Federal loan guarantee, financing completed, Premier Kathy Dunderdale says

James McLeod
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Muskrat Falls hydroelectric project is a go

Premier Kathy Dunderdale announced that the federal loan guarantee is signed, sealed and delivered at a media event with plenty of pomp and hoopla in the lobby of Confederation Building this evening.

In addition to the loan guarantee, Dunderdale announced that the government has now gone to the market and secured the full $5 billion in financing to build Muskrat Falls.

Dunderdale said the province has borrowed the funds over 40 years at a blended rate at 3.8 per cent.

Nova Scotia Energy Minister Andrew Younger and federal minister Rob Moore were both on hand for the announcement, along with most of the provincial cabinet, public servants and other dignitaries.

Little cards placed on every seat in the lobby quoted Dunderdale saying that Muskrat Falls represents "one of the most bold, visionary and significant ventures, not only in our province's history, but in Canadian history."

The ceremony comes almost exactly one year after a nearly identical event where Dunderdale formally sanctioned the project.




Geographic location: Nova Scotia

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Recent comments

  • william
    December 11, 2013 - 07:52

    When will our power bills double after its build or before ?

  • Maggy Carter
    December 10, 2013 - 22:48

    Things which Ms. Dunderdale will not thought to have mentioned: 1. While the 40 year term is at the upper limit of what is possible in mega-project financing circles these days, that still leaves a quarter century for which replacement financing must be found. We won't know until then, of course, what the rollover rate will be at that time. Remember the days of 17% percent interest rates that crippled many homeowners refinancing their mortgages? 2. The premier's claim of savings in excess of one billion dollars - owing presumably to the federal loan guarantee - cannot be substantiated. To know that with any degree of confidence would require, at the minimum, that a separate, serious bidding process for $5 Billion in project debt would have had to take place at the same time - minus the loan guarantee. Even then, bidders would understand that this alternative scenario was merely for show and would therefore be inclined to accommodate NALCOR by overstating the value of the guarantee. Any economist worth his salt would also point out that when such artificial elements are brought into play, the monetary value of the guarantee is split in some incalculable fashion between borrower and lender. 3. How is the $5 Billion allocated? Can we assume that $1.5 Billion to $2.5 Billion of that amount (i.e. whatever the final cost of the Link), is principally a benefit to EMERA and Nova Scotia. That would leave as little as $2.5 Billion to be applied toward the preliminary estimate of NALCOR's project investment of $6.2 Billion. Under that -albeit theoretical scenario- less than 25% of NL's share of the project would be guaranteed by the feds. 4. Indeed the rate of 3.8% is generally what one would expect to see on any project of this scale in developed regions of the world. The current reality is that there is an enormous glut of investment capital in search of places to invest. Remember that the BOC prime rate is half of one percent - even lower in Europe. It is impossible to calculate the discount in lieu of a national guarantee (remember the federal guarantee only kicks in after the province fails to make good on the debt). 5. Finally, the elephant in the room - or in this case the Confed Bldg lobby - is the ultimate cost of the project. I would gladly offer to eat my had - if I had one - were this project to come in on budget. When one examines precedents - especially for public sector projects of this magnitude - it would be fair to conclude that the final price tag for the total project will fall somewhere between $10 Billion and $12 Billion. Can Ms. Dunderdale tell us now whether the chosen lenders have approved a contingency for the difference, and if so, whether the rate on loan principal in excess of $5 Billion will still be 3.8%? I think we all know the answer to that question. These and a great many other questions regarding this financing arrangement no doubt account for Ms. Dunderdale's decision to make her announcement immediately AFTER closing the House of Assembly. That should tell us volumes about her ability to provide answers. If she had answers, she would be more than willing to address these questions in the House - if only to embarrass her critics. When all is said and done, it might indeed turn out that this project is financially viable - that is to say, that the lenders will get their money back and the project will not go bankrupt. But what the public needs to understand is that financial viability and economic merit are not one and the same. If it proves financially viable it is only because the lowly ratepayer in THIS province is being saddled with all the risks and all the repayment obligations for the associated debt. If, in accordance with the final costs of the project and the many other imponderables, electricity rates need to be doubled, tripled or more in order to retire the debt and provide a profit to NALCOR - then so be it. Unlike Nova Scotia, there is no regulatory agency in this province empowered to step into to protect the ratepayer. And if in the end the ratepayer falters under the load and is unable to continue, then it will fall to the taxpayer to make up the difference. For the most part, of course, the ratepayer and the taxpayer are one and the same.

  • Tony Rockel
    December 10, 2013 - 21:27

    "Bold and visionary"? Brazen and short-sighted would be a better description of this appalling piece of fiscal banditry.

  • mike
    December 10, 2013 - 19:39

    when is the annnouncent that we will be paying less for power than nova scotia NEVER

  • Pauline
    December 10, 2013 - 17:52

    Kathy, I can't believe what you did to the people, How can you and the rest of your party sleep at nights,