Race to reorganise before credits expire

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The repowering of FloWind Corporation's California wind farms could get underway as soon as this summer. A bankruptcy court hearing has been set for April 24 to consider a reorganisation plan backed both by FloWind and a new group named WindCo that includes some familiar faces: the American firm ESI Energy Inc and MNR Energy Systems Inc, also known as Premier Technologies. When Premier first emerged last year in connection with the FloWind reorganisation, it was 75% owned by NEG Micon of Denmark and 25% owned by Renewable Energy Systems (RES) of England and had financial backing from an unnamed Japanese company.

The reorganisation plan, which has taken months to formulate, was filed with the US Bankruptcy Court in Santa Rosa in northern California on March 23. Objections to the disclosure statement and plan must be submitted by April 17. At one point Zond, now known as Enron Wind Corp, was objecting to Premier moving in to pick up the FloWind pieces. It is not clear, though, whether any objections are likely to be filed.

The progress of the plan, or its timing, is especially crucial. Unless the federal Production Tax Credit for wind produced electricity is extended beyond June 30 1999, the wind farms in question will have to be repowered by then for the effort to make most sense economically. The reorganisation plan recognises this by, among other things, stating that the "effective date" for its implementation must be no later than September 15, 1998.

If the plan is approved it will also greatly strengthen the positions of both fast growing ESI -- the unregulated sister company of the utility Florida Power & Light and part of the FPL Group -- and of the Danish manufacturer NEG Micon A/S. In February another California bankruptcy court approved FPL's purchase of Kenetech Windpower's 164 MW of wind farms in the Altamont, a deal backed by Nichimen Corporation of Japan and involving NEG Micon, which is to supply turbines for a repowering of the wind farms. In Texas, another part of the FPL Group was recently awarded a purchase contract for the wind power from a 75 MW plant (Windpower Monthly, March 1998.) Furthermore, FPL is planning to develop the Vansycle wind farm in Oregon, bought a few months ago from bankrupt Kenetech and is also tipped to build 42 MW in Iowa (story page 12).

Main assets

FloWind's main assets are its wind farms, both in the Altamont Pass and in Tehachapi. A year ago they had a market value of $14 million, according to the court documents. Their value, however, may have diminished because of the passage of time. "WindCo will have no opportunity to repower the power plants before the 1998 high summer wind season and faces increasing pressure to complete the repowering process before expiration of the production tax credit on June 30, 1999," says the disclosure statement accompanying the amended reorganisation plan. It also warns that unsecured creditors would receive nothing if FloWind is liquidated under Chapter 7 of the bankruptcy code -- and that if the plan is not approved FloWind will almost certainly end up in liquidation.

Since the bankruptcy filing last June, FloWind's fleet of 'eggbeater' vertical-axis turbines -- the company's hallmark -- has been reduced from 362 to 282, of which 154 are operating and 30 are economically repairable. After declaring bankruptcy last June, FloWind had hoped eventually to be able to co-develop the wind farms over the long term with MNR, the "Premier" NEG Micon-RES partnership. Even before FloWind declared bankruptcy, MNR had loaned it $626,000 in the hopes that it would be able to buy FloWind's power plants. Since the June bankruptcy filing, MNR has loaned or committed to loaning FloWind another $1.37 million, of which $923,000 had been drawn as of March 23.

Another $500,000 is likely to be needed to keep FloWind and its wind plants going until the reorganisation plan kicks in, say the court documents, as long as approval of the plan comes no later than the end of May. It is not clear, however, whether FloWind will continue in business even if the plan is approved by the court, says the disclosure statement. Under the proposed plan debtors will be repaid by WindCo, the ESI-Premier partnership. The payments will be distributed by United States Trust Company of New York.

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