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Nalcor potentially overstated value of Muskrat Falls project: audit

The construction site of the hydroelectric facility at Muskrat Falls, Newfoundland and Labrador is seen on Tuesday, July 14, 2015. THE CANADIAN PRESS/Andrew Vaughan

An audit found Newfoundland’s Nalcor Energy may have overstated the potential value of its Muskrat Falls hydro megaproject and prematurely dismissed alternative electricity options for the province.

READ MORE: Muskrat Falls public inquiry over cost overruns begins

Accountants from Grant Thornton are testifying Friday at the inquiry into cost overruns of the $12.7 billion Labrador dam, presenting a report on the provincial Crown corporation’s early financial analysis and consideration of other power options.

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David Malamed and Scott Shaffer found that Nalcor’s early estimates for the project excluded $500 million of strategic risk exposure, and could have used a more precise model when estimating its capital costs.

Experts consulted for Grant Thornton’s report said a different calculation model would have increased the project’s capital cost estimate by $767 million.

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Nalcor initially forecast annual operating and maintenance costs at $34 million – an estimate that has since risen to $109 million.

READ MORE: Indigenous leaders share historical ties to Churchill River at Muskrat Falls inquiry

The report also found that Nalcor did not formally discuss importing power from Hydro-Quebec and dismissed the option of waiting until 2041 to import power from the Churchill Falls dam, when the longstanding contract with Hydro-Quebec expires.

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