Treasury Awards Second Round of Recovery Act Grants; +$1 Billion Out Since August

Clean-Energy Grants: Iberdrola Wins Big, Again

By Keith Johnson September 22, 2009, 12:50 PM ET

When it comes to clean-energy grants from the U.S. government, it’s déjà vu all over again.
That is, Spain’s Iberdrola was again the big winner in the second round of government grants for wind farms: Iberdrola scooped up $251 million of the $550 million awarded today. The grants cover three Iberdrola wind farms in Iowa, Texas, and Missouri.
The cash-in-hand grants are an alternative way for the government to subsidize clean energy after the implosion of the tax-equity market last year. Iberdrola was also the biggest winner in the first round of the grants, announced earlier this month. So far, Iberdrola’s U.S. wind farms have snared $545 million in grants.
Germany’s E.On took home the biggest single prize, a $121 million grant for the Pyron Wind Farm in Texas, underscoring the role that European wind developers have in the U.S. wind-power market.
But do the grants amount to a bailout of foreign energy companies? Duke University figures the growth of wind power in the U.S., even if spearheaded by Europeans, will in fact help restore manufacturing jobs for U.S. companies. (Here’s the study.)
That’s because much of the value chain in wind power is suited to U.S. firms. The Duke study found that every 100 megawatts of wind power that are installed–a pretty typical-sized wind farm–creates 387 total jobs, including 310 in manufacturing.
“Every time a wind power project is installed it creates jobs, not only in the manufacturing sector, but also for structural engineers, surveyors, mechanics, sheet metal workers, machinists, truck drivers, construction equipment operators and wind turbine operators,” said Duke professor and study co-author Gary Gereffi.

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FROM THE DOE: The following is a chart of the 25 projects that qualified for awards as part of today's announcement.

STATE	PROJECT/SUBSIDIARY	LOCATION	AMOUNT
CA	Bob's Big Boy LLC	Burbank, CA	$53,648
CA	Ameresco Half Moon Bay LLC	Half Moon Bay, CA	$6,641,747
CA	Ameresco Keller Canyon LLC	Pittsburgh, CA	$2,796,377
CA	BioFuel Oasis Cooperative, Inc	Berkely, CA	$16,858
CO	5135 Company	Denver, CO	$23,130
FL	Conditioned Air Corporation of Naples	Naples, FL	$50,250
HI	Two Daughters	Kihei, HI	$15,150
IA	Barton Wind Farm	Kinsett, IA	$93,419,883
MN	BI	Minneapolis, MN	$25,649
MN	Spruce Tree Centre	St. Paul, MN	$107,764
MO	Farmers City Wind Farm	Tarkio, MO	$84,959,857
MO	Ameresco Jefferson City LLC	Jefferson City, MO	$2,300,244
NC	Solar Billboard Property	Bolivia, NC	$5,850
NJ	Meadowlands Exposition Center	Secaucus, NJ	$767,937
NJ	EHT Leasing LLC	Egg Harbor Township	$118,560
NJ	OC Kearny	Kearny, NJ	$992,006
NV	Enel Salt Wells, LLC	Fallon, NV	$21,196,478
NV	Enel Stillwater, LLC	Fallon, NV	$40,324,394
NY	OP 110 E. 59th St. CHP	New York, NY	$415,774
SD	Impervious Energy Systems, LLC	Whitewood, SD	$31,511
TX	Barton Chapel Wind Farm	Jacksboro, TX	$72,573,627
TX	Rio Grande Valley Sugar Growers, Inc.	Santa Rosa, TX	$10,232,261
TX	Bull Creek Wind LLC	O'Donnell, TX	$91,390,497
TX	Pyron Wind Farm, LLC	Roscoe, TX	$121,903,306
VT	Wheeler Brook Apartments	Warren, VT	$19,155
			$550,381,913

Wind Farm Finance Picks Up

Wind Farms Set Wall Street Aflutter

By RUSSELL GOLD

Associated Press

A new program offering cash rebates on renewable energy investments is sparking interest in wind farms. A worker atop a windmill in Maine.

After nearly a six-month lull, Wall Street is getting back into the business of financing new wind farms.

