KENYON WIND PROJECT INFORMATIONAL MEETING. Thursday, February 15, 2007

Transcription

1 KENYON WIND PROJECT INFORMATIONAL MEETING Introduction Thursday, February 15, 2007 I am John Daniels, one of four owners of Kenyon Wind, LLC. We are proposing to build an 18.9MW wind project, utilizing nine Suzlon Energy S88 2.1MW wind turbines in Kenyon Township and neighboring Cherry Grove Township. Eight of the machines will be in Kenyon Township. One will be in Cherry Grove Township. These wind turbines cost in the area of $2 million each to buy, rig and install. We are serious about wind energy. You have to be to get into this business. We are also serious about making this substantial investment in your community. We will go over the siting of our Wind Farm with you later in our presentation. Who are the Developers? This project is being developed by Kenyon Wind, LLC. We are a Minnesota company. There are four owners me, my wife Lisa, Rory Artig and Todd Andrews. Let me tell you a little about each of our backgrounds. Rory Artig. Rory is a mechanical engineer by training. From 1989 through 2004, he was the Renewable Engineer with the State Energy Office in St. Paul. He worked extensively with wind energy-related projects. Among other things, he developed the first statewide wind resource map, using digital land use information and local wind resource data. From 2003 to the present, Rory has done business as Wind Management, LLC, focusing on development of community-scale wind projects in Minnesota and working for a variety of consulting projects, including Western Illinois University and Minnesota State Colleges and Universities. Rory lives in Stillwater, Minnesota, although his work is statewide. Todd Andrews. Todd is an attorney who has specialized in tax and corporate law. He has appeared annually on the Super Lawyer list by Law & Politics Magazine. He served as an Adjunct Professor of Law at William Mitchell College of Law, where he taught classes in tax. He brings to our group more than 25 years experience in business planning. Lisa Daniels. Lisa has worked in the wind industry for the past 15 years. She is the founder and Executive Director of Windustry, a nonprofit 1

2 corporation which works with wind policy issues and advises landowners, colleges, schools and municipalities on wind energy development for both the small application and large commercial applications. John Daniels. I am an attorney who has practiced law for 33 years. I practice in the areas of commercial and civil litigation, commercial representation and family law. I have been Windustry s legal counsel since it was formed. I have extensive banking experience in that I served as an outside Director and Audit Committee Member of National City Bancorporation for 17 years and as outside Director and Audit Committee Member of National City Bank for 11 years. I am also the Chairman of the Board of the National Sports Center Foundation, which operates the National Sports Center in Blaine, Minnesota. The Sports Center has annual revenues of $10 million and serves children and athletes of all ages. Lisa and I live in Minneapolis. Local Connection to the Kenyon Area. None of us live in Kenyon, Kenyon Township or Cherry Grove Township. However, we have strong connections to your area. Our partner, Todd Andrews, grew up in Faribault. In fact, his family came to the Faribault area in the 1870s. Todd has relatives in the area. Todd s family ran the Andrews Nursery in Faribault which some of you may know or remember. In high school, Todd played basketball for Faribault, before going on to play basketball at the University of Minnesota. We are all Minnesotans. We all care a great deal about the health and welfare of the State in which we live. Why are we in wind energy? We are, of course, trying to make a successful wind project with the Kenyon Wind Farm. But our interests and concerns run deeper than that. I am sure you have all followed issues involving global warming and energy independence. Minnesota and particularly rural Minnesota faces serious consequences if global warming is not addressed. I do not need to give you the full Al Gore presentation on global warming, but there are some very interesting facts which came out of scientific testimony before a joint session of the Minnesota House and Senate a week or so ago on January 30, The Legislature heard from University of Minnesota scientists, Drs. Tillman and Johnson. 2

3 One of the primary contributors to global warming is coal-fired power plants, which we rely heavily upon to produce our energy. If we do nothing about global warming, future forecasts are that the 1988 drought year which many of you remember well and which was the worst in the 20th Century will be the average for this State later in this century. The result will be an increase in drought and deterioration of soil. Increased temperatures will lead to less weight gain in livestock and less milk production. Our soil quality will deteriorate. We will have a climate like summers in Kansas and winters in northern Illinois. Increase in water temperatures will lead to decline or elimination of sportfishing species which need colder water, increased algae growth and deterioration of our water resources. We will start to see more, different and extreme weather events something we may have already begun to see. The University of Minnesota scientists agreed that renewable energy such as wind energy is definitely a viable strategy for slowing the growth of climate change. Scientists are now more sure than ever that people cause warming. Renewable energy has been recognized as one significant step toward mitigating and reversing global warming and its effects. Also and as equally important in a time of war renewable energy is a giant step in industry independence. Our neighbor to the south, who owns and operates Wind Farms in Dodge Center, calls his turbines Freedom Towers. That is an apt description. State policy has begun to reflect the importance of wind energy and renewables. On February 8, 2007 only a few days ago the Minnesota Senate overwhelmingly passed a bill requiring the State s utilities to generate at least 25% of their electricity from renewable sources such as wind turbines. After two hours of debate, the Senate passed the bill 61 to 4. This effort is a bipartisan effort and, we think, one which is important to all Minnesotans. 3

