HAPPY VALLEY-GOOSE BAY, N.L. – Prime Minister Stephen Harper signed off on a loan guarantee agreement Friday that would save Newfoundland and Labrador and Nova Scotia more than $1 billion in borrowing costs on the $7.4-billion Muskrat Falls hydroelectric project.
The federal backing, which Harper promised during last year’s election campaign, is included in a term sheet that would guarantee up to $6.3 billion in debt over 35 to 40 years for the financing of the project.
“I want to emphasize that this project is going to be a real game change for this region and this province,” Harper told a news conference Friday at the 5 Wing Goose Bay airbase in Happy Valley-Goose Bay.
“It is a genuine historic occasion and it is the beginning of what I think will be a very long era of prosperity and opportunity for the people of this region and the entire province.”
Harper congratulated Nova Scotia Premier Darrell Dexter and Newfoundland and Labrador Premier Kathy Dunderdale, whose determination on the loan guarantee he called “relentless.”
Dunderdale said Muskrat Falls is the key to “a sustainable, prosperous future” that will allow her province to harness more of its energy resources at the lowest cost to the province’s residents and businesses.
Dexter said Muskrat Falls will provide secure reliable energy in a province where many families struggle to pay heat and light bills.
The project would be built in the riding of federal Intergovernmental Affairs Minister Peter Penashue, who has come under criticism for months for overspending his legal limit in last year’s election campaign.
The Opposition NDP have also questioned Penashue’s involvement in the awarding of contracts related to Muskrat Falls.
Harper dismissed the attack, saying the federal government is not a contracting party on Muskrat Falls.
“What the federal government is doing under this agreement … is providing a loan guarantee at extremely low risk, and frankly, I think in the long-term zero cost to the taxpayers of Canada,” Harper said.
“(Penashue) included this commitment to the people of Newfoundland and Labrador and he is doing exactly what the people of Newfoundland and Labrador, the people of Labrador, elected him to do.”
Dunderdale’s government has waited for the federal support before sanctioning Muskrat Falls, which is expected to happen before the end of the year.
The Quebec government has opposed federal support for the project, and on Friday that province’s intergovernmental affairs minister spoke out against the announcement.
“We’ll make sure that we use all tools available to us to make sure Quebec’s point of view is being heard, including judicial means,” Alexandre Cloutier told a news conference in Quebec City.
“The federal government is acting against Quebec’s interests, using Quebecers’ money to deploy a federal grant to Labrador, and that will have a bad impact on Quebec’s economy.”
If it goes ahead, Muskrat Falls would be the largest single public expenditure in Newfoundland and Labrador’s history, costing almost as much as its annual budget.
It is expected to begin generating power in 2017, and some of that electricity would flow to Nova Scotia through subsea cables.
Opponents have said Dunderdale has not proven the case for Muskrat Falls, accusing her of expediting a project without debate that could burden future generations with a heavy debt.
But her government has countered the criticism by releasing a series of reports in recent weeks that conclude the project is a viable, clean source of renewable energy that’s needed to wean the province off fossil fuels.
If it proceeds, Muskrat Falls would be capable of generating up to 824 megawatts of electricity, 170 megawatts of which would go to Nova Scotia annually for 35 years. That would serve about 10 per cent of that’s province’s power needs.
The development is a joint venture between Nalcor Energy, Newfoundland and Labrador’s Crown utility company, and Nova Scotia private utility Emera (TSX:EMA).
Nalcor Energy would be responsible for the construction of the dam and power station in Labrador as well as transmission lines on the island of Newfoundland. That is expected to cost about $6.2 billion.
Emera would build subsea a 180-kilometre subsea link that would transmit the power from Cape Ray in southwestern Newfoundland to Lingan, N.S., in Cape Breton. That is expected to cost at least $1.2 billion.
Emera has until July 2014 to opt out of the deal, but Harper said he is confident it will proceed.
“I don’t see anything in Nova Scotia that will change that, so I’m very confident that everybody who’s a party will remain a party,” he said. “This is a project that is in everybody’s interest.”
Preliminary work on a road to the site near Happy Valley-Goose Bay has already started.
The project has been on the drawing board in one form or another for decades. In 1980, it passed an environmental assessment but was set aside due to market access and financing issues.