Morgan Stanley and Citigroup Inc. have invested $100 million each to finance separate wind farms this month, taking advantage of a brand-new federal program that is paying substantial cash grants to help cover the cost of renewable energy investments.

Bankers say this is the beginning of an active pipeline of new wind-farm financing, as well as investment in large solar installations and geothermal facilities. Project developers and Wall Street appear to be viewing the federal cash grant program as such a good deal, industry experts say, it may grow much larger than its Washington creators expected.

"The money is coming back," says Ethan Zindler, head of North American research at consultant New Energy Finance Ltd.

Under the program, the government will give a cash rebate for 30% of the cost of building a renewable-energy facility, awarded 60 days after an application is approved. Investors are also given valuable accelerated depreciation deductions, which help offset taxes.

The Energy and Treasury departments have said they expect to spend $3 billion on the program, which started July 31 and runs through the end of 2010, and was part of the stimulus bill. But a government spokesman says requests for $800 million in grants were submitted during the first four weeks.

Some Wall Street bankers say they expect applications to grow to $10 billion, based on projected wind-power installations.

"We see opportunities and we are pursuing them pretty actively," says Kevin Walsh, managing director of General Electric Co.'s GE Energy Financial Services division, which was a major financier of wind deals in the past.

The strong interest echoes the $3 billion cash-for-clunkers program that provided incentives to trade in older, lower-gas mileage cars, and which was quickly overwhelmed by demand. "We are concerned that this may evolve into a cash-for-clunkers version 2.0," says a spokesman for Rep. Darrell Issa, a California Republican.

But unlike the popular cash-for-clunkers programs, there is no spending cap on the renewable energy grants, and the government has committed to spending as much as is needed to keep renewable-energy investments flowing.

Under an earlier renewable energy program, the government gave companies tax credits over 10 years, which were attractive as long as financial firms believed they would be generating taxable profits for years to come. When Wall Street imploded last year, profits turned to losses and appetite for these investments disappeared quickly. Some of the companies most active in these deals -- including Lehman Brothers Holdings Inc. and American International Group Inc. -- were hobbled or destroyed by the turmoil.

But the new cash grants are offering the potential for attractive returns. Several bankers interviewed said they expected deals to provide an annual return of anywhere from 9% to 15%.

Most of the investments are expected to go to wind projects, because the industry is more mature and in a better position to capture limited funds. "I would not be surprised if the program is ridiculously successful and spurs a huge amount of development," says Liz Salerno, director of industry analysis for the American Wind Energy Association.

More

• Duke Energy Makes More Investments in Wind Farms

Even capital-constrained financial giant Citigroup has been drawn to wind power. In August, it made a $120 million investment in a large wind farm under construction in the rolling hills of northern Pennsylvania. The project, called Armenia Mountain by developer AES Corp., will deliver about 100.5 megawatts of power-generation capacity from 67 turbines, each the size of a 20-story building.

The quick returns provided by the cash grant "made it an attractive investment option," said Sandip Sen, Citi's global head of alternative energy.

It's not just Wall Street banks that are attracted. Iberdrola SA, a Spanish company that is the world leader in renewable energy by capacity installed, said in July that it expects to tap $500 million in cash grants for U.S. wind projects. "We've been in contact with the Treasury Department and we think the $3 billion is a minimum-type number," said Ralph Curry, chief executive of Iberdrola's U.S. business unit.

The Treasury Department didn't return calls seeking comment.

Additional financing from the grants would potentially benefit major wind-farm developers such as Florida utility FPL Group Inc. and large-scale solar developer Edison International. It could also give a boost to manufacturers who make the turbine blades and solar panels, such as Vestas Wind Systems A/S and First Solar Inc.

Morgan Stanley recently made a $120 million investment in a Montana-based wind farm developed by Grupo Naturener SA. "The cash grants are a good deal for both developers and financial backers," says Martin Torres, a Morgan Stanley vice president who worked on the deal.

"If we have a quick recovery and we're going like gangbusters again, you could easily get to $10 billion in two years," says Kevin Book, managing director of ClearView Energy Partners LLC, a Washington consultant.

Write to Russell Gold at russell.gold@wsj.com