Samsung Deal with McGuinty Resurfaces

On Jan 19th, Canadian Press broke the story that the long-mooted green energy deal between the Ontario government and a consortium of South Korean companies led by Samsung was expected to be announced by Premier Dalton McGuinty this week (Jan. 20-22/2010).

The Toronto Star’s coverage Jan 21st continued to self-congratulate for breaking the original Samsung story, three days after it was posted here September 24th.

Keith Leslie at Canadian Press deserves special mention for getting the January McGuinty announcement story early and thoroughly.

In interviews with CFRB, 570News on Jan 21 and several print outlets, my main points were that consumers and competitors have suffered a blow but more importantly our standards of public administration have been damaged. Secret negotiations for multi-billion dollar twenty year government contracts invite corruption.

The names Samsung and Korea Electric Power Corporation still don’t show up on the Ontario Lobbiest Registry. What’s up with that? This absence is particularly difficult to understand since it appears that these foreign firms were able to get the Ontario government to issue a directive to the OPA to ensure preferred access to scarce transmission capacity. See: Directive to OPA to reserve transmission capacity

The National Post’s news report Jan. 22 quotes me as describing the deal as “ugly, ugly”. See: “Samsung has the power to impress”

Please send your comments, updates and analysis.

19 Comments

  1. When public policy is no longer based upon reality, when other members of the Liberal party break from the party line and strenuously disagree, when the leader of a party already hemorrhaging from numerous scandals breaks his own rules on transparency and sole source contracts, one is forced to ask: “Cui bono?” I no longer get the sense that policy is being made to the benefit of Ontario citizens, but to align to some outside agenda, which does not consider the welfare and the standard of living of people in Ontario as its top priority. Dalton McGuinty is a politically astute individual, and he must realize the optics of this situation are not good. He has never struck me as reckless, but it seems he is now willing to risk not only his political career and legacy, but the future of the provincial Liberal Party. Mr. McGuinty and Prime Minister Gordon Brown of Britain seem to be engaged in some sort of perverse contest over who can sink their boat fastest. Perplexed citizens, who have been trying to make sense of the Liberal energy policy, are now left with the sad conclusion that we are now so far from reality that we can’t even catch a bus back. I am angry and disgusted to see this beautiful province being brought low. I am angry and disgusted that in a province full of engineers and energy professionals, who understand the complexities of energy production and distribution, that so few have found the courage to confront the misinformation of profiteers and their collaborators. This cannot continue. Either the people who understand what is happening here stand up for truth and scientific principle, or Ontario is lost.

  2. Lynne is absolutely right about McGuinty -It seems he is doing his utmost to economically destroy Ontario . This deal with Samsung confirms his total lack of integrity and his ineptitude is mind boggling.
    How long will this infatuation with futile wind turbines last? other provinces and almost every State of the US is rushing headfirst to cash in on this mirage of” thousands of high paying jobs”. Many of the wind turbines required for projects in the foreseeable future are already ordered overseas and our electrical systems can only absorb so many. China is light years ahead and will continue to produce much cheaper than in Ontario.
    Lynne also makes a valid point about the lack of courage among our thousands of engineers and energy professionals who know the truth yet fail in their moral duty to speak out and confront this travesty.

  3. Using billions of our tax dollars to skip down the fantasy yellow brick road to buy votes is criminal.

    I’ve seen some real airheads be duped by the wind industry but Dalton is completely insane.

    He’ll have a cushy job with the “green” energy industry when he’s kicked to the curb though…so what does he care?

  4. Dalton KNOWS he is finished! Diaper Boy KNEW he was finished! This is his last big move to make sure he has a nice “nest egg” put aside when he is thrown out like “last last weeks garbage!”

    Any investigation into this guys back room deals with Samsung and others has to include Law Enforcement Officials so that he is held responsible for what he has doen to this “once great Province”

    It WAS the “engine that drove Canada”. Now it’s a Third World Backwater State” all thanks to a reckless and immoral team which I like to refer to as “Gang Green!”

    Hang your collective heads Ontarians who let this get this far!

  5. McGuinty obviously has a death wish. That’s the only explanation I can give as to why he continues to throw our money at ineffective, horrendously expensive methods of energy generation (read industrial wind turbines). He knows he is not going to govern in this province ever again after the next election so he figures he might just as well do as he pleases. He is going to be horribly embarrassed in a few years when the world finally realizes the truth about wind turbines — that they are NOT green and that they don’t work!

