Former Newfoundland and Labrador premier and cabinet minister Paul Davis says he was kept in the dark by Nalcor Energy about early signs the Muskrat Falls hydro project was in trouble, and expressed shock at some of the findings of a forensic audit.

Davis is testifying Tuesday in Happy Valley-Goose Bay at the public inquiry investigating why the project is so far over budget and behind schedule.

And it turns out many of the troubling findings exposed by the audit of the construction phase of the project were not discovered by Davis until he received an early copy of the Grant Thornton report in December.

And based on the tone of questioning by various government lawyers this week, it's clear other senior politicians and bureaucrats from that era, including then-premier Kathy Dunderdale, were not told by Nalcor.

Former cabinet minister Derrick Dalley is scheduled to testify Wednesday at the Muskrat Falls inquiry. (Terry Roberts/CBC)

Davis was a cabinet minister when Muskrat Falls was sanctioned in late 2012 and when the final financing arrangement for the project was concluded a year later, in November 2013.

The November date is critical because it includes the signing of a federal loan guarantee that locked Newfoundland and Labrador into completing the project, regardless of any cost overruns.

According to the audit, early bids for various work packages came in $600 million higher than estimates, representing 25 per cent overages in the first few months after the project was sanctioned at a capital cost of $6.2 billion, plus interest during construction.

Despite this, there's no evidence Nalcor reassessed its cost estimates, and growing evidence this information was withheld from Nalcor's lone shareholder, the provincial government.

Evidence also shows that by July 2013, the project team was forecasting a new capital cost of $7 billion, an $800-million increase.

But again, Davis, who was transportation and works minister during this phase of the project, said he was not aware of this either.

It's obviously different information than I had known. I was trying to reconcile it. I was surprised by it. And it's the first I knew of it. - Paul Davis

"It's obviously different information than I had known," Davis said in response from questions from inquiry co-counsel Barry Learmonth.

"I was trying to reconcile it. I was surprised by it. And it's the first I knew of it."

A capital cost update by Nalcor dated Nov. 19, 2013, just days before financial close on the project, also showed a "final forecast cost" of more than $6.5 billion.

A cover email for the document from one Nalcor employee directed another employee to "not provide access to NL ... at this time."

Barry Learmonth is co-counsel at the Muskrat Falls public inquiry. (Terry Roberts/CBC)

Davis again said he was not aware of this document, and could not explain why the province would be excluded.

"I saw this last night for the first time. I can tell you I had a very long look at it.… When I read this it appears to me to be some type of intent or direction to not provide this information to (government)."​

Right up to the point of financial close and the signing of the federal loan guarantee, Davis said, he understood the cost estimates had not changed, and the project would cost $6.2 billion.

This was not the case, and Davis said he wasn't happy to discover that years later, with the all-in costs now reaching nearly $13 billion.

It's absolutely important and critical that information, especially of this magnitude, is stated and shared publicly, accurately and correctly. - Paul Davis

"It's absolutely important and critical that information, especially of this magnitude, is stated and shared publicly, accurately and correctly," he said.

And if government had been made aware of those early problems?

"I don't know if the outcome might have been different, or the decision would have been different, but certainly knowing the estimated costs had gone from $6.2 [billion] to $7 [billion] before financial close, which was a critical point in the project progression, I'm quite confident it would have created a different conversation, for sure."

Davis served as premier for just over a year before his government was defeated in the November 2015 provincial general election.

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