Muskrat Falls costs jump by $800M

James
James McLeod
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CEO assures people it’s still the cheapest option

The costs for the Muskrat Falls project are now projected to be around $800 million higher than previously forecast, but Nalcor CEO Ed Martin said he’s comfortable with how the project is proceeding.

Nalcor CEO Ed Martin says although costs of the Muskrat Falls hydroelectric project have increased by $800 million, it’s still the lowest cost option.  — Photo by James McLeod/The Telegram

The long-awaited cost update for the Muskrat Falls project revealed that the total cost of the project is estimated to be $6.99 billion — not including the $1.5-billion Maritime Link being built by Nova Scotia utility Emera.

But Martin assured people that the project is still substantially cheaper than the other options Nalcor studied before sanctioning the megaproject, and he said the project is on schedule to be completed in 2017.

For months, journalists, opposition politicians and members of the public have been pushing for fresh information on Muskrat Falls costs, and Nalcor has refused to give any information because Martin said he wanted to award all major contracts before revealing the updated cost forecast.

At this point, Martin said 90 per cent of the project contracts have been awarded, and 98 per cent of the engineering on the project has been done.

Work is well underway in Labrador. More than 1,800 people are employed on the project.

But the cost increases will be partially offset, Martin said, by better than anticipated rates for project financing, which will save around $300 million on borrowing costs.

When the current plan to develop Muskrat Falls was unveiled in late 2010, the cost forecast for the Newfoundland and Labrador portion was $5 billion. As of today, the forecast costs have increased by nearly 40 per cent.

But Natural Resources Minister Derrick Dalley said that people should only look back to 2012 when the project was sanctioned by the government — not two years earlier when the Muskrat Falls deal was first announced by the Progressive Conservative government as the preferred option to meet Newfoundland and Labrador energy needs.

“The decision around Muskrat Falls was made at sanction,” Dalley said. “I mean, we could go back to 2002 when efforts were made to develop Muskrat Falls, and if we’d gone from that number to now, it’s even greater (cost increase.)”

Premier Tom Marshall said that he can’t say with any certainty that this is the last of the cost overruns, either. He said we’ll only have an absolutely firm picture in 2017 when power starts to flow.

But Martin said that the contracts which have been signed so far are unit-cost contracts or fixed rate agreements, so they won’t suffer overruns.

“I believe that we have narrowed down the risk of additional cost increases very, very, very significantly,” he said. “We’ve reduced our risk of cost increase significantly, just because of where we are in the project. And now we turn our attention squarely and clearly to project execution.”

 

jmcleod@thetelegram.com

Twitter: TelegramJames

Geographic location: Muskrat Falls, Newfoundland and Labrador, Nova Scotia

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Recent comments

  • a business man
    July 03, 2014 - 13:18

    This is great news for me! I have said from the beginning that I support MF because I am a residential landlord and MF will make the home ownership unaffordable. I want home ownership to be unaffordable because that means more people will have to rent. In turn, that will cause the price of rental housing to increase, and that will increase the balance in my bank account. So I welcome these cost overruns, and cannot wait for the next announcement of added MF expenses.

  • Terry Walsh
    June 28, 2014 - 05:42

    When they first claimed that this project would cost $6.2 billion dollars I wrote, and said if this project came in under $12 Billion dollars it would be a first for any major development to come in on budget, where are we now or

  • Scott
    June 27, 2014 - 16:16

    Henry, you joker, Only thing Dwight is going to do, Is take any extra money and put its on the MHA's unfunded pension plan, to make sure his friends, won't go with out,

    • Henry
      July 01, 2014 - 19:21

      Scott I don't know what to say. You appear hurt for some reason..

  • Tony
    June 27, 2014 - 11:29

    The people of NL have one person to thank for this. Mr. Danny Williams. Muskrat was his baby and the plan was set and written up as he stepped down and walked away from signing it. He left that up to his sidekick Dunderdale to do so she would take the wrap for its failure. As far as wealth, NL should not be a Have province, it is that far in debt it surpasses any of the other have not provinces in Canada and has one of the smallest populations yet holds strong on the title of highest unemployment rates.

  • The Electorate of Newfoundland and Labrador must demand an Anti Corruption Commission to be set up to oversee the Muskrat Falls Project.
    June 27, 2014 - 10:27

    If our ruling government was thinking correctly and honestly it would strike up and "Anti-Corruption" Commission to oversee the large projects that are on-going in our province at the moment, especially the Muskrat Falls Project, since the principal Engineering Company overseeing that project is forbidden from operating in many countries of the world, including its own province Quebec. Quebec's Anti Corruption Squad has uncovered Hundreds f Millions of dollars worth of kick backs perpetrated by the company I am referring to in this comment.

  • Henry
    June 27, 2014 - 09:28

    800m cost over run and project barely started. I don't know why Mr. Martin is comfortable when I am not. Mr. Marshall states he can't guarantee their won't be additional cost over runs. Cheez, our electrical bills will clearly be higher because of this project. The government states that the project will pay huge profits to the treasury, I hope they take some of those profits and pay down some of those elect. Increases...

  • Scott R
    June 27, 2014 - 09:23

    Where is this " Great White Hope " known has Ball. He must be gone into hiding, hoping this will just " Fade " away. Or his he out "Promoting " his one liner. ( Elects Me Then Find Out ).

    • Henry
      June 27, 2014 - 12:14

      Scott. Mr Ball can't stop this project even if he wanted too. Its started, millions have been spent, contracts are inked however with respect to cost overruns and significant increases in our elect. bills in 2017 Mr. Ball is on record as stating that Muskrat Falls profits will first be used to off set the cost overrun increases on elect bills when it arrives. At least he trying to reduce burden on private citizens which is the right thing to do. The PC 's promise nothing but burden on citizens to pay for cost overruns. Premier Tom Marshall won't even consider this as a option when he speaks of huge profits accruing because of this project. Scott ask the premier why he won't off set cost overrun increases and subsequent charge to elect bills with some of the huge profits thus not impacting private citizens at all. Progressive Conservative greed I suspect... And the attitude of "Let the public eat cake"

  • Ken Collis
    June 27, 2014 - 09:19

    “I believe that we have narrowed down the risk of additional cost increases very, very, very significantly,” he said. “We’ve reduced our risk of cost increase significantly, just because of where we are in the project. And now we turn our attention squarely and clearly to project execution.” .... We don't believe that you actually believe what you profess to believe. I feel very, very, very strong on this opinion.

  • Duffy
    June 27, 2014 - 08:18

    These are the same "so-called professionals" that gave us 3rd world electricity last year and were and are still supported by Ministers like Daley - remember “this is not a crisis just a little inconvenience” BS. BUT in the end it will not matter when Newfoundland is declared Bankrupt by 2020 and fails to pay its bills. Rest assured we will be a poor and “bailed out” province again in the future as our present wealth is squandered – like a kid with a quarter in his pocket he must spend. We need a real change in government and bosses at Nalcor and NL Power fired – but there will be no change in the future just the same old patronage from each party. Wonder why there are "Newfy" jokes ?

  • Charles Murphy
    June 27, 2014 - 05:46

    So many cold nights , and hungry days, been bought upon our people, for no reason.