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Klondike bought at bargain price -- Northwest utility aims to buy more

Adding to its wind supply portfolio, PPM Energy has bought Northwestern Wind Power's one-year-old 24 MW Klondike wind farm in north Oregon for just $16.8 million. Klondike is PPM's first wholly owned wind project. In addition to the turbines and facilities, the deal also includes an existing 20-year purchase agreement with the Bonneville Power Administration (BPA), which is buying both the power and the green tags generated at the site.

Northwestern, owned by Golden Northwest Aluminum of Goldendale, Washington, an aluminium smelter, began seeking a buyer for the project in October and closed the deal with PPM last month. The Klondike plant consists of 16 GE Wind 1.5 MW wind turbines. PPM, a power marketing agency owned by the UK's Scottish Power, develops and owns wind and natural gas resources in the West and Midwest.

Most of the aluminium smelters in the US Northwest have been shut down since the West Coast power crisis in 2001, when BPA, faced with a 2800 MW power shortage, began paying the smelters to cease operations as a way to balance loads with power supplies. Instead of accepting what may eventually be the fate of most Northwest smelters, Golden Northwest began building power plants, including a gas turbine and the Klondike wind farm, to eventually serve the smelter's load.

Forced to sell

The aluminium company had fronted Northwestern Wind Power about $24 million in cash to build the wind farm and intended to finance the project upon completion, but by the time the project was finished in December 2001, the financial markets had declined and the amount the company could finance had dropped considerably, says Northwestern Wind Power's Allen Barkely. "Our intention was to use the output of the plant for the smelters," says Barkely. "But changes in the finance market caused us to decide to sell."

PPM's Jan Johnson says her company "had a very motivated seller who needed this deal and had an eagerness for the deal to close." She says PPM hopes to buy other wind projects. "When we see attractive plants at attractive prices, it only makes sense to buy."

PPM currently buys 332 MW of wind energy and says it will buy up to 2000 MW of renewable generation in the next five to seven years. Its next foray into owning and operating a project is the proposed 50 MW Moraine wind farm in Minnesota.

Barkely says Northwestern has other leases and development rights in the same area -- where the terrain is remote, is very attractive for wind and where wind development poses few problems for birds -- and may build other projects in the future. The company says, however, that it would need a power purchase agreement adequate for financing.

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