Power plant built to light up Caesars may be worthless, was thoughtless and is powerless
By CHRISTINA BLIZZARD, SUN MEDIA
Last Updated: 20th November 2009, 3:31am
As I first wrote Oct. 2, Ontario Lottery and Gaming Corp (OLG) is locked in a lawsuit with Buttcon, the company that won the contract to design, build and operate the Windsor Energy Centre (WEC).
In 2006, as Caesars Windsor was being built, concerns were raised that there wasn't enough electricity to keep the glitz alight in the casino.
Buttcon won the contract to build a gas-fired power plant. They designed and built it, but OLG took over the operation. That issue is now the subject of a court case.
Forensic auditor Al Rosen raised concerns recently. He has reviewed a report on WEC that places its value as somewhere between the $81 million it cost to build -- and nil. Another report pegs the value at between $20 and $70 million.
The plant was budgeted at $40 million but cost more than double that.
Rosen urged caution interpreting the report by Cole Valuation Partners that was given to OLG this week.
"They look at different scenarios and say if we are able to sell the power off to other people and if we are able to sever a contract that runs into 2017, then it is possible you could get almost a recovery," Rosen said in a telephone interview yesterday.
"On the other hand, if you don't get other things, the value could be zero," he said.
'HUGE LOSS'
"Until you establish a contract with somebody, I would assume there is a huge loss," Rosen said.
He estimates there's been a loss of about two-thirds of the value of the power plant and points to deep flaws in the deal that have taxpayers on the hook for millions of dollars.
For starters, the OLG has a contract to sell electricity to energy suppliers until 2017.
When it expires, the casino has to incur millions of dollars in switch-over costs in order to be able to use the electricity from its own plant.
"Clearly what happened there was just a lack of thought," Rosen said.
As for the baffling valuation, everything depends on the kind of contracts the OLG can negotiate to sell electricity.
One way the OLG could recoup its losses -- on paper -- is this: The OLG may choose to sell the plant for $80 million-- but promise the buyer a lucrative contract with a high price for selling the electricity back to the OLG.
"It's worth $80 million because you are sacrificing the next 40 years, where you are using taxpayers' money to pay these high rates for electricity," Rosen explained.
Thornhill Tory MPP Peter Shurman says the OLG is "out of control." And the plant isn't working.
"We, the taxpayers of Ontario, have spent $81 million and that energy centre doesn't generate any energy, except a fair amount of hot air," he said. He wants the provincial auditor to step in.
Finance Minister Dwight Duncan says he, too, is unhappy with the WEC deal, but said the court is the best place to air concerns.
"So long as this issue remains unresolved, I think a court of law is where taxpayers will get their best look at this," Duncan said yesterday.
Meanwhile, this casino has been a sinkhole for tax dough.
Here's my solution: Play poker for the power plant. Sit OLG down at a table with Ontario Power Generation -- and let OPG walk away with it.