Foreign Investors Will Reap 92 Percent of Profits from Aroostook County’s King Pine Wind Power Scheme

by Steve Robinson September 14, 2023

"The Legislature and the MPUC have already selected, approved, and endorsed the project and its developers — all with only a guess as to whether it will raise electricity costs in Maine."

EXCERPTS

When the 170-turbine 1,000 megawatt King Pine Wind Farm in Aroostook County becomes operational near the end of the decade, the majority of the profits from the sale of electricity to New England ratepayers will head to the other side of the planet.

That’s because Longroad Energy, the Boston-based developer that will manage the wind farm, is 92 percent owned by large foreign investment funds, including one controlled by a foreign government, according to financial records reviewed by the Maine Wire.

The NZ Super Fund – a.k.a. the New Zealand Superannuation Fund — reported owning 40 percent of Longroad Energy in 2021 and 2022, according to their annual report.

The $34.23 billion fund, which is operated by the New Zealand government for the benefit of the nation’s pension system, reports that Longroad is one of its “larger” green energy investments.

Infratil, a $5 billion Wellington, NZ-based infrastructure investment company, owns another 40 percent of Longroad, according to its recent company reports.

Rounding out the firm’s foreign investors is MEAG, a €324 billion German asset management company.

MEAG purchased a 12 percent stake in Longroad in August 2022 for a reported $300 million.

According to NZ Super Fund’s public reporting, NZSF US Renewables, a subsidiary of the sovereign wealth fund, has provided Longroad energy with a letter of credit agreeing to backstop the firm’s financial commitments.

If completed, King Pine Wind would be the largest onshore wind facility in the state of Maine, more than doubling the total megawatt capacity of every other wind power installation operating in the state combined.

Indeed, the proposed wind farm is the largest of its kind east of the Mississippi.

According to Longroad, the project’s towers will stud hilltops in a 4,500 acre region that runs through Aroostook County northwest of Houlton.

Although Longroad hasn’t selected towers and turbines yet, the company says the tower heights will be 492 ft-535 ft tall, easily making them the largest wind turbines in Maine and the tallest structures in the state.............................

.......................Longroad’s management has several veteran wind industry alums from First Wind, a Boston-based company that has successfully completed several wind power projects in Maine.

First Wind built and operated wind farms from Hawaii to Maine with a total capacity of 1,300 megawatts before it was acquired in 2014 by SunEdison.........................

.......................Although Maine-based contractors and sub-contractors may stand to gain from the initial construction of the sprawling wind farm, the law authorizing the project would not preclude the hiring of workers from out-of-state or nearby Canada.

Nor would it force the developers to prioritize Maine workers, as the recently passed wind power port construction bill did.

Another uncertainty about the project: the Power Purchase Agreement (PPA) between Longroad and Maine’s utility companies, Central Maine Power (CMP) and Versant.

That agreement will dictate the price Maine’s utilities must pay for the wind-generated electricity — and therefore the price Maine ratepayers pay for their electricity.

However, under the Maine Public Utility Commission’s rules, those details have been withheld from the public and even lawmakers.

The term sheet Longroad submitted to regulators is heavily redacted in the public version.

Foreign Influence on Maine Electricity

The foreign ownership of Longroad means most of the profits earned on the sale of King Pine’s “green” electricity and related Renewable Energy Credits (RECs) will flow out of the U.S.

These investors will fund the initial development of the project and recoup their investment as wind-generated electricity is sold to New England ratepayers.

Longroad’s investors will also earn returns on the RECs sold to American firms, primarily in Massachusetts, which are required by law to purchase the carbon offsets.

Longroad has made no attempt to conceal that its major investors are foreign companies and a foreign government.

In 2022, the company touted MEAG’s investment in a press release.

“We are thrilled to have MEAG join with our existing investors to power our robust growth plans, and we appreciate their collective support as we make strides in implementing our ambitious near-term objectives,” said Longroad CEO Paul Gaynor.

MEAG, Infratil, and NZ Super Fund execs similar echoed the enthusiastic sentiment, with NZ Super Fund’s Del Hart stating, “Longroad has been one of the NZ Super Fund’s most successful investments and, in line with our long-term, partnership approach to infrastructure development, we are pleased to both welcome MEAG as a co-investor and contribute more capital ourselves.”

