If it wasn’t so tragic, you’d have to laugh.
Looking back this week at Telegram coverage tracking cost estimates for the Muskrat Falls hydroelectric project, I stumbled upon an article from August 2010 based on an interview with then Nalcor CEO Ed Martin, before the project was sanctioned: “Martin said the environmental panel asked for Nalcor to lay out a scenario proving the viability of the megaproject. The one chosen is on the conservative side of the scale. It would see a debt-equity ratio of 70-30, and a targeted rate of return on equity of 12 per cent. The construction cost of Gull Island and Muskrat Falls combined is tagged at $6.5 billion.”
That number — $6.5 billion — came up in the news often this week, but not in reference to the combined cost of Muskrat Falls and Gull Island.
Instead, it is what Muskrat Falls was expected to cost by the end of 2013, even though politicians of the day say they were told $6.2 billion.
The difference — almost a third of a billion dollars — is hardly small change.
In fact, as we heard at the public inquiry into Muskrat Falls this week, even back then, Nalcor’s project team was tossing around $7 billion as a possibility. Trouble is, they don’t seem to have let everyone in on that who might have benefited from knowing — including Nalcor’s chief financial officer.
Testimony at the inquiry has been troubling on many fronts, suggesting that battle lines — or at least barricades — existed between Nalcor employees and those at SNC-Lavalin.
SNC-Lavalin project director Normand Béchard testified there was a clear divide between people working on the project, with some at SNC-Lavalin feeling they were generally “treated like slaves” and that their expertise was disregarded.
It’s hard to get anywhere if people aren’t pulling in the same direction, particularly with a huge undertaking like Muskrat Falls.
Harder still if people are not only pulling in different directions, but working in silos, neglecting to share the information needed to keep people on the same path.
It turns out that members of Nalcor’s financial team knew by the time the project reached the point of no return — at financial close in November 2013 — that the cost had already shot up from $6.2 billion to $6.5 billion. Those key players have also acknowledged that information was not shared with the government.
Nalcor vice-president of finance Jim Meaney knew the cost estimate was pegged at $6.5 billion in November 2013, but both former premier Paul Davis and former natural resources minister Derrick Dalley have said they weren’t told that.
“I believe that we have narrowed down the risk of additional cost increases very, very, very significantly.” — Ed Martin, June 2014, when the Muskrat Falls price tag was $6.99 billion
Nalcor’s chief financial officer, Derrick Sturge, has acknowledged that then finance minister Tom Marshall asked for a project cost update in October 2013 and was given the figure of $6.2 billion in November. Sturge found out days later that the cost had jumped to $6.5 billion but didn’t bother to update Marshall.
Meaney said he knew by February 2014 that the cost would be even higher than that, but it wasn’t until June 2014 that the public found out — through CEO Martin — that the price had hit $6.99 billion, despite months of clamouring from the media, public and opposition politicians anxious for fresh information.
Martin downplayed concerns then, telling reporters that unit-cost contracts and fixed rate agreements were already in place, so there was no worry about further overruns.
“I believe that we have narrowed down the risk of additional cost increases very, very, very significantly," Martin said.
The price now hovers at $12.7 billion and we’re learning more about who knew precisely what and when — though of course there’s further inquiry testimony to come. It’s a little harder to discern at this point precisely what political or personal interests might have been at play that kept vital information from the people of the province.
But after what we’ve heard so far, there is one main, overarching question: just who, exactly, was putting the interests of the public first?
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