  6. Provincial governments of all stripes have entered into “dirigiste” schemes and the record is not good (think Suncor and the Urban Transit Development Corporation in this province). That said it strikes me that one doesn’t have to go look too far to find even small examples of how McGuinty’s Ontario has over-reached, and screwed up the “green” file ….
    For example, during the last campaign in September 2007, McGuinty’s office announced that government departments and agencies would commit to buying paper products that were certified by the Forest Stewardship Council (FSC). This had two goals: demonstrate a commitment to the environment and keep the ENGOs on-side. Unfortunately, the Premier’s office steered the policy through Government Services, and never consulted with Natural Resources, who would have told Mr. Butts that FSC office paper wasn’t actually made in Ontario. Thus, a “green” procurement policy turned into a commitment to buy paper that wasn’t manufactured by Ontarians! The policy types had to spend the next 18 months coming up with language that turned (reduced) FSC-procurement, into a quite different open-border promise to buy paper from suppliers all over the world. The fact that McGuinty had twice slapped down the Ontario forest industry never really sank in.

    Multiply this deal several times – with the same finger prints all over it – and you get Samsung. The only question is: How long will it take the deal to come apart?

    • Regarding the question of “how long will it take the deal to come apart?” I am guessing that Samsung has the very finest legal counsel, certainly as good as the lawyers who helped the Non Utility Generation industry in dealing with Ontario Hydro in the late 1980s and early 1990s. Those contracts were able to live out their natural lives and were so iron clad that reopening them to make mutually beneficial adjustments was only achieved in a limited number of cases.

  7. Thanks to Tom for continuing to help get the story out. The Samsung “deal” is of concern both because of the thinly veiled secrecy, but also due to the gift it gives, for unknown reasons. Setting aside for the moment the wisdom of large scale wind and solar generators, if we look at the financial implications they are strange. One can understand that if one cannot find investors for a desired “high risk” project, that it is necessary to “sweeten the pot.” However, when the risk is minimal, and there is a financial guarantee for 20 years, then it is like selling a Guaranteed Investment Certificate. Last time I checked, they are paying less than a percent in Canada. There is a large group of investors clamoring to get a piece of the action, as it is very lucrative. Usually that should drive price down, not up!

    But now, our government is issuing a guarantee to an investor to recompense them for energy produced at a high price (which does not look directly like a provincial giveaway on the books, but surely effectively is that for Ontario power consumers) – and even then “sweetens” the pot with a giveaway of another $450 million, so long as the investor promises to install 2500 MW of generation, that will be paid for in short order because of the guaranteed price. 2000 MW of wind at say $150 a MWh (to factor in the sweetener), will return about (2000MW x $150/MWh x 8760hrs x .28) = 735 M$/yr, and 500 MW of solar will return about (500MW x $500/MWh x 8760hrs x .10) = 219 M$ per year, for a total return in round numbers 1 B$ a year. In 20 years, that generates a pretty good return for a guaranteed, low risk investment. Now, the investor agrees to invest in 6.7 B$ of product, mostly made at its own plants, so the out of pocket cost is small as it is a shift from one pocket to another. Some components, the towers, turbine blades, solar panel assembly, and solar inverters will be assembled in Ontario, but the high priced items, the wind turbine generators and the solar cells are sourced elsewhere, so do not expect all of the 6.7 B$ to be spent in Ontario. Do not forget that the investor also gets a tax holiday as they can depreciate the investment at about 30% a year against revenue stream, and sell it when depreciated – perhaps to allow the depreciation cycle to restart. There is no guarantee that the jobs will persist for 20 years, and the factories and 1440 jobs may close when the Ontario market is saturated. I’m no economist, but the optics look bad enough that it certainly would look warranted to have the Ontario Auditor look at this contract, as it certainly seems to be missing some diligence in preparation.

  8. Very sad day for Ontario. Our province will never be the same. I cant believe our children and granchildren will have to pay for this corrupt government for decades. Our political decision process needs to be governed by Ontario residents. It is our money they are using for their own benefit.

  9. I am “almost speechless” at McGuinty’s boondoggling Turbine enterprise. How does any Provincial democratic governemnt, over ride and change its laws to “gag” its citizens and councils, from preventing harmful energy “Wind Turbines” to invade our province?
    Where is our “Federal Government? and why for Gods sake are they allowing McGuinty to break all the rules in our “charter of rights” to force these unwanted health risks down our throat.
    The Feds have acknowledged that there are health risks attached to these unsightly “War of the Worlds” aliens! and yet they stand by and do nothing, is there another agenda that we should all know about?

