The State Property Fund says it plans to oust its Canadian partner from a joint venture because the company has failed to fulfill its investment requirements.
The SPF is attempting to annul a 1997 contract it signed with Canada’s Northland Power, SPF chief Mykhailo Chechetov told the Post on Sept. 28. The contract yielded the Canadian company a 51 percent stake in the Ukr Can Power joint venture, which was established in 1997 to modernize the Soviet-built Darnytsya Heat and Power Plant.
“[Northland Power] did not raise the investment capital that it was obligated to raise by our agreement,” Chechetov said. The expectation was that Northland Power would attract investments for the upgrade and modernization of the plant, but seven years have passed, and that hasn’t happened, he added.
“If an investor delivers promises without making investments, we are forced to break the agreement,” Chechetov added.
Last year, Special Projects Director for Northland Power in Ukraine Roman Sawycky said the upgrades would begin later that year and would last until 2006. He said the plant would receive nearly $195 million in investments from the European Bank for Reconstruction and Development and a consortium of European banks. Additionally, Sawycky said Northland Power had already invested more than $14 million into the project, most of which had been spent on planning and logistics.
Sawycky explained that his company had stalled on its investment plan because it was waiting for Ukraine’s National Electricity Regulatory Commission to increase the maximum amount it could charge consumers for power. However, Northland Power’s request was granted partially in July 2004, said Volodymyr Brinzuk, a spokesperson for Ukraine’s NERC, but not to the extent the Canadian firm had hoped for.
“If [Northland Power] plans to make investments, it should make real investments instead of generating investment capital from consumers by setting tariffs artificially high,” he said. Brinzuk added that Northland Power never followed through with its ambitious investment plans, even though his commission gave it permission to increase tariffs.
The upgrades would have enabled Darnytsya Heat and Power Plant to help stabilize Ukraine’s electricity grid by serving as the country’s first peaking power plant. Peaking plants requires a large surplus in power capacity.
Northland Power officials have failed to respond to recent inquiries by the Post.
Northland Power owns 51 percent of Ukr Can Power, the SPF owns 34 percent and Darnytsya Heat and Power Plant employees own the remaining shares.
Northland Power was founded by Canadian businessman James Temerty, who has served on President Leonid Kuchma’s Foreign Investment Advisory Council and who currently chairs the Kyiv Mohyla Business School board. Temetry, chairman of Northland Power, has managed the company’s growth and development since its establishment in 1987.