Non-U.S. firms funding Longroad also have a significant presence on the company’s board.

NZ Super Fund’s Head of Portfolio Investments George Crosby, Infratil’s Chief Executive Jason Boyes, and MEAG executive Alex Poll all have seats on Longroad’s board, as does Kellee Clark, a partner at the NZ-based firm that manages Infratil.

But Longroad’s foreign ownership hasn’t been front and center as residents of northern Maine have debated the controversial project and, more broadly, the subject of foreign influence in Maine’s politics and energy markets.

An Aug. 15 story in the Bangor Daily News covering the controversial aspects of the project, for example, never touched on the big money behind the wind power scheme, even though those foreign firms stand to reap the lion’s share of profits over the 20-25 year lifespan of the project.

Those profits will come directly from Maine ratepayers thanks to a state-approved agreement that will require Maine’s utilities to buy King Pine’s power — agreements that have been withheld from the public.

Aroostook Corridor: The LS Power Transmission Line

In October, the Maine Public Utilities Commission (MPUC) gave initial approval for Longroad Energy’s ~$2 billion wind farm, which will be largely built on timberlands owned by the Canada-based JD Irving, Maine’s largest landowner.

At the same time, the commission selected the New York-based LS Power (operating in Maine as LS Power Grid Maine, LLC) to construct a $2.9 billion high-voltage 1,200 megawatt transmission line that will allow King Pine’s electricity to enter New England’s.

(Note: The $2.9 billion figure is based on an MPUC estimate of the total cost to ratepayers over 30 years for the construction and operation of the transmission line. The upfront capital expenditure of the transmission line and substations will be less than $1 billion, according to LS Power.)

Without that transmission line to connect to ISO-New England, the King Pine project would not be feasible.

The commission also made final approval of the project contingent upon an agreement with the Commonwealth of Massachusetts to share in the costs of the wind farm and the transmission line.

In December, the Massachusetts Department of Energy Resources approved a deal that will have the Commonwealth purchase 40 percent of King Pine’s eventual output and pay 40 percent of the transmission line costs.

A month later, the MPUC approved both projects, determining that they were in the public’s interest.

“These projects will provide significant benefits to Maine and the region, including jobs during construction, property tax revenue for local communities, and environmental benefits from new renewable energy displacing fossil fuels,” said MPUC Chairman Philip Bartlett, the former chair of the Maine Democratic Party.

Both projects stemmed from a 2021 Maine law that created the Northern Maine Renewable Energy Development Program.

That law created a number of requirements for potential bidders on the projects, but it did not contain requirement that eligible firms prioritize the hiring of Maine workers or that they be primarily owned by U.S. investors.

LS Power, as a privately held company, is not required to disclose investors.

However, in 2018 the company launched an equity fundraise through an affiliated fund that targeted investors in the Middle East and Asia, according to an LS Power press release.

Four years earlier, the company conducted a fundraiser that targeted “U.S. and European public and private pension plans, insurance companies, corporations, not-for-profit organizations, endowments, foundations, family offices, and Asian and Middle Eastern sovereign wealth funds.”

The extent of sovereign wealth fund investment in LS Power, if any, is unclear.

The proposed transmission line in northern Maine would be the LS Power’s second energy project in Maine, their first being Kibby Wind Power in Franklin County, which is operated by subsidiary REV Renewables.

LS Power has attracted criticism from northern Maine landowners who claim the potential path of the transmission line will disrupt farmland, impose on wildlife, and involve drilling that could expose water aquifers to PFAS contamination.

But most of the criticism has revolved around precisely where the transmission will run, and on who’s property.

The company has held meetings across the state to persuade local land owners of the project’s benefits, but public comments registered with the MPUC have been overwhelmingly opposed to the project.

Rep. Steve Foster (R-Dexter), the House Republican lead on the Energy, Utilities, and Technology (EUT) Committee opposed the approval of the corridor, citing a lack of information about the cost of the project and the eventual route.

“Much of the information regarding the Aroostook Corridor was not available at the time it received Legislative approval, including any potential route,” Foster said.

“Several legislators who opposed that approval and who represent towns and land owners along the recently proposed route are working with local citizen groups to find more acceptable options,” said Foster.

