Moventas on the move to MN

November 30th, 2008

Moventas, a company that builds wind turbine gearboxes, is coming to Faribault, Minnesota. So I learned when yakking with an attorney in Faribault. Wind turbine gearboxes… Now that’s the sort of economic development we need – a lot better than a new prison, eh? But there’s a catch — it’s JOBZ which means massive tax exemptions. CLICK HERE FOR JOBZ HOME PAGE. It’d probably be easier to list what few taxes they will pay. How will the community provide the infrastructure they want, provide schools for the workers kids, provide the roads and airport and maybe train siding they’ll want? Here’s perks they’ll get, per the “Moventas deal closer to reality” article below:

• Corporate franchise tax exemption;

• Income tax exemption for operators or investors;

• Sales tax exemption on goods and services used in the zone;

• Property tax exemption on commercial and industrial improvements, but not the land;

• Wind energy production tax exemption;

• Employment credit for high-paying jobs.
This is a company I know zip about, so I’m getting up to speed. From their site, there are two manufacturing sites in the U.S. that make wind gear boxes, one in Portland, OR and another in Big Spring, TX.

Moventas coming to Rice County

John Agliata, special to the News

A wind turbine gearbox manufacturer is building its first North American assembly plant in the Rice County area, a move that will provide a multimillion dollar spark for the local economy, said city and company officials Thursday.

Finland-based Moventas, which employs about 1,300 people worldwide, announced Thursday morning it would be building a 75,000-square-foot assembly and distribution facility in the Met-Con Business Park that is currently in Wells Township by Interstate 35. Faribault city officials said they expect that land to become part of Faribault by October 2009.

The project is part of a nearly $145 million worldwide expansion for the company, its third expansion in the past three years.

Along with the facility will come about 90 jobs and an initial annual payroll of roughly $4 million, said Jim Bjork, Moventas’ vice president for the North American expansion project. Peter Waldock, community development director for Faribault, said the hope is the facility could one day employ as many as 200 people if the wind energy market continues to grow.

Moventas’ wind turbine division makes gearboxes that provide a key step to help convert wind into an alternative form of energy. The company is the largest independent manufacturer for wind turbines. While other gearbox manufacturers such as Winergy — the largest in the industry — are bigger, they are owned by a turbine manufacturer.

Construction on the roughly $8 million facility will start in October and be completed in September 2009, said Troy Zabinski, vice president of development for Met-Con, which spearheaded the deal.

In addition to the jobs the completed project will create, the construction of the facility will mean more employment for area workers. Zabinski said Met-Con, which as of last week had 403 employees, will be able to keep more people employed during the winter months than it typically does. He said its employee roster typically falls to about 350 in the winter but it will be fully staffed this season.

When the facility is finished, Met-Con will retain ownership of the facility and lease it to Moventas. Terms of the lease have not been finalized, Zabinski said.

Project history

Moventas hired Bjork in October 2007 to research setting up an assembly plant in North America. Rising fuel prices and calls to reduce dependence on foreign oil for energy in the United States have led to greater interest in alternative energy sources, such as wind.

“The United States is one of the world’s fastest growing wind power markets, with the annual installation of new capacity expected to double by 2010,” Bjork said. “Being closer to our U.S. customers will further strengthen Moventas’ position in the … U.S. market.”

An important aspect for the company was to make sure a North American plant would be supplied by vendors with quality components to build the high-precision gearboxes.

By the end of 2007 the company was satisfied that would be the case, Bjork said, and the project moved forward with site selection. The upper Midwest was the target because of its proximity to the company’s potential vendors and customers, Bjork said.

“The closer you can get to the action, the lower your shipping costs in or out are going to be,” Bjork said.

That brought the states of Ohio, Michigan, Illinois, Iowa, Indiana, Wisconsin and Minnesota into play.

Bjork said the first priority was to separate the states that say they want wind energy businesses from those that back their words with economic incentives and a solid labor market.

