Allegations denied, says Nalcor after Muskrat Falls lawsuit by Austrian contractor

An Austrian company says the Muskrat Falls Corporation is forcing it to complete work on the Labrador megaproject on a compressed timeline and threatening to take actions that could “cause irreparable harm” to the firm.

Austrian company says contract was ‘unilaterally’ changed to compress timelines, restrict costs

A subsidiary of Nalcor Energy is being sued by a contractor on the Muskrat Falls hydro megaproject. (CBC)

The company hired to do a significant piece of work on the Muskrat Falls project is suing a subsidiary of Nalcor Energy, alleging a breach of contract, but a Nalcor vice president denies the allegations and says such disputes are common on large construction projects.

Andritz Hydro Canada Inc. — whose parent company is Austrian — says the Muskrat Falls Corporation is forcing it to complete its work on a compressed timeline and threatening to take actions that could "cause irreparable harm" to the company.

In court documents, Andritz alleges that delays by another contractor — the Italian firm Astaldi — contributed to project milestones being pushed back.

None of the claims have been tested in court, and Nalcor had not filed a statement of defence by Tuesday morning. Andritz did not return messages from CBC News. An Astaldi official also declined comment.

In a statement emailed Wednesday afternoon, the Nalcor vice-president in charge of the Lower Churchill project said it is "not uncommon" for disputes to arise between parties in large construction projects.

"Andritz Hydro Canada Inc. has submitted a statement of claim in response to a disagreement between Andritz and Muskrat Falls Corporation regarding a performance issue as it relates to their work on the Lower Churchill project," Gilbert Bennett noted.

"Muskrat Falls Corporation stands by the concerns it has raised and denies the allegations in the statement of claim and will respond to Andritz's claim through the legal process. Muskrat Falls Corporation and Andritz are currently working to resolve these issues and we anticipate they will be addressed to our mutual satisfaction in the near future." 

While the tangly matter to be heard at Newfoundland and Labrador Supreme Court involves complicated commercial arrangements, it also appears to shed more light on delays and problems at the megaproject.

$205-million contract

The legal dispute involves a $205-million contract awarded to Andritz Hydro in late 2013, to supply and install equipment for the Muskrat Falls powerhouse and spillway — in particular, mechanical gates.

In court documents, Andritz says it needed Astaldi to complete concrete foundations and other work before it could begin installing the gates.

"However, by the first half of 2014 it was obvious to Muskrat and Andritz that the civil works performed by Astaldi were delayed," the court filings note.

Those documents outline milestones being pushed back and other changes to the sequence of the work to be done.

When Andritz says it finally gained access to part of the site in November 2015, "it determined that Astaldi's civil works remained incomplete and, in certain cases, defective, contributing to further disruption and delay."

'Aggressive' and 'likely unattainable' timelines

Andritz says the Muskrat Falls Corporation "unilaterally" imposed new timelines for completion of work — timelines that were "aggressive and in Andritz's view, likely unattainable on Muskrat's stated budget."

It says the contract allowed a year to complete work on the gates, but that time frame was shortened by four to five months and shifted to "the much more difficult winter period."

The company says it was told it would receive an additional $3.4 million to cover costs of the "accelerated" schedule, to finish work by mid-June.

Nalcor Energy is developing Muskrat Falls. An update is expected next month on costs and timelines associated with the megaproject. (CBC)

Andritz said it informed the Nalcor subsidiary it would try its best to meet the new timeline.

But the company alleges that the Muskrat Falls Corporation issued a notice of default, and threatened to call in a $20.5-million letter of credit Andritz had to provide when it took on the work.

Andritz says that would cause "irreparable harm" to the company, and damage its reputation.

It wants a judge to declare the new schedule and price of the work invalid, and stop any action to go after the $20.5-million letter of credit.

The matter will be in court in June.

More delays, cost hikes possible

Muskrat Falls has been plagued by bad news this year.

Nalcor CEO Ed Martin departed from the energy corporation in April, a month after refusing to rule out more delays and cost hikes for the project.

First power at Muskrat Falls was originally expected in December 2017. Last fall, Nalcor pushed the project's projected start date into 2018.

Last month, Martin declined to comment on whether a 2018 start date was still part of the plan.

The share of expenses for Muskrat Falls that Newfoundland and Labrador ratepayers were initially expected to bear was $5 billion.

That number has since jumped three times, to $7.65 billion last fall.

An update is expected by the end of June.

About the Author

Rob Antle

CBC News

Rob Antle is producer for CBC's investigative unit in Newfoundland and Labrador.