Cheol Woo Lee is feeling betrayed these days.
The senior vice-president of Samsung C&T understands why Ontarians are getting frustrated by higher energy bills, but he’s disturbed that his company is taking much of the blame.
He’s embarrassed that Samsung – its well-known brand and international reputation—has become a political punching bag to win votes. The unfolding drama is being watched closely at the company’s headquarters in South Korea.
“We haven’t received one cent of money from Ontario,” said Lee, chatting over coffee at a downtown hotel. “We’ve only been spending money—and big money so far. Why do we have to be blamed or criticized?”
He was talking about the well publicized but often mischaracterized “Samsung deal,” frequently referred to in the media and by Progressive Conservative leader Tim Hudak as that $7-billion “sweetheart” deal signed back in January 2010 by the McGuinty government.
Hudak has said he will kill the deal if elected in October. Even if Hudak is bluffing, Lee said irreparable damage has been done. “The comment has affected our projects seriously. Our partners, our investors, are considering very seriously whether Samsung can manage the situation.”
You’d think, the way it has been framed, that Samsung stands to get $7 billion from the deal, but in fact it’s the other way around – the agreement requires that a Samsung-led consortium deliver $7 billion in investment to Ontario.
This will involve developing 2,000 megawatts of wind power projects, 500 megawatts of solar, and arranging for a manufacturing supply chain that will provide wind turbines and solar panels for those projects. In all, Samsung’s efforts and promised investments are expected to deliver 2,140 direct jobs and 13,860 indirect jobs.
In return, the company gets a premium – called an “economic development adder” – that’s expected to amount to $437 million during the first 20 years of operation of its wind and solar projects. That works out to about $22 million a year, on top of feed-in-tariff rates that apply to all solar and wind projects.
Getting that adder is conditional on Samsung reaching certain milestones related to investment, manufacturing and job creation. Manufacturers must maintain their operations for a certain period of time. A certain number of jobs must also be maintained.
The $427 million that Samsung stands to get also needs to be put into perspective. The federal Conservative budget, for example, is throwing another $405 million at Atomic Energy of Canada Ltd. to cover “anticipated losses” and basically keep the crown company on life support.
This is just for one fiscal year, and it follows past years of similarly large support payments. About $300 million in 2010, more than $800 million in 2009, and so on… Yet Hudak’s energy strategy depends heavily on building more nukes—from one sweetheart deal to another.
For its part, Samsung seems to be following through. The Korean industrial giant and its partners, including Korea Electric Power Corp., have so far spent more than $100 million to get the ball rolling.
They struck an agreement with CS Wind that will see a wind tower manufacturing facility established in Windsor that will create an estimated 700 jobs. They hooked up with Siemens Canada to build a wind-turbine blade manufacturing facility in Tillsonburg that will create 900 jobs.
They most recently partnered with SMA Solar Technology, which through a contract manufacturing deal with Celestica will make solar inverters for Samsung’s projects. That will create more employment opportunities at Celestica’s facility in Don Mills.
“We organized this investment, and we induced this investment,” said Lee, adding that construction and hiring has already started, though it has slowed since Hudak threatened to kill the deal. “Our manufacturing investors are concerned about whether they should continue.”