A Solar Developer’s Bankruptcy Aftermath: Will Blythe Be Built?


The roller-coaster ride for the massive 1 GW Blythe solar power plant took another bumpy turn this week when Oakland, Calif.-based developer Solar Trust of America (STA) filed for bankruptcy in a Delaware court.

STA, which is building the Blythe plant on 7,025 acres of public land in Riverside County, Calif., said it was no longer receiving vital funding from its parent company Solar Millennium AG, which had filed for its own bankruptcy last December.

STA's bankruptcy filing was announced one day after the company missed a $1 million land-rent payment to the U.S. Bureau of Land Management, which had allowed the company to pay its $2.3 million annual rent in installments, according to an affidavit from Edward Kleinschmidt, president and chief operating officer of STA.

Court documents and corporate announcements indicate that the BLM rent-payment lapse was representative of significant cashflow problems for the Blythe plant. This lack of liquidity stemmed from the financial troubles of STA and other related companies that have played varying roles in the Blythe plant's ownership over the years.

As developmental-phase installations, the Blythe plant and STA's other major solar farms – which include the 500 MW Palen solar project and the 500 MW Amargosa Farm Road project – cannot yet generate revenue for STA, Kleinschmidt noted in his affidavit.

Thus, STA depended primarily on Solar Millennium AG to cover both project development costs and STA's corporate expenses. That cash spigot was immediately shut off when court-appointed German insolvency administrator Volker Boehm took control of Solar Millennium AG as part of its bankruptcy arrangements.Â

In a Jan. 5, 2012, announcement Boehm made clear his intent to sell off Solar Millennium's project companies – including STA – and found an initially attractive prospective buyer one month later in Germany-based developer solarhybrid AG. Without solarhybrid's intervention, Solar Millennium's U.S. business would have filed for bankruptcy in early February, the company said.

However, the deal fell through, as solarhybrid was ‘ultimately unable to consummate the sale due to its own deteriorating financial condition, which [the company] publicly attributed to a recent decision of the German government to reduce certain subsidies for solar energy production,’ Kleinschmidt explained. solarhybrid stopped providing any funding to STA on March 8 and filed for bankruptcy on March 21.

In a last-minute effort to improve financial conditions and attract new buyers for Solar Millennium's U.S. assets, Boehm shook up STA's management, kicking out Uwe Schmidt, CEO and chairman of the board, on March 26.

‘We will now drive the sale of the U.S. companies under a new management,’ Boehm proclaimed in an announcement at the time. ‘The main objective is to reach the best possible result for the creditors.’

New options
Given these new chapters in the Blythe plant's history – which already includes a technology changeover from concentrating solar power (CSP) to PV and the consequent forfeiture of a loan guarantee from the U.S. Department of Energy – can the project still succeed?

In his affadavit, Kleinschmidt repeatedly touted the project's already-secured Large Generator Interconnection Agreement (LGIA) – indeed, an enviable milestone for any utility-scale solar project.

An LGIA is ‘the primary means by which a power generator connects to the power distribution network â�¦ and a key element to the operation and implementation of any solar project,’ Kleinschmidt explained, describing these transmission rights as ‘scarce and extremely valuable.’

Because of the LGIA, Southern California Edison is providing more than $200 million in financing for network upgrades – costs that other solar project developers would typically pay themselves. Kleinschmidt stressed that retaining the LGIA during bankruptcy proceedings is crucial for the continued viability of the project.

Fortunately, the LGIA and the Blythe farm's other attributes have already caught the attention of at least one company. Fellow developer Next Era Energy Resources has committed to supplying STA with a post-petition secured credit facility and may also be interested in purchasing assets from STA, according to Kleinschmidt's affidavit.

Blythe City Manager David Lane told The Desert Sun that locals are optimistic about the future of the project. ‘When you consider the amount of investment in the project and what it's got going for it, someone is going to build it,’ he said.

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