More cost hikes, delays possible for Muskrat Falls

The Muskrat Falls megaproject could face even more delays and higher costs to complete, Nalcor Energy CEO Ed Martin says.

When asked by reporters Thursday afternoon if a 2018 start date was still part of the plan, Martin declined to comment.

"I'm not at liberty to say right now. Those things are under review," said Martin.

"And as usual, I have to say that our job is to make sure that we are balancing full transparency with the commercial needs of the project and the province.

"And until we complete some of our work upcoming, I will not be presenting that kind of update, because of the commercial considerations."

First power at Muskrat Falls was originally expected in December 2017. Last fall, Nalcor pushed the project's projected start date into 2018.

Powerhouse work 'fallen behind significantly'

Martin said work on transmission assets and the generation site are going "very well."

But other work is not.

"We do have an issue with the powerhouse that Astaldi is constructing," Martin said. "They have fallen behind significantly."

That lag will have "schedule implications," Martin acknowledged, "and with schedule implications, there will be some cost implications."

Last fall, Nalcor announced Muskrat Falls construction costs were expected to rise another 10 per cent over the previous estimate.

That marked the third upward shift in the price tag for the megaproject since it was announced in late 2010.

• Muskrat Falls another 10% over budget, cost climbs to $7.65B
• Muskrat Falls costs rise to almost $7B

The share of expenses for Muskrat Falls that Newfoundland and Labrador ratepayers were initially expected to bear was $5 billion.

Less than two years later, in October 2012, Nalcor announced that number had risen to $6.2 billion — a jump of 24 per cent. The number rose to $6.99 billion in 2014, then upward again to $7.65 billion last fall.

That figure doesn't include the $1.5-billion cost of the Maritime Link that will carry Muskrat power from Newfoundland to Nova Scotia. Emera is footing the bill for that.

Martin said he expects to be able to provide another update on costs and timelines before the end of June.

'These are 100-year assets'

When asked about the date for first power, Martin stressed the importance of looking to the long term.

"If you take a Muskrat Falls, Labrador-island link — particularly the generating facility at Muskrat Falls — much like a Churchill Falls, or a Niagara Falls, or a Hoover Dam, these are 100-year assets," Martin said.

"So our job is to make sure we get it done right and safely and get this thing on stream so it's going to provide us with the returns we need over the next 100 years."

Martin spoke to reporters at Nalcor's annual general meeting in St. John's.

2015 report released

Nalcor released its 2015 business and financial report earlier this week.

The Crown corporation reported a loss of $19.2 million on overall revenues of $811.9 million.

The company blamed cratering global oil prices and the lack of a final decision on Newfoundland and Labrador Hydro's general rate application at the Public Utilities Board for negatively impacting those final numbers.

Nalcor would have been in the black except for a writedown on the value of its five-per-cent stake in the White Rose oilfield extension. It booked an impairment charge of $61.7 million related to that project, attributing the move to "sustained decreases" in forecasted oil prices.

Excluding that impairment charge, Nalcor's operating profit in 2015 was $42.5 million.

That's down significantly from a year earlier — just over one-third of the operating profit of $115.6 million from 2014.

Nalcor expects the fiscal picture to soon improve dramatically, with income-producing assets projected to produce annual profits in the range of $400 million to $500 million.