Ontario's Minister of Energy Brad Duguid announced amendments to the province's renewable energy deal with Samsung C&T Corporation and the Korea Electric Power Corporation (the "Consortium") (see our related post for background on the deal).
The amendments, which are described below, are designed to accelerate the manufacturing job creation benefits of the deal while substantially reducing the additional payments to which the Consortium is entitled, all in exchange for extending the deadline by which the Consortium must build its wind and power projects. The amendments are likely also intended to help mitigate negative public sentiment about the arrangement, which has been described by some (including Tim Hudak) as a secret "sweetheart" deal.
The amendments are as follows:
1) The Consortium's deadline for building wind and solar farms has been extended by a year
The consortium committed to build 2,500 MW of renewable generating facilities in Ontario: 2,000 MW of wind farms and 500 MW of solar. As with all Feed-in Tariff contracts, the government's agreement with the Consortium stipulated deadlines for building these projects (although those deadlines were not disclosed). The amendments will see all such deadlines pushed out by one year. This is consistent with the offer the OPA has made to all FIT contract holders to extend their Milestone Dates for Commercial Operaion by one year.
2) The Consortium's deadline for opening new manufacturing facilities has been accelerated by a year
Under the original agreement, the Consortium agreed to build 4 new manufacturing facilities in the province, one for each of the following types of component: wind turbine towers (to be in full operation by March 31, 2013); solar inverters (March 31, 2013); solar module assembly (December 31, 2013); and wind turbine blades (December 31, 2015). These operational dates all appear to have been moved up by one year, meaning the first will open in March of next year.
3) The economic development payments to the Consortium will be reduced by 75%
Under the original deal, if the Consortium meets the deadlines for commencing commercial operation of projects and opening the four manufacturing facilities , its wind and power projects will become eligible for an undisclosed "economic development adder", which is a premium on the already premium per-kilowatt-hour FIT prices. The total cost of the economic development adder over the 20-year lives of the wind and solar farms was projected to be $437 million (net present value). Today's amendments reduce the total cost of the economic development adders to a maximum of $110 million (which may be further reduced if the Consortium misses the revised deadlines).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
