Empty echoes

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There was supposed to be a financial update on where the Muskrat Falls project stood at the end of last month. It didn’t happen.

Now, Nalcor Energy isn’t even willing to say when there might be an update.

Here’s the corporate message as of April 4: “In response to your question on capital costs for the Muskrat Falls project, we are still in the process of negotiating and letting some large contracts for the project. We need to finalize these contracts before we can provide a complete picture on costs. We will provide an update on project costs as soon as this process is completed.

“When we examine project costs, we look at a combination of things: capital, operating and financing. To date, some of these elements are lower than budget, some are similar, and some are higher. Right now, on materials/supplies, this is generally coming in where we expected them to be. For the unit rate contracts, we are seeing some upward cost pressures here. This is no surprise as we are seeing pressures on capital cost being experienced throughout the province and country. On the financing side, we now have certainty here and we have saved more money than we budgeted.“

Here’s the corporate message as of Dec. 12, 2013: “We will aim for a capital cost update during the first quarter of 2014. We just finished financing and we are still letting some large contracts and we need to get a full picture before an updated capital cost estimate can be provided. This time-frame is when we anticipate having the last of the major contracts in place and that would be the right time to provide an update on the full cost picture.

“When we examine project costs, we look at a combination of things: capital, operating and financing. To date, some of these elements are lower than budget, some are similar, and some are higher. Right now, on materials/supplies, this is generally coming in where we expected them to be. For the unit rate contracts, we are seeing some cost pressures here. Some are up and some are down at this point. This is no surprise as we are seeing pressures on capital cost being experienced throughout the province and country. On the financing side, we now have certainty here and we have saved more money than we budgeted.”

Is there an echo in here?

One thing there isn’t, is clarity. The only numbers that Nalcor is making publicly available on the project is a number from Decision Gate Three — and that means there hasn’t been a cost update since Oct. 30, 2012, — 18 months ago. At that point, the entire cost of the project was $7.4 billion, with this province’s share coming in at $6.2 billion.

As an aside, it’s worth pointing out that publicly traded companies have to supply shareholders with management discussion and analysis documents every three months, and these MD&A documents include any known material change to major projects. The securities industry describes it like this: “For example, MD&A requires a discussion of known trends or uncertainties that are reasonably likely to affect your company’s business.”

Why? To show shareholders what they’re buying.

“Your objective when preparing the MD&A should be to improve your company’s overall financial disclosure by giving a balanced discussion of your company’s results of operations and financial condition including, without limitation, such considerations as liquidity and capital resources — openly reporting bad news as well as good news.”

In Nalcor’s case, it’s hard to argue that no news is good news.

Organizations: MDA

Geographic location: Decision Gate

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Recent comments

  • Corporate Psycho
    April 08, 2014 - 14:42

    We are being fleeced by a few special interests.

  • Tony Rockel
    April 08, 2014 - 10:29

    Where is you "transparency" Mr Marshall? Why are you allowing NALCOR, essentially a rogue organization, to continue riding roughshod over the taxpayers and ratepayers of this province? I thought you said NALCOR belonged to the people. Evidently NALCOR belongs to a very select few "people"-- a few of the mega-rich who don't give a damn about the rest of us.

  • Maggy Carter
    April 08, 2014 - 01:06

    Yes, I agree with the underlying sentiment of the editorial - that NALCOR has once again failed to deliver on its promised disclosures. Where I disagree perhaps is with the consequences of that failure. As I see it, the horse is gone and timely public disclosure at this stage amounts to a belated, futile attempt to close the barn door. One could not overestimate the value of an honest, forthright approach by government in consulting the public on this massive investment in the first place. The objective should have been informed consent, a perquisite of which was that the 'informed' part be timely, accurate and comprehensive. Unfortunately it was none of the above. Now that the die is cast, frankly I attach less urgency to public disclosure. We are now beyond the point that a thorough public airing of the facts could be expected to alter the elements of the deal or the fact that it was sanctioned at all. That doesn't diminish - rather it heightens - the importance of providing timely updates to the decision makers within government. That includes the newly struck oversight committee of bureaucrats and of course Cabinet itself. We can only trust that some group other than NALCOR is riding herd on the costs of this project. We hope of course that our misgivings are misplaced and that the project proves a great success. History, if nothing else, will hold those responsible to account in the event that Muskrat becomes a sad sequel to the infamous Upper Churchill saga.