Power plant sale a lengthy process
ESCANABA – The sale of Escanaba’s power plant has been a lengthy process that began seven years ago with a feasibility study followed by one failed purchase deal after another. One company is hoping to change that pattern.
Escanaba Green Energy (EGE) has been working to purchase the facility for more than two years now and is close to finalizing its $36.5 million loan to buy the coal-fueled plant and convert it to burn biomass.
In early 2012, Charles Detiege, of Ford River, formed EGE to buy the power plant and keep the jobs here. He has worked at the facility since 2010 and is currently the environmental health and safety coordinator there.
After several delays during EGE’s financing – including a loan facilitator backing out less than a year ago – EGE’s new facilitator, Corban/Realty Financial Group, says loan funds have been approved and are on the way.
“Corban told me we’ll get our money no matter what. It’s just a matter of time to get through the paperwork,” Detiege said during a recent interview at the power plant.
In 2007, following completion of a feasibility study on building a new power plant, Escanaba decided to sell the property because it is less costly to purchase energy from a supplier rather than build new or continue to generate power in the 50-year-old facility.
In 2009, the city began negotiations with Traxys North America of White Pine to buy the plant and convert it to burn biomass. In December 2010, the deal fell through prior to closing.
In 2011, Fuel Streamers Group of Houston was negotiating a purchase and later backed out of a sale that was close to finalizing.
On Jan. 1, 2012, the city began buying its power from NextEra of Florida at a cheaper rate than it can generate by burning coal.
That month, Recast Energy LLC of Richmond, Va., expressed interest in purchasing the Escanaba power plant which had been idled, accompanied by employee lay-off notices. Recast offered to buy the plant for $200,000.
Aon, a firm affiliated with American Wind and Energy Group, was also interested in purchasing the property.
The city decided to give the exclusive right to negotiate a contract to EGE which had offered $1.5 million for the facility. Coal and diesel fuel inventory will be tallied at an additional cost.
While waiting for the sale to process, the city’s operational contract expired with Upper Peninsula Power Company on June 1, 2012. The city made plans ahead of time to hire Pro Energy to operate the plant in the event the sale had not taken place.
Detiege originally anticipated EGE’s sale could be closed within 90 days but that didn’t happen. He apologized to council and said he didn’t know what to expect because he has never bought a power plant before.
In July 2012, the city upped the plant’s selling price by $100,000 to $1.6 million because of the delay. Further setbacks for EGE included holdups with federal regulatory permits.
EGE agreed to pay for the city’s additional attorney fees due to the delays. EGE is also paying Escanaba $2 million which the city will retain if the company decides to back out of the deal after the sale.
After more than a year of EGE working with Provartis, its loan facilitator, the deal fell through.
“Their financial relationship with their bank dried up and they couldn’t do the project,” explained Detiege. “It was a ‘fall on your face, kinda’ hurts’ deal.”
Corban came on board in November 2013 and is now finalizing EGE’s financing.
Once the funds are put in escrow, the city will submit a 14-day notice of the sale to the Midwest Independent Transmission System Operator, Inc. (MISO), a regional interconnection agency which regulates power sales.
Current MISO funding – reimbursements which have been made to the city to keep the power plant operational and available to the market – will be transferred to EGE.
In December 2011, the city sought MISO’s approval to shut down the plant. MISO denied the request and is paying Escanaba $3.7 million annually to continue operations on stand-by mode because the facility provides reliability and additional transmission for the regional market.
MISO can terminate this agreement with a 90-day notice.
On May 6 of this year, voters granted city council the option to dispose of the facility if the pending sale falls through and MISO’s operational funding stops.
Once the new EGE biomass plant is operational, the facility will be connected to the regional power grid and will have energy available for sale.
The city will to continue buying power from an outside supplier.
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Jenny Lancour, (906) 786-2021, ext. 143, firstname.lastname@example.org