Nfld. & Labrador

Liberals put Nalcor on notice, and on edge, with broadside in budget

Cathy Bennett used to chair Nalcor's board of directors and publicly campaigned for Muskrat Falls. Now she's fired a broadside at the organization she once helped lead, over the project she once championed.
Finance Minister Cathy Bennett had sharp words for Nalcor in her first budget. (CBC)

Cathy Bennett is a former chair of the Nalcor board of directors and one of the founders of a grassroots organization that publicly campaigned for Muskrat Falls.

But in her first budget speech on Thursday, the finance minister fired a broadside at the organization she once helped lead, over its handling of the project she once championed.

"As the province's energy corporation, Nalcor belongs to every citizen of Newfoundland and Labrador," Bennett said in the House of Assembly.

"And since its creation in 2007, taxpayers have invested over $2.25 billion yet have received no dividends. For all corporations and their shareholders, this would be unacceptable."

Those words ricocheted through the corridors and offices of 500 Columbus Drive.

The former Progressive Conservative government celebrated Nalcor as the Crown jewel of the public sector.

Now, the Liberal finance minister was slamming it for substandard project management, poor financial performance and unacceptably high compensation packages that would have to be brought "more in line with similar positions in other public sector bodies."

Leadership put on notice

Bennett has effectively put the senior leadership of Nalcor on notice that their jobs may be on the line.

Cathy Bennett stopped short of giving Nalcor CEO Ed Martin an endorsement when she met with reporters on Thursday. (CBC)

At a bare minimum, the provincial government isn't going to defend the often-criticized Crown corporation any longer.

Nalcor CEO Ed Martin and his team enjoyed the full confidence of premiers Williams, Dunderdale, Marshall and Davis.

But when I asked Bennett on Thursday if she still had confidence in Martin, she gave a long answer that didn't lead to yes.

"I have confidence in our government to make sure that we make the right decisions, and certainly we've been working with Mr. Martin," Bennett said.

"But I'm not going to have a conversation here about the executive management team at Nalcor."

Premier Dwight Ball was just as ambiguous after a Friday speech to sell the budget.

"Well, the confidence in Ed Martin will be a decision that we will make as a government," Ball said.

Frustration is obvious

It's clear the government is frustrated with Nalcor's heavy financial requirements — especially in an era of record deficits and massive tax hikes. Martin responded to the budget speech criticism with a statement promising that Nalcor would cut costs.

"Nalcor understands the fiscal reality of the province and the concerns of the people. Since January, we have been working closely with government to ensure a continued focus on cost reduction initiatives," Martin said.

"Through the Government Renewal Initiative, we identified $6.7 million in operating cost savings for 2016. Like all agencies, boards and commissions, we will continue to work with government to find additional savings."

As for Muskrat Falls, Martin said that the management of the project "is a critical and ongoing activity. We will continue to work with government to ensure the effective management of this important project."

One top Nalcor official says it was "a given" in the organization that the Liberals would eventually replace the board of directors.

But now there are open questions as to whether they might clean house in the executive offices, to change the face of the energy corporation, and — given Bennett's comments about compensation — replace them with cheaper hires.

Over budget, behind schedule

It's not a stretch, especially given the recent series of critiques Nalcor has faced for its handling of Muskrat Falls. The EY report showed that the project was (again) over budget and behind schedule. But it also outlined a series of project management problems that has the new government promising change.

The new Liberal government maintains that the public is not getting an appropriate return from Crown-owned Nalcor Energy. (CBC)

"There is a need to strengthen project governance and reporting to provide more effective oversight and constructive challenge to project performance and execution, key decisions and forecasting," the report said.

Then there was Bennett's budget speech, in which she seemed to begrudge the $1.3 billion the government had to give Nalcor this year to help pay for Muskrat Falls and equity stakes in offshore oil projects.

Bennett promised to do everything possible to get the project back on track. But she said killing Muskrat Falls wasn't an option.

"The financial risks of cancelling that project right now are so enormous that now we're stuck in a situation where we have to make strong decisions about how we're going to manage things," Bennett told reporters.

Natural Resources Minister Siobhan Coady said much the same thing when she released the EY report. Things aren't going well at the project but the window of opportunity to scrap it or mothball it has passed.

"Because of the numbers of contracts that are involved, because of our obligations under the loan guarantee, because of our obligations to Nova Scotia, it's not in the province's best interest [to cancel the project]," Coady said.

So the Liberals are prepared to see Muskrat Falls to conclusion.

Their patience for the people who have been running the project may be more limited.


David Cochrane is a senior reporter in CBC's Parliamentary bureau. He previously wrote for CBC Newfoundland and Labrador.