$6.99 billion is the new cost estimate for the Muskrat Falls dam and the link to the island.
With that much money and with such a record of inaccurate forecasts, giving a cost estimate to two decimal places could only be a terribly cynical attempt at humour by the highly paid people running Nalcor.
Did Ed Martin, Gil Bennett and Dawn Dalley really think that people wouldn’t recognise the oldest and most transparent bit of retail psychology on the planet and think this project wouldn’t cost $7.0 billion?
It’s almost $7.0 billion.
In December 2012, the estimate was $6.2 billion. Now we are up another $800 million or there abouts. That represents a 40% cost increase over the 2010 estimate of $5.0 billion.
Now notice a word in the official news release.
The figure of almost $7.0 billion is for capital costs.
That’s not all the costs associated with the project. To figure out what the actual cost of the project will be, you have to add at least the interest cost on borrowing all that money.
Back in May, Nalcor said that amount was $1.2 billion. Simple math: the cost for the dam at Muskrat Falls and the line to St. John’s is now $8.2 billion.
The only people paying for the project are taxpayers in Newfoundland and Labrador. Nalcor included a mention of sales of $100 million outside the province in its announcement on Thursday.
Not $100 million a day or a month or a year.
Just $100 million.
Another cynical joke.
But the sick Nalcor humour to one side, we are pretty much where SRBP said we were last December when Nalcor proudly told us how much money they had borrowed and how it would break down between the Labrador-Island Link and the Dam. Put that together with the federal loan guarantee details and bit of basic math, and you could figure out that in order to borrow $5.0 billion the provincial government would have to inject $2.2 billion of equity.
5 + 2.2 adds up to $7.2 billion. Given that this amount was for the capital costs – taxpayers will over the interest cost later on through their electricity rates – you can see that we pretty much had the information in this June announcement last December.
Here’s another clue that Nalcor actually had these cost figures six months ago. Back in December, Tom Marshall told NTV’s Mike Connors that the provincial equity share of the project would be about $1.9 billion. That’s a bit low compared with the federal loan guarantee but notice that if you add it to the $5.0 billion in borrowing and you have… $6.9 billion.
And that’s roughly what Nalcor announce on Thursday.
So not a coincidence.
Not by a long shot.
So why did Nalcor sit on their estimates for six months and wait until the House of Assembly was closed to announce the figures on a summer afternoon before the Canada weekend?
That wasn’t a joke.
It was just cynical.
One last thing.
That $2.2 billion in equity is going to come from additional borrowing by the province government. We don’t know what the interest costs will be for that. We do know that it won’t be at the Government of Canada’s great interest rate. It will be at the provincial government’s rate.
And so the $5 billion that became 6.2 that became 7.2 and is now 8.2 will be something above even that before Nalcor is finished.