Thursday, 20 June 2019

MUSKRAT: THE BIGGEST GAMBLE OF ALL

Guest Post by David Vardy
Recent disclosures at the Muskrat Falls Inquiry confirm that the project is on track to become a financial tsunami. Former Finance Minister Cathy Bennett told the Muskrat Falls Inquiry that the Department of Finance was marginalized in the decision-making process. This was confirmed by former Deputy Minister Donna Brewer when she was on the stand this week. Yet the provincial government played a pivotal role in the financing of Muskrat Falls. In fact this pivotal initiative was the biggest gamble ever taken by this province.



Base and contingent equity committed
At the outset the province provided the base equity, with the understanding that the flow of dividends would be delayed for decades, placing the burden of borrowing $5 billion in base equity squarely on the taxpayer. The federal government took the assets as security so they are not available to the province.

Second the province committed itself to finance any cost overruns with unlimited equity that they would have to borrow, with no fiscal analysis of the risk. At the date of project sanction on December 17, 2012 the required equity was $1.9 billion. Without the second federal loan guarantee it would have been close to $8 billion.

50 year payback period
The Muskrat Falls Inquiry has heard tons of evidence on construction costs. They have heard less on financing costs and on how we are going to pay for the project. During the eight years of construction, financing costs have been accumulating year after year, mostly interest, and will be included in the amount to be recovered, through a combination of higher rates and taxes.

After commercial operations begin Nalcor will seek to recover $10.1 billion in construction costs, plus $3.6 billion in financing costs during construction, for a total of $13.7 billion. The payback period begins when full power starts to flow and operations begin. When construction is complete the annual costs, known as “revenue requirements”, have to be paid. These annual costs include interest on debt, repayment of principal, as well as return on equity or dividends.  They must be recovered through power bills or higher taxes.
Donna Brewer, Former Deputy Minister (Finance)

These payments are similar to the monthly home mortgage payments which depend upon the interest rate and the term of the mortgage or the payback period. For Muskrat Falls the decision on the payback period played a big role in determining annual costs and the rates required to cover them. Nalcor also had to decide on whether rates should rise over time, remain level or decline.

In the case of Muskrat Falls Nalcor decided to take a different approach in setting rates than is normal.  Nalcor decided to adopt a longer payback period, 50 years rather than 20-30.  They also convinced the province to forego a return on its equity investment in the early years and this shifted the balance of cost recovery to later years. The result is a pattern of rates that is lower in the early years and higher in later years, reversing the normal pattern of rates. The normal pattern is based on charging costs as they appear and not deferring them to future generations. The return on equity capital is a cost of providing services and is normally charged fully each year and is included in rates. The approach chosen for Muskrat Falls defers these costs to future generations.

Back end loading a departure from normal practice
This “back end loading” of cost recovery is intended to reduce rates in the early years below what they would traditionally have been. With the traditional approach, rates would be high at the beginning but would decline toward the end of the payback period. For Muskrat Falls, rates will rise in nominal terms and remain constant in real terms per unit of energy. With level rates in real terms repayment of costs must occur late in the payback period. Rates will be “back end loaded” rather than loaded toward the early years, as was the case for example with Bay D’Espoir.

For the Labrador Island Link (LIL) between Muskrat Falls and St. John’s the traditional approach has been followed. For the power plant (MF) and the other transmission assets in Labrador (LTA) they have chosen what we call the “Muskrat Falls formula” for setting rates. The construction costs of building generation assets (MF + LTA) are twice as high as those of the Labrador Island Link (LIL) so these costs are dominant in rate-setting. This means that annual revenue requirements will rise over time as is the pattern with the Muskrat Falls formula. The risk is that the load may not rise sufficiently to cover the rising annual costs. If this happens then the costs will be stranded and will be unable to be recovered.

Interim Banker Role of province
In addition to the $7.9 billion federal loan guarantee and the injection of $5 billion in provincial equity the province also plays another key role which has been largely ignored. Financing over a 50 year time horizon poses large challenges. The province has agreed to become the “interim” banker, waiting decades for its return on equity capital and speculating on a massive increase in demand. This results in initial rates being 30% lower than they would be under traditional rates.

Muskrat Falls is unlikely ever to become self-supporting. Government’s equity will have to be written off, thereby converting the equity into a subsidy or grant. The Muskrat Falls “formula” depends upon growing demand over a period of 50 years and is back end loaded. This means that most of the costs are recovered over the final 30 years and not over the first 20 years. This shifts the burden for cost recovery to future generations.

On top of this the financial costs are understated as was shown in my post last week and are close to a billion dollars higher than the reported $4 billion. Instead of $12.7 billion the real project costs are closer to $13.7 billion, without accounting for any settlement of the disputes with Astaldi or General Electric.

Future dividends rely upon escalation in demand for power
The power purchase agreement relies upon increasing demand for power and the willingness of ratepayers to pay twice as much for power as they currently pay. Without population growth, or growing electrification of our economy, costs will be stranded. This will force the province to write off its massive investment and thereby increase our net debt.

Former CEO Ed Martin told the Inquiry dividends can be used for rate mitigation and that net benefits from the project can be used to reduce rates. The notion that the project could generate dividends of 8.4% or more is not based on reality. Any dividends would have to come from ratepayers, adding to already unaffordable rates. The power purchase agreement cannot “guarantee” dividends. The shareholder invests equity in the hope of earning a return but there is no way to guarantee a return.

The return depends upon the strength or elasticity of demand and upon growth in population. New demand for electricity such as electrification of vehicles and further penetration of electric space heating will depend upon our ability to offer low cost power. With high generation and transmission cost Muskrat Falls cannot offer competitive power rates.

Higher financial costs will exceed fuel savings. The massive payment obligations will transfer far more personal disposable income to bondholders and banks than Holyrood paid to the oil barons. The direct, indirect and induced impact on the local economy will be negative.

With limited personal disposable income it is inconceivable that the project will pay interest cost, repay the debt, recover operating and maintenance cost and also distribute dividends to shareholders. The dividends will have to come from you and me.