The company has posted a map with a theoretical route that the transmission line could take, stretching from Glenwood Plantation down to Coopers Mills, east of Augusta...................

............In a written statement, LS Power’s Vice President of Development Doug Mulvey said that the company currently has no updates on the proposed route for the transmission line to disclose.

LS Power will get paid on the transmission line under a Transmission Agreement (TA) which, like King Pine’s PPA, is also not available for inspection by the public or lawmakers.

The version of the term sheet available to the public and lawmakers is redacted.........................

.................Regardless of MPUC’s reasoning for keeping the pricing agreements from the public and from lawmakers, the end result is that lawmakers voted to approve the project without a key piece of information that would help them determine the projects’ impact on electricity rates in Maine.

Will King Pine Wind Reduce Energy Prices?

Although backers of the project have claimed that King Pine will reduce electricity prices in Maine, the agreements that would allow lawmakers and members of the public to evaluate those claims remain undisclosed.

Those agreements are critical to understanding the financial obligations state lawmakers and the MPUC are placing on CMP, Versant, and Maine’s ratepayers.

CMP and Versant will be required by law to purchase power from King Pine and to pay LS Power for transmission costs for at least 25 years, and those costs will be passed along to Mainers through electricity bills.

CMP and Versant will collect those payments, but they will not profit from the projects themselves.

Representatives from CMP and Versant declined to comment for this story.

Lawmakers and Maine residents have been asked instead to rely on predictions from Daymark Energy Advisors.

Daymark concluded in that the project will reduce electricity costs for Mainers in a 22-page report paid for by Longroad and LS Power.

In addition to the pricing agreements, much of the proprietary information and modeling used to reach the conclusion that the ambitious project will benefit Mainers is also confidential and not available to members of the public.

In other words, no one is allowed to see the power purchase agreement, the transmission agreement, or the underlying details of the only study that shows the benefits of the project for ratepayers.

That means the true cost of the power the wind turbines will generate — and therefore the actual impact on Mainer’s electricity bills — is unknown not only to the lawmakers who voted on the plan, but also to the citizens of Maine who will be picking up the tab.

King Pine, LS Power, & Question 2

The foreign ownership of the developers proposing to build Maine’s largest wind farm is especially newsworthy considering the ongoing debate over the foreign ownership of Maine’s two largest utility companies.

CMP and Versant are owned, respectively, by the Spain-based Iberdrola and the Canada-based ENMAX Corp.

ENMAX Corp. is owned by the city of Calgary, Alberta, while Iberdrola’s largest investor is the Qatar Investment Authority, a sovereign wealth fund controlled by the Qatari government.

This fall, Maine voters will either approve or reject a ballot referendum (Question Two) that asks: “Do you want to ban foreign governments and entities that they own, control, or influence from making campaign contributions or financing communications for or against candidates or ballot questions?”

While the question is largely seen as an attempt to block CMP and Versant from lobbying Maine officials or spending money to defend their interests, next to no attention has been paid to King Pine, which is 40 percent owned by the New Zealand sovereign wealth fund.

In recent years, Longroad Energy and LS Power, have lobbied lawmakers extensively and contributed modest amounts to political action committees for the purpose of influencing State House politics in a favorable direction.

LS Power enlisted the services of top green energy lobbyists Jeremy Payne and Anthony Buxton to cajole lawmakers in the 131st Legislature on a bill sponsored by Senate President Troy Jackson (D-Allagash).

The bill (LD 924) was a resolve, signed by the governor in June, that would provide legislative approval to the transmission line that is vital to King Pine’s viability.

Buxton is a partner at Preti Flaherty, one of the largest lobbying firms in Maine. Payne is a veteran green energy lobbyist with Cornerstone Government Affairs.

Doug Mulvey, of LS Power, also reported lobbying activity related to Jackson’s bill.

According to state lobbying records, Payne received $21,000 for his services this year in relation to LD 924, while Mulvey and Buxton received, respectively, $3,733 and $4,592.

LS Power’s lobbyists have met this summer privately with lawmakers — in separate meetings with Democrats and Republicans — in order to address their concerns about the project.

The ballot referendum banning foreign influence, if passed, will almost certainly face legal challenges.

