paid for asset which the Hatch report says has about half its useful life left. We used 885 last year. What is left over -- UNUSED --- is 2,100 GWH annually, ---- 300 GWh MORE THAN the 40% (1,800 GWh) government says we need from Muskrat Falls. So it is a good deal to build Muskrat Falls to supply power that we don't use? On island hydro spill the equivalent of Vale's needs last year and Nalcor gave evdience to the PUB that they expect to keep spilling till Vale comes on stream to use up the island existing EXCESS capacity. So Holyrood will only need to use part of its UNUSED capacity to handle Vale's needs. Ratepayers are being mislead so that they will pay for the construction of Muskrat Falls power to provide (at their cost) to the mining companies of Labrador. .... Island power needs is being used as an excuse so that Labrador's mining companies won't have to pay for their own power. ------ Done on the backs of low and middle income island ratepayers.

  • Coco
    December 02, 2012 - 11:23

    According to the Electricity Bill Calculator, we will save on electricity. Are the construction costs of building Muskrat Falls included in the calculations? If so, how is it possible to save money and pay back billion$ at the same time?

  • Maurice E. Adams
    December 01, 2012 - 15:12

    G & M reports Emera CEO as saying Maritime Link could now be up to $1.5 billion (up by 25%)......... That brings the cost up to $7.7 billion and with cost overruns, that will be well over the $8 billion where Wade Locke says the project needs to be reviewed.

    • John Smith
      December 02, 2012 - 09:03

      ...but Maurice...who cares about how much Emera has to pay? I don't care if they have to pay ten billion to lay the will not matter to me, or to rate payers. The thing everyone has to remember is that if Emera backs out, and the guarantee goes away...the project is still very much a go. The project came in as the least expensive, without the connecttion to the mainland, and without the guarantee. So even if that happens, we will still have to build the dam and line across to Labrador. The thing is the deal will cost us around 6.5 billion, and rate payers will pay for it...the cost we pay for electricity will go up to pay for it...true. However, what we will pay if we don't build muskrat will be much more, our bills have increased by more than 70% since the mid 90s! and will continue to go us...with, or without the project....that is the absolute bottom line. Will we watch our bills escalate forever...or for the next few years....i think the latter makes more sense...

  • crista
    December 01, 2012 - 13:35

    guarantee loan approved for you know who????taxpayers pays the guarantee loan back the contractors walk away with their pockets full and the bussiness are happy why???? investments,the government says it's the best thing for the future????why is it the best thing for the future???? and who is best for????

  • Cyril Rogers
    December 01, 2012 - 10:46

    JOE....I find it amusing that PC partisans like you can't handle the legitimate concerns and criticism of this project. One might ask what you personally stand to gain by it. If nothing, then why would you want to us to take on a multi-billion dollar project that offers so little in return? Perhaps if you told us who you really are we'd have a better idea why you support this project. Feel free to email me at: and we can debate this privately in a respectful manner.

    • John Smith
      December 01, 2012 - 15:26

      What are these ligitimate concerns? Please tell me what they are because I would love to hear the ...ligitimate concerns...give me abreak

  • Coco
    December 01, 2012 - 10:16

    Does anyone know what our monthly payment might be?

  • Joe
    December 01, 2012 - 09:52

    Looks like Ed Hollett and 2041 are shaping editorials again. It is also shameful how Russell Wangersky gets two spreads in the Telegram to voice his blatant anti-muskrat views. This nameless editorial and his own column. The Telegram staff should give up on this newspaper/toilet paper and pick up the protest signs with Con O'Brien

  • Cyril Rogers
    December 01, 2012 - 09:21

    What he's delivered, like so many commitments by this Prime Minister, is a weak "promise" to help guarantee the funds associated with the original cost projections. It will purportedly save us a billion dollars over the life of the project. When you consider that the project costs, from start to final payment, will be in excess of 20 billion dollars, that is small consolation. As your editorial points out, the Island supposedly gets 40% of the power and will pay 100% of the cost. How anyone can spin that into being a great deal is beyond me! The issues confronting this project are huge obstacles and the province is floundering around trying to make it look economical. It will never be that! Our new slogan should be: MEGA dollars for a MINI project!!!