The business plan relied upon escalating demand and stable rates. Instead we are witnessing shrinking demand and surging costs. The promise of dividends to come rings hollow in the land!

Rate Mitigation
Rate mitigation has a hollow ring to it when you consider that money to keep rates low will be transferred from social programs or else stolen from future generations. If rate mitigation comes in the form of eliminating dividend payments this will effectively write down the value of the assets. When this is done the net debt of the province will rise because the value of the financial assets used to lower rate debt will be reduced or eliminated. The former Deputy Minister of Finance admitted, in response to a question from the Muskrat Falls Concerned Citizens’ Coalition that the equity investment poses a risk that the promise of dividends may not be reliable and that a write down is a possibility, depending upon how government chooses to mitigate rates.

Indemnification
Does our exposure go beyond the equity or are we protected against default on the debt by the “non-recourse” provisions of the federal loan guarantee? The Muskrat Falls Concerned Citizens’ Coalition asked the former Deputy Minister of Finance if the province may be forced to indemnify the federal government in the event of a default. Given” non-recourse” funding under the federal loan guarantee, are there conditions where the province must indemnify the federal government for the failure of Nalcor or any of its subsidiaries to meet its debt servicing obligations?

The Coalition also asked what would happen if NL Hydro cannot provide sufficient revenues to meet its financial obligations under the power purchase agreement. Must the province provide the funding?  NL Hydro is not one of the Nalcor subsidiaries whose debt is federally guaranteed and for which financing was provided without recourse to the province. The witness was unable to answer these probing questions, confirming that the Department of Finance was kept out of the negotiations. 

The biggest gamble in our history
The risk exposure of the province may not be limited to its $5 billion equity investment. It may include the $7.9 billion in federal debt as well. We now know that financial costs have been underestimated and that the full project cost is $13.7 billion. This amount is close to the size of our net public debt; to date the cost of Muskrat Falls is not included in the net public debt. The Public Accounts show that as of March 31, 2018 the net debt was $14.7 billion.  

The Inquiry has a mandate to assess the risks of the project and to consider “the need to balance the interests of ratepayers and the interests of taxpayers in carrying out a large-scale publicly funded project.” We understand that phase three of the Inquiry will be the venue for considering recommendations and potential solutions. We will be looking to the Inquiry to probe the extent of the province’s financial exposure, in order to measure the magnitude of the problem we face and to make recommendations on how the burden might be relieved without shifting the cost to future generations.

The absence of the Department of Finance from the negotiations leading to project sanction, and from financial close a year later, will cost the province dearly. It is a tragedy that institutions established to provide vigilance and supervision did not sound the alarm before it was too late. Instead our public institutions allowed us to risk the future of the province in the biggest gamble in our beleaguered history.

David Vardy



85 comments:

  1. An excellent and easily understandable summary/outline of our debt obligations and other financial risks associated with what I would consider to be a fraudulently perpetrated project.

    A purposely contrived travesty force-fed on current and future generations (including our children, grandchildren and great grandchildren).

    Well said Mr. Vardy.

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  2. Excellent review!

    In my books even with this Inquiry ongoing I still don’t think it has been fully explored, or explained the exact financial implications of how “WE” are all going to pay off this Muskrat Falls debt?

    For me it’s like the elephant in the room?

    Ed Martin and others can talk all they want about revenue, equity and on and on.

    However from what I am seeing is that “WE” are the revenue?

    If “WE” don’t buy the electricity from this project at appropriate rates including profit margins, then the project will not be able to pay for itself?

    I agree this project was a gamble, unfortunately “WE” are innocent bystanders in an ongoing game of voodoo economics by our own political masters, obviously with the aid of our very own NALCOR.

    Then to hear Mr. Paddock talk about all of us putting on the jersey and embracing NALCOR?

    This is coming from an organization that hasn’t even admitted they did anything wrong!

    We live in interesting times!


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    1. And that makes me wonder ---- when we went from a PC premier to a Liberal one, from a PC appointed Board Chair to a Liberal appointed one, from Ed to Stan?

      And as I first said --- Ball merely changed horses (but the objective -- to push, to force "no matter what" this fiasco through remained the same.

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  3. "It is a tragedy that institutions established to provide vigilance and supervision did not sound the alarm before it was too late."

    You collectively allowed the PUB to be neutered with nary a blink. Why was that?? Was it not apparent that fraud and public disgrace was underway?? You stood idly by while a very few of us were bleating that our democratic input was being denied. Ditto for the JRP. Why did a former deputy minister stand by and allow the emperor to have his way with the treasury??

    At the JRP Nalcor claimed a 57 not 50 year amortization. Why do you quote 50??

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  4. Burden to "future generations"? LOL..Who in their right mind and two functioning feet will stay around here to pay for this tragedy? Anyone who's not a public servant or has no public funded pension IS GONE!!!

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    1. The old and the poor are trapped Levy. They are the most tragic victims of MF.

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    2. FWIW, the risk exposure of the province itself should be limited to its $5 billion equity investment.

      Now for the $7.9 billion FLG, we're not really better off as the recourse / collaterals for defaults are all of Nalcor's assets and revenues...

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  5. For those who think that ramping production in the "ponzi" oil production revenues, will bail us out of Boondoggles such as Muskrat;

    https://www.silver-phoenix500.com/article/global-economy-propped-us-shale-oil-ponzi-scheme

    Global Economic collapse, when it is allowed to prevail, will hit Canada and NL very hard!

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    1. Robert...I didn't realize you live here now. Do you have a gov't pension?

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    2. Living the life, as they say in the Kootenays, thanks in part to the Canadian taxpayer, (never worked for the gov't though :-)

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  6. How ironic Nalcor has its own Goebel on staff leading the bullshit on mercury loading. Whoever that woman is questioning him is very weak about mercury, the HHRA is a retrospective statistical analysis AFTER people are poisoned. It is such a shame that the cross examination is so weak!

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  7. But Bruno, just like Nalcor's 'aggressive' schedule, which everyone now knows was a scam, Leblanc's priority is to keep to the schedule.

