April 4, 2005

Hydro-Quebec, Ont join SNC-Lavalin in Lower Churchill hydroelectric proposal

Hydro-Quebec, the Ontario government and SNC-Lavalin have filed a joint proposal for the hydroelectric development of the Lower Churchill River in Labrador. The proposed project would yield 2,824 megawatts (MW) of clean, sustainable electricity. The proposal was presented to the Newfoundland and Labrador government in response to its request for expressions of interest and proposals released in January 2005.

The joint proposal would see Ontario and Quebec work with Newfoundland and Labrador to develop the 2,000-MW Gull Island site, and an additional 824 MW at Muskrat Falls, both on the Lower Churchill River. Ontario would receive one-third of the total output of the project.

In addition to the joint Lower Churchill proposal, Hydro-Quebec and Ontario have confirmed their intention to build a new 1250-MW intertie between the two provinces. The intertie, which could be in service by the summer of 2009, would enable Hydro-Quebec to provide Ontario with 670 MW of power from 2011 until the commissioning of Gull Island, the first of the two generating stations planned along the Lower Churchill. The 670 MW is representative of Ontario's share of Gull Island's expected power flows.

The intertie project and the power supply from Hydro-Quebec are both subject to certain conditions, including the granting of the necessary approvals and start of construction for the Eastmain-1-A/Rupert Diversion Project in the summer of 2006.

The Gull Island and Muskrat Falls sites on the Lower Churchill River are generally acknowledged to be the most economic undeveloped hydroelectric sites in all of North America. The proposal includes two options.

Option One: The Ontario Electricity Financial Corporation (OEFC) and Hydro-Quebec would form a joint venture company to fund the development of the project. Ontario would own one-third of the company, while Hydro-Quebec would own two- thirds. The joint venture company would lease the sites from Newfoundland and Labrador for 50 years. The joint proposal would see Ontario and Hydro-Quebec work with Newfoundland and Labrador to develop the 2,000-megawatt Gull Island site, and an additional 824 megawatts at Muskrat Falls. Ontario would benefit from one-third of the total output (945 megawatts), which is equivalent to the electricity required for more than 550,000 homes. SNC-Lavalin would be responsible for engineering, procurement and construction contracts for the generation and transmission facilities required in Labrador, and for preparing the required environmental impact statement and associated documentation.

Option Two: The second option would see Ontario and Hydro-Quebec negotiate a power purchase agreement for the output of the project. Ontario's share would be one- third of the total output (945megawatts). Newfoundland-Labrador Hydro would fund and construct the assets.

The proposal is now with officials in Newfoundland and Labrador who will evaluate all proposals received and compile a short list. The time required to complete this short list will depend on the number of proposals received, and their complexity. Once a short-list is compiled, a feasibility review of selected proposals will be conducted. The feasibility review will likely take a minimum of six months.

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