Lenders are wary of risks, due to uncertainty in Ontario's green energy rules, says Jonathan Weisz in the Wall Street Journal

Ontario's Green-Energy Rules Add Element of Uncertainty

February 05, 2010

If Ontario hopes to realize its goal of becoming the Silicon Valley of green energy, say green-energy-industry participants, it needs to clarify and perhaps modify domestic-content rules (DCRs) that are aimed at jump-starting the province's manufacturing sector.

The DCRs are part of Ontario's feed-in-tariff program, which provides generous long-term contracts to developers, but they have added uncertainty to project financing. To be eligible for an FIT contract, developers must procure a fixed percentage of goods and services in Ontario. For instance, 50% of goods and services used in a large solar project must originate in Ontario. That rises to 60% in 2011.

(Companies) are believed to be eyeing the province, but are leery of the costs. Before committing, these companies want clarity of the percentage of a product that can be manufactured abroad and then assembled in Ontario. Lenders are watching and waiting. "They're the ones that have 75-80% of the money at risk and they won't put that kind of money at risk with this unresolved," says Jonathan Weisz.

Ontario's announcement last month of a C$7 billion deal with a Korean consortium led by Samsung C&T Corp. could help alleviate DCR concerns, as it will add four new clean-tech manufacturing plants. However, the first of those plants will only be operational in 2013.

Read the full article on the Wall Street Journal website.

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