Developers close financing for 824-MW Muskrat Falls hydropower project

Financial closing for Canada’s 824-MW Muskrat Falls hydroelectric plant has been achieved, international business law and litigation firm Fasken Martineau said.

The US$4.5 billion hydropower project and its associated maritime transmission link are being developed by Newfoundland and Labrador’s Nalcor Energy.

The Canadian federal government announced a Sovereign Guarantee for the project in December 2013.

The Muskrat Falls plant will be located on the Churchill River in Labrador, downstream from the existing Churchill Falls project. It is one component of the Lower Churchill complex, which could eventually also include the 2,250-MW Gull Island plant.

“The critical aspect of the Lower Churchill hydro and transmission project financing was to structure it in a manner that the Sovereign Guarantor’s AAA credit rating would be transferred to the project special purpose vehicles such that the pricing for the debt would resemble as much as possible that of the AAA Sovereign,” Fasken Martineau lawyer Xeno Martis said. “Fasken Martineau conceived and proposed a modified ‘structure wrap’ which sheltered the lenders from any project risk and provided them with direct recourse to the Sovereign.”

Muskrat Falls has stirred controversy throughout its development, though multiple studies have defended it as the least-cost option for future power generation.

Nalcor awarded Italian contractor Astaldi a contract to construct Muskrat Falls’ major civil works in October after awarding a $170 million contract to Andritz Hydro in February to supply turbines and generator units. Muskrat Falls received the official go-ahead from Newfoundland and Labrador Premier Kathy Dunderdale in December 2012.

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