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  8. Her name is Gobhina, ASSOCIATE COMMISSION COUNCIL. Can they find weaker less informed, less forceful council on the mercury issue. She seems to be feeding Goebel(you can't make this up!) soft questions about why water levels were never lowered. This means Nalcor did NOTHING, SQUAT, NADA about the concerns. No soil removal, no pause in methyl mercury formation. Just monitoring drawing community into the plan. Consumption advisories, rejected by community because again compensation after contamination is unacceptable.



    This is just RACIST pandering

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  9. Goebel and Susie Squires looked blank when asked if they had consulted with the federal scientist from Geological Survey of Canada that had testified at the JRP and finally said no.

    The federal scientist was fearful and showed large progressive slides that had happened quickly upstream quickly (in less than an hour). No need to consult them or consider Bernander's work.

    This is truly disgusting and shows a reckless disregard for human health by the cherry picking of data.

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  10. This comment has been removed by a blog administrator.

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    1. Too much to the point UG?? At what point does our weak kneed subservience become complicity?

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  11. Why has the Commissioner not ordered a halt to the filling of the Muskrat Falls reservoir until the issue of the stability of the North Spur has been resolved?

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  12. Yea, for Mr. Vardy, but seems he is still the lone economist crying in the wilderness. Most of the comments are made by the average citizen, like myself. Where are the other hundreds of other economist, CA's, bankers, university types, and public servants that are economist, CA's etc. Meek as mice it seems. They were squeaking up as mice a decade ago and are still mice, and little men and women. Comment as anonymous, but for Christ sake comment says average Joe.

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    1. Before Leblanc wanted to hear from the Environment Dept (as they give the go for dam safety), I said the final test is for Graham Letto to jump 3 times on the North Spur, 2 feet high, and if if holds, it is good to go, Safety Certificate guaranteed.
      Do we now feel safer to the good design after this testimony? The jumping test is as good as anything we have heard today.
      D-Day Leblanc calls it, when they start to fill the reservoir. Good analogy .......D for disaster? D for damn the torpedoes? D- Day, in 1944, was high risk and cost many lives. Churchill put the code name on it, but that was war. This boondoggle, on the Churchill River, has been a big gamble and high risk from day one.
      The question was asked: Has any engineer of authority signed off that that dam is safe? Apparently no one has. We find that the Dam Safety regulations are not regulations at all, just guidelines, which is just fine for the Environment Dept, who says that they trust Nalcor and their consultants. We see a document which one expert says all looks fine but he in not qualified to certify it as safe. For Christ's Sake, what type of operation is this, that they state this in public, and are unconcerned.? What insurance is covered in case of a failure.......no answer on that either.
      What a pathetic trio of spineless people we see again today. 14 billion dollars and no one will certify this North Spur as safe? They talk in circles about hydraulic monitoring, as to river flows,
      but no details on quick clay monitoring,geotechnical stuff they say, is outside their knowledge. Pass the buck is like a game show for all these Nalcor and government people.
      Call PENG2 to the stand.....a Nalcor consultant, a geotechnical guy........he says the North Spur is NOT safe in his opinion. Will he go public? Do we want some incompetent engineer like the guy who signed off on the concrete forms that collapsed? Should we not need at least 2 if not 3 very competent engineers, with expertise, including in quick clay, to sign off, and with a firm that is well insured, not a 2 bit single man consultant with little insurance.
      Has Leblanc got the authority to order a work stop as to filling the reservoir, if Dam Safety is not assured by best practises by competent engineering firms? Or is he the Da judge with the rubber chicken, as Bruno says? Perhaps he cannot so order , but highly recommend his opinion, before it is too late.
      D-Day.......sound ominous. Good choice of words, Mr Commissioner.
      Winston Adams

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  13. Well well the circus continues. Notebooks suddenly appear, LeBlank is waving his rubber chicken angry that his staff must work the weekend to read the "Dead Muskrat Scrolls". All the beagles are in a tizzy wanting in on the info to be able to cover their clients asses.

    This is the most excitement so far!

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  14. Top Priority to see Bennett testimony today.
    Yesterday I heard lawyer Ralph mention 8000 references in documents as to notes or note books and a yet essentially all note books destroyed or missing, and this business of destroying transitory documents they so refer to notes. What carp, as if mafia organisation.
    Now Bennett has notes and more to come. Leblanc is not pleased, such information was ordered to be supplied in 2018
    Winston Adams

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  15. Commissioner recess for 5 minutes, to get over his anger about the notes that have misteriously appeared after most of the witness have had their day in court. How convenient. The swearing in has been omitting one word, it should be, " I swear NOT to tell the truth, the whole truth...etc..." Sure nalcor etc, have been telling lies and half truths about muskrat for more than a decade, why should we all of a sudden expect them to be now telling the truth, ask average Joe.

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  16. Gilbert sees it an advantage that all the project management team knew one another from their oil and gasbag days. They are contract employees. No performance reviews for contract employees of mngmt team. The "Muskrat Python" crew are above review!

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    1. Interesting way to justify cronyism. noun: the practice of favoring one's close friends, especially in political appointments. There is a good reason that cronyism is not a positive thing. Except for the rare occasion, there are better people for the job than your friends. I would have wanted people with mega project experience had my goal been to complete a successful mega project.

      Cronyism is rampant in all government departments. People are seldom hired on merit. Students get work terms because they have family in government. Managers/Directors often have political connections. The school board AG audit showed people getting jobs despite the fact they were obviously unqualified, and then getting promoted in secret competitions with upscale salaries because they were the only candidate. It is an abuse of the system.

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  17. Gilbert needs to offer "enticements" to management team to stay on until completion! Read shovel money to his buddies before the gravy train left town! Their outrageous daily rate was not enough for these pigs grunting at the trough.

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    1. This is common in bankruptcies. The very executives that drove the company into insolvency are retained with large bonuses to oversee the liquidation, the rationale being that they understand the remaining assets better than anyone else. It addes insult to injury in that bad people get a bonus for their incompetence and/or malfeasance. Ed Martin didn't even have to stick around to get his bonus and it clearly wasn't deserved.

