The Government of Canada is committed to developing Canada's extraordinary resource wealth in a way that protects the environment. In the June 2011 Speech from the Throne, the Government committed to supporting major new clean energy projects of national or regional significance, including the Lower Churchill Hydroelectricity Projects.
Agreement for the Federal Loan Guarantee
The Government of Canada has committed, through the signing of a term sheet agreement, to guarantee project-related debt of up to $6.3 billion for the Lower Churchill River Projects. The Government of Canada has agreed to guarantee the loan for a period of 35 to 40 years from the time project debt is raised, which will apply to the construction and operating phases of the projects. By backing the projects with Canada's credit rating, the loan guarantee will significantly reduce borrowing costs.
It is estimated that the loan guarantee will save over a billion dollars for the projects and correspondingly for ratepayers in Newfoundland and Labrador and Nova Scotia. The Government of Canada continues to work with the financial advisor to ensure that the support provided to the projects is financially responsible to Canadian taxpayers. The loan guarantee will be managed by Natural Resources Canada.
The term sheet agreement has been signed by the Governments of Canada, Newfoundland and Labrador and Nova Scotia, as well as the utilities, Nalcor Energy and Emera Inc. It sets out the terms and conditions of the loan guarantee which will be formalized in detailed agreements. With the term sheet signed, the projects' proponents will now be in a position to engage capital markets to plan and arrange the debt financing for the projects.
OVERVIEW OF THE PROJECTS
Muskrat Falls Hydroelectric Generation Facility
Nalcor Energy is proposing to develop the Muskrat Falls Hydroelectric Generation facility (with a generating capacity of 824 megawatt on the Churchill River downstream from the existing Churchill Falls facility in Labrador).
The Muskrat Falls facility is expected to generate 4.9 million megawatt-hours (MWh) annually, with first power expected to flow in mid-2017.
Transmission Lines
- Labrador Transmission Interconnection: The Labrador Transmission Interconnection will be a 345-kilovolt, high voltage alternating current transmission interconnection between the proposed Muskrat Falls Hydroelectric Generating Station and the existing Churchill Falls Hydroelectric Generating Station.
- The Labrador Island Transmission Link: The Labrador Island Transmission Link will be an estimated 1,100-km, 900-megawatt high voltage direct current transmission line between Labrador and the island of Newfoundland.
- The Maritime Transmission Link: The Maritime Transmission Link will be a 500-megawatt high voltage direct current and high voltage alternating current transmission line to bring power from the Island of Newfoundland to Cape Breton, Nova Scotia.
BENEFITS OF THE PROJECTS
In Newfoundland and Labrador, it is estimated the projects will generate $1.9 billion in income to labour and business, $290 million in taxes, and will result in average of 1,500 jobs during each year of construction with peak employment during construction of approximately 3,100 people. The construction of the Maritime Transmission Link will add to these economic benefits and create thousands of good jobs for the region.
The projects will provide clean, renewable electricity to help replace oil- and coal-fired electricity in the region. Once completed, Newfoundland and Labrador will obtain up to 98 percent of its electricity from renewable sources. Nalcor Energy estimates that the projects will help eliminate up to 4.5 million tonnes of greenhouse gas emissions (GHG), which according to estimates is the equivalent of taking 3.2 million cars off the road. As such, on a national scale, the projects will help to reduce Canada's overall GHG emissions.
PROJECT PROPONENTS
In November 2010, Nalcor Energy, Newfoundland and Labrador's Crown-owned energy corporation, and Emera Inc. of Nova Scotia announced plans to develop the Lower Churchill River Hydroelectric Projects, comprising the Muskrat Falls Hydroelectric Generating Station and the three transmission lines.
Nalcor Energy and Emera Inc. estimate the total projected cost of the Lower Churchill River projects at $7.4 billion. Nalcor Energy will construct and own 100 percent of the Muskrat Falls Hydroelectric Generating Station and will also build the Labrador-Island Transmission Link through a joint venture with Emera Inc. (with Emera Inc. having an option to take a stake in this transmission line). Emera Inc. will also build, operate and own the Maritime Transmission Link for 35 years, after which the ownership of the Maritime Transmission Link will revert to Nalcor Energy.
