Wednesday, November 28, 2012

RICL and National Grid

If you don't know it by know, National Grid is investing $40 million dollars into Clean Line Energy.  National Grid, a Great Britain Company, is traded on NYSE and is something of a "legitimate" energy company.

This strategic move possibly explains some mysteries.  For the last couple weeks I have been asking myself why RICL has created two more shell companies above the flagship company "Clean Line Energy Partners LLC”.  There is now Clean Line Investor Corp and Clean Line Investments LLC.  Why?  My first guess was they want as many holding companies as possible to pad the bills and puff up the “expenses”.

Now it appears that Clean Line was creating additional companies to make room for NatGrid.

After reading the news that Nat Grid is making an investment in Clean Line, I wondered if Clean Line Investments was created to invest in other companies besides Clean Line Energy Partners, like NatGrid.  Possibly Clean Line Investments could purchase $40 million (or more) in NatGrid stock and NatGrid returns the favor and invests $40 million in Clean Line Energy Partners LLC.  This does sound confusing.  When there are as many shell companies as there are involved with RICL, it's going to get weird. 

This could explain why there are now two shell companies above Clean Line Energy Partners LLC.  It would be a whole lot simpler if Michael Skelly would have come to Illinois and explained his company to use like the ICC intended.  Unfortunately he chose to play these games and we now have to speculate on the companies motivations.

Regardless of shell companies and who is investing in what, this was an interesting strategic move by Clean Line.  There is a real public perception problem for Clean Line with the company being owned by billionaire Michael Zilkha and the Ziff Bros. of New York City.  This creates a problem for Clean Line to obtain the right of ways in Illinois for the RICL project.

Farmers and landowners have objected stating Clean Line desires to take the land rights, in essence, the land itself and giving it to billionaires through eminent domain.  This is a public relations nightmare for the company because it is true.  RICL wants eminent domain power to take the land for a nominal fee.  Yes, RICL's owners are billionaires. 

It's going to be hard for RICL to play the "good for the public" card when a couple of billionaires will profit.  If these venture capital companies are allowed to sell the RICL powerline to the highest bidder, Michael Zilkha will be hailed as a visionary, but his profit will come from the land held by generations of farmers in Illinois.  This is clearly a public relations problem.

Now RICL is able to claim that National Grid is publicly owned.  Illinois residents can buy stocks at the New York Stock Exchange and invest in National Grid.  RICL would like us to think it's almost like investing directly in Clean Line Energy Partners, but NatGrid's investment is only a paltry $40 million. 

Last I heard, the Rock Island Clean Line project is a  $2 Billion project!   Clean Line has four of these sister projects.  Rough math here but 4 projects at $2 billion each and Nat Grid is investing $40 million equates to a 2% investment.

Should the RICL project go through, their investment in Illinois Right of Ways will likely exceed $80 million.  NatGrid's investment won't even cover half the cost of Illinois right of ways.  Regardless if NatGrid's investment is two companies investing in each other or an actual partnership, a $40 million dollar investment is Mickey-Mouse-Cornflakes insignificant.  A 2% investment also does not make RICL a publicly traded company or give RICL 2% legitimacy as a public utility company.

1 comment:

  1. Scott I really appreciate your eleoquence on the subject. Your response letter in the Morris paper and this blog have really helped me better understand the business side of this issue. Thank you.