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    2. Last I checked Nalcor is not bankrupt. Show the piggies the door and take anon justifiers of the scam with them.

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  18. The poor PM's were upset that their daily rate was about to be made public. they were about to mutiny over the ATTIPA request for their rate. No stress about the project overcost and years late but expose their salary and they threaten to leave!!

    This shows how piggy the whole PM team are! Bigger threat than Astaldi!!

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    1. They are worried about the public backlash.

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  19. And note also, that Bennett had no "concerns" about bifurcation decision, but he clearly said he had "concerns" about ATIPPA requests exposing contractors pay. Even affected his sleep.

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    1. He looks like it is still affecting his sleep.Nothing affecting Harold Smith's sleep though.

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  20. Did I get the date right on an email.....from Meanny, Feb 2019? After Jim Hayes appointment.........time now for integration including Nfld Hydro........various components coming together says Gil, and need to hand off to operations, that is to Nfld Hydro, ....Gil says this was the philosophy from the beginning!.
    This integration issue the philosophy from the very beginning? I suggest the software issue wit GE, and the complexity of DC/AC systems was "ignored" from the very beginning, and now a big problems, maybe a very big problems, and whether a "fixable " problem even? Maybe even needing Bruno batteries whether they will help? Mercy Mercy!
    Winston Adams

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  21. The first mention of the 6.53 Billion to the board came 5 days AFTER financial close . Until then 6.02 was what the board knew. Whoops!!!

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  22. Gilbert avoided doing the QRA that EY said was needed by the board. No discussion needed with government. He was "waiting for certainty!! Way to go Gil!

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  23. Poor Gil was "disappointed" with the tone of the EY emails expressing the need for a QRA. More disappointing emails came to poor Gil from EY! Gil does not like being told what to do. He has the keys to the treasury after all!

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  24. IN Dec 2014 Harrington had a fit that EY wanted a QRA. Head it off at all cost by doing an internal review. A QRA was a distraction and an attempt to take control of the contractors according to Harringbone.

    Gil is squirming at last!

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    1. No, Bruno, Gilbert is not squirming,(squirming is relative)it is the same old Gil we saw before......actually Kate made him squirm more at times.
      Gil is attempting to defend the indefensible, and even Leblanc was not accepting his BS reasoning at one point.
      Gilbert either says Yes, "I and we could have done better,we made errors" or admit to no errors or wrong doing. He has chosen the latter, as before.
      To make him squirm the Inquiry co-counsel or other lawyer needs to ask him " Mr Bennett, are your familiar with the term "wilful blindness", and if so, you can explain to the Commissioner your understanding.
      Winston Adams

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  25. Can anyone provide any insight into the QSC decision yesterday?

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    1. Maybe it is time for HQ to be courting the wounded Ball, for a Trumpie :-)

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    2. http://t.soquij.ca/e6C8G

      In short, as we all know UC annually produces more energy than what was planned and allocated (to HQ, recall power and Twinco bloc).

      The ruling says CFLCo has the right to sell any surplus energy produced (over those blocs) - as opposed to offering it first to HQ first at the 1969 rates...

      Not sure how much more net revenues CFLCo will fetch considering the current depressed export market and the related wheeling fees (whether via the HQ grid or via the maritime route)





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    3. The good news is this will provide "some" lower costs back up option if MF doesn't produce / operate as planned.

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  26. Yup!

    The Inquiry has been on for 10 minutes this afternoon and Harold Smith is asleep already!

    I wonder does sleep time get knocked off his day rate?

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  27. Don't know which is more boring;co-counsel's questioning or Gil Bennett's answering. No wonder that Harold Smith is sleeping.

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  28. Breaking News. Danny says bad day for the naysayers. Two things have been resolved... The water rights, and Paddick says the north spur is safe and will hold. Now there you have it right from the horses mouth. So he said put on the jersey and the team will be called North Flex. Joe blow.

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    1. The appeal court ruling does not appear to address water management issues per se but rather issues of the differences of interpretation between the original contract and the 25 year extension with respect to the rights of HQ to all of the power and energy outside of the extension contract and the GWAC contract and taking into account the recapture energy and the Twinco block. It does not address the lower Churchill developments downstream at all.

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  29. I traced down Danny's silly statements to NTV news. Elsewhere I hear Nalcor said the Quebec court did not give water control on the river to Nfld as Danny says as to MFs. Would Danny lie?
    And yes Danny assures us that Paddick assures us that the Spur is safe. Did Paddick say what engineer has certified it safe? The one who admits he is not qualified to certify?
    So will will do the jump test? Green Graham is out of action, lost by 2 votes. Who will be our new Environment Minister?
    Is Nfld going Green? Less than 2 months go the VOCM poll, I think, had only 25 % favor the environment over oil and gas. Today, 40 % ranks the environment first while 54 % ranks oil , gas and jobs. That's a major shift: we have school students marches, the pope, on one side and the oil and gas industry and Charlene Johnson, and Ball and Crosbie on the other side. As for the Digger.......Peckford, he counts 2 or 3 glaciers doing fine, but the AMerican spy satelites over the Himilaya count 650 in big decline, with 1 billion people in risk of low water supply from these.
    Biggest event of the day, at the INquiry: DESTROYED NOTES SUDDENLY APPEARING....Leblanc saying not a good state of affairs,,, his orders to produce them long ignored, by Ralph it seems to me...........so a rubber chicken type judge Bruno would say. This reported by NTV news and the Telegram, by Ashley....not CBC TV.
    Other big news: much coverage of indigneous events, and now the RCMP allows swearing on an eagle feather. Gil preferred , like most who hide the whole truth, to hold the Bible. Is it too late for the Inquiry to have an eagle feather on hand, maybe give the Beothic a little respect? Is there a production at the Arts and Culture as to the the last Beothic?
    Winston Adams

