PlanetNL19:
Muskrat Dividends Will be Negative
While megaprojects have huge costs, their promoters love to
talk about the benefits. At the Decision
Gate 3 (DG3) final sanction stage in 2012, Nalcor developed cost and benefit
models that predicted not only that Muskrat was going to be billions cheaper
for ratepayers than the Isolated alternative but that the Province would reap many
billions in dividends. Key Muskrat promoters
heard from at the Inquiry so far still seem to cling to expectations of positive
dividends from the project.
This post lays out how Nalcor and Government failed to assess
rate affordability and revenue risk before sanction. As a result of one of the key risks becoming
realized, Government’s anticipated dividends will be greatly exceeded by
subsidies and mounting debt servicing costs.
These two-way cash flows must only be considered together in finding the
true dividend or net loss on the project.
Government and taxpayers will struggle to subsidize high Muskrat costs
in every year of the 50-year project payback term leading to massive new debt
growth far larger than the original capital cost of the project.
