DBRS Limited (DBRS Morningstar) notes that on March 26, 2020, Nalcor Energy (Nalcor) provided a construction status update of the 824-megawatt hydroelectric generating Muskrat Falls Project (the Project). In response to the Coronavirus Disease (COVID-19) pandemic that began mid–March 2020, the Project was placed in care and maintenance mode with reduced construction activities. Nalcor is now preparing to gradually resume construction and commissioning at the end of the month (May 2020). However, Nalcor estimates that completion will be delayed at least four months, and depending on the size of the workforce and level of productivity achieved in the coming months under the new health guidelines, final completion could be delayed an additional two to six months. Nalcor also predicts additional cost overruns associated with the delay.
Muskrat Falls/Labrador Transmission Assets Funding Trust and Labrador-Island Link Funding Trust issued $7.9 billion bonds to finance the Project. We rate the bonds at AAA with Stable trends, based on unconditional and irrevocable federal loan guarantees provided by the Government of Canada (Canada; rated AAA with a Stable trend by DBRS Morningstar). Notwithstanding the latest construction delays, the ratings on the bonds will continue to move in lockstep with Canada’s sovereign rating.
All figures are in Canadian dollars unless otherwise noted.
The principal methodology is DBRS Morningstar Criteria: Guarantees and Other Forms of Support (January 22, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.
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