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  30. Tomorrow I will report on UG my speculation on stress reactions at the Inquiry, the witness and lawyers. I was unsure if it had merit, but just googled some on the matter, and my observations seems to have some merit.
    Winston Adams

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  31. Question of the Day. A full 40 percent say we will reap benifits from muskrat in the future. Must be sticks in the mud and heads in the sand. Yesterday Danny compared muskrat to Hibernia. What a collossial distortion of the facts and a warped way of thinking. I believed in Hibernia right from day one. Reason, we were not putting 10B$ into it. It was oil money, and we had nothing to loose but everything to gain. That's the business of big oil, to take risk, gamble. But they have their homework done and are usually right. When Hibernian was paid for, we began making royalties money in 2003 about the time Danny arrived on the scene. If muskrat operates at capacity, we may make some money after it is paid off, some 57 years down the road, and we have to pay it off as rate payers and taxpayers, plus the 5 cents we get from NS. Big oil, is not paying it off. Hibernia oil goes on the world rates, and shipped mainly to NY and Baltimore, etc in the eastern US. That's who paid off Hibernia. You and I are paying off muskrat. Does anyone see the difference ask Joe blow.

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    1. Joe, you and I are in sync 90% of the time, and yesterday you and I posted at exactly the same time at 09:47, what is the odds of that happening? The DC/AC grid cannot do that good!
      On this issue of of future benefits of MFs.....surprised 40 % think that way, maybe the DW effect lingers, and the Messiah spoke yesterday, and many accept his fake news. But did you hear the expert a couple of days ago who said in 5 to 10 years it is possible it may have value.......I was surprised he said it, but do not disagree, but not so soon as 5 years. And too, I think Dave Vardy overlooks an issue in his piece here.
      I will follow up and explain my view, but even before I do so, Bruno will say Winston talks bullshit from what I have said here already, as he is wilfully blind.....fixed in his opinions and wants not to hear another point of view.You on the other hand is open minded to say state your case and then you assess and say if it has merit or not.Of course technical issue of dam safety, reliability etc can absolutely or greatly diminish out long benefits.....these will be known soon.
      Winston

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    2. Vardy says " The power purchase agreement relies upon increasing demand for power and the willingness to pay twice as much for power as they currently pay"
      Also " The return depends upon the strength or elasticity of demand and upon growth in population. New demand for electricity such as electrification of vehicles and further penetration of electric space heating will depend upon our ability to offer low cost power."
      Both of these statements require examination I suggest.
      What is meant by saying "paying twice as much for power"? Is it twice the power rate, from 11 to 22 cents rate? Or twice the yearly power bill for electricity? You can have a 22 cent rate which is a 100 % increase, but only 65 % increase in annual power bills for electric heated houses. This is equivalent to 14.3 power rate, not 22 cents, although the rate is actually 22 cents. This may seem a contradiction in the law of physics or economics, but it merely reflects the very high efficiency of space heating with heat pumps.
      This is also laid out to some extent by Synapse. So for space heating we can see a decease in electricity consumption in existing houses but an increase in other houses( oil or wood switching to HPs) and commercial and institutional buildings.
      Winston Adams

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    3. The use of HPs is disruptive technology ( and why Nalcor should have realised this to avoid MFs). Yet is is almost equivalent to having low cost gas heat. Some locations in the USA constractors opt for HPs over running gas lines to new subdivisons.
      So too for electric vehicles. Do we need low cost power long term , or just short term for incentive and ramp up the demand? EVs is essentially disruptive to gas engines, say getting 110MPG equivalent, double or triple as to fuel costs. Low power rate would be great to ramp up demand, but higher power costs is very economical for EVs, and as EV vehicle costs also drop. BC and Quebec is moving this direction to use hydro power for transportation.
      Our oil is sold as international prices.As to electricity, NY city pays 22 cents for power. Much of Europe 30 cents rates. Coastal Labrador 18 cents above a basic volume. So are we at great risk here with 22 cent rates if it MITIGATED with disruptive technology to cushion those high rates, so the yearly bill is not double?
      Such is my argument as to why the Inquiry expert could be right, and why the 40 % of the VOCM poll, with just faith, could be right. But if this argument has merit, it must be finely tuned to produce a favourable result. Leblanc has said these matters before the PUB can be of importance, but being ignored by the Oversight Committee. And certainly this approach was not envisaged by Nalcor or Danny Williams or Ed Martin or Gilbert Bennett nor Stratton, nor Nfld POWer/Fortis.
      At a time of climate emergency, it is essential to optimise energy efficiency and reduce fossil fuel burning. With the world on the verge of going green, such an approach seems prudent, and may save our asses to absorb this boondoggle high power cost.
      Bullshit says Bruno: Winston is crazy says Bruno. Winston is a troll says Bruno. Winston is like Trump for distortion says Bruno.
      Or Bruno fumes and says nothing?
      Of course what you or Dave Vardy says is much more important, and PENG2 ( who seems to have abandoned UG?)
      Winston Adams

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    4. Trolls of a feather flock together.

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    5. It took Bruno 8 hours to state what I suggested he would, he is so predictable. It helps explain why Bruno was silent on Synapse too. I repeat : Bruno's opinion doesn't count much. He countered not a single point of my argument.
      And who would I be trolling? Vardy, who has done so much to expose the deception of MFs as a prudent idea? Vardy has said with HPs we invest twice, which is true. Stick with burning your black native coal, Bruno, while you colour yourself green.
      WA

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  32. Kudos to Russell Wangersky!

    Worth the read!

    https://www.thetelegram.com/opinion/columnists/russell-wangersky-hang-onto-those-jerseys-for-now-324082/#.XQ4g9SKZWwM.facebook

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  33. Also worth the read!

    https://www.thetelegram.com/opinion/columnists/pam-frampton-nalcor-a-league-of-its-own-324689/#.XQ4iEzTdNjE.facebook

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  34. Read the Quebec court of appeal ruling on differences between the original contract versus the 25 year extension. It is positive for NLH/CFLCo and, if upheld by the supreme court of Canada, could provide some excess surplus energy as well as some operating flexibility with respect to the Twinco Block and recapture totalling 525 MW once MF comes on stream.

