Thoughts and Opinions On Today's Important Issues

Friday, January 22, 2010

Samsung Deal: Bruce Nuclear #2

Is the deal with Samsung a good one or a bad one for taxpayers? We'll know many years from now when Ontario's Auditor General does an audit on it.

Of course it will be too late then since the money will have been committed and most of the politicians involved will be long gone except for Spanky who will be around forever so nothing will be achieved.

Samsung gets a sweetheart of a deal:
  • "Ontario guarantee Samsung access to sell wind and solar-generated power into the provincial power grid."
  • "The company will be paid a high, fixed price for the "green" energy -- a premium that will be passed on to consumers at some point."
  • Plus a huge EDA "bonus" payment.

However, if you want to place a bet now, here is what will happen based on what happened with the Bruce plant:

  • "Nuclear deal too costly: Auditor
    Apr 06, 2007, Rob Ferguson, Queen's Park Bureau

    Ontarians would have saved $1.5 billion on their hydro bills over the next 25 years had the government negotiated a smarter deal to refurbish the Bruce Power nuclear station, the provincial auditor general says.

    A review also found the government had "only partial success" in reaching its goal of protecting electricity ratepayers from cost overruns that have plagued past nuclear projects.

    Among other concerns, the $4.25-billion pact to modernize four reactors at the Lake Huron plant included a "mechanical error" that cost ratepayers an estimated $88 million, and $514 million for pricey enriched fuel.

    "It's not clear cut it's a good deal," Auditor General Jim McCarter said yesterday after completing a government-ordered review of the pact...

    The review found the actual price of electricity from Bruce is 7.1 cents per kilowatt-hour and is poised to rise depending on construction costs and other factors.

    "That is significantly higher than what we're paying," he added, noting the average market price for electricity from all sources in Ontario over the last five years is 4.9 cents per kilowatt-hour…"

And what would our Spanky say? Exactly what he did with Bruce Nuclear:

  • "Still, Energy Minister Dwight Duncan said he would sign the same deal all over again.

    "The trade-off is what you pay for power," said Duncan, who was energy minister when the deal was negotiated, before becoming finance minister in October 2005 for seven months and then returning to the energy job."

PLUS, he would throw in about the economic downturn and jobs and all of that. That absolves everyone of stupidity and wasting taxpayer money.

Why would I make this statement. Simple read this about the Samsung deal:

  • "The total cost of the EDA [economic development adder], assuming the manufacturing facilities are built according to the schedule set out in the agreement, will be approximately $437 million (net present value) over the lifetime of the contracts."

Huh, net present value, what the heck does that mean in real dollars that people understand? Have you ever read that term in any Government announcement. What EDA represents is the "donation" that the Government will pay to "buy" Samsung to come to Ontario.

It's a 25 year deal and if we take an interest rate of 5% compounded annually, then Samsung will get an extra $1.5B

  • "Smitherman said Samsung, as a developer, will get the same rate as every other developer taking part in the program. But if the company commits to manufacturing its equipment in Ontario, it will get what he called an "economic adder" on top of the 13.5 cents rate. He wouldn't say how much that benefit might be."

Now you know why net present value was used and why he would not say.

As for jobs, the Toronto Star reported last fall:

  • "Samsung officials visited Crown land this summer in South Cayuga, Haldimand County, about two hours southwest of Toronto. They met with Six Nations Chief William Montour to talk about a plan to build a 55-turbine wind farm, and using aboriginal workers to help manufacture and erect the turbines."

Now mini-Gord needs to rethink about the credibility of his provincial government insider or was it the corrupt Member of Council again:

  • "$7-billion Samsung energy deal to benefit Windsor-Essex County

    Windsor and Essex County will learn today they are major beneficiaries of a $7-billion investment that will see the birth of a new solar and wind energy industry in Ontario...

    Parts of the huge scheme were leaked to The Windsor Star on Wednesday. As many as 16,000 jobs will be generated by the five-phase project, including jobs at four new factories -- two of which may be in Windsor -- plus dozens of suppliers and spinoff jobs in the service sectors...

    The Windsor portion of the project includes a large-scale solar farm covering hundreds of acres of vacant property to start, with further phases likely. The solar panel mother glass plant would be located near the solar farm for marketing and sales purposes."

Yet the Star reports today:

  • "Samsung in talks with city
    Interest high in energy deal

    The WindsorEssex Economic Development Corporation has confirmed it is in discussions with Samsung as part of Ontario's blockbuster $7-billion green energy deal.

    But WEDC executive vice- president Patrick Persichilli stressed that the region is still in the "relationship-building" process with the corporate giant."

Where the hell is our WEDC President superstar? Is he involved or not? Does Patrick have the skills to make this happen? Isn't that why we hired a new President? Why is he missing from the action?

Huh, what the heck does Patrick's quote mean. Mini-Gord told us we had the mother plant here.

Then the Premier threw cold water on everything:

  • "McGuinty added the location of four new plants -- which will employ an estimated 1,440 workers -- hadn't been decided yet.

    The siting of those plants will be up to the consortium, according to officials."

Then Edgar (aka Eddie) and the WEDC VP in effect destroyed mini-Gord's story and his credibilty unless this is all being stage-managed to help Edgar out so that when the E C Row upgrade is announced, we won't take it out on Edgar so much. Of course, it boosts Dwight and Sandra as our saviours for their re-election:

  • "The announcement today is a very positive announcement for the Province of Ontario," Francis said. "It's a game changer for the Province of Ontario, and obviously, by virtue of landing this investment in Ontario, and the nature of the investment, many cities like Windsor and Essex, many regions like Windsor and Essex, will be in a position to try to benefit from that type of announcement."

    There has been speculation that Windsor could be the site of a large-scale solar farm and a plant that makes the "mother glass" for solar panels...

    Persichilli said there is fierce competition across the province for Samsung's attention.

    "Obviously, all communities in Ontario are interested in this type of investment," he said. "We're not the only region, we're not the only economic development corporation that has been speaking to the company."

This flipflop is bizarre.

Finally, I loved this line from Edgar:

  • "When we meet with investors, we remind them that what many might refer to as our unemployment rate, we refer to as our employable rate because you have 13 per cent of people, highly skilled people, ready to be employed.

    "They are ready, they are available, and they are employable at a drop of a hat. To us, that's an advantage."

Yup just like plant closures and foreclosures keep our house prices down too. No wonder we gambled and did not do anything over the years on economic redevelopment when we can wait and pray for major deals like this to save us. Sheer genius.

Thank goodness we are not economically diversified and prosperous here with full employment or we would not be in the running.