01 October 2008

Lower Churchill delayed a mere six months?

Energy corporation boss Ed Martin told CBC News that the current market turmoil in the United States could delay the Lower Churchill project by up to six months.

The province will need to borrow billions of dollars to finance the project, and Ed Martin, CEO of Newfoundland and Labrador Hydro, said Wednesday the project could be set back by a few months as he waits for the financial market to sort itself out.

It was hoped the megaproject could get the green light as early as 2009, but with the U.S. economy in turmoil Martin said raising the cash on the open market won't be easy.

"Well, we can be flexible and we will be. We are going to be very strategic in terms of when we go in. If that means that we're going to delay going in for six months, we will," he said.

Just six months?  That seems incredibly optimistic given the apparent magnitude of the economic downturn in the United States. 

Earlier on Wednesday, the Liberal opposition in the provincial legislature raised questions about the impact economic uncertainty might have on the project.

The project is currently in the midst of an environmental review and, to date, no firm power purchase agreements have been made public.

A downturn in the American economy would reduce demand for electrical power, a potential export customer for the project. Likewise a global downturn in the economy would lessen the need for a new aluminum smelter which has been suggested as a potential local development in Labrador.   A global recession in the early 1990s helped to scuttle plans to develop the Lower Churchill at that time.

Tightening capital markets were cited as one reason proponents of a oil refinery near Come by Chance, Newfoundland to seek bankruptcy protection.  Bond Papers took a different view.

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