Harper Says Canada Could Guarantee Loans for Lower Churchill Hydro Project

A Conservative government would guarantee loans for the development of the Lower Churchill hydroelectric project in Newfoundland if re-elected, Canadian Prime Minister Stephen Harper said.

The guarantees would help ease financing for a project that will help Canada reduce its greenhouse gas emissions, Harper said today at a campaign stop in St. John’s, Newfoundland. Harper said other projects in Canada may also qualify for similar types of arrangements.

Two party officials, who spoke to reporters on condition they not be identified because details of the arrangements haven’t been completed, said the federal government will guarantee all debt issuance for the project, worth C$4.2 billion ($4.3 billion), through the government’s business financing or export financing agencies.

The government would need to make a provision in its budget for a percentage of the total loans to be guaranteed, the official said.

Harper, at an election campaign stop in Halifax, Nova Scotia earlier today, said the benefits of the project are “evident” because it will help the country reduce greenhouse gas emissions.

“It is a big chance to shift an entire region of the country towards greener energy,” Harper said at a press conference. “There is a lot of discussion yet to go but I think the opportunities of the project for this country are evident.”

Financing Required

Nalcor Energy and Nova Scotia’s Emera Inc. (EMA) agreed last year to invest C$6.2 billion ($6.4 billion) in a hydroelectric project to ship power from Labrador’s Lower Churchill River to customers in eastern Canada and New England. The project requires financing for an undersea transmission line between Newfoundland and Nova Scotia. Nalcor, which is owned by the province of Newfoundland and Labrador, will build a C$2.9 billion, 824-megawatt generating facility.

The project will allow Newfoundland and Labrador to bypass Quebec, whose state-owned utility, Hydro-Quebec, has refused to let Nalcor use its transmission network to export power to the U.S. Nalcor has also contested a 1969 contract to supply power to Hydro-Quebec because it says the accord, which runs until 2041, fails to account for rising electricity prices.

Nathalie Normandeau, Quebec’s natural resources minister, said in a Nov. 18 telephone interview with Bloomberg News that the province isn’t opposed to the Lower Churchill River project. Still, Quebec would contest any request from Nalcor and Emera for Canadian government subsidies because any federal funding would lead to a “distortion” of electricity prices, she said. Quebec has never received federal subsidies to build its own transmission network, Normandeau said.

Construction of the generating station and transmission links is scheduled to begin in 2013 once environmental and regulatory approvals have been secured, with service slated to start in 2017.

To contact the reporter for this story: Theophilos Argitis in Halifax, Nova Scotia at targitis@bloomberg.net.

To contact the editors responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net; David Scanlan at dscanlan@bloomberg.net.

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