Friday, April 17, 2015

Let's Do The Math -- April 17, 2015; Original Price: $2.6 Million / MW -- Sold For $500K / MW


June 13, 2015: Spain is paying the price of high-cost solar
Original Post
Zacks is reporting:
ALLETE, Inc.’s subsidiary ALLETE Clean Energy, Inc. acquired a combined 97.5- megawatt (“MW”) wind generation facility, comprising the Chanarambie and Viking wind farms, from a unit of EDF Renewable Energy. The transaction was valued at $47.5 million. The two wind farms jointly have 65 turbines, manufactured by General Electric Company GE.

Including the latest transaction, ALLETE Clean Energy’s renewable portfolio has now reached 437 MW.
$47.5 million / 97.5 MW =  $487,000 / MW

This is a steal.

From an August 25, 2014, post, this is 30-second sound bite for "cost of renewable megawatt":
  • Solar: $3 million / MW
  • Wind: $2.5 million / MW
  • Natural gas: $865,000 / MW
The seller, EDF Renewable Energy, got tons of tax credits and now will take a huge loss in the sale. They will carry those losses forward for many years, I assume. 

Meanwhile, ALLETE just got a great deal -- but no tax credits, I assume. Probably done for "PR" and government mandates.

Chamarambie wind farm: Minnesota; commissioned in 2003

Viking wind farm: co-located with Chamarambie.

Chamarambie-Viking wind farms are located 20 miles away from the 104-MW Lake Benton wind farm which Allete also bought, back in January, 2014.

The original reason for the Chamarambie wind farm: 79.5-Megawatt project by Xcel Energy, Inc. (formerly Northern States Power Company) as part of Xcel's requirement to provide 425 megawatts of wind-generated electricity.

Quick: see how long it takes you before you find the original cost for the Chamarambie wind farm.

This was the best I could do:
Xcel Energy and enXco, an EDF Energies Nouvelles Company announced plans to develop 351 megawatts (MW) of wind power in Minnesota and North Dakota by the end of 2011, increasing the utility's wind power resources by more than 10% company wide. Once developed, project ownership will be transferred to Northern States Power Co.-Minnesota, an Xcel Energy company.

The agreement between enXco and NSP-Minnesota targets approximately $900 million in investment over three years. It stems from a competitive bidding process Xcel Energy launched late last year, as part of its plan to meet state renewable requirements. The agreement marks Xcel's first major wind undertaking in North Dakota.
Original cost: $900 million / 351 MW = $2.6 million -- in line with generally accepted numbers for a new wind farm. And now it's being sold for less than $500K / MW.

So, Xcel / enXco starts this back in 2011, commissioned in 2013; once built, turns it over to Northern States Power Company, a subsidiary of Xcel. Then in 2014, sells it to Allete. In the real estate business this is known as flipping, but the goal is to sell real estate for more than it was purchased. In wind power, it appears to be all about tax breaks and government mandates. The road to Germany comes to mind.

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