Community Wind Model

1
Community Wind Model Guidance for Farm Bill
Section 9006 Application

• Christine Watson MikellWats Consulting
• 801-943-0104 or 801-455-1045
• rayandwats_at_comcast.net

2
Why Develop Your Own Wind Farm

• Wind Farms produce big bucks
• Leasing your land produce medium bucks, but
  there is less risk.
• The difference is lots of dough
• Waiting for a wind developer to visit you is like
  playing the lottery.

3
Return on Investment Analysis
From the Wisconsin Based Wind Power Project
4
Community Wind Farm Process

• Form a Steering Committee
• Mission Statement
• Select Leaders
• Raise seed money
• Research and visit other similar projects
• Apply for grants
• Form entity/structure/governance
• Select professional consultants
• Feasibility study

5
The 12 Steps in Building a Wind Farm

• Site Selection
• Land Agreements
• Wind Assessment
• Environmental Review
• Economic Modeling
• Interconnection Studies

• Permitting
• Sales Agreement
• Financing
• Turbine Procurement
• Construction Contracting
• Operations Maintenance

6
Site Selection

• Does it feel like you are in Wyoming
• Private Land
• Close to transmission
• Roads or easy to build roads
• Endangered Species over head or below
• Neighbors

7
Land Agreements

• Term-typically 20 years with option to extend
• Rights-Wind, Ingress, Egress, Transmission
• Compensation- of revenues
• Assignable-financial requirements
• Indemnification
• Reclamation Provision
• Get signed and complete the exhibit
• before investing money

8
Wind Assessment

• Find data to correlate toairports, highway
• Install meteorological tower50 meters or greater
• Collect hourly wind speed and direction
• Minimum 1 year hub height data or for purposed of
  grant, correlation to another met tower
• Report conducted by known meteorologist
• Energy and Capacity output for turbines (size and
  model)

9
Environmental Review

• Meet with US Fish Wildlife
• Find out about endangered species in area
• Determine which avian studies needed
• Raptors
• Bats
• Migratory Birds
• Call Division of Wildlife Resources
• Help with bats and other species
• Call Hawkwatch/Local Audubon
• Conduct studies if US Fish
• Wildlife deem important

10
Environmental Review

• Visual Study
• Mock up drawing of wind farm
• Review with community
• Noise study if near a community
• Historical and Archaeological Review
• Letter to State Historical Preservation Officer
• Letter to Tribes
• Wetlands/Flood Plain Analysis
• Letter to FEMA to ensure no floodplain

11
Economic Modeling

• Obtain Cost Data for Spreadsheet
• Have an accountant in your family?
• Output projections using wind data
• Get turbine quote from a couple of companies
• Suzlon works with smaller projects
• Balance of Plant Costseverything else
• Foundation--Allan Henderson
• Collection System/Substaion/Communications
  Control SystemContact Electrical Engineering
  firm and
• see if they do it free in exchange for doing
• design build later
• ErectionOlsen Beal, Lehi Utah
• Or call Signal Wind or like company for
• construction estimates

12
Economic Modeling-Continued

• TaxesAsk County Assessor
• Sales
• Property-Depreciation?
• Income
• Operation and Maintenance
• Many mfgs have this along with warranty
• Finance Assumptions
• Tax Credits
• Equity rate of return9-10
• Debt rate of return
• Debt/Equity ratio

13
Interconnection Studies

• FERC Small Generator Interconnection
• Shorter Timeline for studies
• Less upfront costs
• Trade sweat equity or negotiate a deal with
  engineering firm to do free interconnection
  application and participate in interconnection
  study process with utility

14
Permitting

• Local, State, Federal
• Public Land
• Private Landless permitting unless you have
  federal monies.
• Land Use Permit/Conditional Use
  PermitMeteorological Towers and Wind Farm
• Building Permitas you prepare to erect the
  turbines

15
Sales Agreement

• Power Purchase Agreementwhich utility?
• Kilowatt pricereal or normalized
• Term
• Credit worthy buyer

16
Financing

• Source of Equity
• Source of Debtsome equity partners can carry the
  debt. Local Utah banksZions Bank
• Term of Debt
• USDA guaranteed loan
• Third party due diligence

