Razzle-dazzle

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For better or for worse, the deed is done, the money borrowed, the electrical customers truly on the hook.

“This is one of those occasions we should tell our children about and help them understand how important this moment is for them and their future,” Premier Kathy Dunderdale said Tuesday night in an announcement that the province had borrowed billions of dollars to build Muskrat Falls. “Today, history is being made.”

Well, every day, history is made — it just isn’t always the history we expect it to be.

Right now, the government maintains the Muskrat Falls project is the most examined venture in the province’s history. It’s a venture that is supposedly the most economic source of electric power possible, yet a project that apparently can’t stand on its own two feet without legislation expressly forbidding all competition, and that has to be exempted from review by the province’s Public Utilities Board, the one agency that actually has a mandate to protect electrical consumers from unreasonable rate hikes.

It’s not the only curious thing about this project.

The government has resolutely maintained that the

$5 billion isn’t really “debt,” because it will be secured by an asset that is legislated to make revenue, no matter how much the project costs. Semantics aside, we’ll all owe

$5 billion more — and the only place that money is set to come from is this province’s electrical consumers. The actual details of the borrowing have not been made public: the only real information is that the blended rate is 3.8 per cent over the 40-year term of the loan, and that financial houses gobbled it up. Of course they would; the details of the project don’t matter to financial houses — what matters is that the federal and provincial governments have absorbed all the risk, guaranteeing the repayment.

And the simple math? If you borrow $5 billion at 3.8 per cent, you pay $190 million in interest every year.

Any more information than that will have to wait until the details of the financing are released — if they are. For now, we just have another announcement of the same project, and another speech.

Of course, no political announcement would be complete without over-the-top hyperbole, in this case Dunderdale’s, “Just like the first permanent telegraph cable, that in 1866 connected Europe to North America at Heart’s Content, this cable will be a game-changer — a link of nation-building significance no less important for us than ‘the Last Spike’ when it was nailed.”

There’s more: “These Newfoundlanders and Labradorians are using the experience and expertise gained on megaprojects around the world to build a world-class project right here at home,” Dunderdale said.

Sounds like almost anything else said about major deals: here’s then-premier Joey Smallwood on a different Labrador hydro project: “It gives me real pleasure that Newfoundlanders can show those mainlanders how to build a hydro-generating station.”

When an announcement like Tuesday’s spends much of its time praising its own people for being “brilliant,” lauding the project not once, not twice but thrice in a single speech as a “game-changer,” it begins to make you wonder.

And that’s before the adjectives “amazing,” “thrilled,” “best,” “maximum,” “historic,” “tremendous vision,” “largest,” “robust,” “exceptional,” “most affordable,” “world-class,” “beyond reproach,” “second to none,” “change our future,” “like never before,” “trail-blaze,” “immense,” and “shining beacon.” Oh, and “proud,” at least six times, just for good measure.

It’s almost as if she was trying over-hard to convince us of something. Now, imagine you’d just been told all that about a used car …

Organizations: Public Utilities Board

Geographic location: Europe, North America

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Recent comments

  • Cashin Delaney
    December 12, 2013 - 17:21

    A project founded on counterproductivity, engineered to fit a scientifically-bankrupt global carbon offset credit scheme. Developed under land user protest, with help from Federal agents, into a looming example of specific diseconomy. Rigid and/or stupid and/or give-away planning and a general-level of salutory neglect, government controllism and Nalcor's collective "Enron Ego". Loyal opposition's "loud silence" enabling a dangerous radical monopoly to expand at the expense of the power needs of the people.

  • Jon Smith
    December 12, 2013 - 13:34

    And the winners are: Peter Mackay: Newfoundland's wealth and natural resources transferred to Nova Scotia ( not Quebec) and vindication for ABC campaign. Steven Harper: vindication for ABC campaign. Nova Scotians: who will also benefit from legislation to permit them to buy energy at the cheapest price from whoever can supply it. And the losers: locked in to take or pay at the variable escalating price to be determined by Nalcor without scrutiny by PUB, hidden from view by Bill 29'er. And the cost: a minimum of $450 million per year-(an average of a mere 50% increase in energy cost). And not allowed to benefit from cheaper sources of energy (especially imported energy from the mainland. Wow, Stupid Newfie or what?????

