Canada will offer up to C$5.2 billion ($4.1 billion) to debt-ridden Newfoundland and Labrador to help it complete a problem-plagued hydroelectric power plant and also ease the Atlantic province's fiscal plight, Prime Minister Justin Trudeau said on Wednesday.
The government agreed in principle to invest C$1 billion and provide a C$1 billion loan guarantee for the construction of the Muskrat Falls project, which has suffered from big cost overruns since it was announced in 2010, he said at a televised event in St. John's, the provincial capital.
"There is more work to be done but we're confident this agreement is a big step in the right direction," Trudeau said.
He also said Ottawa was prepared to offer a total of C$3.2 billion in annual financial transfers over the remaining lifetime of the province's Hibernia offshore oil project.
The money is equivalent to the federal revenues Ottawa has gathered to date from Hibernia, which the province says should continue operating until 2047.
Aides have said Trudeau plans to launch a snap election next month. His Liberals hold six of the province's seven seats.
The Muskrat Falls project represents a large portion of the remote and sparsely populated Atlantic province's overall debt.
Premier Andrew Furey said that without the C$2 billion aid package, electricity rates could have doubled.
"(This) is a big day for Newfoundland and Labrador and will finally get the Muskrat off our back," he told the event.
Last December Ottawa temporarily waived a C$844 million debt payment on the project.
In May, RBC Economics projected Newfoundland's net debt as a share of gross domestic product in fiscal 2021-22 would dip to 47.0%, second only to Ontario, from 51.8% in 2020-21.
($1=1.2552 Canadian dollars)
(Reporting by David Ljunggren; Editing by Richard Chang)