4 Sure, we want to have a successful project in Kenyon, and we want that project to be financially successful. However, wind projects such as this are no financial bonanzas. Like most farms or small businessmen who have to buy their way in, we have to buy our way into this project by a number of years of hard work. We plan to stay with this project for 20 years or more. To us, this is a lifetime commitment. We are most frequently asked what steps have you taken so far and why haven t you come forward earlier to tell us about the Kenyon Wind Farm? I want to go into some detail on this, because I think you all deserve a very candid answer. Projects such as this come together piece by piece, like a big jigsaw puzzle. If one piece of the jigsaw puzzle is missing, you have nothing. For us, we have been putting together the pieces of the puzzle which make up this project since 2004, but until recently we have not had a viable project to come and talk to you about. A number of factors have had to come together to make this project viable. 1. There has been a good deal of wind development in southern and southwestern Minnesota for the past 10 or 15 years. Southern and southwestern Minnesota have excellent wind resources. However, there are limits the power industry people call them constraints on power lines. There has been so much wind development in the southwestern corner of the State that new developments simply cannot get their power to market. As a result, developers have had to start to look elsewhere. 2. You cannot put a Wind Farm just anyplace. You need three things: First, you need a location with a good wind resource enough to power a commercial turbine. Then you need sufficient line capacity to get the power to market. Then you need a utility of power company or other purchaser to buy your electricity. Of course, it is much more complicated that that, but those three components drive most wind projects in the State. 4

5 3. In 2004, Rory Artig identified land in the Kenyon area as a good potential site for commercial wind development. There was no hard data to back this up, but the information available made the prospect look good. 4. Rory then met with a number of landowners and looked at the possibility of leasing land in Kenyon to build a Wind Farm. There was interest with the landowners and a willingness by some to grant us options to develop. With those options, we could justify looking further. 5. One of the key aspects of the site which has now become the Kenyon Wind Farm is that it already has an existing 69KV power line running through the area. There is a new substation nearby. To build our Wind Farm, we would have to add our own substation. However, the location of good land with what we hoped would be a good wind resource located near an existing power line gave this project a distinct possibility. In 2004 and 2005, that is all the project was a possibility. 6. We had to measure the wind resource to see if it was sufficient to make our project work. In the winter of 2005, we received permission from Kenyon Township in Goodhue County to put up a 50-meter meteorological tower or MET tower. I think most of you have seen that tower. We mounted on that tower wind directional and measuring equipment. We monitored wind resources for more than a year. That data was taken to Wind Logics, a Minnesota company which uses computer modeling to assess the commercial value of a wind resource. By mid-2006 with a year s worth of data we felt confident that we had a wind resource. 7. But having a wind resource, having land and having access to a power line is still not enough to make a project work. We had to find a buyer for our electricity. We actually began discussions with Xcel Energy in late Those discussions remained ongoing for a couple of years. Our goal was to enter into a Power Purchase Agreement with Xcel Energy. Under this Power Purchase Agreement, Xcel Energy would purchase our power for a 20-year period. While there are some wind projects which simply sell their power to the highest bidder, those projects work off an entirely different financial model than we have chosen to follow. 5

6 8. We continued working with Xcel Energy throughout 2006 and finally arrived at an agreed Power Purchase Agreement in late September of last year. That Power Purchase Agreement had to be approved by the Minnesota Public Utilities Commission. Again, without that Power Purchase Agreement and without the Public Utilities Commission s approval of the Power Purchase Agreement, we would not have a viable project. Our Power Purchase Agreement, with some modifications, was finally approved on October 16, Okay. So now we had (a) land, (b) a wind resource, (c) a power line to take the power to market, and (d) a buyer for the electricity. All of these elements were still not sufficient to put together a viable project. We needed financing and a financial partner. Financial of a wind deal is complicated, but it is not rocket science. The important thing to remember is that the rate you receive for your energy from the power company is not sufficient alone to pay for the project under current circumstances. The income stream from the utility has to be matched with a federal Production Tax Credit in order for the project to be financially viable. This is really the only financial incentive for wind projects which exist under federal law. The Production Tax Credit operates on the basis of energy produced. If you do not produce energy, there is no Production Tax Credit. Similarly, it is only an offset against passive income. As a result, there has to be a partnership with a large company which has an appetite for the Production Tax Credit. There are many, many ways to finance a wind deal. However, all of them, for a small wind developer, involve partnering with a large corporation. 10. Making matters complicated in 2006, were a number of financial and political factors which posed huge challenges to a developer. I think the two biggest ones were, first, Congress did not immediately reenact the Production Tax Credit. This made finding a financial partner difficult. At the same time, China s demand for steel and a thriving world economy generally put steel prices through the roof. We experienced an odd situation in which the cost of turbines shot up in 2006 while at the same time the availability of turbines decreased. In all of this, we had to find a financial partner, and we had to find turbines. Without either, there would be no project. 11. Last summer and fall, as we finalized the Power Purchase Agreement with Xcel Energy, we identified a financial partner which could offer 6