Minnesota was one of the states that passed that initial test — mainly because of its business climate. Among the things that helped it do so was its JOBZ — Job Opportunity Building Zones — program. Passed by the Legislature in 2003 and launched on Jan. 1, 2004, the JOBZ initiative provides tax relief to companies that start up or expand in targeted areas of Greater Minnesota.

Once its interest in the state was confirmed, the company looked at individual labor markets, doing studies on each community it was considering. This area scored high.

“Faribault has a nice market. You’ve got Faribault, Owatonna (and) Northfield all within a 40-minute commute. For certain professional positions, you’ve got the southern suburbs of the Twin Cities that are attractive. It’s a good, educated workforce,” Bjork said.

Officials from Faribault, Rice County and Wells Township cooperated and worked with Met-Con, which Zabinski said was one of five developers originally being considered for the project. In addition, state Rep. Patti Fritz (DFL-Faribault) and Sen. Dick Day (R-Owatonna) wrote letters in support of the project. The chambers of commerce for Faribault and Minnesota got involved, as did Tim Penny, president and CEO of the Southern Minnesota Initiative Foundation.

That cooperation and widespread support was key to Moventas proceeding with Faribault as an option.

“The fact that they worked together demonstrated they were willing to get into this highly competitive market. That was impressive,” Bjork said. “If it were a train wreck like it can be when different agencies get involved, I would have very quickly walked away from that. They made it very clear that they wanted to work with us.”

Part of that cooperation came in the form of financial incentives. The city will pay $600,000 toward infrastructure improvements leading out to the business park. The county will contribute $3.2 million, the state will pitch in $500,000 and Met-Con will pay $400,000.

Bjork had worked with Met-Con before when he was with another Finnish company, Uponor, based in Apple Valley.

“I knew that I wanted to at least get a quote from them,” Bjork said of Met-Con. “They always have had a good reputation. They did what they said they were going to do.”

The two companies started talking about the land at Met-Con’s new business park.

“Overall, the prospect of working with a quality builder who does what they say they are going to do and making it a reasonable overall package seemed attractive,” he said.

Company officials came to Faribault twice, once in April, once in June, the city’s Waldock said. Faribault’s efforts were strongly on the marketing side.

“We talked about our quality of life, our proximity to the metropolitan area, the lakes and other environmental features, about our education system and all of those things that make Faribault a great community,” Waldock said.

One of those things was South Central College. School officials gave presentations to Moventas about how it could help train its employees and perhaps even provide assembly plant workers at some point.

As the process went along, communities were eliminated from consideration until there were two — Faribault and Cedar Falls, Iowa.

“Then it’s about the people,” Bjork said. “Does the market have the horsepower to provide the candidates to fill the job? The last thing you want to be doing a couple of years down the road is hiring 50 or 100 people that the market doesn’t have or busing them in from somewhere else or reducing your standards.”

In addition, the facility’s proximity to the Minneapolis-St. Paul International Airport played a role in the decision, as did the Met-Con Business Park’s location along the Interstate 35 corridor.

“What it all boils down to is that the most important thing is going to be to attract good people to work for us, and being visible on the I-35 corridor will make people who are driving to and from the Twin Cities stop and wonder what we’re all about,” Bjork said. “This is going to be Moventas’ North American headquarters for its wind businesses. Location matters.”

Faribault’s role

Moventas has facilities elsewhere in North America, though none do manufacturing. A facility in Portland, Ore., services gearboxes — rebuilding them, testing them and sending them back into service. An operation in Greenville, S.C., does service work for the company’s industrial operation, which provides gearboxes for such things as pulp paper plants. There are also facilities in Big Spring, Texas, and Cambridge, Ontario.

“(The Faribault facility) will very quickly become our largest facility in North America. Some of the people working in Faribault are not going to be focused just on Faribault. There will be people in human resources, in information technology, in quality control, in supply chain management that will be deeply involved in Faribault but will also have responsibilities outside of Faribault.”

The expansion in Faribault will handle mostly new business, though some production will be shifted here from Finland.

“It’s not going to leave a void for long, though, because Finland’s operation is rapidly increasing capacity,” Bjork said.

What kind of jobs?

