Nova Scotia Power's parent company has agreed to spend more than $1.5 billion to develop the Maritime Link, its portion of the Muskrat Falls hydroelectric project in Labrador.
The subsea cable is the largest investment Emera Inc. has ever made.
"We're pleased to announce that Emera and Nalcor have sanctioned the Maritime Link project," said Chris Huskilson, the president and CEO of Emera Inc.
Huskilson made the announcement Monday evening as Newfoundland and Labrador Premier Kathy Dunderdale simultaneously sanctioned the $7.7-billion venture billed as Canada's new energy warehouse in St. John's.
Emera Inc. is a minority partner in the Muskrat Falls project and is responsible for the Maritime Link, a 180-kilometre subsea cable which may see as much as 40 per cent of the electricity from the 824-megawatt project moved to Cape Breton.
While Nova Scotia Power ratepayers still don't know what the investment will mean for their power bills, Huskilson said Emera Inc.'s agreement with Nalcor Energy — Newfoundland and Labrador's Crown-owned energy corporation — means the cost estimate is much firmer.
"With an 80 per cent certainty, the $1.52 billion is what we have now studied and will present to Nova Scotians," Huskilson told reporters.
The cost estimate for the Maritime Link could still rise because Nalcor Energy has only completed some of the engineering and ordering for the project. The total cost is variable based on the amount of work that still needs to be done.
Emera Inc. will apply to the Nova Scotia Utility and Review Board for approval for the project in January. The company said it will apply for a 9.1 per cent rate of return on its equity, which is 30 per cent of the Maritime Link project.
Huskilson said studies will show Labrador is the cheapest source of renewable energy over 35 years when considering other sources such as importing power from Hydro-Quebec and using more natural gas and wind power in Nova Scotia.
"Our view right now is that will produce somewhere between $200 million and more than $500 million of savings over that 35-year period against the alternatives," he said.
Huskilson said construction of the Maritime Link is expected to begin in late 2013 or early 2014.
Earlier this month, Emera Inc. said the company would not wait for approval from the Nova Scotia Utility and Review Board before going ahead with the Maritime Link.
If the Utility and Review Board decides the Maritime Link is not in the interests of ratepayers, Emera Inc. will have several choices: its shareholders can finance the entire Maritime Link, it can look for partners or it can walk away from the project.
If Emera Inc. walks away from the project, it will have to pay the federal government a $60-million penalty.
Muskrat Falls is expected to produce power by late 2017.
Nalcor Energy would build the dam and power station in Labrador as well as transmission lines on the island of Newfoundland. That is expected to cost about $6.2 billion.