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    Replies
    1. https://news.hydroquebec.com/en/press-releases/hq/1513/the-quebec-court-of-appeal-upholds-hydro-quebecs-right-to-operational-flexibility/

      HQ believes it is positive for them also. Could it be a win-win??

      Delete
    2. Why, when muskrat comes on stream?? Yes guess every little bit of power helps. Will that power be shipped over the HQ line, and what price and what cost. Because have to consider how much reliable power muskrat develops, and how much can be carried over the line, LIL. Is it 825 MW or 600, no one seems to know. But it certainly can't carry 525 MW from UC plus 800 from muskrat. So we always hear a little bit about possibilities here and there but no comphrenesive plan. Guess there are so many uncertainties. Can more power be used in Labrador at a profitable rate, probability not, ask joe blow.

      Delete
    3. The judgement will allow MF to run above the 17% mark, but in no way this can fix the boondoggle. None of the financial reviews posted so far limited MF to 17% and they all considered it would run at 100%. So no gain here.

      Also, all excess energy from UC will be during summer time because the contract is from Sept 1st to Aug 31. That makes the annual block reset in summer time. So any excess energy will be during summer and so, worthless. Also, the judgement confirmed that HQ has all of UC's power during winter time (but for Twinco and Recall blocks) so again, nothing of monetary value for CFLCo.

      Delete
    4. Lol...Anon: 18:20 and Anon: 14:18, you guys better have a talk with each other. Obviously one or both of you are full of BS. Or maybe you are both so far apart one is in la la land, and the other back in 1970's. I don't read it I just depend on the legal begals interpeting what the court said. Of course it could be referred to the SCC if one party decides. Seems the legals are saying cflco now has control over the water flows. Average Joe.

      Delete
    5. The VOCM poll: if MFs will reap benefits, this morning it was 40% said yes, 55% said no, now 51 says yes , 43 % says no. I have not voted, but would be inclined to say I don't know, as my comments above are no more than 50/50 if this can be made to work, maybe better than 50/50 with good planning.Like Dannyland should not allow baseboard or oil heat. Montreal is now planning to ban oil heat.
      VOCM has a photo of Danny saying he has read the judgement and it is very favourable...........so many believe him, as many believe Trumpie. Such a turn today on that poll, suggests many would opt now for Gull Island if Danny said roll the dice again.
      Costco is on Danny Drive I see from a face book piece. Now with this Quebec ruling he can put a billboard up showing Danny Falls supplying energy for Danny Drive, MFs worth somewhere less than 100 billion he stated at the Inquiry.
      Winston

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    6. Dwight and Danny are both wrong in their interpretation of this court ruling. It is positive for NL but does not authorize or impose on HQ the water management disagreement on the Churchill River in any way shape or form.

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  35. Not much has changed re Muskrat Falls. The upper CF plant, a BMF Hydro plant, is a base load plant and runs balls to the wall in the winter to support HQ requirements and lower and slower in the spring/summer and early fall. To do this requires significant water flows on the river. All this water passes the MF plant and is used as required. A water management agreement with HQ which has yet to consummated would assist in maximizing the overall potential of the Churchill River but such has not happened yet, but I don't know why not. I guess we need to have the courts finalize where we are before we advance.

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  36. GILBERT BENNETT: "GARBAGE IN GARBAGE OUT" Perhaps his key words from yesterday. That was in reference to QFAs (Quantitative Risk Analysis). EY said they should be done every 6 months for such a project, one was done in 2012 and another not done until 2016, and effectively Nalcor obstructed EY from doing it.
    Gil says it is only a tool and since they knew the issues, just ignore experts say is best practices such as QRAs and fix the problems.So Gil insists, like the song "I'll do it my way". That was the crux of his testimony in support of Ed Martin's approach, or Ed followed Gil's approach. Gil said there is no cookbook solution. There were over 200 risks , over 40 serious risks, so more complex than making a cake. How many wilful blind events and red flags were ignored in Gil's Way? We can see that most reports and forecasts to justify MFs was indeed "garbage in and garbage out", starting with the power demand forecast, and reports edited and changed to "get her done"
    Gil should be remembered by his words : Garbage in, garbage out, 14 billion wasted........some garbage can, hey b'y, over 6 millions documents is it, not counting those deleted, trashed, destroyed and jumped on. Some still being discovered.
    Winston Adams

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  37. Ashley Fitzpatrick, (as I have here on UG) said much on the missing notebooks, in several of her pieces. I think the public and the Inquiry Commissioner should be outraged by such occurances, and what seems to me contempt of court, mischef, or obstruction of justice.
    Ashley says Leblanc is "taken aback" by the latest events. Recall we heard witnesses say they they considered notebooks " transient documents" a concoction put forward by government lawyer Ralph it seems, the guy responseable for protecting and delivering these documents, is he not? Transient means , said Ralph , that they could be destroyed. No big outrage at that! Why not? Now 67 new documents surface, at this late stage, only 2 weeks left in phase 2. Government lawyer Ralph said "When the summons went out in January 2018, there was a request for all paper records..., the summons went out to all government departments, and for whatever reason, the notebooks were not considered a paper record, I guess".
    Notebooks, not a paper record? Holy F..k, what idiot would consider that notebooks are not made of paper? Name every damn government employee that believes that. Drag each before Leblanc to swear on the Bible that they so believed that, or else they had instructions to such an interpretation.And instructions from who? For whatever reason said Ralph.....find out the reason. Ralph looks like the cat that swallowed the bird, telling these fables to Leblanc. So he says "I guess" Well , don't guess.......find out why these were held back from this Inquiry, now for 1.5 years. Ralph toddled off recently with Julia Mullaley in search of her notebooks , but was unsuccessful. So was hers of the transient type? Notebooks of paper or written with invisible ink, maybe, on parchment, not paper?
    Surely this Inquiry is being obstructed just as Nalcor obstructed EY.
    Ashley says Leblanc said " Not a good state of affairs from my perspective" Past time to call in the cops, is it not? We are not all idiots as to what's happening here. This is not accidental. This is not just Nalcor. This is government officials. And government lawyers involved.
    Winston Adams