Of the 90 people expected to be hired, approximately 20 of those jobs would be white collar positions, said Bjork, who will soon start to recruit his leadership team. He declined to say how many people he is hiring for that team or what salary they would earn. He did say, however, that the hope is to find most or all of them from within commuting distance.

Once that leadership team is established, which he said could be by the end of the year, the effort will transition to hiring shift leaders and assembly operators. The starting wage would be from $13 to $15 an hour with the possibility for advancement and promotion.

“It’s important to have cost effective labor but even more important to have highly competent labor. Making a mistake in this business is very, very costly,” Bjork said. “So we’re going to be looking for good people with a good work ethic. We aren’t expecting to find people who have assembled things quite like what we assemble. We’re mainly looking for a work ethic, people ideally with factory experience who have done shift work.”

Bjork expects the plant to operate nearly around the clock, with two shifts as the norm and up to three or four as needed. He said he wasn’t sure how the hiring process would go and would wait for his leadership team’s ideas and vision.

“It’s all about building a positive culture from the beginning,” Bjork said. “I know that one of the most important things for me is that it’s a renewable energy field. I like going to work everyday in a place that’s part of the solution.”

Moventas deal now closer to reality

Moventas lands $25,000 for staff training

So what’s a wind gearbox? Here’s a couple brand new ones:

Here’s their Moventas Wind Turbine Gears Brochure.

What about that huge state-of-the-art Excelsior-Henderson factory that’s sitting vacant in Belle Plaine?  What about that Chrysler plant in Newark, Delaware that’s soon to be closed?  Time for some wind manufacturing in the U.S.!

Yes, the only good coal gasification plant is a dead coal gasification plant. Coal gasification just doesn’t make any sense, and even project proposers are figuring that out!

Here it is in the Chicago Tribune:

Plans dropped for Indiana coal gasification plant

Congrats to John Blair and Valley Watch for exposing the realities of this project.

Coal-gas project shelved

But potential Rockport, Ind., facility still may have life

By Bryan Corbin
Wednesday, November 26, 2008

INDIANAPOLIS — The developer of a $2 billion coal-to-gas plant proposed for Spencer County, Ind., has shelved the project — at least for now.

It was canceled after the developer failed to reach an agreement with utility companies for purchasing the substitute natural gas it would have produced.
Vectren Corp., which along with NIPSCO (Northern Indiana Public Service Co.), was negotiating to buy the substitute gas, said there is too much uncertainty over possible federal carbon regulations to commit to a 30-year purchase agreement now.

The proposed plant near Rockport, Ind., would have converted local coal into substitute natural gas and sold the “pipeline quality” gas to utility companies.

If built, the project could have brought 125 full-time jobs to Spencer County, not counting mining jobs to supply the coal and temporary construction jobs to build it, officials have said.

In light of the possibility of those jobs, Rockport Mayor Nedra Groves said she was disappointed by the news.

“It would have been beneficial work for the people here, and we need industry and infrastructure,” Groves said.

But the mayor hasn’t abandoned hope. The notice she received held out the possibility the project could be resumed once the economy improves.

Negotiations between the developer, Indiana Gasification LLC, and the two utilities continued for months, prompting several postponements of hearings before the Indiana Utility Regulatory Commission.

On Tuesday, Larry J. Wallace, attorney for the developer, read aloud a statement asking the commission to discontinue consideration of the proposal, at least for now. The developer hopes the project can be revived in a different form and resubmitted later, he said.

“If any viable means can be found for developing the project, Indiana Gasification will certainly pursue them,” the statement said.

Two environmental groups, Citizens Action Coalition of Indiana and Valley Watch Inc., had intervened to oppose the developer’s plans. The groups contended the gasification project was a bad deal for ratepayers because it would have locked in 30-year contracts for substitute natural gas, even when the market price for natural gas might drop below that amount.

“We’ve never asked that the commission prevent them from coming back,” said Jerome Polk, attorney for Citizens Action Coalition and Valley Watch. “If (the developer) can come back with a workable proposal that makes sense, even my clients would be willing to sit down and talk if it makes sense and doesn’t hang ratepayers out to dry.”