17
Turbine Procurement

• Power curve-output projections, run serveral
  turbines for best fitting turbine
• Capital Cost-turbine, tower, blades and
  electronics
• Turn-key Construction Cost-Padmounts,
  Interconnection and Erection
• Warranties-Equipment and
• Maintenance
• Construction Financing

18
Construction Contracting

• Turn-Key Contract
• Excavation
• Trenching
• Foundation Assembly
• Concrete
• Cabling
• Tower Assembly and Erection
• Turbine Installation
• Interconnection to utility
• Commissioning

19
Operations Maintenance

• Fixed Cost/turbine/year
• Fixed price/kwh produced
• Availability Warranties
• Penalties from utility for non-performance

20
Sole Ownership

• Sole Ownership
• Possible if a business or individual has the
  resources to put the project together and can
  provide the equity.
• Establish venture in multiple LLCs avoid
  personal financial liability.
• Owner actively involved in managing the project
  has sufficient tax liability, then the federal
  PTC and accelerated depreciation can be used to
  reduce taxable income and taxes
• If outside manager is hired to run project, owner
  is passive investor and PTC could then only be
  used to offset income tax liability associated
  with other passive income.

21
Local Investor Ownership

• Most popular community wind structure
• Own shares in project
• Establish min and max each person can invest
• Require that investors are local
• Allow for proportionate voting rights-one vote
  one investor
• LLC
• All owners are passive which means PTC is awash.
  Okay in MN where they have an additional state
  PTC like credit.

22
LLC/C-Corporation Joint OwnershipAKA FLIP

• Joint ownership by local investors in an LLC and
  an outside investor.
• Long-term ownership and financial benefits from
  project
• Less up-front capital while ensuring taxes are
  utilized.
• Local investor group does pre-development
• Local group then markets project to potential tax
  motivated corporate investors

23
LLC/C-Corporation Joint OwnershipAKA FLIP

• Local investors obtain construction and permanent
  debt financing together with a commitment from
  the corporate investor to acquire an interest in
  the project at commercial operation.
• Local investors providing 25 of the required
  equity capital. (10-15 of overall capital)
• Corporate Investor makes investment with turbines
  begin to generate power
• Investor realized returns in first 10 years
  through combo of PTC and accelerated
  depreciation. Project debt also paid down
• Ten year mark, ownership flips to the local
  investors.
• Local investors buy back the project at the
  market value of the turbines.

24
Loan to Own

• Local Ownership group would pool capital and make
  a loan to outside equity partner
• Loan lowers the equity partners required equity
  and increases its financial returns.
• Local investors earn interest over term of loan
• Equity investor owns 100 and receives all tax
  benefits and income or loss
• Year 10, equity investor sells project to local
  investors at price equal to principal value of
  loan.
• Local investor receives the operating income of
  the project from year 10-20.
• Tax risk in selling project at predisposed price.

25
My Bible

• http//www.rurdev.usda.gov/rd/farmbill/section9006
  rule.pdf

26
Large Wind Technical Report Differences

• Less than 200,000
• Qualification of key project service providers.
  For licensed professionals provide credentials.
• Meteorologists
• Engineers
• Installers
• Turbine Mfg

• Greater than 200,000
• Qualification of Project Team
• Project Manager
• Meteroologist
• Equipment Supplier
• Project Engineer
• Primary or GC
• Construction Contractor
• Operator Maintainer
• Design Engineering
• Project Development schedule

27
Foreshadowing Sticking Points

• Start EarlyApplication process takes over 100
  hours.
• Have the federal register, sample application and
  USDA power point presentation next to you the as
  you write the application
• Number your application the same way the Federal
  Register does in the table of contents
• FORMS, FORMS, FORMS
• Find Electrical Engineers/Accountants in the
  community
• EE can help with the interconnection side the
  technical report
• Accountantfinancial statements for last 3 years,
  current balance sheet/income statement proformas.
  
• Talk to US Fish and Wildlife Early

28
Foreshadowing Sticking Points

• Meterological studyqualified meteorologist
• Feasibility Study must be done by an independent
  qualified consultant.
• Send letter to State Historical Preservation
  Officer and Tribal Officers
• Look at the scoring criteria and compare to yours
  to ensure you are looking good. Fix areas that
  are weak.
• Meet with Richard Carrig a day or two before the
  application is due and get feedback
• Disbursement of Grant MoneyProject complete when
  applicatn provided written final project
  development, testing and performance report.