  10. Still on the topic of procurement …. It would be useful to discover whether or not Ontario and Samsung negotiators considered the impact of “Buy America” provisions in stimulus bills that have already shut the door on Canadian companies hoping to supply state and local agencies. The same consideration should also (unfortunately) be given to government owned utilities in Canada, whose purchase decisions have often been tainted by local preference.

  11. Dalton McGuinty has “done it again”. We, our children and grandchildren will pay the price for this “deal” for years to come. The Ontario Liberal Government, through The Green Act, has virtually put a stranglehold on the voice of the citizens of Ontario.
    It has become apparent that McGuinty plans to continue on his wreckless course, erecting Wind Turbines in residential areas without concern for the health and well being of the people of Ontario, not to mention the enormous waste of tax payer dollars while doing so. Wind Turbines are not the answer to a greener world.
    Hopefully the Federal Government will finally intravene and put a stop to a man who is “out of control”.

  12. Why does Dalton Mcguinty want to injure the children of Rolling Hills in Manvers The City Of Kawartha Lakes?. A giant wind turbine may be place 550 metres by the school. These monsters catch fire. how will the fire dept put it out if the equipment won’t reach. blades have broken apart, I’ve seen the video, they have collapsed where will they fall if they are 450 ft tall plus blade. Many people are ill since wind turbines have been put 550 metres from their homes.We need studies before these monsters are put up. Dalton and his Sopranoes are bullies and lack knowledge, they have not done their homework did they check the notices from England that the science was wrong on noise levels they are much higher than reported, did they check out the set back distances in Europe 2 Kilometers,have they not read the Wind Farm Scam by Dr. J. Etherington he states wind turbines cannot generate enough energy to reduce global co2 levels to a meaningful degree. He also states these farms are environmentally and economically counter productive , there are ecological drawbacks including damage to habitats and wildlife, plus these large towers are very visibility ugly and will destroy the beauty of the sacred Oak Ridges Moraine .

  13. After reading Giusppe Valiante’s article in the Financial Post the other morning about the Montreal Climate exchange and the cap & trade market I realized that the deal McGuinty signed with Samsung is even more beneficial to Samsung than the prices they will get from the province’s electricity cartel for the power they produce!

    If the US launches a cap & trade market Canada will follow their lead and will start handing out carbon credits to green project developers like Samsung. To wit: Samsung will receive huge carbon credits from the Feds that they will than sell via the Montreal Climate exchange. So what McGuinty has done by signing this contract is to create a further means for Samsung to suck even more money from their wind and solar farms than the province has committed to them for the power they produce.

    My bet is their is no clawback for carbon credits in the contract the province signed that would benefit the Ontario power consumers!

    • One element of the design of the FIT program that is not a rip-off of consumers is that the OPA retains rights to all “environmental attributes” associated with the FIT projects. The OPA administrators deserve credit for pushing back against pressure from FIT developers to leave the value of potential future carbon credits with the developers. It is possible that Samsung and Kepco have negotiated special treatment on this issue, but if they are getting the standard FIT deal then Parker’s concern would not apply.

  14. Good financial analysis by Bill Palmer (a $1B per year subsidy) and Parker’s carbon credit point is valid also. What a stupid deal for Ontario. At typical 2W/m2 power densities, these wind farms will occupy 1000 sq km (imagine an area 50km x 20km ) Life nearby will be terrible. And because wind power is never generated at peak load times (ie when its hot and humid) we will have to keep all the existing plants on stand-by so they be spun up quicklyl.
    And the idiot, Smitherman, who came up with this amazing deal now wants to be mayor of Toronto, God help us.

  15. Question – In the Samsung deal. Will Samsung bring sub-assemblies to
    Ontario and then assemble complete units in Ontario. OR will Samsung
    build complete systems from raw materials to finished products in Ontario.

  16. Hey Tom
    I know this story is fairly dated but it is still relevant today as we go for an election next week to see if we can get some sanity back into Ontario regarding energy. I checked your links in your story, such as the “Power Authority PDF file about allowing Samsung their “front of the line” space on our grid. That document appears to be removed from their site. Then I went to retrieve the story from The National Post where they called your initial post “ugly, ugly” ….it too was pulled……….I don’t want to sound like a conspiracy theorist here (heaven’s forbid that!) but do you think McGuinty may be trying to get rid of any negative references to his past poor performance with this Samsung/Kepco “secret deal”??

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