Ottawa offers temporary debt relief for N.L.’s troubled Muskrat Falls project

ST. JOHN’S, N.L. — Ottawa is giving Newfoundland and Labrador temporary relief from debt and financing payments for the troubled Muskrat Falls hydroelectric project and appointing a top bureaucrat to oversee the project’s financial restructuring. 

Prime Minister Justin Trudeau said Thursday by video conference his government will defer payments owed by Nalcor Energy, a province-owned corporation, as part of the federal government’s loan guarantee agreement for the project.

Newfoundland and Labrador Premier Andrew Furey said Trudeau’s decision will ease pressure on his province’s finances. “This means the province doesn’t have to borrow $844 million in payments, almost all of which would have been required this month and added to our debt,” Furey said during the call with the prime minister. 

Ottawa has also updated the terms of its financing agreement for the project, pushing the date by which Muskrat Falls must be fully commissioned by nine months, to Nov. 30, 2021.

Newfoundland and Labrador projected a $1.84-billion deficit in its latest budget and a net debt of roughly $16.4 billion. In a province of about 520,000 people, that works out to just over $31,000 per person. 

Without a significant change in the project’s financial situation, Nalcor’s latest projection shows the province’s electricity rates jumping to more than 23 cents per kilowatt hour in 2022. According to Newfoundland Power’s website, its current residential rate is 12.2 cents per kilowatt hour.

The Muskrat Falls project looms large over the province’s faltering finances. The project was sanctioned in 2012 at a cost of $7.4 billion, but the price tag had ballooned to $13.1 billion as of September. With full power delayed until September 2021, the project isn’t generating revenue from ratepayers and payments are coming due.

Ottawa guaranteed billions in loans to the Muskrat Falls project under certain conditions, including requiring the provincial government to make payments to special accounts dedicated to covering cost overruns and emergency debt servicing. Thursday’s announcement defers some of those required payments.

Trudeau said during Thursday’s video call that his government appointed Serge Dupont, former deputy clerk of the Privy Council, to oversee the financial restructuring of Muskrat Falls. “Our government is committed to working with Newfoundland and Labrador to ensure that the ongoing Muskrat Falls project remains on stable financial footing,” Trudeau said.

Dupont will work on the restructuring with Brendan Paddick, who leads of Newfoundland and Labrador’s rate-mitigation team. Furey assembled the rate-mitigation team in September, and Paddick stepped away from his role as Nalcor’s chair to lead the team.

This report by The Canadian Press was first published Dec. 17, 2020.

Sarah Smellie, The Canadian Press