$1.3M in daily interest: Why further Muskrat Falls delays matter

Lingering uncertainty continues over when the troubled Muskrat Falls project will be finished, but one thing is certain: every day the project is delayed, the costs continue to go up.

Newfoundland and Labrador Hydro has confirmed that the bill for interest and other financing charges on the billions it has borrowed to construct the project is $1 million per day.

In addition, the provincial Department of Finance has revealed that it is being hit with $300,000 in daily interest charges for the money taxpayers have poured into the project.

It's sobering news for a project that is already more than $6 billion over budget, years behind schedule, and has forced the federal government to offer up billions in support to prevent electricity rates from doubling when the project is finally commissioned.

The issue of financing charges is significant because the overall completion date has once again suffered a setback.

N.L. Hydro confirmed in October that the Nov. 26 finish date is not achievable, largely because GE Grid Solutions is struggling to perfect the software used to operate the 1,100-kilometre high-voltage direct-current transmission line from Labrador to Newfoundland's Avalon Peninsula, known as the Labrador-Island Link.

In an update to the province's utility regulator last week, N.L. Hydro set a new completion target of late March.

So if the project is completed by March 31, that will add 125 days to the schedule, which will mean a combined $162 million in additional interest and financing charges for N.L. Hydro and the provincial treasury.

N.L. Hydro president and CEO Jennifer Williams has acknowledged delays will likely drive up the final forecast cost of the project, currently pegged at $13.1 billion, but said last month, "I don't expect it to be material."

In a followup statement, Hydro officials said all costs anticipated to be paid to GE, and the cost of maintaining a "skeleton project team" into 2022, "are contained in the current estimate."

There's also a contingency allowance. "Any potential increase in the total project cost estimate would result if there are costs that fall outside of that contingency, primarily the interest payments referenced," said the statement.

The extra financing costs "will be recovered over the life of the asset through electricity rates," the Hydro official wrote.

Muskrat Falls is a Nalcor-led hydro generation and transmission project sanctioned in 2012 at a cost of $7.4 billion, featuring an 824-megawatt generating station on the Lower Churchill River, and the Labrador-Island Link.

In addition, Emera has constructed the Maritime Link between Newfoundland and Nova Scotia, with a capacity of 500 megawatts and a 35-year guarantee of 20 per cent of the energy from Muskrat Falls.