If a utility's credit rating is good and it can pay its bills, Jaunich says, it is much easier for the financial institution to know that the developer will make a payment every month. But when a utility has a low credit rating it makes financing more difficult.
Northwestern, which provides gas and electricity services to customers in Montana, Nebraska and South Dakota, "as a whole is healthy," says the utility's Claudia Rapkoch. But she confirms NorthWestern Corp, its parent, has financial problems due to a "failed strategy" of diversification from the mid-1990s, when it bought three non-core businesses that have since failed. At the same time, it also failed to spin off utility operations into a separate subsidiary, leaving the utility with the same financial rating as the parent. NorthWestern Corp, based in South Dakota, filed for bankruptcy last month and is pursuing the sale of its non-utility businesses.
Rapkoch says some baseload natural gas facilities are having similar problems to wind in not getting the financing they need to move forward. All are affecting the utility's ability to reach agreements for its default supply portfolio, which is mandated by the state's restructuring plan. Montana has partially deregulated its electricity industry, requiring retail utilities to divest themselves of generation but continue to serve customers who do not want to leave Northwestern's system, using power from the default supply portfolio. Those resources are to be available by the end of this year.
Depending on a congressional extension of wind's federal production tax credit, Jaunich is now predicting his wind development will be pushed back to 2005 -- if it moves forward at all. "This is a strange turn of events," he says. "A few years ago utilities worried about the financial health of wind companies." Now wind investors worry about the financial health of utilities.
