N.L. takes 'significant step' toward Ottawa's $5.2B deal to offset Muskrat Falls electricity rates
CBC
A complex financial arrangement aimed at offering relief to electricity users on the island portion of Newfoundland and Labrador in the Muskrat Falls era is a step closer to reality, although concrete details on how much customers will pay for power remains unclear.
Meanwhile, Innu Nation leadership is expressing concern about its level of involvement in the rate mitigation strategy, and the possible financial impacts on the Indigenous group.
Federal and provincial officials announced Monday that terms sheets have now been signed for a $1-billion federal loan guarantee — the third guarantee of borrowing by Ottawa for the troubled project — and capital restructuring for the Muskrat Falls power generating station and the Labrador Transmission Assets.
Secondly, there'll be a $1-billion investment by Ottawa in the province's portion of the Labrador-Island Link.
The final agreements will be signed in the coming months, according to officials.
Monday's announcement builds on an agreement-in-principle announced by Prime Minister Justin Trudeau and Premier Andrew Furey in late July.
In a briefing document distributed to media on Monday, officials called it a "significant step" toward finalizing a strategy to prevent power rates from nearly doubling once the Lower Churchill Projects are commissioned, and project costs are required to be included in customer rates.
Under the deal, Newfoundland and Labrador Hydro will borrow $1 billion, which will be guaranteed by the federal government, which means being able to optimize Ottawa's AAA credit rating.
This money must be used to fund principal payments on the Muskrat Falls power plant and the transmission line from Muskrat to Churchill Falls up to June 2029. The money must be repaid between 2037 and 2057.
What's more, $650 million in sinking fund payments to the federal government associated with the original $5 billion federal loan guarantee, which was signed in 2013, will be waived.
Amendments will be made to the financing agreements to reflect this latest loan guarantee, according to documents.
A second loan guarantee of $2.9 billion was announced in late 2016 as the project was spiraling out of control. According to Monday's announcement, the so-called guarantee fees of roughly $14 million annually, and declining in future years, will also be waived.
Meanwhile, Ottawa will provide financing of $1 billion through a convertible debenture, on the condition that the money be used to offset financing costs related to the Labrador-Island Link, the 1,100 kilometre, nearly $4-billion transmission line that will bring Labrador power to Newfoundland's Avalon Peninsula.
This financing can be used at a maximum of $150 million annually. The interest rate will be fixed at closing for a 50-year term, based on the federal government's 30-year bond rate.
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