The partnership between Manitoba Hydro and four First Nations via the Keeyask Hydropower Limited Partnership (KHLP) announced a significant increase in its control budget and a revised commissioning date for the 695-MW Keeyask Generating Station in a statement on March 7.
Currently under construction on the Nelson River in northern Manitoba, Canada, increased cost for the project is estimated at C$8.7 billion (US$6.5 billion), up C$2.2 billion (US$1.6 billion) from C$6.5 billion (US$4.8 billion). The original commissioning date of November 2019 has been revised to August 2021, which is an additional 21 months.
According to Manitoba Hydro’s Public Affairs Manager, Scott Powell, a control budget is the figure on which Manitoba Hydro has budgeted for the project.
KHLP includes four First Nations: Tataskweyak Cree Nation, Fox Lake Cree Nation, York Factory First Nation and War Lake First Nation.
Lorne Midford, chair of the KHLP Board, is quoted in the statement saying, “The new control budget and revised in-service date developed by Manitoba Hydro has been presented to the KHLP Board. Manitoba Hydro continues to work with its Keeyask partners to evaluate the impact of the cost and schedule changes to each partner’s interests in the project.”
The potential for the increased cost estimate was first identified in the Manitoba Hydro-Electric Board’s (MHEB) review of capital projects completed in the fall of 2016.
In September 2016, HydroWorld.com reported BCG assisted Manitoba Hydro to determine “whether the Bipole III project should proceed as planned, or if the corporation’s current fiscal situation warrants the immediate delay, rerouting or cancellation of the project,” according to MHEB Chair, Sanford Riley.
Riley said the investigation “quickly expanded in scope to include the Keeyask Generating Station… and ultimately, the overall financial situation and operation of the utility corporation.”
In February, Manitoba Hydro announced it will eliminate more than 15% of its workforce while raising rates by at least 10% as the provincial utility efforts to reduce expenditures.
Bipole III is a 500-kV transmission line that would stretch more than 1,380 km from Keeyask to the southern Winnipeg area. Bipole III’s pricetag has grown from a current budget of $4.65 billion to up to $5 billion, with a completion delay between 12 and 15 months.
The September analysis that identified Keeyask’s costs expected them to increase from the 2014 control budget of $6.5 billion up to a possible $7.8 billion, along with a potential delay in completion of up to 31 months.
According to Manitoba Hydro, “The revised control budget reflects a more detailed review conducted by Manitoba Hydro. The review considered the current state of the project’s progress and costs incurred to date, including the results of the first full year of structural concrete work in 2016.”
The new control budget includes an additional $900 million (US$669 million) in contingency funds, interest and escalation not included in the BCG analysis. The utility believes these allowances are prudent to help address potential cost and schedule risks still present in the project.”
“Keeyask is a large and very complex project and the updated control budget is a realistic estimate based on what we know today,” said Kelvin Shepherd, Manitoba Hydro president and chief executive officer. “However, there is always a chance of additional risks materializing that could impact the schedule and costs.”
Shepherd said MHEB reviewed the updated plan developed by Manitoba Hydro and considered other factors, such as revised estimates for Manitoba load growth, updated export pricing and a risk analysis of the cost estimates. MHEB concluded that despite the cost escalation, completing the project makes the best sense for Manitoba Hydro, its customers and the province.
When fully commissioned, Keeyask will be a major source of renewable energy, producing an average of 4,400 GWh of electricity each year, which according to Manitoba Hydro is enough to power 400,000 homes.