$1.3M in daily interest: Why further Muskrat Falls delays matter
New schedule sets overall completion date for Muskrat Falls at end of March
Lingering uncertainty continues over when the troubled Muskrat Falls project will be finished, but one thing is certain: every day the project is delayed, the costs continue to go up.
Newfoundland and Labrador Hydro has confirmed that the bill for interest and other financing charges on the billions it has borrowed to construct the generating station and transmission lines is $1 million per day.
In addition, the provincial Department of Finance has revealed that it is being hit with $300,000 in daily interest charges for the money taxpayers have poured into the project.
It's sobering news for a project that is already more than $6 billion over budget, years behind schedule, and has forced the federal government to offer up billions in support to prevent electricity rates from doubling when the project is finally commissioned.
The issue of financing charges is significant because the overall completion date has once again suffered a setback.
N.L. Hydro confirmed in October that the Nov. 26 finish date is not achievable, largely because GE Grid Solutions is struggling to perfect the software used to operate the 1,100-kilometre high-voltage direct-current transmission line from Labrador to Newfoundland's Avalon Peninsula, known as the Labrador-Island Link.
In an update to the province's utility regulator last week, N.L. Hydro set a new completion target of late March, which could add 125 days to the schedule if the project is not commissioned until March 31.
N.L. Hydro officials continue to assess the financial impact of the Labrador-Island Link delays, say a spokesperson.
N.L. Hydro president and CEO Jennifer Williams has acknowledged delays will likely drive up the final forecast cost of the project, currently pegged at $13.1 billion, but said last month, "I don't expect it to be material."
In a followup statement, Hydro officials said all costs anticipated to be paid to GE, and the cost of maintaining a "skeleton project team" into 2022, "are contained in the current estimate."
There's also a contingency allowance. "Any potential increase in the total project cost estimate would result if there are costs that fall outside of that contingency, primarily the interest payments referenced," said the statement.
The extra financing costs "will be recovered over the life of the asset through electricity rates," the Hydro official wrote.
Muskrat Falls is a Nalcor-led hydro generation and transmission project sanctioned in 2012 at a cost of $7.4 billion, featuring an 824-megawatt generating station on the Lower Churchill River, and the Labrador-Island Link.
In addition, Emera has constructed the Maritime Link between Newfoundland and Nova Scotia, with a capacity of 500 megawatts and a 35-year guarantee of 20 per cent of the energy from Muskrat Falls.
But the Muskrat Falls project has been plagued by delays and controversy, and was the subject of a commission of inquiry that labelled it a misguided project.
In June, the provincial government announced that Nalcor was being swallowed up by N.L. Hydro, with a new, leaner executive team announced last week.
As a public project, the provincial government has committed to funding any cost overruns, and so far has invested $4.4 billion, with $3.5 billion of that borrowed, according to the Finance Department.
In addition, Nalcor has financed the project through $7.9 billion in borrowing that's been guaranteed by the federal government.
Meanwhile, Hydro's update to the PUB last week exposed a growing level of frustration with GE.
With the Nov. 26 completion date no longer achievable, GE set a new date of Dec. 31 for commissioning of the control and protection software. But Hydro expressed a lack of confidence in that schedule, writing that it considers GE's schedule to be optimistic "based on their performance to date," and that March is a more reasonable timeframe.