However, it’s an open question as to whether King Pine’s owners would be allowed to influence Maine politics if the question prevails.

Whether the prohibition would apply to LS Power is even murkier.

Although LS Power’s transmission line and Longroad’s wind farm are mutually dependent on one another and they share a common interest in seeing certain legislation pass, they have no formal partnership.

Daymark: “Trust us, this is good for Mainers”

The suggestion that the King Pine project and the Aroostook Corridor will reduce Mainer’s electricity prices comes from a 22-page study paid for by Longroad Energy and LS Power, the two firms with the most to benefit from convincing politicians, ratepayers, and regulators that the plan is a good idea.

The study was conducted by Daymark Energy Advisors, a Worcester, Mass.-based consulting firm.

The document has been the key tool of persuasion lobbyists and backers of the project have used when advocating for its approval.

Daymark’s assignment was to conduct a cost-benefit analysis of the project from 2028 to 2053, a task that is akin to trying to predict the future.

Adding to the uncertainty of the task is the future cost of competing energy sources and the auction price of Renewable Energy Credits (RECs), both of which could vary wildly before the project is supposed to become operational, and at any time after it begins producing energy. While the transmission line is supposed to be operating by 2029, the wind farm is projected to be fully operational by 2031.

In order to address that uncertainty, the consultants had to make a number of assumptions about how New England energy markets and energy policy will develop over the next two-three decades.

One of those assumptions was that the price of natural gas will increase two to three times from current levels.

“Alternative long-term pricing scenarios were not evaluated in this study,” the authors wrote, “but in general higher natural gas prices increase the net benefits of inframarginal resources such as the Project.”

In other words, the benefits of King Pine for Maine depend largely on the expectation that natural gas prices will surge in the future. If natural gas prices remain flat or decrease, then the cost of power from King Pine could exceed the cost of alternative sources.

That means the prediction that King Pine will provide lower cost electricity to Mainers only holds true in a future scenario where electricity prices from Maine’s current primary sources increase well beyond their already-high current levels.

Even if you assume that the assumptions in the Daymark study are accurate, the benefits to Mainers are modest.

The consultants project that the project will provide a cumulative net present value to Maine of $887 million over a 25-year period.

That is, $35,480,000 per year from 2029 to 2053.

Put differently, every Mainer will see about $27 worth of benefit per year under the projections of the firm that was hired by the project developers.

The following table is Daymark’s take on hypothetical benefit scenarios for residential versus commercial customers.

A spokesperson for Daymark declined to comment on their study.

“The Daymark study is based on hypotheticals, because the economics of wind power do not allow for real ratepayer reductions,” said Rep. Reagan Paul (R-Winterport), a member of the EUT Committee.

“Subsidies, RECs, and other market manipulations are the only way wind power can even pretend to be competitive,” said Paul.

Consultancy predictions aside, Maine ratepayers still will have no idea what the costs to CMP and Versant — and therefore to ratepayers — will be under the agreements that will govern the life of the project.

Yet the Legislature and the MPUC have already selected, approved, and endorsed the project and its developers — all with only a guess as to whether it will raise electricity costs in Maine.

Despite Maine’s large taxpayer-subsidized investments in wind power over the past two decades and general political enthusiasm for wind power, electricity prices in Maine remain some of the highest in the country.

Rate history records show that CMP and Versant, the utilities that are forced by law to purchase wind power, have increased rates steadily over the past decade. Although both companies have and continue to earn substantial profits, often times their rate increases are driven by mandates from the State Legislature or the MPUC, such as Net Energy Billing.

Rates spiked in 2022 even has an unprecedented number of renewable energy projects, mostly community solar, came online in Maine.

In 2021, the U.S. Energy Information Administration ranked Maine as having the 11th most expensive electricity in the country.

Will King Pine final buck the more than decade-long trend of green energy projects promising low cost electricity only to increase rates for Mainers?

Paul thinks not.

“For every piece of energy legislation that Maine passes, ratepayer costs go up,” Paul said.

“If bills like 1710 and 924 continue to pass, the current standard offer rate of 28 cents will seem like a dream,” she said.

Please read the full article at https://www.themainewire.com/2023/09/foreign-investors-will-reap-92...

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