The Yukon Development Corp. will borrow the $52.5 million to cover the territorial government's contribution for the Mayo B hydro project and the grid extension to Stewart Crossing.

David Morrison, the YDC's chief executive officer, told the Star this morning the government will pay the annual interest on the loan and make the annual payments on the principal.

The cost to Yukoners will be in the neighbourhood of $2 million to $2.5 million a year over the 30-year life of the loan, Morrison explained.

Morrison, who is also the president of Yukon Energy, the development corporation's only major asset, said the corporation is also trying to negotiate a deal that would allow individual Yukoners to buy into the action.

The YDC is looking at the bond market to secure the financing, rather than a straight loan from a bank, he explained.

Morrison said right now it's looking like the annual interest rate on the $52.5 million will be fixed at somewhere between five and 5.5 per cent over the 30 years.

The corporation, he explained, is exploring how Yukoners could buy a portion of that bond.

It would see individuals buying a portion of the bond used to provide the financing, knowing their annual return would be the five to 5.5 per cent interest the government would be paying on that bond.

Morrison said one of the unknowns right now is just how much Yukoners would be interested in buying into the bond.

"We don't know,” he said. "We might be looking at $5 million or $10 million of it.

"It's hard to gauge how much people would want to invest.”

Morrison said YDC is currently in discussions with a couple of financing firms to arrange the terms of the loan bond, and how much should be set aside for direct investment by Yukoners.

It was not yet clear, he added, whether Yukoners would have to lock in their investment for the full 30 years, or just how long.

An annual interest rate of five to 5.5 per cent may seem high for a loan these days but arranging financing through a bond means a fixed rate over the life of the loan, Morrison explained.

The government is also using the Yukon Hospital Corp. as its vehicle to borrow $67 million to finance the construction of the new nurses' residence on Hospital Road, and the new hospitals for Watson Lake and Dawson City.

The cost of Mayo B, which will more than double the five megawatts of generating capacity at the Mayo Dam, is estimated at $120 million. Yukon Energy is hoping to have Mayo B on line in 2012.

The cost of extending the Whitehorse-Aishihik-Faro grid to Stewart Crossing, to tie into the Mayo-Dawson grid, is estimated at $40 million. The right-of-way has already been cleared, and construction is expected to begin this spring.

Of the $160 million for both projects, Yukoners will be contributing the $52.5 million, the federal government is putting up $71 million and Yukon Energy is pouring in $36.5 million, which will be added to the rate base.

Morrison insists that adding the $36.5 million to the rate base will not require an increase in electrical rates, as new customers are coming on line to buy power and increase profits, and the payback period is spread over 50 years.

Negotiations are ongoing with Mayo's First Nation of Nacho Nyak Dun to buy a portion of Yukon Energy's $36.5-million contribution into the Mayo B project.

There is also a longstanding provision in the financing arrangement between the YDC and the government that ensures any revenue from new industrial customers that tap into the grid extension will go toward the government's $22-million contribution for phase two to bring the line to Stewart Crossing.

Based on the principle that the grid extension would not have happened if were not for the Minto Mine's desire to buy hydroelectrical power, the mine owner was obligated to contribute $7.2 million to the cost of constructing the main line from Carmacks to Pelly.

The mine was also responsible for paying 100 per cent of the cost of its 27-kilometre spur line running off the Klondike Highway into the mine site.

On the same principle, any new industrial customers that tap into the line will have to contribute to the capital cost of the grid extension, Yukon Energy insists.

When the Mayo B project was given the green light last year with the arrival of federal money, Yukon Energy was negotiating a $12.5-million contribution to grid extension from Western Copper, which is proposing to build its Carmacks copper mine.

Those negotiations have since been shelved, though Western Copper is currently pursuing a water licence for the Carmacks Copper project.