Canada waives $844m payment due on Muskrat Falls project

OTTAWA — Canada on Thursday temporarily waived an $844 million debt payment for the construction of Newfoundland and Labrador's Muskrat Falls hydroelectric power plant, bailing out a troubled project in a province already laden with debt.

Since the announcement of the project in 2010, Canada has guaranteed a total of $7.9 billion in debt for the project, which has faced major cost overruns and now represents a large portion of the remote and sparsely-populated Atlantic province's overall debt.

BMO Capital Markets estimates Newfoundland's net debt as a share of gross domestic product will rise to 55.6 per cent in 2020-21 from 42.1 per cent in 2019-20, the highest among the 10 provinces.

The next highest is Ontario, estimated at 47.0 per cent for 2020-21. Canada's federal and provincial debt loads have increased notably during the COVID-19 pandemic.

"The federal government has agreed to provide temporary debt relief to reduce immediate financial pressure on

Newfoundland and Labrador," Prime Minister Justin Trudeau said in comments streamed on Twitter.

"This is important progress but there's more to be done."

Newfoundland and Labrador's former premier Dwight Ball once characterized the Muskrat Falls project as the greatest economic mistake in the province's history.

On Thursday, Andrew

Furey, the current premier, said negotiations to restructure the power plant's debt would now "begin in earnest."

To complete the restructuring, the federal government on Thursday also appointed its own adviser.

The final restructuring agreement "may include federal participation in the capital structure, equity and debt profile" of the project, Furey said.