A new regional Canadian government with a new policy on wind farms plans to cancel a German-led project midway through. Both the developer and Canada’s business reputation are set to suffer as a result.
It’s not often that Germany and Canada have a falling out. The two countries have had good relations for years and Germany was instrumental in securing the Comprehensive Economic and Trade Agreement between the EU and Canada this year, the bloc’s biggest trade deal in years.
But no one seems to have told the regional government in Ontario. It is planning to drop a German-led wind farm project in the state, despite years of preparatory work and several turbines already being put in place.
The newly elected administration, a right-wing government, announced on July 10 that it would introduce legislation to abandon the White Pines project and limit compensation, broadsiding German developer WPD and raising eyebrows in Berlin. The project, which was unpopular with locals, had been commissioned by a previous, left-leaning government.
The announcement came as a surprise. Although the region’s new political leaders had pledged during the election campaign that they would not approve any more wind farms, nothing was said about reversing projects that were already underway.
The news is a blow for WPD, which has already installed four of a planned nine wind turbines at the farm near the town of Milford. The Bremen-based firm has been working on the 18.5 megawatt project for 10 years and its investment amounts to €53 million ($62 million). There may be other casualties: the turbines were delivered by German manufacturer Senvion and the contract was funded by German state-owned development bank KfW.
Sabine Sparwasser, Germany’s ambassador to Canada, has found herself in the unusual position of having to come to a German company’s defense, in a country that is otherwise known for being open to free trade.
“Obviously, every incoming government has the right to change policy direction,” she told The Globe and Mail, Canada’s second-largest newspaper. “But to have a unilateral cancellation pushed through by law that way is unsettling for the company, but is also something that will unsettle other potential investors.” Some 70 percent of German investment in Canada is spent in Ontario.
The Economics Ministry in Berlin told Handelsblatt it was in touch with the German embassy in Canada about the case. Government sources said Economics Minister Peter Altmaier had already discussed it with Canada’s new trade minister, Jim Carr.
The cancellation of White Pines could also hurt the Canadians. WPD had received support not just from German authorities but also from the Business Council of Canada, which warned that the pullout could hurt Canada’s investment climate and contradict Ontario’s claim to be “open for business.”
WPD, which is plowing on with White Pines until the law is changed, hopes the appeals will make the government change its mind.
“It’s surely unprecedented that a big, completely approved and almost completed project should be torn down again for political reasons in a country that is listed even above Germany in the World Bank’s Doing Business Index,” WPD board member Hartmut Brösamle told Handelsblatt. “In future every investor will think carefully about how secure their investment is in Canada.”
WPD said it will seek to recoup CAD100 million (€65 million) from the Ontario authorities, but the new law may limit this claim. Worse news for the Germans is that the CETA agreement provides no protection: it is yet to be ratified by all 28 EU states.