Plunge in oil price, demand pushes Nalcor to $137M loss after 2nd quarter

A steep drop in oil production and demand under the COVID-19 pandemic is still impacting Nalcor Energy's bottom line, as the provincial energy corporation Thursday announced a $137-million loss after its second quarter.

It's a much different situation from the same time frame in 2019, when the corporation recorded a profit of $119 million.

Despite a $37-million profit in the second quarter of 2020, the company is still dealing with a first-quarter loss of $171 million.

With Thursday's release of the second-quarter financial results, Nalcor CEO Stan Marshall said completion of the troubled hydroelectric megaproject is in sight, and could, within a month, begin producing power, which will then be sold to lower costs for electricity users in Newfoundland and Labrador. 

But getting power to Newfoundland will take a bit longer.

A problem with the transmission software — the Labrador-Island Link — is still being ironed out. 

Marshall said General Electric — the company working on the software — is still working out the kinks, but added he feels better about the project than he has in a long time.

"They worked throughout the COVID period, which is very positive. Obviously they've had some productivity lost because of COVID, but we're now past a critical phase," said Marshall. 

"We've tested all aspects of the software in the factory acceptance tests. We've identified certain bugs which they're still working on, but we've got a version now that allows us to load. We have loaded. We have tested. We began testing."

Work was suspended at Muskrat Falls and the Soldiers Pond transmission centre in March due to the pandemic, but resumed in June. As a result of the interruption, project completion has been delayed by four months.

But there could be a further delay of two to six months,, depending on the level of productivity and the number of workers allowed on site as a result of COVID-19 guidelines this fall, Marshall added.  

Marshall said another version of the software is due this fall, but the final version isn't due until next spring. 

Testing of the Labrador-Island Link software will continue over the next few months, with power intermittently coming to the island, he said. 

Marshall said it's difficult to estimate how much power will actually flow in that time, but it could be a lot. 

"It'll start within the next month, and before the thing is finally commissioned there should be a substantial amount of power delivered," he said.  

"The revenue from that, the proceeds from that, will help mitigate rates."

Commissioning work and an inspection is underway at Unit 1, said Marshall, and the second unit is expected to be online before the end of 2020.

A loss

Marshall said he will give an update at the end of September on the full effect of the COVID-19 pandemic on the cost and the schedule of the project.

To date, the project has cost $11.5 billion.

In March, Husky Energy announced the suspension of construction on the West White Rose Project due to COVID-19. Marshall said engineering, preservation and maintenance, and some procurement activities have continued while the project is under review. 

"As of the suspension date, the project was approximately 58 per cent complete," he said. "Production remains steady at White Rose, as well as at the Hebron and Hibernia fields, and all facilities are operating with enhanced screening provisions and physical distancing measures for site workers."

Marshall said he met with and briefed Premier Andrew Furey last week on where the Muskrat Falls project stands. 

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