The truth about the Samsung deal

Ontario Premier Dalton McGuinty and Samsung C&T CEO Chi Sung Ha shake hands in Toronto January 21, 2010.

MARK BLINCH/REUTERS

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.

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