The Newfoundland and Labrador provincial government has released the terms of the federal loan guarantee for its Muskrat Falls hydroelectric megaproject.
Prime Minister Stephen Harper signed the agreement in Happy Valley-Goose Bay on Friday, along with Newfoundland and Labrador Premier Kathy Dunderdale and Nova Scotia Premier Darrell Dexter.
Provincial Natural Resources Minister Jerome Kennedy tabled the document in the house of assembly Tuesday.
Dunderdale said the agreement will significantly reduce the borrowing costs associated with the project, and will help lower electricity rates.
"We have a binding agreement between ourselves, the federal government, and Nova Scotia, that will bring a value of over $1 billion to the people of Newfoundland and Labrador," she said.
The opposition parties stated that the document is stronger than a simple term sheet.
The 19-page document outlines the terms and conditions for up to $6.3-billion worth of borrowing, and is a legally binding contract that will allow the provincial government to go to markets and arrange financing.
The last page of the loan agreement states that this agreement "shall be binding on the parties" and it is "irrevocable, legal, valid and binding obligation of the parties, enforceable in accordance with its terms."
There are four key points to this agreement:
- The debt will be booked at Canada's AAA credit rating – the best in the world.
- The agreement guarantees that any interest savings must be used to reduce electricity rates.
- The entire loan agreement is conditional on all parties sanctioning all aspects of the Muskrat Falls project.
- The debt is capped at $6.3-billion, and will not cover cost overruns.
The provincial government will be responsible for any extra costs, which has the opposition parties worried.
"So any cost overruns on this project, we'll be responsible for that," said provincial Liberal Leader Dwight Ball.
"And the ratepayers will have to pick up that tab."
Provincial NDP Leader Lorraine Michael is also concerned.
"The financing structure that everything is being based on right now is totally on the backs of the people of Newfoundland and Labrador. We're the ones who are carrying all the risk," she said.
PUB won't set rates
Kennedy also confirmed on Tuesday that the forthcoming Muskrat Falls enabling legislation will effectively remove the Public Utilities Board from setting rates for the hydro project.
"The Public Utilities Board will certainly not play any role in the setting of rates for Muskrat Falls," he said.
To qualify for the loan guarantee, the provincial government has to be able to pay the bill, and therefore the hydro project must guarantee a certain rate of return. It will be decided through legislation, and not the PUB.
"The legislation will outline how we are going to go about the setting of rates," Kennedy said.
"There won't be specific rates obviously outlined in the legislation."
The PUB won't come into play until the time comes to set costs for transmission.
Kennedy said the enabling legislation will be passed in the current session of the house, possibly as early as next week.
Dunderdale said a decision to sanction the Muskrat Falls project will be made before the end of December.