After reviewing information from Nalcor Energy, Export Development Canada (EDC) says the Lower Churchill Project will ultimately result in a product for international export, namely power.
As a result, according to the EDC’s David Surrette, the Crown corporation is offering to work with local companies interested in participating in the construction of the hydroelectric power plant at Muskrat Falls and associated transmission links from Labrador to Newfoundland to Nova Scotia.
“And so the banks are very happy and the SMEs (small and medium-sized enterprises) are very happy, and every day I am getting phone calls from companies who are saying. this is what I want to do, can you support me? And we’re doing more and more business with them,” Surrette said, following the release of a statement marking the EDC’s evaluation of the megaproject.
The EDC (edc.ca) is a federal Crown agency and provides financing, insurance and bonding for Canadian companies selling into foreign markets. If there is no international sale, though, there is no EDC step-in.
“We’ve had discussions with Nalcor and they have confirmed to us what amount of power will be exported. And because we know a certain percentage will be exported, it qualifies as an export enabling project. So it falls under our legal mandate to support this particular project,” he said.
Supporting the project means helping companies — typically small and medium-sized enterprises — who are looking to land sub-contracts. In some cases, it means helping with working capital.
“For example, if a company was going to bid on a project for Muskrat Falls and they had to post a bid bond, they would go to their bank and their bank would issue an irrevocable standby letter of credit. And no bank will issue this irrevocable undertaking to pay without security,” Surrette said.
“Without EDC, the company would have to either post cash collateral or have its operating margin reduced because, if there was ever a call under the letter of credit, the bank would want to be protected. So what EDC does — we substitute our balance sheet for that of the exporter.
“In other words, we give the bank a guarantee which is both irrevocable and unconditional. EDC basically is the Government of Canada. We’re a Crown corporation. The bank is very happy with the security and the exporter has his working capital, to do the actual contract that he has to do.”
In town to address a gathering at the Delta Hotel on Friday, EDC chief economist Peter Hall said he has been following the progression of the Lower Churchill Project for 20 years, calling the current period “gratifying.”
“It’s clear that we live on a very energy-hungry continent and cleaner sources of energy are fundamental to that. Now we’ve just lived through 5 1/2, six — some say seven or eight years — of economic stagnation, and so the draw on these sources has not been quite as intense as it was in the years leading up to 2008,” he said. “So with the economic cycle being rejuvenated at the moment, I think it’s very prescient for those who are interested in projects like this to be reinvigorating them.”
The EDC is welcoming calls from representatives for companies who are anywhere in the supply chain who are looking for or have a tie-in to the Muskrat Falls project and are interested in learning more about the agency’s work.
The main contact in Newfoundland and Labrador is Patrick Murphy. He can be reached at: 709-772-8808.