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  38. Again, Ashley Fitzpatrick latest piece is good, here in summary form,and sums up Eds and Gil's version of how the boondoggle came about:
    1. Ed and Gil knew the schedule was aggressive but was doable
    2 John Mallam and Westney disagreed.
    3 P factors of of 1 to 3 was assessed, indicating only 1-3 % chance of success
    4 Ed told the Telegram that the idea he pressed ahead with certainty of a failed schedule and cost overrun was "ridiculous"
    5 But Martin and his lawyer never took the opportunity to question witnesses on those issues at the Inquiry
    6 Learmouth says Martin now springs his theory near the end of the Inquiry,that he was denied a chance to question it, that others support his view that this was all manageable, and besides: a time risk document is only a tool....you cannot equate it to a schedule, "that in my own mind, and in the company,this is not a P1 schedule....I am going to say we did not sanction on a P1 schedule".
    7 Ed repeatedly rejected the idea of P1 stated by Kate O'Brien, saying they had mitigated it.
    8 Now Gilbert Bennett, Ed's number one, and VP, says costs were coming in higher but Martin chose not to communicate that to the Board or government, but Martin understood the risks, and no further QRA was done, as it is only a management tool, he saw no need of it.
    9 Bennett rejected EY notion that more QRAs would be beneficial and the "studies can be garbage in and garbage out"...there are other ways...decisions are discretionary......not dictated by a standard....we don't have a cook book to say if you do QRAs every 6 months all will be fine.
    So Ashley stated their case. Ironclad, is it not, they were world class engineers and managers, and used good discretion,worth every cent. Just a little bad luck. Best practises and discretion. No civil or criminal activity, hey b'y?
    Ashley points out that Bennett has 2 more days, then there's the new missing notes that were destroyable, Ralph said,being transient, now a miracle, he has found them .....deserves an Emmie prize that guy.
    Winston Adams


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    Replies
    1. How much is now missing from those notes,now that they have had time to choose what will be presented to the inquiry,omitting what could be incriminating?

      Delete
  39. Bloody-well right... that hideous monstrosity Nalcor will henceforth be spoken of in the same breath as the likes of Mount Cashel and the NL government's Constituency Allowance Scandal... amongst the recommendations coming out of this MRF inquiry is that the Nalcor monstrosity should be dismantled lock, stock and barrel and sold off to the private sector. Even demolish that looming edifice on Columbus Drive for good measure, as was done with the infamous Mount Cashel orphanage. Then arrest the entire lot of that goddamed MRF cabal and haul them all up to court.

    https://www.thetelegram.com/opinion/columnists/pam-frampton-nalcor-a-league-of-its-own-324689/

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  40. Hear...hear!!

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  41. Why are we waiting to make payments on the Clunker"? I was always told by the Ol' Man to pay off my bills as soon as i can to save interest. So, get the "mitigation" in place, get the Phantom money from the the Feds (that no other province will know about), jack our rates up and start paying down now!!

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    Replies
    1. Seems payments don't start until first power from the MFs plant, but interest accumulates at hundreds of million per year.....so this why the schedule delay has been so costly.....and add to that the continued use of oil at Holyrood. A good reason to half MFs before financial closure due to schedule delay. Wind or gas turbines can be producing in say 12-18 months. Interest during construction was always not included in figures given to the public, so now that is over 3 billion maybe, including the govn borrowed money injected. And it keeps on ticking......18 months in the 1930s to build the Empire State building! Interest costs on MFs is one of the biggest deceptions on the public....so 10.1 billion is now actually 12.7 with interest included........yet Nalcor and govn was promoting the 1 billion "savings" in interest from the federal loan guarantee!
      You can go broke "saving " money, when savings is promoted this way.
      WA

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    2. One benefit of getting the payment plan in place is finally we can see what the hit to the pocket book is. We can decide if we will stay or go, CFA's will decide if they want to move here, the economy will either survive or collapse, etc,etc..Just get on with it. All we got here now is doubt and stagnation.

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    3. Seems the hit to the pocketbook will be on rates and or taxes and reduced economic climate.
      All depend on if MFs operates at all, is reliable enough to keep operating, and if mitigation can boost revenue, to counter elasticity effect.So by next summer, and perhaps clues from the PUB early in the new year.
      To me, this why Synapse mitigation suggestions is important, and the public should be more attentive to that, especially to CDM measures that can assist customers, reduce peak load that can permit EV uptake and conversion from oil heat, and exports.
      Leblanc was critical that the Oversight Committee was not even following that at the PUB.....the public should be following that, as we are 2nd worst in Canada for assisting homeowners as to using energy wisely and efficiently. The public is disengaged as usual, and the results most always do best for the shareholders of Nfld Power and the insanity of Nalcor/Nfld Hydro wild gambles.
      Winston

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  42. A childhood puzzle to identify: "Little niddy noddy, two heads and one body" What is it? The answer was a barrel, and in Upper Island Cove area generally referred to a very small barrel.
    Yet a niddy noddy I just see is a wooded devise for yarn.
    Can AJ or other know of it referring to a barrel? The Ndld dictionary does not say so.
    Winston

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    Replies
    1. A friend of mine would sometimes say, when an older person in the community died, that "He left a barrel on money" . I took such statements with a grain of salt, and would respond asking "was the barrel a niddy noddy or a puncheon"? My friend would smile and say "I don't know". One such person seldom worked, but would pick many berries in the fall of year, but was very tight with spending money.
      I could not imagine him leaving a barrel of money.
      As to one's tendency to stretch the truth,exaggerate, whether Trump, Ed Martin, Gil, Paddick, Danny Williams, Bruno etc.....by an order, or orders of magnitude, it is like the size of a barrel, one can buy a wooden barrel from 1 litre up to 45 gallon (450 lb ).
      If MFs is sold as is for 1 billion, or can pay its way at 10 billion, or maybe worth close to 100 billion as Danny Willians suggested......this a very big range, 3 orders of magnitude of difference. Much the same for 1 litre to 450 lb puncheon barrel.
      So too MFs is about one order of magnitude smaller than Cfs as to power capacity, but one order of magnitude more costly, indicative of a boondoggle.
      Why is this relevant? As to the figures being tossed around by Nalcor at the Inquiry, as to MFs reliability and power on so far with the old GE software. Same deception as Nalcor has done from day one, now happening before this Inquiry.
      Winston Adams

