The Ex Place Toronto turbine: disappointing investment

Not as advertised?
Not as advertised?

Toronto’s Exhibition Place Turbine Part 2: investment in a green future or financial sinkhole?

In Part 1, Parker Gallant revealed that the mythology around the iconic Toronto waterfront wind turbine doesn’t hold up to scrutiny. Yet, the venture was presented as a way to invest for a green energy future. Parker Gallant dives into the numbers and comes up with a different truth.

How well did Toronto Hydro Energy Services Inc. or THESI management perform in choosing the Exhibition Place turbine as an investment? It’s in the best interests of both ratepayers and taxpayers in Toronto to know!   I attempted to review the logic behind THESI’s acquisition to see if it made economic sense.  In 2011, I emailed several questions to CEO and President, Anthony Haines, copying several Toronto politicians—I was ignored.

Next, I used the FOI (freedom of information) process; the response to my application was a request for hundreds of dollars to answer these questions.

1. How much is THESI paying per kWh?

2. How much was THESI’s investment in WindShare?

3. What is the current depreciated value?

4. How many kWh of power has WindShare delivered?

After exchanges with THESI’s Executive Vice President, Paul Sommerville (formerly with the Ontario Energy Board) and getting the runaround I gave up and went to the Ontario Privacy Commissioner to seek mediation.   This was ultimately successful and I finally received the answers I sought but the information came via major Bay Street law firm Borden Ladner Gervais, not from Mr. Sommerville.  “Transparency” is apparently not a watchword for THESI’s executive—they will run up legal bills to avoid directly answering pertinent questions that may prove embarrassing!

The answers to the four questions were:

1. $111.30 per MWh (or 11 cents per kWh)

2. $1.1 million

3. Depreciated to $350,816.26 as of December 31, 2013

4. Approximately 9,000 MWh.

Not as advertised

On the last question, I assume that the power delivered was to the December 31st, 2013 date so the claim is that the last six years of operation produced more power (annually on average) than was delivered during the initial five years of operation.  I suspect this was/is an exaggeration but in any event, the turbine either operated at 15.6% of capacity @ 600 kw or 14.1% @ 660 kW or 12.4% @ 750 kw—nothing close to the original claims.

Looking further at the answer to payment per MWh, the 9,000 MWh delivered over the 11 years would have generated $1,001,700 or approximately $91K annually. That would barely cover the depreciation (assuming a 20-year life of the turbine) and leave nothing for maintenance or interest, let alone the ability to pay a dividend to the investors.  As well, the cost to THESI is fixed at 11.13 cents per kWh without considering the negative return on their investment—that would put the price per kWh well over 20 cents.

Trekking into TREC                                                                                                                                 So exactly how was THESI management convinced that the Exhibition Place wind turbine was a worthwhile investment?  From all appearances THESI were never in it for the money as a presentation by Brian Iler on March 20, 2013 to the Co-op Zone Legal Network, described WindShare as follows:

“II. Example 1: WindShare Financing

Early grants from Trillium Foundation

Partnership with Toronto Hydro: TREC did the work, TH paid invoice for 50% @ fmv. Staff were paid far less than fmv, so these first two elements were substantial financial resources.

Environment Canada – forgivable loan

TAF – bridge financing pending proceeds of offering (Toronto Atmospheric Fund)

Offering to members  ~$800K – Preference shares with a variable dividend; member shares were also sold for a nominal amount to give membership rights.”

Iler noted that TREC (Toronto Renewable Energy Co-op) incubates renewable energy co-ops. This is about “community power. WindShare was not a financial success.”  (My emphasis)

From all appearances “community power” in the mind of Brian Iler and those involved in TREC is all about securing taxpayer and ratepayer funds which truly involves the community—the community just didn’t have a choice.  The Offering Statement for the original shares in WindShare contains interesting information confirming the receipt of a Government of Canada forgiveable loan of $150K and a $495K repayable loan from TAF (Toronto Atmospheric Fund) a Toronto taxpayer-owned foundation.  TREC has also received considerable grant monies from the Trillium Foundation (well over $200K), TAF (over $400K), Toronto Hydro (compensation for TREC staff), and an unnamed “Foundation” via the share offerings in WindShare who purchased shares on behalf of the Daily Bread Food Bank and another  charity.

The Offering Statement carried some interesting forecasts on revenue and profit which have not come to pass despite all the taxpayer/ratepayers funds thrown at TREC for the project.  When TREC officers were out selling the shares they used a PowerPoint presentation which on page 9 offered these reasons to invest in WindShares:  “1. Earn a financial return, 2. Earn a good financial return and 3. Earn a good financial return for many many years”!  The presentation also had a disclaimer warning investors!

TREC is still trying to launch a 20-MW wind turbine development referred to as LakeWind near Kincardine and again they lie about the number of homes that could be powered. The claim is 3,000— that would require the turbines to operate at 71% capacity.

Despite the obvious inability of TREC’s management to “incubate” a viable renewable energy project without taxpayer,  the media holds them up as a great success.  The taxpayer and donor-funded TVOntario show The Agenda frequently invites TREC’s Executive Director Judith Lipp as a spokesperson for the renewable energy advocates.

While the “iconic” Exhibition Place wind turbine that WindShare erected with help from THESI costs each of the 701,000 Toronto Hydro ratepayers only 15 cents annually, the truth is, its impact is much larger. It played a key, emblematic role in the politicization of the electricity sector through the push for renewable energy and ultimately the Green Energy and Green Economy Act and that in turn was a major factor in the costs for average Ontario ratepayers individually of hundreds of dollars annually, and collectively in excess of $100 billion over the next 20 years.

TREC’s founders will go down in history not only for the Toronto turbine but also for their part in the biggest rip-off ever of Ontario’s taxpayers and ratepayers.

Parker Gallant,

July 4, 2014

The opinions expressed are those of the author and may not represent Wind Concerns Ontario policy.

Email us at windconcerns@gmail.com

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