7 us both financing and turbines. We have partnered with Edison Mission Energy, a wholly owned subsidiary of Edison International. Edison has $6 billion in energy assets worldwide. It is involved in financial development and independent power production across the United States. It is a specialist in wind energy. Most importantly for us, it has proven that it has the ability to work with small developers and have done so with a number of wind energy developments in Minnesota. It has access to a preferred turbine the Suzlon S88 2.1MW machine which we are proposing to install here in Kenyon. 12. There were still more pieces to our jigsaw puzzle, and I will not run on about them, but will only briefly mention them. First we had to make sure it was feasible for our project to be interconnected with the local transmission system. In August, 2006, we learned from the Midwest Independent Systems Operator ( MISO ) that it was, in fact, feasible that our project could be interconnected. We also had to begin the State application process and carefully comply with the siting and setback requirements of the State in our final design. Our State application was completed in December, and, with the approval of the Public Utilities Commission, it was sent out area residents in January. Adam Sokolski of the Minnesota Department of Commerce will describe the permitting process to you, so I will not go over that. We have also placed our project under State legislation passed in the spring of 2006, the Community-Based Energy Development Law ( C-BED ). There is someone here tonight to talk to you about the law as well. Most importantly, what I have wanted to tell you is that the pieces to the puzzle which we have had to put together have taken us some time. We do not think it would have made any sense to come to you with an incomplete or speculative project or no project at all. We also think it would have been a waste of your time to have public meetings and discussions about a project which may or may not happen. 7

8 What s in it for Kenyon? The second most frequently asked question we receive is what s in it for Kenyon, Kenyon Township and Cherry Grove Township? I will talk about this only briefly, as our time is short. The landowners from whom we lease land will receive what we earnestly believe is fair compensation for their new crop wind energy. They can farm up to and around our project. The project will pay its fair share of taxes. These taxes are a new revenue stream which would not exist without the Wind Farm. The Suzlon S88 turbine which we intend to use has major components which come from Minnesota. The blades are manufactured in Pipestone, Minnesota, in a plant that was recently opened there. The Pipestone plant has provided a number of new jobs for the Pipestone area. We expect that the towers will come from a local Minnesota provider. Construction of the project will utilize a large number of local contractors. There will need to be road work, drain tile work, electrical rigging and other contracting work, and we intend to use contractors from in and around the Kenyon area. In fact, we will need to do so. Cement will come from local providers. When the project is up, we will need to maintain it. We will operate these towers for 20 years or more and will need to have good, competent, welltrained service staff over a 20-year period. Facts about the Project Here are some basic facts about our project. The hub height of the Suzlon turbine is 264 feet. The rotor diameter (the circle the blades make) is 289 feet. The total height with the blade in the vertical position is 407 feet. Each turbine will produce approximately 6,439,000 kilowatt hours per year. An average household uses approximately 10,000 kilowatt hours per year. Assuming that, each turbine would serve 644 homes. 8

9 The whole wind project will produce approximately 57,950,000 kilowatt hours per year all from clean wind energy. The whole wind project then will serve approximately 5,800 homes annual needs. Electricity will not be sent to California or Chicago. The electricity is purchased by Xcel Energy and used by local Xcel customers. There will not be an immediate effect of reducing costs of electricity, but our long-term Power Purchase Agreement taken with other wind developers will do a lot to stabilize wind energy prices in the future. There will not be a lot of farmland displaced by our project. In all, the 9 towers will consume approximately 55 acres of farmland for roads and turbine sites. Foundations are made out of a pad and pier design. Each uses about 350 cubic yards of concrete and about 40 tons of reinforcing steel. The pad is approximately 56 x 56 square, and it is about 9 feet from the surface to the bottom of the foundation. Only the center pier rises about the ground, and that is taken out in decommissioning. Approximately 1.8 miles of access roads are going to be built for the project. Approximately 2.5 miles of heavy-gauge electrical wire will be trenched four feet into the ground to interconnect with the wind turbines. We will have our own substation. When the project comes down, we have and will assume special responsibilities for closing and cleaning up each site. This is called the Decommissioning Process. Design and Siting of the Wind Project. I will now turn this over to my partner, Rory Artig, who will describe the project layout to you. Thank you all for your attention and consideration. 9