The end of contract negotiations comes amid uncertainty over what the new Congress or the incoming administration of President-elect Barack Obama might require of coal plants, in terms of limiting their greenhouse gas emissions, such as carbon dioxide. The likelihood that coal plants might have to capture the carbon dioxide and inject it underground, at unknown costs, adds to the uncertainty.

“That could have an impact on the price of gas this (plant) could yield, especially if the plant would have to capture carbon. That could impact the capital costs,” said Chase Kelley, Vectren Corp. communications director.

Vectren never was going to be a “significant purchaser” of the substitute gas, she said. But the uncertainty of federal carbon legislation was too much of an obstacle to reaching agreement on a 30-year purchasing contract.

A spokesman for NIPSCO would not be as specific on what derailed negotiations with the developer. “We actively negotiated . . . however, a business decision has been made to discontinue those negotiations,” NIPSCO spokesman Nick Meier said, adding the utility had made no financial commitment to the project.

The developer intended to apply for a federal loan guarantee to help finance the project along with private equity.

Two years ago, Gov. Mitch Daniels attended the Indiana Gasification announcement at Vectren headquarters in Evansville, and on Sept. 3 he specifically cited the plant as an example of clean-coal technology’s potential during an energy summit in Indianapolis.

“We understand that the developer is looking at other ways to continue the project,” the governor’s communications director, Jane Jankowski, said Tuesday.

Two legislative sessions in a row, state Rep. Russ Stilwell got bills passed to clear regulatory obstacles to the coal-to-gas plant.

“Obviously, I’m disappointed. We worked hard to get to this point,” said Stilwell, D-Boonville, whose House district includes the Rockport area. “I would call it a lost opportunity. A project of this opportunity only come around once every few decades.”

But Stilwell noted that the project is not dead unless the developer completely withdraws it. “Whatever we need to do to bring partners in, I’m committed to doing that,” Stilwell, D-Boonville, said.

For environmentalist John Blair, president of Valley Watch Inc., the developer’s announcement comes as no surprise, given the uncertainty about the project’s costs.

“In a word, ‘thrilled,’” Blair said of his reaction to the decision.

Indiana Gasification requested Tuesday that the Utility Regulatory Commission end its proceedings on the proposal, while leaving open the door to resubmitting the project later. Utility commission regulators have not ruled yet.

So what the hell is a “procedural reconsideration?” Today the PUC had the never-ending (until May 1, 2009) saga of Excelsior Energy’s Mesaba Project. The issue? Yet another Motion to Reconsider from Excelsior Energy, they don’t want to take NO for an answer.

November 25, 2008 Staff Briefing Papers

The PUC staff recommended reaching the hand toward the life-support plug, but not yanking it with a final decision:

Staff acknowledges the comments of Minnesota Power requesting the clarification of whether the Commission’s approval or denial of Excelsior’s petition for reconsideration at this time constitutes a final decision for purposes of appellate review. In the alternative, the Commission will not enter a final decision until May 1, 2009, the deadline for negotiations. As such, Staff believes that the most judicially efficient course would be for the Commission to grant the petition for reconsideration for procedural reasons and hold further consideration in abeyance until after May 1, 2009.

Briefing papers, p. 13. And so they voted unanimously for alternative 1:

Grant the petition for reconsideration and rehearing for procedural reasons and hold further consideration in abeyance until after May 1, 2009.

For the whole Excelsior Energy saga, GO HERE and search for Docket 05-1993. And if that’s not enough, search also for 06-668!

So we’re still holding… zzzzzzzzzzzzzzzz

Surprise Drop in Power Use? DUH!

November 22nd, 2008

Surprise Drop in Power Use Delivers Jolt to Utilities

An unexpected drop in U.S. electricity consumption has utility companies worried that the trend isn’t a byproduct of the economic downturn, and could reflect a permanent shift in consumption that will require sweeping change in their industry.

Numbers are trickling in from several large utilities that show shrinking power use by households and businesses in pockets across the country. Utilities have long counted on sales growth of 1% to 2% annually in the U.S., and they created complex operating and expansion plans to meet the needs of a growing population.