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    2. Can't enhance you knowledge of a niddy noddy, Winston. But can relate a true story that ended up in court. Many years ago when the entrance to the dockyard, south side road, and the rail way station was a beehive of activity all locals in their motor cars and trucks etc. And one well known person of the dockyard had a twitch so that his head was always nodding. His name was Ned or as they called him Neddy. So in the busy intersection of going in and out and turning an accident occurred causing serious damage to both vehicles. When it went into court, the judge asked the charged why he proceeded when he clearly didn't have the right of way, and his only defence was, " Neddy, nodded at me your honour", meaning giving me the right of way. Now don't think that will help your barrel but shows there may be many meanings. Joe blow.

      Delete
    3. Now, Eddie, never officially passed along the numbers to the board, premier, govt. officials, etc. but just with a wink and a nod. So maybe he could be called a Eddie Noddy. But am sure the commissioner would not accept that as just cause for not officially giving the real numbers. Joe blow.

      Delete
    4. Amusing story, AJ. Now Ed tends to move his head back and forth sideways, even at the AGMs when I tuned in. Noddy would be up and down more so. But his communication was with a wink and a nod no doubt, nothing in writing on the numbers, but says if he had his time back he would keep lots of notes, and have his team do likewise to back him up. We assume he means these notes would be on paper, that are meant to be kept, not transient. Likely Nalcor's lawyer would find a loophole to get around this to make them transient and therefore destructable, if need be. Dan too would likely nod to authorise that, for self protection.
      As most all witnesses from govn and Nalcor are YES men /women, I guess they are all noddy types : Yes sir, you say so and I kiss your ass, I will fudge the numbers. I will hide or destroy documents. I will edit and get changed consultants reports. I will keep my mouth shut. I will turn a blind eye as often as it takes. What ever it takes "to get her done". And we will do it all in a world class style. If we cannot mitigate the risks, we will have a problem,yes, but a world class problem, maybe a boondoggle. All publicity is good, as long as it is world class. We will just shake it off, just change the narrative,change the brand the a little, and put on a new jersey.
      Winston

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  43. http://vocm.com/news/testimony-from-chair-of-nalcor-board-a-breath-of-fresh-air-danny-williams/

    I have a question, how does all this positive stuff help with the $750,000,000 per year after completed that the big boondoggle at MF requires from our taxes(our pockets) to keep rates as they are?

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    Replies
    1. Don't be stunned, Danny L'il Trump knows best
      listening to Dwight talk about "big victory" in Quebec courts, and L'il Trump about a "reasoned judgment", you juts know they're lying.. that's the only thing all politicians/senior civil servants/world-class Nalcor experts are really good at, lying

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    2. Ain't that the truth!!

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    3. The river still is controlled to run much as before, to supply the needs of HQ, which is fortunately for winter loads as we have in NL,perhaps 80% of the time, but not always, so MFs water and production will be secondary to HQ needs from the CFs plant. Nothing or little change on that, and now just a few months from production no agreement with HQ that they might consider MFs needs. At the 11 th hour this still not settled or negoticated. If the case is a big win for water flow for MFs, perhaps some one can say here, I have not read the case,which they is complex, perhaps Ex military or other can clarify further? I can trust neither DW nor Ball on their statements.
      WA

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  44. "He says it was stated under oath by an expert witness that the project will end up being worth more than the $12 billion dollars it cost to develop it. "

    Well well, the disaster on the Churchill has had a fresh load of bullshit generously applied by a paid consultant to said disaster. It will be worth more than the 12 billion it now costs! Will it be worth more than the 15 billion the cost will soon spiral to?

    When that 12 or 15 billion is extracted from ratepayers at 22 or more cents kWh will it be worth it?

    When the old and poor have to make choices between food and heat will it have been worth it?

    When the youth of the next three generations have no choice but to go down the road will it have been worth it?

    When the spur fails and the whole of MF turns to shit what then?

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  45. The expert is Jergeas I assume. I recall the witness said it MAY turn out to be a good project or it is POSSIBLE ( as projects that run high over budget sometimes do turn out that way.) I above explained why that may happen. I did not say it will or shall happen.
    Of course my memory is poor says Bruno, so maybe Danny's is better. What do others recall was said? Or someone check the recording.
    For Danny to say the expert said it WILL be worth more than it cost, if that is not the case, then it is false, and whether a lie or poor memory.
    Now the Messiah could say it SHALL be worth more than it cost,for certainty, this the language of lawyers and judges.
    As to the breath of fresh air issue, coming from Nalcor, it is as fresh as when I was young and getting a ride on a horse and cart, and suddenly the horse farts. But that was momentary. Nalcor and Danny Williams comments is of the same scent, for a decade now or longer.
    I look forward to some straight talk from Stan Marshall to call a spade a spade, and that is 50/50 odds if he is like Paddick about putting on the jersey. Perhaps Marshall will admit mistakes and apologise on behalf of the old Nalcor and promise scouts honour to do better going forward?
    A big burden if Stan testified the North Spur is safe. I think he will want reputable signatures of experts knowledgeable about quick clay, to certify. Paddick's comment just don't cut it.
    Winston

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    1. Bruno, like Danny, see certainty, but in opposite directions. There is no grey area to be evaluated. So they have visions that they are absolutely sure is right. No room for doubt. Neither would want a QRA, so just like Gil, ignore an alternate opinion, he did it his way.
      I say we have made a hard bed and must lie on it, and seek solutions. If there is no accountability,and public engagement, it will happen again and again.
      WA

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