Nalcor Energy chief financial officer (CFO) Derrick Sturge says he knew something was happening with the Muskrat Falls project in the summer of 2013, that CEO Ed Martin (now former CEO) and the project team were “having discussions” about project costs.
On Wednesday, Sturge testified at the Muskrat Falls Inquiry that he and his finance team — separate from the project team — were asking for an update over that summer, into the fall, and long before early November, when they learned the project was at a $6.5-billion estimate, up from the $6.2-billion estimate known to politicians and the public.
Financial close including the province, Government of Canada and financial institutions came before that month was out, using the $6.5-billion estimate. It’s when the province locked in to the hydroelectric megaproject.
Sturge testified an independent engineer’s report mentioning $6.5 billion “never resonated.” He later said he may not have read the drafts of the report.
He said he did not know about the even-higher, $7-billion “final forecast cost” (i.e. not board-approved) estimate being kicked around by the Nalcor project team, back in July 2013.
Inquiry co-counsel Barry Learmonth asked the CFO why he wouldn’t have been told about the project team’s projection.
“I can’t give you an answer,” the CFO said in response.
Speculating, Sturge suggested there might have been discussions ongoing affecting that estimate.
But shouldn’t he have known clearly, sooner where costs were heading, Learmonth asked.
“I think it would have been reasonable. And we were seeking to get an update at that point,” he said.
The “we” includes project finance lead Jim Meaney, who testified at the Inquiry last week, into Monday.
Sturge pinned his formal update at Nov. 6, saying he was “very frustrated” by that point.
Reporting, he said, was controlled by Martin (as CEO) and Nalcor project lead Gilbert Bennett.
On seeking information, Sturge said, “There was not much any of us could do to get the number if they weren’t ready to give it to us.”
Sturge added that he believes information would be passed on, “if it was ready.”
Learmonth pressed Sturge on why he didn’t push harder to get a costing earlier in 2013.
He asked why he didn’t demand information and, if needed, take the step of reporting to the board of directors or to the provincial government his dissatisfaction.
“There’s still norms about the way the organization operates,” Sturge said.
“I just would never have thought that that would be something I would bring to the board,” he added.
“That’d be pretty serious stuff.”
Before financial close, provincial Finance and then-minister Tom Marshall was also looking for more information. Marshall wanted a sense of any changes from the cost at sanctioning, broken down into the different project components — powerhouse, transmission line, etc. A request for information was sent on behalf of the minister (by Paul Myrden in the Finance department) to multiple individuals within Nalcor, including Sturge. That was Oct. 18, 2013. It was forwarded by Sturge that day to Ed Martin.
But by Nov. 1, Martin was sending an email to Sturge, asking for the minister to be updated as, Martin wrote, “he is asking.”
“I think given what we knew at that point we did the best we could do to provide the data that was available,” Sturge said of the update later relayed.
Sturge had no direct conversations with Marshall. He didn’t tell him about his expectation of a change in cost. He didn’t contact the minister to update him after firming up the $6.5-billion estimate days later.
People within Finance, including Myrden, would have known about the change before agreements were signed in November 2013, Sturge said. And any communication would have required Martin’s sign-off, he said.
Learmonth asked him if he agreed there was deception or deceit in communications, including to the Nalcor board of directors.
“I just don’t like using strong words like that,” he said.
There is no reference to the $6.5-billion cost estimate in the minutes from the Nalcor Energy board of directors' meetings as late as Nov. 14 and Nov. 15, 2013.
Asked if the board was ever informed before financial close, “I can’t be certain. I really can’t,” Sturge testified.