Muskrat Falls payment due in December
A $200-million question remains unanswered for Newfoundland and Labrador as the first payment for the Muskrat Falls project is due on Dec. 1.
Earlier this week, Nalcor CEO Stan Marshall gave an initial update on the cost and schedule of the Muskrat Falls project in light of delays related to the COVID-19 pandemic. Marshall says early estimates indicate up to $400 million added to the cost of the project, with at least a four-month delay in the schedule.
The first payment of $200 million is due on the $7.9-billion loan guarantees issued to the province to finance the project and cannot be moved, even with the COVID-19 pandemic and plummeting oil prices playing havoc with the province’s financial position.
In February, the provincial and federal governments announced negotiations were underway to mitigate the effect of the project on the electricity bills in the province.
Finance Minister Tom Osborne says the $200 million initial payment is part of the ongoing negotiations.
“We are all motivated to find a solution that works for everyone, and teams are going through the required financial, legal, legislative and regulatory changes. The delays identified by Mr. Marshall have no impact on the timing of first payment — these are fixed payments that cannot be moved,” Osborne said in a statement.
“The work with the federal government will be completed before the project is commissioned. The figures that Mr. Marshall presented this week, as well as any other issues that arise between now and commissioning, will factor into these ongoing discussions.”
In a statement, the federal Department of Finance says the negotiations announced on Feb. 10 include some deferrals of payments in the short term.
“As part of this announcement, Canada also indicated it would allow Nalcor and its subsidiaries to defer making certain payments through to the end of 2021 and would also waive the requirement for Nalcor to prefund potential cost overruns on the projects. These allowances will reduce some of the projects’ expected payments in the near term,” reads the statement.
“Both governments continue to work to be in a position to reach and implement an agreement by the time of the project’s commissioning.”
DBRS Morningstar, one of the credit rating agencies for the province, issued a statement on Friday acknowledging the cost and schedule changes, noting the loan guarantees have a Triple-a rating.
“Nalcor is now preparing to gradually resume construction and commissioning at the end of the month,” reads a release from the agency.
“However, Nalcor estimates that completion will be delayed at least four months, and depending on the size of the workforce and level of productivity achieved in the coming months under the new health guidelines, final completion could be delayed an additional two to six months. Nalcor also predicts additional cost overruns associated with the delay.”