How much will the project cost?
Today, the estimated cost to build the Muskrat Falls Hydroelectric Generating Facility (including Labrador transmission assets) and the Labrador-Island Transmission Link is $6.2 billion (excluding interest during construction). The cost to build the Maritime Link between the island and Nova Scotia, which is being constructed and financed by Emera Inc. of Nova Scotia, is estimated at $1.2 billion. The total combined cost of the Muskrat Falls project and the Maritime Link is $7.4 billion (excluding interest during construction).
How accurate is the project estimate?
Engineering and detailed design is well advanced with more than 50% of the engineering complete today. This project has been intensely pre-engineered to ensure we understand costs and are able to mitigate risks prior to starting the project. Over the past 18 months, between Decision Gates 2 and 3, Nalcor has been working on refining the design and engineering of the project to ensure a high degree of cost certainty. The capital costs identified in the Manitoba Hydro International (MHI) report are based on the completed work of approximately 50% of the engineering and detailed design work for the project, the results of early site work being completed near Muskrat Falls, and actual bid values for major components, such as turbines, generator sets and the Strait of Belle Isle crossing. Having all of this information ensures an extremely reliable and sound cost estimate.
Can we afford this project?
With revenue from our offshore oil resources, and a reduction in our provincial debt by almost a third, the provincial government has the ability to invest revenue from our non-renewable resources into our renewable resources.
The analysis shows that Muskrat Falls is the lowest-cost option to meet our energy needs. By building Muskrat Falls, the province has an asset for our investment, rather than paying foreign companies for oil. Smart investment decisions today will secure energy independence for the future.
We will finance our equity investment through a combination of cash and borrowing. The project will not increase our net debt as anything we borrow will be invested in a revenue-generating asset. The Muskrat Falls asset will generate dividends for the province that will be more than sufficient to service the project debt.
Several other factors make this project a smart and affordable investment. The Government of Canada has committed to a federal loan guarantee, and we have a partner for construction of the Maritime Link. As well, interest rates are at an historical low, making this the right time for this investment.