February was a big Iberdrola month as newspapers throughout northwest Ohio carried the news of Iberdrola’s presentation of PILOT payment checks to schools from the Blue Creek Wind project. Sen. Cliff Hite and Rep. Tony Burkley (R-Payne) were there with big smiles to hand out the checks. The smiling faces from Van Wert and Paulding Counties call into question whether the citizens or media really understand what is happening. We suspect Senator Hite and Rep. Burkley know but are happy to play along with the charade. To refresh our memories:
Ø Blue Creek received a federal taxpayer-funded grant of $172, 688,076 to build the wind facility under Section 1603 of the American Reinvestment and Recovery Act;
Ø Local taxpayers gave them a tax abatement of approximately $30,000 per MW per year by granting the PILOT (Payment in lieu of Taxes) – at 304 MW, Blue Creek would have paid over $9 million instead of $2+ million; Local taxpayers gave up $7 million to receive $2 million;
Ø Ratepayers are paying higher rates for the energy and that includes OSU which purchased 25% of the output by buying Renewable Energy Credits; and
Ø Blue Creek is producing at about 27% of its rated capacity.
So tell us again. Why are these people smiling? Iberdrola isn’t smiling. They are laughing all the way to the bank.
Speaking of which, this past week, Iberdrola purchased a large utility company serving the New England area. The $3 billion purchase reflects their intention to “offset falling profits at home.” Because of subsidy cutbacks at home and increasing taxes, Iberdrola “has vowed to slash domestic investments and expand abroad.” The Financial Times reported: “Over the course of 2014, the company lost €339m in state subsidies for its renewable energy operations in Spain.”
Iberdrola also owns the UK’s Scottish Power. Problems are forecast there if the Labour Party prevails in the May elections. The stakes are so great that the wind industry is under investigation to determine whether foreign interests are trying to influence the outcome of the election.
Iberdrola’s announced purchase of UIL will provide them with the platform to drive more profits from US subsidies and mandates. They intend to sell some of their assets to finance the deal. The renewable energy trade papers continue to forecast ongoing asset sales and consolidation in the wind industry. We wonder about Iberdrola’s plans as they have been the most vocal in opposing Ohio’s temporary freeze on renewable mandates. They have been equally vocal, along with Apex, on their vigorous objection to Ohio’s new setback requirements. We wonder if Iberdrola, like Apex, will seek to buy projects that have been approved under the old setback rules but not yet built.
One trade paper speculated on how utilities and developers might finance expansion. One paper speculated that:
“If utilities and developers want to expand in new markets they need working capital, and one way to quickly raise it is to sell operational projects in established countries. This is driving the growth of secondary wind markets in Europe and North America. On paper, the thinking is good — and it sounds relatively straightforward too.
But, as the number of projects being offered to investors on the secondary market increases, utilities and developers will need to become more savvy about how they sell these projects.
In short, the secondary sell isn’t as simple as it sounds as there is no shortage of projects or investors.
Indeed, in the last week, two funds have told us there is a large number of projects to invest in. First, Greencoat Capital in the annual results for its UK wind fund said that it expected to see a “significant number of further investment opportunities” over the next year and that it would have to “invest selectively”.
And second, The Renewables Infrastructure Group said in its annual results that it has a “healthy pipeline of projects available across its target markets”. That “healthy pipeline” is competition for all those utilities and developers who want to offload assets; and they can be sure that potential buyers will carry about tough due diligence before completing a deal.
The message for would-be sellers is clear: potential buyers have no shortage of options. If sellers want to sell their assets for the best prices then they need to be aware of this. Pitch an asset right and a good asset will move fast at a good price.
But pitch it wrong and the project — or, worse still, a portfolio of projects — will struggle to sell and get stuck in a vicious circle as potential buyers question why it hasn’t sold already.”
Many folks in Champaign, Logan and Hardin Counties wonder if EverPower or Invenergy will be buyers or sellers. Apex has been a buyer and it appears Iberdrola may have to decide whether it is going to be a buyer or a seller based on Ohio’s legislative actions. Time will tell but it is clear that the sellers will need better projects to sell and buyers will be picky. Will a buyer be interested in a project with inadequate setbacks and no federal or local tax subsidies?
Spanish utility Iberdrola SA (IBE.MC) will buy UIL Holdings Corp (UIL.N) for about $3 billion to create a new listed power and gas company and expand in the United States, where it hopes to offset falling profits at home.
A world leader in wind turbines, Iberdrola joins other European companies seeking to grow via acquisitions outside sluggish domestic markets. Last year, German engineer Siemens (SIEGn.DE) agreed to buy U.S. turbine maker Dresser-Rand (DRC.N).
Iberdrola’s earnings have been hit hard by Europe’s economic crisis, as well as by energy reforms in Spain, where new power generation taxes and renewable cutbacks dented profits….
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