ST. JOHN'S, N.L. — Premier Dwight Ball says the celebration of his 2015 election victory was short-lived, because the province had money problems.
Testifying at the Muskrat Falls Inquiry on Thursday, he described the Liberal government stepping into a financial challenge after being elected Nov. 30, 2015.
“Very early, from the Department of Finance, I learned that there would have been a requirement to get some $400 million for December. We needed to borrow that, so that was something that needed to be done swiftly,” he said.
In a refrain familiar from the 2015 election, Ball said there had been no mid-year financial update under the former government.
In the Progressive Conservatives’ last budget, a deficit was projected to be $1.1 billion for the year 2015-16.
When the Liberals took over, Ball said, it looked more like $1.9 billion.
“And if nothing was done going into budget 2016-17, the deficit (projection) would be $2.7 billion. So, you see where I’m coming from,” he said to inquiry co-counsel Barry Learmonth.
Negotiations were coming for collective agreements for the public service at the time. And all of that is before yet another problem with the budget on the Muskrat Falls project.
A project update in September 2015 increased the estimated capital cost to $7.65 billion, but without covering a significant, standing issue with Astaldi Canada. It was determined the company could not finish its work with the money it had. The suggestion was hundreds of millions of dollars – beyond anything in the project budget – could be needed for Astaldi to complete the job.
Ball testified it was something he may have heard about in the fall of 2015. However, he testified he didn’t have a dollar figure on what might be needed. The estimate shared with him, for what it might take to resolve the Astaldi problem, started at about $200 million.
“This took me by surprise,” he said.
The estimate grew to $650 million, then more, over the first few months of 2016.
The new premier already believed the Muskrat Falls project was not the best option for meeting provincial power needs. But he said he quickly determined it was too late to stop the project.
So what to do with Astaldi?
Former Nalcor Energy president and CEO Ed Martin has testified he was at the negotiating table at one point, when he was called away by Ball. Ball did not recall ordering Martin away from the table.
“I’m not aware of any phone call that would have been given to Mr. Martin. I would question, however, if he was in negotiating without a mandate,” Ball said when asked about the incident.
“He would have been, because he didn’t have a mandate,” Learmonth replied.
“That’s right,” Ball said.
In March 2016, during what Natural Resources Minister Siobhan Coady described as a “sensitive time,” the Italian ambassador to Canada came to St. John’s. He met with Coady at the Natural Resources Building in St. John’s, wanting to talk about the importance of the Muskrat Falls project to Astaldi, based in Rome.
The premier testified he also met with the ambassador, separately, at his office.
“And he did remind me, too, about how important this contract was,” he said.
Ball said he also encountered the ambassador “a few days after” at a hotel in Toronto. The premier was in the lobby there with one of his staff members.
“I found, given the time of day, it was probably not coincidental,” Ball said of the meeting.
He said the ambassador did not have any effect on final decisions on the Astaldi contract.
The premier had made it clear he didn’t want to have just Martin at the negotiating table with Astaldi. He wanted consultants EY involved (although the added presence wasn’t something Ball insisted on after Martin left Nalcor in April 2016 and new president and CEO Stan Marshall took over at Nalcor).
Martin left the Crown corporation, challenged by trust issues with the new government and a lack of public expressions of confidence in Nalcor Energy’s leadership, including in then-Finance Minister Cathy Bennett’s budget speech.
“I would think those comments (in the budget speech) would have been pretty mild given the impact (the project) was having on the province. So I think it was a little overly sensitive given the state of the affairs within the province and in Nalcor,” Ball said Thursday.
He said he didn’t celebrate Martin’s departure, but also could not be “a cheerleader.”
He said the government continues to work on how to keep island power rates down to 13.5 cents per kilowatt hour, given the capital cost of the project, now at $10.1 billion ($12.7 billion when interest costs are included). The government has also committed to a return to budget surplus by 2022.
The premier continues on the stand Friday.
Twitter: @TeleFitz
RELATED
Coming up
Premier Dwight Ball is the last witness for the current phase of the public inquiry, reviewing the period of the project’s construction. The next and final phase is scheduled for July 16-26 and will review several topics through expert reports and invited witnesses. Topics include the financial effects of the project on the province, managing large-scale projects, the role of the public service, energy regulation, and preparations for 2041 renegotiating the contract governing Churchill Falls power.
There will also be two open public consultation sessions, to be facilitated by Memorial University of Newfoundland’s Harris Centre. The first session is scheduled for 7-9 p.m. at the Signal Hill campus in St. John’s on July 30. The second is 7-9 p.m. at the Lawrence O’Brien Arts Centre in Happy Valley-Goose Bay on Aug. 8. Anyone interested in offering in-person comments is asked to pre-register, or you can submit comments online. More information, including guidelines for submissions and the inquiry’s terms of reference, are available on the inquiry’s website.
