07 March 2012

Checking Jerome’s Numbers #nlpoli

In the House of Assembly on Tuesday, natural resources minister Jerome Kennedy said:

The Muskrat Falls Generating Station will cost $2.9 billion and the Labrador-Island Link will cost $2.1 billion. That is $5 billion, Mr. Speaker. Into that, there is built in 15 per cent contingency and escalation costs.

Before you go any further, understand that those numbers are not correct at all.

Jerome admitted that in the very next sentence when he said:

What we are doing, Mr. Speaker, in terms of the overruns and the final numbers, we will have them from Nalcor shortly.

And even that is not strictly true.  No one will have the “final” Muskrat falls numbers until the project is done and all the receipts are in.  What the minister was talking about is merely the latest estimated final numbers.

We won’t even chuckle at the idea inherent in Jerome’s first comments that the actual cost of the dam and line to the island could be less than $5.0 billion because it supposedly includes a mere 15% cost over-run contingency.

Let’s take the total for the dam and the line as $5.0 billion and say right away that they are wrong.

And we know the numbers are wrong  - i.e. out of date - because the minister said so.

We also know the numbers are wrong because Manitoba Hydro International did a recalculation. They put the cost for the dam and the line and all the other associated bits at $6.6 billion using both Nalcor’s method of calculating the costs and the one used by MHI.  This cost includes the extra thermal generation that the Muskrat Falls project includes, as well as fuel costs (oil) for all that thermal generation.

So right off the bat we have taken that $5.0 billion and added to it another $1.6 billion.

Jerome’s comments came in response to a question from Liberal leader Dwight Ball about interest costs.  According to Ball, Nalcor added those costs in response to a question that was part of the public utilities board process.

The interest costs were $1.1 billion.

Add that on and you have $7.7 billion.

Now you can add the line to Nova Scotia for a total of $8.9 billion.

Just so that you can follow the numbers for Muskrat Falls (Island Infeed), here they are in a table:

 

Original Estimate

 

Updated

Comments


Dam and infeed

 

$5.0 billion



$ 6.6 billion


Updated uses MHI’s cumulative present worth analysis


Thermal and Fuel


Not included


Included above

 


Nova Scotia


$1.2 billion


$1.2 billion

Untested original estimate

 

Interest costs

 

Not included



$1.1 billion


From PUB-Nalcor

 

Total

 

$6.2 billion

 

$8.9 billion

 

 

- srbp -

2 comments:

rod said...

Donald Rumsfeld should give these guys a lesson.

We know what we know.
We know what we don't know.
But we don't know what we don't know.

Once you get that figured out...you're off to the races.

rod said...

ignoramus et ignorabimus