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.
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.”