Tag Archives: wind farm financing

Economic, social disaster: Wynne government green energy policy

09 Tuesday Feb 2016

Posted by in Renewable energy, Wind power

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Higher electricity bills, manufacturing being driven away, social costs of huge wind power plants

Shoreline Beacon, February 8, 2016

By Jim Merriam

Premier Kathleen Wynne (Antonella Artuso/Toronto Sun)

Photo Toronto Sun

It’s to be hoped the Fraser Institute didn’t spend much money on its recent study of the fiscal performance of Canada’s premiers.

Every resident of Ontario able to sit up and take nourishment — probably including Wiarton Willie last week — has known the study’s conclusion for a long time: Premier Kathleen Wynne is doing a lousy job of managing Ontario’s economy.

Wynne, with the help of her predecessor Dalton McGuinty, has reduced Ontario from a powerhouse to an empty house.

On almost every file Wynne’s government is found wanting if not severely under water, to borrow a phrase from the mortgage industry.

The worst is energy. The cost of power in the province has forced industries to close and some families to choose between heat and groceries.

A columnist in a Toronto newspaper recently suggested the heat-vs.-food statement is an exaggeration. He should spend a few minutes listening to clients at food banks in rural areas. But I digress.

Much of the high cost of power is associated with renewable energy production.

A new study from the University of Ottawa confirms what we’ve been saying all along: Ontario brought in wind energy with a “top-down” style that brushed off the worries of communities where the massive turbines now stand.

Stewart Fast, who headed the study, said, “It was a gold rush, basically.” Since those involved kept details secret to avoid giving their competitors an edge, residents didn’t know what their neighbours were planning.

“That is really the worst way to go about something that you know is going to have a big impact on landscape and people,” he said.

In defence of renewable energy, we keep hearing from our urban cousins how much money farmers are earning by allowing turbines on their land. Although true on the surface, there’s much more to that equation, said Jane Wilson, president of Wind Concerns Ontario.

Just one question is the impact of the presence of a turbine on the farm owner’s financing.

Read the full story here.

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Farm owners’ property used as security for wind farm financing: what property owners need to know

07 Thursday May 2015

Posted by in Renewable energy, Wind power

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Farm owners’ property as security for wind farm financing: what owners need to know

Wind developers can use farm leases as security for financing the power project
Wind developers can use farm leases as security for financing the power project

Ontario Farmer, May 5, 2015

by Garth Manning and Jane Wilson

It came as a surprise to many in Ontario when it was revealed that the multi-national power developers behind the K2 wind power generation project near Goderich had secured $1 B in financing, and that this arrangement is now registered on title for the 100 farm properties involved as lessors.

The arrangement is between K2 Wind Ontario Inc. and Mizuho Bank Ltd. Canada Branch. It secures a revolving credit facility of up to $1 billion at 25% on a number of items, including the contracts between landowners and K2 for land and road agreements with municipalities.

Another, smaller example has also come to light: a wind power project south of Ottawa in Eastern Ontario, where the five landowners leasing land for a 30-megawatt, 10-turbine project now have charges on their properties for $70 million.

Immediately, questions arise as to what would happen if the power developers were to default on their loans: would the lender then own the farm properties? How would that affect road use agreements with municipalities?

The fact is, this is a common practice. Property owners can refer to the leases imposed by the developers to review this potential situation, and many others that may affect operation and ownership of their land while leasing land for the power projects.

In an Invenergy standard contract, for example, is this clause: “In connection with the Lessee’s financing of the Project, the Lessee….is hereby given the right by the Lessor…to mortgage its interests in the Lease…and to assign this Lease, or any part of parts thereof, and any subleases as collateral security…”

The proper term for this is a “Charge of Lease” but may also be referred to as a “Demand Debenture.” What it means is, the present value of the wind power contract (i.e., the Feed In Tariff or FIT contract with the Ontario government) is greater than the present value of the lease amount. The difference between those two amounts is security for the loan to the power developer. It is a charge against all contracts favourable to the wind power developer, which may also include road use agreements.

It is like a line of credit for the developer and typically, advances against the amount are tied to certain milestones such as stages of construction.

The critical factor, however, is what it means for the lessors, in other words the farm owners who have leased their land for wind turbines, access roads, substations, transmission lines, etc. The importance lies not so much that the farmer lessors might on default lose their land (the farm land itself is not mortgaged, just the turbine contract on that land) but the damage it does to that property owner if he/she wants to sell, or to renew an existing mortgage, or place a new one, or in any way borrow money for which the lender would want security on his/her land.

