Contract to complete Muskrat Falls transmission system surpasses $500M
Original 2014 contract has increased by 30%
A combination of missed deadlines, change orders, protests and settlements has pushed the cost of a contract to ready the Labrador-Island Link for operation beyond the half-billion-dollar mark, CBC News has learned.
And documents show there is still risk associated with the contract as the Muskrat Falls project inches closer to completion.
An access-to-information request by CBC News has revealed that the original contract to construct converter stations, transition compounds and a specialized computer software for the 1,100-kilometre high-voltage, direct-current transmission line from central Labrador to Newfoundland's Avalon Peninsula has grown by 30 per cent, to $519 million.
It's another example of how the price tag of Muskrat Falls has grown from $7.4 billion at sanction in 2012, to just over $13 billion, and why it was labelled "misguided" by Justice Richard LeBlanc, who led a commission of inquiry into the project.
According to a breakdown of the cost escalation provided by Nalcor Energy, the provincial energy corporation that oversees the project, a decision to make contractor GE Grid Solutions responsible for the civil work added $60 million to the contract value.
Nalcor explained that it resulted in a streamlined management structure under one contract instead of two, and the additional cost was already included in the overall project budget.
A decision by Nalcor to change course and allow electricity to flow early over one conductor line, which first occurred in 2018, and energize the second line later, cost more than $32 million, while Nalcor has paid out more than $17 million in settlement claims to GE.
Protests against the project in October 2016 added $12 million to the cost of delivering transformers to Muskrat Falls and Cartwright, according to Nalcor.
Glitchy software
Nalcor inked a deal with a French company called Alstom in March 2014 at a value of just under $370 million, with a target to finish the work by the summer of 2017.
The contract called for the construction of a station at Muskrat Falls to convert electricity from AC to DC, two shore-based transition compounds for the undersea cable that crosses the Strait of Belle Isle, and a second station at Soldiers Pond to convert the electricity back to AC for integration into the provincial power grid.
Another critical part of the contract is the development of the computer software needed to operate the line, which has a capacity of 900 megawatts.
But like just about every other aspect of the project, the cost and schedule for the contract has been upended in a big way, beginning with Alstom's acquisition by General Electric in 2015, with subsidiary GE Grid tasked with completing the contract.
For years, the computer software has been plagued by glitches, and three synchronous condensers at Soldiers Pond continue to undergo modifications to repair vibration problems. The condensers generate or absorb power as needed to maintain optimal energy flow during the conversion from DC to AC.
The latest update from Newfoundland and Labrador Hydro to the province's utility regulator earlier this month set a date of July 29 for the delivery of the final software, which is a further five-week delay from an earlier update. Further delays "remains a risk," according to Hydro, but trial operations using both power lines on the link — known as "bipole" — have been ongoing throughout the winter and spring.
As for the condensers, all three are not scheduled to be fully operational until September, just two months before the entire project is scheduled to achieve full commercial operations.
The Labrador-Island Link is the energy corridor that will bring Labrador electricity to Newfoundland, and to Nova Scotia and beyond via the Maritime Link.
The link comprises some 3,200 towers, 2,300 kilometres of conductor wire, and the 30-kilometre subsea cable across the Strait of Belle Isle.
According to a recent quarterly report from Nalcor, some $3.6 billion has so far been spent building the Labrador-Island Link.
CBC News requested an interview Monday with Nalcor CEO Stan Marshall, and is awaiting a response.
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