“We’re in a period where growth is going to be challenged,” says Jim Rogers, chief executive of Duke Energy Corp. in Charlotte, N.C.

The data are early and incomplete, but if the trend persists, it could ripple through companies’ earnings and compel major changes in the way utilities run their businesses. Utilities are expected to invest $1.5 trillion to $2 trillion by 2030 to modernize their electric systems and meet future needs, according to an industry-funded study by the Brattle Group. However, if electricity demand is flat or even declining, utilities must either make significant adjustments to their investment plans or run the risk of building too much capacity. That could end up burdening customers and shareholders with needless expenses.

To be sure, electricity use fluctuates with the economy and population trends. But what has executives stumped is that recent shifts appear larger than others seen previously, and they can’t easily be explained by weather fluctuations. They have also penetrated the most stable group of consumers — households.

Dick Kelly, chief executive of Xcel Energy Inc., Minneapolis, says his company, which has utilities in Colorado and Minnesota, saw home-energy use drop 3% in the period from August through September, “the first time in 40 years I’ve seen a decline in sales” to homes. He doesn’t think foreclosures are responsible for the trend.

Duke Energy Corp.’s third-quarter electricity sales were down 5.9% in the Midwest from the year earlier, including a 9% drop among residential customers. At its utilities operating in the Carolinas, sales were down 4.3% for the three-month period ending Sept. 30 from a year earlier.

American Electric Power Co., which owns utilities operating in 11 states, saw total electricity consumption drop 3.3% in the same period from the prior year. Among residential customers, the drop was 7.2%. However, milder weather played a role.

Utility executives question whether the recent declines are primarily a function of the broader economic downturn. If that’s the case, says Xcel’s Mr. Kelly, then utilities should continue to build power plants, “because when we come out of the recession, demand could pick up sharply” as consumers begin to splurge again on items like big-screen televisions and other gadgets.

Some feel that the drop heralds a broader change for the industry. Mr. Rogers of Duke Energy says that even in places “where prices were flat to declining,” his company still saw lower consumption. “Something fundamental is going on,” he says.

Michael Morris, the chief executive of AEP, one of the country’s largest utilities, says he thinks the industry should to be wary about breaking ground on expensive new projects. “The message is: be cautious about what you build because you may not have the demand” to justify the expense, he says.

Utilities are taking steps to get a better understanding of the cause. Some are asking customers who reduced usage to explain what is influencing them. Xcel and other utilities, for example, have been running environmentally focused campaigns to urge consumers to use less energy recently, a message that might be taking hold.

Power companies are also questioning the reliability of the weather-adjustment models they use to harmonize fluctuating sales from quarter to quarter. “It’s more art than science,” says Bill Johnson, Chief Executive of Progress Energy Inc., Raleigh, N.C.

If the sector is entering a period of lower demand — which could accelerate further if the automotive sector collapses — many utilities will have to change the way they cover their costs.

Utilities are taking a hard look at the way they set rates and generate profits. Many companies are embracing a new rate design based on “decoupling,” in which they set prices aimed at covering the basic costs of delivery, with sales above that level being gravy. Regulators have resisted the change in some places, because it typically means that consumers using little energy pay somewhat higher rates.

Write to Rebecca Smith at rebecca.smith@wsj.com

… utterly rational “correction” I presume?

Otter Tail Corporation’s stock has had major dive. It was slowly rising over the year, in July it was over 40, a peak of 46.15, but then, waaaaaaay, down, now it’s at 16.38.  Yes, we know, we’re in a depression, but Otter Tail’s dive is significantly worse than, say, Xcel’s.

CLICK HEREL Otter Tail stock chart over last year

Contrast with Xcel, lower all along but not so drastic, high of 23.50 and now 17.87.

CLICK HERE: Xcel Energy stock chart over last year

And there’s at least one of Otter Tail’s major investors with egg on his face:

Meringue, that is…

Who’s else has gotten carried away investing in coal a la Otter Tail?