Hydro warns Keeyask price tag could hit $9.9B
Utility company sticks to 2021 timeline, warns delays will add to final cost
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Hey there, time traveller!
This article was published 22/01/2018 (1833 days ago), so information in it may no longer be current.
Manitoba Hydro admitted Monday that any more delays to the Keeyask generating station megaproject could push the final cost as high as $9.9 billion.
Keeyask project manager Dave Bowen told Public Utilities Board (PUB) counsel Bob Peters significant further delays could push the project’s price tag that high.
But Hydro is sticking to its insistence that Keeyask can open for business in August 2021 at a cost of $8.7 billion — while admitting there are risks, some significant, over the next four years. Bowen said Hydro has no plans to update its cost estimate, though it will release its review of its completion date at the end of February. Bowen told Peters any further delay will “absolutely” drive up the cost.
Hydro is basing its promise to deliver the Keeyask megaproject at $8.7 billion largely on its contractor delivering an improvement in productivity of 10 per cent or more over original expectations — the same contractor whose underproduction Hydro blames for blowing the original $6.5-billion price tag.
Coming in at $8.7 billion by the summer of 2021 also depends on seasonable weather, no work stoppages and no nasty surprises when they drill through bedrock, Bowen told the PUB.
“We can’t have any major risk come true in order for us to meet our control date,” Bowen said. “We haven’t uncovered the bedrock where the future south dam will be. We need favourable spring weather. Further improvement is required — we know we need to improve the performance. We are confident our team can deliver continued improvement.”
The PUB is hearing Hydro’s application to increase its rates 7.9 per cent annually for the next six years.
Bowen said that at the start of 2016, the contractor — the BBE consortium of companies — was only one-third of the way to where it should have been on concrete and earthworks.
“The aggressive concrete projections could not be achieved,” he said.
A new plan required bringing in an additional 600 specialized tradespeople, as Hydro revised the Keeyask cost to $8.7 billion in April of last year. KPMG financial consultants was hired to advise Hydro in getting back on track, and continues to provide advice, Bowen said.
Bowen blamed the $2.2-billion cost overrun on productivity issues, slower progress than expected and geotechnical problems at the site, all of which Hydro will discuss in much greater detail with the PUB behind closed doors today.
The Hydro executives told Peters they will also discuss in camera how close the utility came to cutting loose its contractor; they were also uncertain Monday whether the estimated cost of stopping the project altogether had ever been made public, so that story will likely also be told in camera.
“Both Manitoba Hydro’s and the contractors’ expectations were not achieved,” Bowen testified.
Bowen said Hydro set its productivity levels based on its Limestone project in the 1990s. Hydro expected better productivity than on its Wuskwatim project that opened in 2012, but instead is seeing less.
Keeyask business manager Jeff Strongman said workers rotate off the site after 14 or 21 days, instead of the 35 to 42 days in decades past. That means more time travelling and less time working, he said.
Next Tuesday, the board will hear from Calgary-based MGF Project Services, which says Keeyask will eventually cost $10.5 billion and be even further behind schedule. The PUB paid $2 million to MGF to review Hydro’s capital projects.
Updated on Monday, January 22, 2018 6:15 PM CST: Adds related items
Updated on Monday, January 22, 2018 10:28 PM CST: updates quotes