Why Canadian taxpayers have to pay Wall Street bankers $28 million for an Ontario wind farm that never got built
New York investment banker David Mars never wanted to force the long-suffering taxpayers of Canada to write him and his “very high net-worth” U.S. investor friends a cheque for $28 million, as ordered by a NAFTA panel, in exchange for a wind turbine project they never built.
Mars would also rather not travel to Toronto next week to talk to the Ontario Provincial Police, who have asked him to answer questions as part of a probe into the destruction of evidence by former staff in the office of Ontario’s premier.
All Mars and his fellow investors in Windstream Energy LLC wanted was to erect 130 wind turbines in the eastern edge of Lake Ontario near Kingston and sell the power to the grid.
But that simple project has become a tangled saga involving the police, Canada’s largest-ever NAFTA litigation defeat, deleted emails and terse, vague statements from governments in both Ottawa and Toronto.
Because Ottawa, not Ontario, signed NAFTA, federal taxpayers must compensate the investors. And if Windstream’s project never sees the light of day, they will likely have to pay the New Yorkers a lot more than the $28 million the NAFTA panel said they already owe — possibly closer to the $568.5 million that Windstream initially sought in its NAFTA case.
“We are currently assessing the (NAFTA) decision to determine next steps,” Diana Khaddaj, a spokeswoman for Global Affairs Canada, said in an email to the Financial Post.
In 2010, the government of Ontario, keen to jumpstart its green energy sector, signed a 20-year deal to buy 300 megawatts of electricity from turbines that the New York investors behind Windstream agreed to erect.
Things got messy mere months later in February 2011 when the provincial Liberals, fearing they would lose an election, slapped a moratorium on offshore wind projects, none of which had ever been built. Around the same time, Ontario cancelled two unpopular natural gas power plants, a move that cost provincial taxpayers about $1 billion.
After waiting five years to get approval to build their wind turbines, Mars and his group lost their patience.
“I have a group of very high-net-worth individuals who invest across energy and technology,” Mars said in a series of interviews from his office in Manhattan. “The contract remains in force. We would like to either build it or come up with an amicable solution. We have gotten many mixed messages on this.”
They complained to the Permanent Court of Arbitration under Chapter 11 of the North American Free Trade Agreement. A panel of three arbitrators heard the case in Toronto last February.
“The claimant’s claim that the respondent has failed to accord the claimant’s investments fair and equitable treatment in accordance with international law, contrary to Article 1105 of NAFTA, is granted,” the panel ruled last month.
Police are now apparently probing whether Ontario government employees broke the law when they deleted documents related to the offshore wind project. A source told the Financial Post that Mars will answer police questions in Toronto next week.