The only thing you can do with a Project as nonsensical
as Muskrat Falls: follow the money.
Bankers understand that. The public should, too. The “Federal Loan
Guarantee” is really all about the money trail, especially the Fed’s money. I have no problem with that issue. I only wish Nalcor had been held to account, from day one, as it will under the FLG. But other problems abound under this Agreement.
risk to the Province, is now at a point where you have to begin to question the
rationality of the political leadership and ask why it is determined to
jeopardize the Treasury of the Province to get this deal done.
hide the weak underpinnings of what Nalcor and the Province have proposed.
small cabal of engineers, at Nalcor, place billions of Federal dollars at risk,
it has, compliments of Federal Minister Peter McKay, made sure that, on the
front end for sanction and in the middle, as Muskrat comes off the rails, Nova Scotia and EMERA
will always be in the driver’s seat.
Government is there with an Overseer called the “Independent Engineer” (IE). The IE is a “CZAR” for the Government of
Canada, mandated to take control of the Muskrat Falls Project….but only when
the “Guarantee kicks in”.
This person/office will perform a critical role. The IE will “ensure compliance with the terms
of the FLG Agreements and all Financial Documents required to effect Financial
Close” (part 4.9). The IE will have to sign off “by way of an IE Certificate”
to support any drawdown requested by a Borrower (the Province) and to ensure “the
Projects are developed, maintained, and operated…consistent with Good Utility
Practice…”. In short, NOTHING WILL MOVE
UNLESS THE “IE” ISSUES A CERTIFICATE allowing it to happen.
fifty (50) years, at our expense! Its job, for fifty years, is to make sure the
Federal Government is protected.
one reading the “Term Sheet” can see that all the essential legal agreements
between the Governments of Canada, Nova Scotia and NL, as well as Emera and
Nalcor, will require at least another year’s work for dozens if not hundreds of
lawyers. There is
Overruns. The IE will have a fundamental
role here, too; he is required to confirm “Expected Costs to Complete” and his
role in this process is spelled out in great detail. He must ensure that the debt/equity ratios are maintained by the Province and that it does not let any cost Overruns be included under what is guaranteed.
Default) the Federal Loan Guarantee can be defaulted upon and make clear
that it is “a non-exhaustive list”.
Borrower or subsidiaries, except as among the Parties…”). This is the clause that permits EMERA
exclusive access to the MF asset, when our money runs out. Nalcor and the Provincial Government cannot
run to a third party in an effort to bring in some additional equity into the
Project, as is common when projects go awry. Under this Term Sheet, it can only
defer to EMERA.
rates to you, in the early years of the Project, would be kept low (ostensibly
to avoid sticker shock). Part
3.3 of the FLG permits amortization of
35 years for
the MF site and 55years for the transmission line. Plus, MF is only permitted 65% debt and the
TL 75% debt. The balance is “equity”
which must be produced by the Province. Hence, you had better ask Mr. Kennedy
how your rates will be affected, especially by the changes in amortization.
all the conditions have been met (some 20 of them) and the IE has signed off
– these funds have to come totally from
Provincial coffers. Any money spent
prior to “Financial Close” is totally and completely at Newfoundland and
of consideration of the Maritime Link (ML) by the Nova Scotia Public Utilities
Board (UARB) is preposterous. What
Minister Kennedy is getting on with, in terms of his suggestion that Nalcor and
Emera are considering early sanction, I am unable to
reconcile. It makes no sense. The UARB
is tied into the sanctioning process, in several parts of the Term Sheet
including under 3.5B (vii) where it states “all necessary permits,
approvals….”, are “FLG Conditions Precedent”.
Scotia’s UARB, let me tell you something:
you can only get away with that
in Newfoundland and Labrador. And, I have some doubts that Nova Scotia’s
politicians are as arrogant as ours!
Federal Loan Guarantee. Others, lawyers
and financial people as well as politicians, will doubtlessly comment over the
next few days. I will add this:
- The Premier, who signed
for this Province, on Friday, must have done so not knowing what she was
doing. No politician, knowing the financial implications of what they were about to sign, would put their pen to an agreement that is so uneven, that the Province in such a corner. Frankly, in signing this Agreement on behalf of the Province, the Premier has sold us
down the river!
- The big winners are Emera
and the Nova Scotia Government.
- Sanctioning this Project,
now, will ensure that at least $2 billion of our money will be spent
without us knowing if all the conditions prescribed for ‘sanction’ by the
Government of Canada, can ever be met.
- The Government has to
wrestle the Muskrat Falls Project away from Nalcor before it is too
late. I have no desire to alarm,
but I believe, left to its own devices and using the taxpayers money to
fund this Project, Nalcor, on the basis of this “LOAN GUARANTEE”, will harm the
economy of this Province for a generation.
I have only scratched the surface of the many questions posed
by this FLG. Before anything else
happens, we have a right to have them all answered by this Government.