Oct. 4 (Bloomberg) -- Sany Group Co., China’s biggest machinery maker, said an affiliate may lose about $20 million after U.S. President Barack Obama blocked a planned Oregon wind-farm project because of national-security concerns.
The sum includes design and construction costs, Zhou Qing, Sany’s in-house lawyer, said by phone yesterday. The Oregon project poses no threat to U.S. security and the wind-farm operator was unaware of a nearby navy facility, he said.
Obama’s veto is “extremely unfair,” Zhou said. “We are definitely not spies and this is purely a business proposal.”
The rejection threatens Sany’s push to expand in the U.S., Zhou said, as China’s slower economic growth damps domestic demand at its main construction and mining equipment businesses. Wind-farm owner Ralls Corp. is suing Obama in a bid to reverse the ban, the first imposed by a U.S. president in 22 years on national-security grounds.
Ralls, based in Delaware, is “actually controlled” by Sany, even though the listed legal owners are two of the group’s executives, Zhou said. He declined to say why wind-farm company had been set up this way.
The Oregon project received no funding from the Chinese government and all design and construction work was done by U.S. companies controlled by Americans, he said. Closely-held Sany Group isn’t state-controlled.
The loss estimate excludes legal fees from challenging the U.S. ruling and money the company could raise from selling the project. Ralls will also miss out on $25 million in federal investment tax incentives if the wind farms aren’t in service by Dec. 31, according to a court filing.
Sany reported the case to China’s Foreign Affairs Ministry and Ministry of Commerce after it received an order from the Committee on Foreign Investment in the U.S., known as CFIUS, in August. The government offered some support, Zhou said without elaboration. Sany also has interests in two wind-power projects in Texas, he said.
Obama on Sept. 28 ordered Ralls to remove all property and installations from its sites within two weeks and to divest all of its interests in the wind-farm project within 90 days. Ralls added the president on Oct. 1 to a lawsuit filed Sept. 12 that challenged a ruling by CFIUS blocking the project.
Ralls was seeking to place Sany-made wind turbines at the Oregon installations after purchasing land and other rights earlier this year. The assets consist of four locations, all of which are near or within restricted Navy airspace, according to the U.S. Treasury Department. Ralls didn’t report the acquisitions to CFIUS, according to a U.S. filing in the case.
The Navy conducts training for bombing, electronic combat maneuvers and develops drones in areas nearby, according to the website of Naval Weapons Systems Training Facility Boardman.
Sany Group controls Shanghai-listed Sany Heavy Industry Co., China’s biggest construction-equipment maker. The group’s Chief Financial Officer Duan Dawei and Vice President Wu Jialiang own Ralls, according to court filings. Sany, based in Changsha city, Hunan province, is run by Chinese billionaire Liang Wengen.
The case is Ralls Corp. v. Committee on Foreign Investment in the U.S., 1:12-cv-01513, U.S. District Court, District of Columbia (Washington.)
To contact the reporters on this story: Jasmine Wang in Hong Kong at Jwang513@bloomberg.net
To contact the editor responsible for this story: Neil Denslow at email@example.com