Can You Hear the Wind Blow?

Tommywonk, WGMD, and the News Journal all have stories regarding the Blue Waster Wind deal. There are positive notes.

Based on the term sheet
we can expect the following.

300 MW each hour, enough to power all the homes in Delaware.

No increase , for the next 25 years, over what we are now paying for electricity. By the way oil hit $ 80 a barrel today, pushing up coal and gas! But will it affect Delaware’s electricity rates? Not with wind power, it won’t!

Wind power guaranteed to be on line in either 6 3/4 or 7 years.

Construction costs of 1.5 billion directly infused into the local economy.

Increased aesthetics and fishing habitats to the Rehoboth/Dewey Beach area.

Transmission upgrades included in cost. No additional charges for Delaware consumers.

Finally. A business dedicated to full compliance with Federal, State, and Local environmental requirements.

But there are storm clouds of doubt and uncertainty surrounding both Delmarva’s and Connectiv’s commitment to this grand project, completion of which would elevate Delaware to be the “First State” in renewable energy.

They are focused on the lack of transparency of Delmarva’s calculations. Delmarva wishes to make up stuff, and not have to show how it came about with the figures it did. Can you imagine if Bush last night had said: ” No American has died in Iraq, and not one dollar of taxpayer money has been spent in Iraq. Therefore we will continue on plan.” That is exactly what Delmarva wants to be allowed to do……….
make stuff up……….

Furthermore, Delmarva wants to charge penalties to Blue Water Wind based solely on the stuff it makes up. Both Blue Water Wind and NRG have consulted among themselves and independently determined that penalties will not be necessary. They can perform well within the criteria. But Delmarva wants to charge them anyway should it ever arbitrarily decide it needs some extra cash………Likewise,

while Bluewater attempted to have similar dialog with Connectiv on this and other issues related to the proper coordination between the wind park and the back up facility, Connectiv declined to enter into a confidentiality agreement related to any such discussions and no dialog was possible.

As has often been my experience in business, when someone gets antsy about poking through their records, it usually means they are stealing. In government, when public officials get antsy about the opening of committees and hearings to public scrutiny, it usually means they are stealing. So why, might we ask, should Connectiv pattern the same behavior and not enter a confidentiality agreement Blue Water Wind, unless they have some dark secret they cannot afford to see the light or day? This should send up a red flag of outrage for all citizens. Is another Enron brewing at Connectiv?

Outstanding issues that may or may not block the forward momentum.

1) The first issue is the consequence of the delay caused by the impending lawsuits sponsored by Delmarva and Connectiv.

Delmarva has taken the position that it must retain its appeal rights ( and therefore it would not discontinue its appeal of the State Agencies prior order authorizing these negotiations), and that it does not control its affiliated company Connectiv and should therefore retain the right to terminate and/or collect delay damages.

In other word if Delmarva/Connectiv purposefully slows down the process, it is entitled to receive the delay penalties owed to it on behalf of the BlueWater Wind investors. As was dryly noted: “such a provision presents a serious concern to Blue Water investors..”

2) Delmarva seeks termination rights in the event of a consolidation triggered by accounting rules FASB Interpretation #46. Under these rules, if Delmarva is the primary beneficiary of Blue Water Wind, Delmarva may be required to consolidate Blue Water Wind. To prevent this, Blue Water has offered to modify the agreement so as to eliminate the consolidation, in lieu of termination rights. So far Delmarva has refused. Again, as is dryly noted, Delmarva’s termination could again cost Blue Water’s investors millions of dollars.

3) Finally Delmarva has adamantly insisted upon the right to veto any change of control (not to be unreasonably withheld) at Bluewater , for any time over the next 25 years, regardless of the level of ownership at which the change of control takes place. This of course gives Delmarva the option to block deals resulting in tens of Billions of dollars which may not have any relationship to the wind farm. (Delmarva has adamantly refused to accept the same restrictions upon itself). Obviously the Blue Water Investors are uneasy about this clause as well. Bluewater has proposed several compromise solutions, all of which have been rejected by Delmarva.

Obviously Delmarva is unhappy to find itself in the position of supplying Delaware with cheap energy. They would much rather see households paying $8oo a month for electricity, than say $80.

But with proper public pressure these deals could still go forward. It is reassuring that great strides have already been taken…………….