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Astaldi rejected adviser’s advice about Muskrat Falls project

Mauro Palumbo at the Muskrat Falls Inquiry on Wednesday.
Mauro Palumbo at the Muskrat Falls Inquiry on Wednesday. - Joe Gibbons

Company was warned it could never meet milestones in contract

ST. JOHN'S, N.L. —

Astaldi Canada wanted the contract for the Muskrat Falls intake, powerhouse, spillway and transition dams — the company progressed through the bid process, and by Nov. 22, 2013 was looking at signing a contract with Nalcor Energy.

That’s when Ken Chryssolor told Astaldi not to sign on the dotted line.

It was a surprise, since he had been working with Astaldi for the specific purpose of helping land the contract and follow through in a project management role. Chryssolor was a Canadian construction manager, had worked with Aecon and had worked on Hydro-Québec projects.

And he believed Astaldi and Nalcor needed to revisit their timeline.

He wrote an email — now in evidence at the Muskrat Falls Inquiry — to Guido Venturini, the go-to contact for Astaldi, meant to land Astaldi’s bold launch into Canada.

The warning couldn’t have been more explicit. Chryssolor noted the contract was coming later than expected. There was already at least a four-month delay that he didn’t see factored in. The project was behind before it had started.

“I wish to inform you not to sign any agreement unless the milestone dates have been reviewed, revised and agreed by both parties,” Chryssolor wrote to Venturini, suggesting the company could refuse to sign in the coming days, or find a way to delay.

An aerial photo of the Muskrat Falls hydroelectric dam project in central Labrador (2018).
An aerial photo of the Muskrat Falls hydroelectric dam project in central Labrador (2018).

Chryssolor believed signing a deal as proposed would relinquish rights to an extension of time to cover delays to that point under the contract.

“Please inform your superiors of my serious concerns, as we will not be able to achieve under the present circumstances the milestone date for the powerhouse and intake.”

Venturini shared this widely, including with lawyer Mauro Palumbo, who was on the stand Wednesday at the Muskrat Falls Inquiry.

Apart from Astaldi’s view of the message, Palumbo was asked by Nalcor Energy lawyer Dan Simmons if the contractor had discussed Chryssolor’s views on the schedule with Nalcor.

Palumbo said there had been no need.

“There was no need to inform Nalcor. Nalcor was aware that the circumstances under which we, that we were facing, could affect the milestone,” Palumbo said.

The agreement for the powerhouse, intake, transition dams and spillway is dated Nov 29, 2013.

At a kickoff meeting for the work package, held at the Delta Hotel in St. John’s on Dec. 19, 2013, the significance of the project to Newfoundland and Labrador was clearly expressed by Nalcor project director Paul Harrington. Notes from an employee of Deloitte, working with Astaldi’s team, recorded details of that meeting.

“This project is the future of the province — carries a heavy burden,” read notes on Harrington’s comments.

At the time, Venturini said Astaldi was honoured to be selected. He noted the company had reason to want to finish the project as promised.

“If we are not successful, this will be a big problem for you, but Astaldi will disappear from North America. Astaldi is a shareholder company. Public company,” read notes on Venturini’s remarks.

At the Inquiry, Palumbo testified the relationship between Astaldi and Nalcor soured early.

For its part, Nalcor Energy’s project team was under no illusions that things were going well early on. In May 2014 — while the people of Newfoundland and Labrador had yet to be told of any increase in project price at financial close, and would be refused a detailed update on the cost and schedule to June — Nalcor Energy’s project team was trying to find common ground with Astaldi.

The interior of the Muskrat Falls hydroelectric dam powerhouse.
The interior of the Muskrat Falls hydroelectric dam powerhouse.

General project manager Ron Power wrote project director Paul Harrington to highlight Astaldi’s “failure to perform.”

“Astaldi are perceived as a joke on site,” Power wrote. “We have paid well in excess of $100,000,000 to Astaldi to date and have nothing to show for it.”

Power told Harrington he had prepared a new slide deck titled “Astaldi: The road to failure” and shared it with members of the project management team.

All of this was just under 4 ½ years before Astaldi was dismissed from the project by Nalcor.

Apart from previous testimony related to Astaldi’s work, an auditor’s report produced for the Inquiry noted the actual construction and company productivity improved over time. But the disputes between Nalcor and Astaldi management never subsided.

As an example of the lack of co-operation and communication, a 120-day work schedule for Astaldi was reviewed, revised and agreed to on Feb. 11, 2015. Before the week was out, Astaldi halted its work on the powerhouse altogether, refocusing in other areas.

“Contractor’s notice was most unexpected in light of the fact that contractor had just submitted a 120-day schedule which showed work was continuing in the powerhouse,” read the emailed response from Nalcor project manager Scott O’Brien.

There was tension over the failed construction of the integrated cover system, a sliding schedule and Nalcor Energy’s decision-makers splitting time between the Happy Valley-Goose Bay area and St. John’s, to name a few items. And despite efforts at recovery, problems continued and new problems — of finances — arose.

Astaldi was issued a notice of default in September 2018. The commercial disputes arising between Astaldi Canada and Nalcor Energy over the contract package have yet to be resolved.


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