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 contractorAstaldi 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 duringa quarterly financial update Thursday.

"Really what we're talking about is who bearswhat pain here. They're going to lose under the contract. It's going to costus 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 saidthe contract isbased on unit costsone of those was labourbut 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 costus more under the contract.- Nalcor CEO Stan Marshall

He saidin July thatthe cap for labour was reached so essentially Astaldi isn'tbeing paid forits 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 saidthere are incentives for them to continue.

Nalcor is preparing a backup plan in case Astaldi walks away from the contract.

Marshall saidhe's been talking to other major civil contractors in North America to get a sense of how quickly those companieswould be able to start work and how much it could end up costing.

He saidit'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 saidthat 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.