CALIF UTILITY FUNDS MONT WIND TO MEET RES

News Analysis: Eyeing Renewables Target, SDG&E Steps in to Finance NaturEner Project
Carl Levesque, July 23, 2010 (Wind Energy Weekly)

"Thanks to financial markets refusing to return to their pre-recession level of health, some dealmakers out West just got a little more creative with their wind farm financing…Utility San Diego Gas & Electric [SDG&E], which is working to meet a state renewable portfolio standard (RPS) that is among the most aggressive in the nation, has agreed to finance up to $600 million for developer NaturEner’s 309-MW Rim Rock Wind project in Montana near the Canadian border…

"…[SDG&E] expects to have 14% of its electricity coming from renewables this year, well below the 20% California standard, which rises further to 33% in 2020. (Other utilities are behind on the aggressive targets as well.) The deal, therefore, underscores the tremendous impact a renewables standard has—even on the financial side—in getting wind projects built."

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"Well before it decided to invest in the facility, SDG&E already had signed a power purchase agreement with NaturEner for the power coming from Rim Rock. Nevertheless, the developer found itself struggling to get project financing, which historically has been the domain of large financial institutions…

"NaturEner first approached SDG&E with the idea of the utility investing in the wind facility after the developer found that companies that traditionally would provide the financing lacked a sufficient tax appetite during the recession for the production tax credits a wind farm generates…"

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"…A utility, with its steady and reliable profits, likely incurs a healthy hit of taxes even during an economic downturn. So the developer approached the utility, which was anxious to tap more wind power to get closer to its renewables target…[T]he deal with SDG&E could pave the way for more such investments by utilities in wind projects…

"…The California Public Utilities Commission must approve the SDG&E investment, and the project is also contingent on the Montana-Alberta Tie transmission line getting built. (The transmission line is steadily making its way through the regulatory approval process.) The Rim Rock project is slated to be completed by the end of 2012."