Let’s assume a farm owner wants financing for farm operations or improvements. That might now pose difficulty: lenders do not like to be second in line, as they would be where a charge of lease is in place.

If the farm owner wishes to sell, similar difficulties arise: the lawyer for a purchaser in the case of an agreement to purchase will do a title search and discover the Charge of Lease on title, then immediately advise his or her client that the client is entitled to get out of the deal unless the registration of the Charge is removed from title. A purchaser is not expected to assume any risk of this nature.

In the case of renewing an existing mortgage or placing a new one, the lawyer for the bank or other lending institution would take the same position — no renewal or new mortgage unless the customer sees that the Charge disappears from title.

This is one of several important characteristics of signing a lease to have wind turbines, and needs to be thoroughly considered. Other legal issues to be carefully considered may include potential liability for the substantial cost of “decommissioning” turbines at the end of the lease, difficulty obtaining insurance on property with wind turbines, loss of autonomy over building on the property and carrying out regular farming practices, and, last, the potential for nuisance suits from neighbours affected by noise or property value loss.

Property owners should consult with a lawyer before signing any agreement.

Garth Manning is a retired lawyer and former president of the Ontario Bar Association, who lives in Prince Edward County. Jane Wilson is president of Wind Concerns Ontario; she lives in North Gower.

$70-million charge on Brinston farm titles for wind farm

28 Tuesday Apr 2015

Posted by in Ottawa, Renewable energy, Wind power

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Construction of one of the 3-MW turbines at Brinston--30-50 more proposed by EDP Renewables

Construction of one of the 3-MW turbines at Brinston, now operating–30-50 more proposed by EDP Renewables

Ottawa Wind Concerns has learned that a “Charge of Lease” has been placed on the South Branch wind “farm” in the amount of $70 million. The charge is on the leasehold interest in five properties, where property owners have leased land for wind turbines, access roads, substations, and other parts of the wind power generation project.

Earlier this month, details came to light on the 140-turbine K-2 project near Goderich, Ontario, where a charge of lease has been filed on the title for 100 farm properties, in the amount of $1 billion.

The Charge of Lease is basically a financing agreement between a lender (who may represent investors in the wind power project) and the wind power developer, that can function as a line of credit. The basis for the Charge, as we understand it, is that the present value of the contract for the turbines, i.e., the Feed In Tariff contract for power with the Province of Ontario is greater than the present value of the lease agreements with the landowners; the difference between those two values is the security for the loan.

The South Branch contract with the Ontario government runs for 20 years and is worth millions to the developer, who bought the project from Germany-based Prowind.

The importance of the existence of these agreements is the effect they have for the landowner leasing land for the wind turbines. In the opinion of a lawyer advising us (who prefers the term “Demand Debenture” for this arrangement:

It’s not so much that the farmer lessors might on default lose their land (the land itself is not mortgaged, just the turbine contract on that land) but the damage it does to that farmer if he/she wants to sell or to renew an existing mortgage, or place a new one or in any way borrow money for which the lender would want security on his/her land.

Assume a binding Agreement of Purchase and Sale. The lawyer for the purchaser does a title search and discovers the Demand Debenture. The lawyer would immediately tell his/her client that the client is entitled to get out of the deal unless the registration of the Demand Debenture is removed from title, and would also insist to the farmer’s lawyer that this be done otherwise the deal cannot close. A purchaser is not expected to assume any risk of this nature nor to be in the position of “buying a law suit”.

in the case of renewing an existing mortgage or placing a new one, the lawyer for the Bank or other lending institution would take the same position – no renewal or new mortgage unless the customer sees to it that the Demand Debenture disappears from title. Period. End of story.

This is another example of the very serious questions that need to be asked by anyone considering leasing their land for a wind power generation project. There are many serious and long-lasting effects to signing these agreements that need to be properly understood.

In 2013, the Not A Willing Host group of municipalities met in Ottawa at the Association of Municipalities of Ontario convention. At that meeting, one Ontario mayor said, What people need to understand is that basically, they sold their property for the amount of the lease agreement.

** Please see also, the article from the May 5th edition of Ontario Farmer on the charge of lease issue, here.