CasinoÂ’s power plant an $81 million gamble

OLG Windsor Energy Centre embroiled in mismanagement claims, cost overruns, and litigation, after a design-build dispute left the Caesars Windsor casino's district energy plant without grid connection, electricity generation, or efficient performance, burning taxpayer funds.

There's a murky tale behind the building of a casino energy plant at the heart of a brewing scandal at Ontario's troubled lottery corporation and two multimillion-dollar lawsuits.

How taxpayers ended up shelling out $81 million for what currently amounts to a conventional boiler and cooling room, a cost that prompted opposition questions at Queen's Park, emerges in a convoluted narrative in dozens of pages of documents filed in provincial court.

The Ontario Lottery and Gaming Corp. and Buttcon Ltd. – part of the consortium that designed and built the plant – each accuse the other of mismanagement, incompetence and threats that soured their relationship and sent costs soaring to twice the budget.

But they leave many questions unanswered, much like an OPG report with little information did, such as the value of the plant, which a 2008 report pegged at $21 million to $78 million.

Court documents say the Windsor Energy Centre, which sits on top of the Caesars Windsor parking garage, heats, cools and provides backup power to the casino, but doesn't generate electricity and isn't connected to the local grid as originally intended.

The agency harbours little hope of getting what it paid for without sinking more money into the facility, a concern reminiscent of an OPG viability review highlighting sector risks. It believes "large portions" of the energy centre will have to be redesigned and constructed, and equipment will need to be replaced.

"Even with the redesign and reconstruction work, as a result of problems created by Buttcon's design, the energy centre will be unable to operate in an efficient, cost-effective manner," OLG's statement of defence said.

Forensic accountant Al Rosen, who examined a report on the plant, said he's baffled by how OLG got into the mess.

"One of the factors obviously is, 'Do I have the power to run this?' given Ontario's hydro bill pressures, because (the casino) is sort of a year-round Christmas tree, the way they've got the thing lit up," he said.

"So what went through their brain at that time, not to allow them to factor in one of the huge costs, which would be electricity?"

Buttcon, which is suing OLG for $355 million, denies allegations in the agency's statement of defence, and says it was strung along for months by lottery executives who said Buttcon would eventually own and run the plant.

The problems seem to have started when OLG let Buttcon start construction before the two sides reached a final agreement.

In September 2006, the $439-million expansion of the casino was underway. OLG realized it needed a separate energy centre for heating, cooling and "standby electrical needs" for the expansion, at a time when a gas-fuelled plant agenda was advancing across Ontario.

OLG decided to hire someone to design, build, operate and own the plant, in line with how Ontario awards deals for power during procurement. It intended that company would bear costs of building the plant in exchange for a long-term agreement to supply energy for the new facility.

Later that month, the agency reached an agreement to "negotiate exclusively" with a consortium of Buttcon and other firms.

OLG denies Buttcon's claim it ever awarded them a contract.

OLG, which is countersuing Buttcon for $60 million, also accuses Buttcon of using underhanded tactics to force the agency to pay its bills, echoing how a power company 'gamed' $100M in the electricity system, including slowing down construction and threatening to disrupt a Céline Dion concert in February this year.

In 2007, Buttcon offered to buy the plant for the amount already put into construction, and to take on costs of completion.

The agency, which has gone through three CEOs since the project began, has no mandate to be in the energy business, Buttcon points out in its statement of claim.

The company also alleges the plant was originally "off-book," a claim OLG denies.

Finance Minister Dwight Duncan, who took over responsibility of the OLG five months ago, has rejected calls for the provincial auditor to look at the books, saying the truth will come out in court.

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