(Bloomberg) -- Canada’s federal government is working with Newfoundland and Labrador on a formula to help the east-coast province to deal with its finances after the costs of a hydro mega-project skyrocketed.
Officials from the two governments have been working toward a power-rate mitigation agreement, Newfoundland’s Minister of Finance Tom Osborne said. The formula to implement the agreement is still being negotiated.
“The discussions have been positive,” said Osborne in a telephone interview Monday. “The federal government has a role to play in our fiscal situation in the province.”
The financing cost of Muskrat Falls, an 824-megawatt hydroelectric power plant and transmission project, would force the provincial government to double the electricity rates to C$24 cents per kilowatt-hour, according to Nov. 22 opinion column written by Walter Schroeder and Bob Hallett in the Globe and Mail.
Schroeder is former chairman and founder of rating service DBRS Ltd.
Osborne declined to say what would be the alternative should an agreement on rate mitigation not be reached. Similar to Alberta, the province is also lobbying Ottawa to modify an equalization formula that funnels tax revenues between provinces through the federal government and to ease rules that would unlock the province’s resource potential, including oil and gas reserves.
“If we were able to develop our resources, we won’t need to be relying on the federal government,” said Osborne.
Newfoundland plans to issue C$1.2 billion of bonds in the current fiscal year, of which C$1 billion has been already raised, Osborne. Borrowing plans remain unchanged, he said.
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