It was a point that gets a bit into the weeds, but was a potentially important piece of testimony Thursday as Commissioner Richard LeBlanc begins to digest evidence on the original federal loan guarantee for the Muskrat Falls project.
On her final day on the stand at the Muskrat Falls Inquiry, former premier Kathy Dunderdale clarified her thinking in late 2012 relating to the federal loan guarantee. She spoke briefly about why she would have been OK with sanctioning the Muskrat Falls project.
Dunderdale has already told the inquiry she personally felt a loan guarantee was a requirement, in order for her to endorse pushing ahead with sanctioning.
The loan guarantee was made possible by the decision to pursue the separate-but-related Maritime Link transmission project, linking Newfoundland to Nova Scotia. As a regional power development, the collective construction then drew the federal support that significantly decreased overall project financing costs.
Dunderdale said she understood the loan guarantee depended on Emera in Nova Scotia sanctioning the Maritime Link, but that happened the same time Nalcor Energy and Newfoundland and Labrador were sanctioning the Muskrat Falls development.
And while the cost in Nova Scotia was to be reviewed by the Nova Scotia Utilities and Review Board (UARB), she said, the related agreements between Nalcor and Emera did not stipulate the UARB had to approve the cost be applied in full to ratepayers for the projects to go ahead.
“The UARB was going to determine what was going to be included in the rates for ratepayers in Nova Scotia. However, if there was a shortfall between what that was and what was required … then Emera would pick up the difference. And we understood that that satisfied the federal government and we both went to sanction thinking all the conditions precedent had been satisfied, that the sanction had satisfied the federal government,” Dunderdale said.
“I didn’t have a question in my mind when we sanctioned that this was a full, unconditional sanction by both Emera and Nova Scotia, and Newfoundland and Labrador and Nalcor,” she said.
In the documentation tied to the project’s sanctioning and the loan guarantee, there are provisions for different outcomes depending on the UARB determinations, including possible variations in the stated exact debt-to-equity ratio on the Maritime Link expected to be guaranteed.
Dunderdale said that given Emera sanctioned the project at the same time Newfoundland and Labrador sanctioned the Muskrat Falls project, on Dec. 17, 2012, and she did not see a problem arising. She said she knew there was still work until financial close, but she did not expect anything that could kill the loan guarantee.
It’s why she was surprised when she was later told the federal government had raised an issue, looking for UARB approval.
That approval was eventually secured.
The original loan guarantee was expected to save about $1 billion in borrowing costs for the Muskrat Falls and Maritime Link projects together, with backing of Canada’s AAA credit rating for up to $6.3-billion in borrowing on what was then a $7.5-billion to $7.7-billion collective total for the projects. The project’s eventual debt financing involved the largest infrastructure bond transaction ever completed in Canada.
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The Muskrat Falls Inquiry
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Federal loan guarantee
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