  • Maurice E. Adams
    December 12, 2013 - 12:55

    Is it such a good deal? Blended 3.8%? Blended how? If you listen to the Dunderdale TV interview with reporters (on the gov. website) one reporter questions whether 3.8 is good when Canadian bonds are at 2.5% (I think that is what he said). Also, the term is for 40 years, but that does not cover the full repayment period for the Lab/Island transmission line, which will have to be renegotiated after 40 years for another 15 years (I think it is). It seems the rates and terms have been manipulated (just like the PPA and PUB cost comparisons) to present what looks like a great picture ---- all with a deceptive result.

  • Dolf
    December 12, 2013 - 12:50

    The one thing the ol' doll missed was the invocation of "Mr. Speaker". Heads should roll in the bullshit department.

  • Cyril Rogers
    December 12, 2013 - 11:38

    Us "naysayers", in the absence of any details, can concede only that the Premier has negotiated a reasonably good deal on the loan itself. However, we are still on the hook for any additional equity injections...if and when the project goes over budget. Of that I am certain, given the history and nature of such undertakings. The biggest challenge may yet come from Hydro Quebec's court challenge and I have very little faith in our government's ability to win that case....so, where will the additional power commitment to Nova Scotia come from? I speculate that Holyrood may very well see an uptick in output in future years. Then, instead of producing power for us in the range of 10-12% per year, we may very well see it going into the 25-30% range. So much for reducing our reliance on oil!. Alternatively, if they continue with their plan to mothball Holyrood, they will have to look at wind and/or upgrade the transmission lines from Central or the Bay Despoir Dam. All of these things could have, and should have, been done, to allow for the closure or upgrade of Holyrood....for our own purposes. Now, we are doing it totally for the benefit of Nova Scotia. Peter McKay has done a tremendous job of delivering this project for the benefit of Nova Scotians. We, in the meanwhile, are left holding the bag, and our people will be paying for Nova Scotia's cheap power for decades. I always felt that the feds would come through on the loan guarantee....if it were to benefit Nova Scotia. Otherwise, they would have broken their promise to our province.....the only one I have ever wished they would break. The Premier's false bravado was almost palpable on Tuesday evening and we have to wonder who is pushing her over this fiscal cliff. Where will the additional equity come from when the inevitable cost overruns come due....from the revenues that we would otherwise have to spend to the benefit of the province. Every additional dollar spent drives us deeper into this fiscal hole. Sure, we may eventually be able to pay it off but only at a huge sacrifice and totally at our expense.

    • doug
      December 12, 2013 - 15:05

      my understanding is they are going to upgrade the Holyrood staion anyway for emergency backup in case of power grid failure of downed poles and hydro lines which will surely be the case with the distance from Labrador to here,,

  • david
    December 12, 2013 - 09:55

    It isn't hard to see that this government, as low in the pols and sinking as it is, was verty anxious to tie this Muskrat Rock as tightly around our collective necks as soon as it could. Come election time, they are counting on the sheer magnitude of the potential financial doom of this intractable obligation making people plug their noses and vote PC, out of pure fear what changing crack dealers mid-high might unleash. In Newfoundland, extortion and fear is obnviously the new "chicken in every pot". We get what we deserve.

    • Dolf
      December 12, 2013 - 15:23

      David, instead of all that hyperbole you could have just said: "She screwed us real good".

  • Too Funny
    December 12, 2013 - 07:26

    "And the simple math? If you borrow $5 billion at 3.8 per cent, you pay $190 million in interest every year. " So simple that you got it wrong. It would only be $190 million "every year" if the plan is to never pay off the debt (Of course that has been a strategy used by governments in the past). The sentence about MF being the most economic source of power but legislation being put in place to prevent competition is bang on. That alone should be enough to make any intelligent person question the benefits of this project.

    • Joe
      December 12, 2013 - 08:09

      A person in the US can borrow for as little as 4.2% for 30 years. I guess they are almost more creditworthy than Canada or the Province. Most debt by companies and governments is paid off at the end of the term with a payments made to a sinking fund each year until maturity. Thus we will only pay $7.6 Billion in interest. But don't worry the sinking fund will earn interest, but like savings and pension funds don't expect much of a return. One other fly in the ointment is that bankers lately have been requiring borrowers to assume unrelated conditions which make the banks profits greater on the transaction. So if the government hides the documents you can be assured there is a default swop or some other sure to fail clause it them to profit the bankers.