New deal with Astaldi needed because of 'problematic' Muskrat Falls contract: Nalcor CEO
Stan Marshall, the CEO of Nalcor, says the Crown energy corporation and Italian contractor Astaldi are both losing on the contract to build Muskrat Falls.
The two companies have reached a bridge agreement to keep the main contractor continuing concrete and other work on the hydro electric project in Labrador.
"The Astaldi contract is very problematic, that's no news to anybody. It's problematic for Astaldi as well as to us," said Marshall during a quarterly financial update Thursday.
"Really what we're talking about is who bears what pain here. They're going to lose under the contract. It's going to cost us more under the contract."
Ed Martin, the former head of Nalcor, had said the contract was a fixed price contract, but Marshall disputed that.
He said the contract is based on unit costs — one of those was labour — but there was a cap to how much Astaldi could charge.
Really what we're talking about is who bears what pain here. They're going to lose under the contract. It's going to cost us more under the contract.- Nalcor CEO Stan Marshall
He said in July that the cap for labour was reached so essentially Astaldi isn't being paid for its workers, making it a money losing proposition.
"We're trying to keep them in there to complete the project and minimize the cost to us," said Marshall.
The agreement reached with Astaldi gives them more money but sets deadlines for critical work at the site. Marshall said there are incentives for them to continue.
Nalcor is preparing a backup plan in case Astaldi walks away from the contract.
Marshall said he's been talking to other major civil contractors in North America to get a sense of how quickly those companies would be able to start work and how much it could end up costing.
He said it's significantly cheaper to continue having Astaldi work on the site than it is to replace them.
So far Nalcor has spent $5.4 billion on the project.
It's estimated the total cost of Muskrat Falls will be $11.4 billion, including interest during construction. Marshall said that estimate includes extra costs from the new contract with Astaldi. Talks continue with the company to reach a longer term agreement to finish the work.