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Understanding Muskrat Stan Marshall, CEO Nalcor Energy
February 15, 2018
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2017 – A Year of Success
• Exceptional performance with 89% construction complete
• Settled all major claims and finalized performance-based agreements
• Raised $2.9 billion with Federal Loan Guarantee – Reduces required equity from Province by $2.7B
– Reduces domestic electricity rates by 1.5 cents per kwh
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POWER GENERATION (MUSKRAT FALLS)
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Generation Site
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Muskrat Falls Generation
• 824 megawatts; 4.9 terawatt hours/yr (TWh)
• Projected facilities costs: – Sanction $2.9B – June 2017 $5.5B
• Projected in service dates: – Sanction: first power Q4 2017;
full power Q2 2018 – June 2017: first power Q4
2019; full power Q3 2020
• Emera to receive on average 20% of energy for 35 years at no cost and an additional 5% during first five years, delivered during off-peak.
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• Major work completed:
– North Spur stabilization
– South dam
– Powerhouse enclosed
– Ice/safety boom installed
• North Dam – 40% completed
Muskrat Falls Generation
78% construction completed
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Tailrace
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Powerhouse Units 1-4
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North Spur (Downstream View)
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North Spur (Upstream View)
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North Spur (Upstream View)
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North Spur (Upstream)
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POWER SUPPLY (TRANSMISSION)
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Labrador-Island Link (LIL)
• 1,100 km line from Muskrat Falls to Soldiers Pond
• 30 km across the Strait of Belle Isle (SOBI)
• SOBI completion by end of 2016
• Projected facilities costs:
– Sanction $2.6B
– June 2017 $3.7B
• Projected in service dates:
– Sanction: Q2 2017
– June 2017: Q2 2018
• Emera provides equity contribution plus interest of $0.8B based on current estimates to receive regulated utility rate of return
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99% construction completed
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Soldiers Pond Soldiers Pond
• AC switchyard constructed, energized and fully integrated into NL Hydro system
• Synchronous condensers and converter stations nearing completion
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Note: Photo taken Oct 2017
Muskrat Falls
• Converter station and AC switchyard nearing completion • Commissioning work underway • Energization planned for Q1 2018
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Labrador Transmission Assets (LTA)
• Churchill Falls to Muskrat Falls
• Two, 250 km 315 kilovolt lines
• Projected facilities costs:
– Sanction $692M
– June 2017 $894M
• Projected in service dates:
– Sanction: Q2 2017
– June 2017: Q2 2018
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99% construction completed
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CFA
• Switchyard construction 99% complete • Commissioning work underway • Energization planned for Q1 2018
Churchill Falls
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Maritime Link (Emera)
• Constructed, owned and operated by Emera for 35 years
• 500 MW capacity
• 170 km undersea link from Cape Ray, NL to Cape Breton, NS
• Projected facilities cost $1.58B
• Testing commenced Q4 2017; commissioning in progress
• Nalcor has transmission rights to import/export power
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MUSKRAT FALLS PROJECT COSTS (DATA AS PER JUNE 2017 UPDATE)
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Muskrat Falls Projected In-service Capital Cost
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$2.9
$5.5 $0.7
$0.9
$2.6
$3.7
$1.2
$2.6
$-
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
Sanction 2012 Jun-17
($ B
illio
ns)
MF LTA LIL Financing and Other
$7.4
$6.2
$12.7
$10.1
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Overall Project Cost Increase – Contributing Factors
• Original cost estimates were optimistic/overly aggressive
• Risks of the project were underestimated at the beginning
• Lack of experience of some contractors working in our harsh environment
• Early execution by some major contractors was poor
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NL Hydro Island Interconnected Sales
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-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
TWh
Sanction 2012 Jun-17
Confidential and Commercially Sensitive
Note: May 2017 load forecast is based on a targeted rate of 18 cents/kWh in 2020 escalating at 2.2% thereafter.
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2021 2022 2023 2024 2025 2030 2035 2040
MF Exports 1,444 1,379 1,290 1,213 1,209 908 464 34
NLH Export Sales 707 728 790 840 887 806 1,078 1,321
Emera 1,166 1,166 1,166 1,170 1,070 927 927 930
NLH Required 1,324 1,368 1,395 1,434 1,476 2,001 2,172 2,373
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
(GW
h a
t So
ldie
rs P
on
d)
Muskrat Falls Energy Deliveries
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Unit Cost Projections (For energy delivered at Soldiers Pond)
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7.00
1.44
8.98
Muskrat Falls Unit Cost Projection by Project Component
(2021 - cents/kWh)
MF
LTA
LIL
Total = 17.42 cents/kWh
5.30
5.75
3.11
1.51
1.75
Muskrat Falls Unit Cost Projection by Cost Category(2021 - cents/kWh)
Depreciation
Interest
Operating & MaintenanceCosts
Emera Net Income
Nalcor Net Income
Total = 17.42 cents/kWh
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Island Interconnected Domestic Rate Projections
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Current wholesale and domestic rates are 7.5 cents/kWh and 11.7 cents/kWh (excluding HST), respectively.
2021 2022 2023 2024 2025 2030 2035 2040
NP Costs 4.43 4.77 4.74 4.71 4.96 5.02 5.50 6.03
NLH Other 6.80 6.54 6.68 6.76 6.80 6.50 7.39 8.87
MF purchased power cost 11.66 12.02 12.02 12.17 12.49 13.82 15.11 17.56
Jun-17 22.89 23.34 23.44 23.64 24.26 25.34 28.00 32.46
Sanction 2012 15.12 15.30 15.26 15.25 15.46 15.84 17.09 18.78
22.89 23.34 23.44 23.64 24.26 25.34
28.00
32.46
-
5.00
10.00
15.00
20.00
25.00
30.00
35.00(c
en
ts/k
Wh
)
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Mitigation Measures
• Extend Federal Loan Guarantee (complete)
• Transmission infeed in advance of Muskrat generation
• Targeted purchases and sales of energy through Quebec and Maritimes interties
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2018 Focus - Transmission
• Maintain safety focus
• Completing construction and commissioning work required to energize the transmission lines for power delivery to the island from Churchill Falls in mid-2018
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2018 Focus - Generation
• Maintain safety focus
• Continue with installation of turbine and generator components
• Complete the North Dam
• Prepare for first power in 2019
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6 Stages of a Mega Project
1. Wild Enthusiasm
2. Disillusionment
3. Confusion, Panic and Hysteria
4. Search for the Guilty
5. Punishment of the Innocent
6. Reward the Uninvolved
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