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Loan guarantee was essential, Kathy Dunderdale tells Muskrat Falls Inquiry in St. John's

Former premier Kathy Dunderdale on the stand for a second day Tuesday at the Muskrat Falls Inquiry in St. John’s.
Former premier Kathy Dunderdale on the stand for a second day Tuesday at the Muskrat Falls Inquiry in St. John’s. - Joe Gibbons

Former premier testifies she never expected problems to arise

Former premier Kathy Dunderdale says she never would have backed sanctioning of the Muskrat Falls hydroelectric project without a loan guarantee from the federal government.

But on the stand at the Muskrat Falls Inquiry on Tuesday in St. John’s, she also described hearing — only after sanctioning in December 2012 — that the loan guarantee she believed was in place and a sure thing was not a sure thing.

There were conditions tied to the agreement on the loan guarantee, signed by then-prime minister Stephen Harper in November 2012. Dunderdale testified she had been led to believe there was nothing that would have caused the deal to fall apart, but something on the Nova Scotia side was flagged.

“We had just done sanction and here we are and this issue is not resolved,” she said.

She recalled the loan guarantee was a significant problem and that 2013 was a “very stressful” time.

“There was nothing to prepare me for that piece of information,” she said about hearing the guarantee might be lost.

As announced, it was expected to save about $1 billion in borrowing costs for the Muskrat Falls and Maritime Link projects, guaranteeing 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 ($6.2 billion estimated for the Muskrat Falls project and $1.3 billion to $1.5 billion for the Maritime Link).

It had all been pitched and bought into on the federal side as support for a regional power project. Without Nova Scotia and the Maritime Link project, there was no guarantee to help Muskrat Falls financing, driving up the burden on ratepayers.

The issue was settled, Dunderdale said.

But Commissioner Richard LeBlanc interjected during the day’s questioning to ask how she and her government were satisfied at all that the loan guarantee was really in place at sanctioning, when it required approval for the Maritime Link from the Nova Scotia Utilities and Review Board (UARB), the utility regulator in that province.

Dunderdale offered a long response, with little clarity.

“It was a commitment, as I understand it and as I recall now, because I haven’t turned my mind to this in five years, commissioner, not for five minutes,” she said.

“To the best of my recollection, it was a commitment that had been made by Emera around how it was going to meet its conditions precedent, or, there was some piece of work around that,” she said.

Further issues did arise at the Nova Scotia Utilities and Review Board, with its far more open process compared to the either-or review at the Newfoundland and Labrador Public Utilities Board.

In June 2013, The Telegram reported both Emera and the Government of Newfoundland and Labrador were saying their megaprojects could proceed regardless.

"What we said at the (UARB) hearing is that if the Nova Scotia UARB does not approve the Maritime Link we would take this to understand that Nova Scotians don't want the energy," Emera’s spokeswoman Sasha Irving stated in response to questions at the time.

"As per the sanction agreement, we and Nalcor are committed to the link, but if not approved by (the regulator), we and Nalcor are committed to finding a way forward," she stated in an email.

In November 2013, the UARB issued its approval for the Maritime Link to proceed. With construction completed, the link was tested in December 2017, having come in at a cost of about $1.6 billion.

In November 2016, facing billions in cost overruns on the Muskrat Falls project, the Liberal government in Newfoundland and Labrador announced an agreement for a second loan guarantee from the federal government, covering up to an additional $2.9 billion in Muskrat Falls debt.

Dunderdale is now into cross-examination and she continues on the stand at the inquiry Wednesday.

The Muskrat Falls Inquiry

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