N.L. credit rating holds its own, but Nalcor debt troubles bond rating agencies

The latest numbers are in from Moody's and Standard & Poor’s about Newfoundland and Labrador’s fiscal situation.

Nalcor's Muskrat Falls folly now responsible for over one-third of provincial debt

Finance Minister Tom Osborne says Muskrat Falls spending is now under control. (Nalcor Energy)

The latest reviews are in from credit rating agencies about Newfoundland and Labrador's fiscal situation.

According to Finance Minister Tom Osborne, the province has maintained its credit rating from last year.

"Standard & Poor's have indicated that it's an A long-term and A1 in the short term with stable outlook, and Moody's have continued with an AA3 with a negative outlook in the short term," Osborne told CBC Radio's St. John's Morning Show.

This means the province is capable of meeting its financial commitments, but is vulnerable to a negative downturn in the numbers.

Osborne said both bond rating agencies have shown that the Newfoundland and Labrador government is performing well by their standards, but there's one smudge on the province's otherwise clean report: Muskrat Falls.

"Prior to Muskrat Falls being sanctioned, Nalcor's direct and indirect debt on this province was zero. In fact, they had money in the bank," he said.

Finance Minister Tom Osborne says Newfoundland and Labrador is about to turn the corner on financial woes. (Jonny Hodder/CBC)

"As a result of Muskrat Falls, they're responsible for 35.6 per cent of the province's direct and indirect debt.… Moody's have clearly indicated that the downward pressure on the rating is Nalcor."

Things could have been worse again with the Muskrat Falls project. Osborne said Stan Marshall brought stability to the hydroelectric project when he was brought in to replace former CEO Ed Martin.

"[Marshal] has taken a project that was grossly mismanaged and brought stability to that project, a project that was grossly over budget, and stabilized the budget on that project," Osborne said.

The province was supposed to only invest only half of what it eventually did, receive a full return in eight years, stabilize rates and make billions in profit.

"We know none of those things are accurate at this particular stage. But we have the project, we will manage it to the best of our ability and we will get beyond that," said Osborne.

Province nearly collapsed

Despite the current fiscal situation under the Liberals, Newfoundland and Labrador was in far worse shape before the last provincial election, according to Osborne.

So bad, said Osborne, that the premier ordered an emergency release of treasury bills to raise money — otherwise the province would not have been able to make payroll.

"It's unbelievable. It's inconceivable to think that a province in Canada would not be able to make payroll," Osborne said.

"But that was the case in December of 2015 … So yes, we inherited a fiscal mess, but we're dealing with the cards we've been dealt. I think we're doing a great job of dealing with that."

Osborne noted the provincial deficit is showing signs of shrinking.

"We've reduced the deficit by $2 billion, to less than $700 million this year, and it'll come in lower than that if oil stays above what we projected.

"The dire fiscal situation the province was in is fresh in people's memories, but things are continuously getting better. Every budget it gets better."

Read more articles from CBC Newfoundland and Labrador

With files from the St. John's Morning Show