Kansas City Power & Light has tabled plans to build in 2008 its second 100-megawatt wind farm, citing difficulties in getting financing.
The wind farm was promised by KCP&L as part of a comprehensive energy plan that included the coal-fired Iatan 2 plant, under construction near Weston. The plan, announced last March by the utility and the Sierra Club, was hailed as the first of its kind and included building 400 megawatts of wind energy by 2012.
The utility, which this week acknowledged construction cost overruns at Iatan 2, is putting off the wind project at a time when other utilities are stepping up their wind-energy construction. The decision also means KCP&L won’t take advantage of federal wind energy tax credits that expire at the end of the year.
A regulatory filing by KCP&L’s parent company, Great Plains Energy Inc., said that it was “committed to evaluating” the construction of additional wind generation in 2009 and beyond. But in an interview, the company went further, saying the terms of the agreement with the Sierra Club would be met, including all the wind generation by 2012.
“Our reputation is on the line on this,” said Michael Chesser, Great Plains’ chief executive officer.
KCP&L opened its first 100-megawatt wind farm last year in south-central Kansas. But the deferral of the second plant, which came to light this week, is raising questions about the company’s commitment to renewable energy, and whether the other 300 megawatts of capacity will ever be built.
“We are definitely concerned that this may put KCPL in violation of the Sierra Club agreement,” said Henry Robertson, an attorney for the Sierra Club. “If they can go ahead with Iatan 2, why can’t they do wind?”
The decision to not build the wind farm was made in December but not publicly announced. Earlier this year, in a filing with the Missouri Public Service Commission, the company said problems in the financial markets caused by “sub-prime mortgages and related problems” wouldn’t allow it to pursue the financing that it planned to use to pay for the wind farm.
According to the company, because of the changed financial conditions, it was unable to issue “hybrid debt securities,” which have characteristics of both bonds and stocks. Such securities are sometimes looked at more favorably by debt-rating agencies.
One such agency, Standard & Poor’s, has had Great Plains and KCP&L on a credit watch. Great Plains’ financial challenges include the costs of its energy plan, now estimated to be near $2 billion, and its effort to acquire the Missouri electric utilities of Aquila Inc.
Great Plains officials said that the company was not under financial stress, and that the purchase of Aquila would improve its ability to pay for its energy plan.
Those assurances didn’t keep consumer and environmental representatives from pressing the company to explain its wind-power decision, especially at a time when other utilities don’t seem to be having any trouble financing similar projects.
The Missouri Office of the Public Counsel, which represents consumers in utility matters, said it would be unable to support “KCP&L’s unilateral decision to cancel the second wind investment” unless it provided a more detailed analysis of other ways that could have financed the wind farm.
The Missouri Department of Natural Resources said in a filing with regulators that the utility could have looked into options such as having someone else build the wind farm and assume those costs, and then sell the electricity to the utility. Such agreements are common and can result in cheaper power for consumers.
The department also noted that KCP&L would have more trouble building wind generation after this year. The state agency used information from a KCP&L regulatory filing to arrive at its conclusion. But that information was not disclosed because KCP&L requested that the document be closed to the public.
It is possible that the information involved the federal tax credit for wind energy, which developers of wind farms have been using. That credit expires in December.
The decision to not build the wind farm caught many by surprise because business in that arena is booming. Besides the tax credit, the growth has been helped by readily available financing.
“There’s a lot of interest in financing these projects,” said Christine Real de Azua, assistant director of communications for the American Wind Energy Association. “This is going to be another strong year.”
Among those investing in wind is Westar Energy, the Topeka-based utility, which plans to have 300 megawatts of wind power in operation by the end of the year. About half will be purchased power and the rest will be from wind farms it is building.
The projects are proceeding as planned, said Karla Olsen, a spokeswoman for Westar.
“No financing issues,” she said.
By Steve Everly and Karen Dillon
21 February 2008
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