A whale of an international power project Friday swam closer to construction along the Atlantic seaboard of Canada and the United States.

By a formal memorandum of agreement with the Newfoundland and Nova Scotia governments, the national Conservative administration in Ottawa kept a spring election promise to support the Lower Churchill Clean Energy Projects with a federal loan guarantee.

The memo, signed in the Newfoundland capital of St. John’s, was a case of translating the political pledge into a formal commitment in principle. Details, including the exact value of the guarantee, were left up to further negotiation.

During the spring Canadian election campaign, Conservative party officials predicted that the federal support would work out to C$4.2 billion (U.S. dollar at about par) or two-thirds of the project’s forecast total cost of C$6.2 billion.

The package includes a hydroelectric installation on the Churchill River in Labrador and three transmission lines: one from the northern dam site to the Labrador coast, a second across the island of Newfoundland, and from there a long third subsea link across the Gulf of St. Lawrence to a Nova Scotia link with the international power grid for the Canadian Maritimes, Quebec and New England.

The development is designed to generate and deliver 4.9 million megawatt-hours (MWh) of electricity per year: two million MWh to replace oil-fired generation in Newfoundland, one million MWh to replace coal-fired power in Nova Scotia, and nearly two million MWh for exports as markets become available.

The sponsors — two provincial government-owned energy corporations, Newfoundland’s Nalcor and Nova Scotia’s Emera Inc. — have an ambitious schedule. The targets call for construction to begin in fall 2012 and power deliveries to start in 2017.

The loan guarantee deal, signed in St. John’s by the provincial and federal energy ministers, did not spell out an agreed project schedule. But the document committed the governments to flesh out details of the financial arrangement by Nov. 30, unless all concerned agree more time is needed to complete due diligence and obtain credit ratings.

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