Thursday, April 3, 2014

The Story of Big Sky WInd Farm and Lee County

Sometimes this circus of wind, energy and RICL reminds me of a big connect the dots conspiracy theory.  A garage full of articles, some Post-It notes and string would be helpful tracking this stuff and keeping it straight. Occasionally, if one connects the dots, the story is much bigger and has only been reported in pieces.

When you have privately owned projects like wind farms on farmland owned by someone other than the wind company, the question arises “What happens if the wind farm goes out of business?”  This is the same concern a lot of people have asked about the Rock Island Clean Line if public domain is used for a privately owned powerline cross crossing farmland to deliver wind energy to urban centers in eastern states.  If the project goes out of business, what happens? Who will be left to remove the towers?

RICL says this is not a concern and the price of scrap steel could cover the cost of removal and besides these projects won’t fail.  Wind energy is a winner.

Now enters Big Sky Wind Farm from Lee County in Northern Illinois.  Marci Jacobs at the Medill Reports (Northwestern University) did an interesting story about this subject last summer.  Louis Vassen, a Sublette, Illinois farmer was quoted;

“I think they’re pushing them too fast and we’re going to have a lot of obsolete equipment down the road,” said Louis Vaessen, a resident of Sublette, a town of 500 in Lee County. Vaessen has lived in Sublette for over 42 years.

Another land owner was quoted;

“The concern is that if the windmill itself or the company operating the windmill is not a profitable entity without government subsidies, if they go bankrupt you could get left with a big windmill on your land that they’re not paying you for and that they’re not going to dismantle,” said Brad Faber, a Chicago-based lawyer whose family operates a farm in Sublette. “If the companies continue to be supported by state or federal grants or a combo, and continue to be kept alive, then great. Nobody’s going to go to war about it.”

Big Sky was the wind farm used in this story to represent the industry’s position. 

Lee and surrounding county ordinances require that wind farm companies have decommissioning plans in place to hedge against such an event. Edison Mission Energy, owner of Big Sky Wind, a wind farm located in Lee and Bureau counties, has a permit that requires a $5 million bond for decommissioning.

Susan Olavarria, the director of communications and government affairs for Edison Mission, explained in an email that this amount “should be enough to cover the cost of decommissioning.”

How ironic.  While Big Sky Wind Farm was built in 2009, Edison Mission Energy and its subsidiaries, including Big Sky and Midwest Generation went bankrupt about a year and a half ago.   As Steve Daniels of Crain’s Chicago Business reported last February, Suzlon, the fifth largest wind turbine manufacturer from India was about to repose the (wind) farm.   Daniels reported;

At issue is an unusual loan Suzlon made to Big Sky to finance the project that comes due in October. With a $228 million balance, the loan won't be paid in full at that time. Suzlon has been in discussions with Edison Mission for months on restructuring the debt, according to Securities and Exchange Commission filings, but there's been no resolution.

Suzlon agreed in 2009 to finance the project's debt despite the fact that Big Sky didn't have a long-term contract to sell its power at a price that would have ensured its costs would be covered. Project loans by turbine manufacturers aren't unheard of, but they typically are made when there's a long-term power purchase contract in place.

Suzlon opted to take the risk at the time because it wanted to demonstrate the quality of its turbines following questions regarding the functionality of earlier versions, according to people familiar with the background of the deal.

Looks like that deal has been finalized.  The Hindu Business Line now reports Suzlon has “acquired” Big Sky.  Like the article linked at Energy Central, no mention is made about the bankruptcy or as Crain’s Chicago reported, Suzlon’s willingness to finance Big Sky.  Reading these articles, a person would think Suzlon bought Big Sky when it’s more like a creditor reposing a car, or a bank foreclosing on a house. 

The acquisition was made through Suzlon's US subsidiary Suzlon Wind Energy Corp. (SWECO), set up to cater to the growing needs of the wind power market in North America.

While the financial details of the transaction have not been disclosed, two people close to transaction said that the deal has been struck at $220 million.

"Big Sky, however, is now completely debt-free and cash generating asset.

So what happens when these wind farms get decommissioned?  While Edison Mission Energy bonded $5 million for the inevitable decommission, was that money really there at or after bankruptcy?   Will the new owner of Big Sky maintain a $5 million bond? 

Is money ever there when a corporate bankruptcy is involved?

The story of Big Sky isn’t over yet.  The same day it was being reported that Suzlon has “acquired” Big Sky (April 2), Bloomberg reports Suzlon is selling Big Sky to EverPower, a British private equity firm.  Amazing.  Big Sky goes from bankrupt to “acquired” and sold all in the same day.  In the end, Big Sky is owned by foreign interests. 

Looks like the most jobs Big Sky created were to the multiple law firms in these deals.  It will be interesting if Big Sky honors their contracts with the farmers and landowners or if these deals were absolved and “renegotiated” in the bankruptcy.  It would also be interesting if the tax revenue to Lee County will remain the same or if it will be renegotiated with the new foreign owners.

The question remains, what happens when these projects like these wind farms and the Rock Island Clean Line reach the end of their useful life and are decommissioned?  Does anyone really believe there will be monies leftover beyond steel scrap values to remove the towers?  Farmers and landowners are asking a legitimate questions and have real concerns when private equity speculation projects like Rock Island Clean Line (the powerline for wind farms) desire eminent domain to cross their land.

Is there really a "benefit" when these projects are turned over to private equity companies?
To connect the last dot in this circular story, Louis Vassen, the farmer who questioned the wisdom of wind farms with communities facing Wind Farm Fatigue has chosen a different route than corporate wind for his farm.  Today's issue of Illinois AgriNews has an article by Jeannine Otto covering Louis Vassen.  He has chosen to go the route of Distributed Generation and control his own renewable energy needs.  He’s install 10,000 watts of solar panels on his barn roof. 

The future of the energy industry is not grandiose transmission projects for wind farms that will eventually be ran into the ground.  The future of energy is more and more going to be farmers like Mr. Vassen in Sublette, Illinois who decide to generate their own energy and be true stewards of their land.

 “There’s enough room up on the barn roof that I can put up another 10,000 watts’ worth of panels after I see how this works out,” he said.

Carol Vaessen has plans for the homegrown electricity come summertime.

“We’re using more than they produce now, but in the summertime, it pretty much should all go back to the grid,” she said. “We don’t use the air conditioning.”

“We will this year if we have those,” she added.

I hope they enjoy the air conditioning this summer.

1 comment:

  1. Has anyone actually tried to verify the claim that the scrap value of the steel is equal or greater than the cost to disassemble and haul it off? I'm thinking that's just one more bogus claim. It's not like you can just pull a handful of bolts and yell "timber" anymore. Would it also be enough to remove the tower foundations to an adequate depth, or will they simply be buried under a couple inches of soil like icebergs for the expensive farm equipment titanic to navigate around? What is the salvage value of high voltage transmission lines/towers?