Variable wind trade; New York officials have questions about a company with growing ties to the Islands

Winds of doubt are swirling around one Northeast-based wind farm developer with projects in Hawai'i.

Newton, Mass.-based First Wind (formerly known as UPC Wind) has found itself one of the targets of an ongoing investigation conducted by the New York attorney general's office.

On July 15th, Attorney General Andrew Cuomo announced his office would commence a probe into the business dealings of both First Wind Holdings, Inc., and Connecticut-based Noble Environmental Power.

First Wind spokesman John Lamontagne told Honolulu Weekly that the company is "cooperating fully" with the investigation.

Cuomo's office is investigating whether First Wind and Noble "sought or obtained land-use agreements with citizens and public officials; whether improper benefits were given to public officials to influence their actions and whether they entered into anti-competitive agreements or practices." The New York AG's office did not respond to the Weekly's requests for an interview.

The Kaheawa connection

The probe of is of special interest to island energy and business affairs, since First Wind has built and operates a wind farm on Maui and has designs for more farms on Moloka'i and on O'ahu.

Kaheawa Wind Power on Maui has been operational since 2005. The $65 million wind farm is made up of 20 turbines with each turbine producing 1.5 megawatts of power which-according to First Wind's website-meets 9 percent of Maui's electricity needs.

This wind farm is one of only three owned by First Wind in operation in the country, the other two being the $94 million, 28-turbine Mars Hill farm in Maine and the $35 million, eight-turbine Steel Winds I farm in Lackawanna, N.Y., which are producing 42 and 20 megawatts of energy, respectively

Wind power is increasingly seen as one possible way to wean Hawai'i from its dependence on oil. Fossil-based fuels such as petroleum account for more than 70 percent of the fuel sources powering the state.

With wind power seen as an alternative energy source, First Wind is looking to consolidate its presence in the islands. On O'ahu, the company is looking to build a dozen turbines on a 500-plus acre spread in Kahuku near tiny Charlie Road. First Wind has a permit for continual use and is in contract negotiations with Hawaiian Electric.

Moloka'i up next

Another more ambitious project sets its sights on Moloka'i. On the Friendly Isle, First Wind's proposed wind farm could consist of 140 turbines on about 12,000 acres of land.

The proposed acreage involved would necessitate building the turbines on lands owned by major landowner Moloka'i Ranch and the Department of Hawaiian Home Lands primarily near the Ho'olehua area.

To that end, First Wind's local representatives have been meeting with homesteaders and working with island community groups like the Moloka'i Community Service Council (MCSC) for more than a year to garner local support for their project.

First Wind made one big move last November when the company announced it would pledge $50 million to the MCSC's "Ho'i I Ka Pono" campaign to purchase the more than 60,000 acres owned by Moloka'i Ranch which shut down its ranch, hotel and other business interests this past spring.

MCSC has been seeking to buy Moloka'i Ranch since 1998 with the intention of reopening the company's lodge and other hotels and providing much needed jobs to residents on the economically depressed island. The County Council has been looking to raise $200 million-the estimated appraised value of the company's lands-to buy out Moloka'i Ranch which is owned by Asian conglomerate Guoco Leisure through Moloka'i Properties Ltd.

Moloka'i Ranch has continually and emphatically stressed over the years-and especially in recent months-that their lands are not for sale and that they have no intention of selling their properties. They have contended the lands are valued at $300 million.

First Wind's $50 million pledge and its courting of community residents and groups appears to have paid off. On March 29, members of a number of community organizations gathered at Moloka'i Community Services Center to talk about the proposed First Wind project. According to an article in the April 3 issue of the Molokai Times, those present chose-after a two- hour discussion-to vote unanimously to back First Wind's Moloka'i project.

Blowback

Before Moloka'i activists and residents seal any deal with First Wind, they might consider what has been taking place in the tiny town of Cohocton, NY.

Located in the western arm of the state, the township of Cohocton consists of just under 2,600 residents and is 56 square miles in length but is home to a huge wind farm project under development by First Wind.

How huge? How about 50 turbines located on 5,700 acres to the price tag of $265 million?

Cohocton Wind Watch (CWW) is a small community group of about 35 active members who have been fighting First Wind's development in their town for three years.

According to CWW Treasurer Judy Hall, members of the group met with representatives from the New York AG's office last November to call for an investigation of First Wind.

In a telephone interview with the Weekly, Hall said the trouble first started in Spring of 2005 when First Wind sent letters out to town residents informing them of the project and that work would commence.

"(First Wind) said that they had been dealing with the Town Board for several years and they had leases in place and were ready to move forward with construction," stated Hall.

Hall said that First Wind's tactics are anything but open, honest, above board and transparent.

"This is what happens all over the country: they sneak into town, buy up huge parcels of land," said Hall, who noted further that "in New York state they approach some of the poorest areas in the country" where "there's no business" and "a lot of poor elderly people."

"They tell you all these grandiose things" Hall said. "People in our town still think they are going to get free electricity and have no taxes and none of that is true."

Hall said that First Wind representatives have come out to Cohocton several times to give 5-10 minute presentations to the Cohocton Town Board, but the gist of their talks were that the project was fait accompli.

CWW has accused First Wind officials of using money to influence permitting and approval of the project not only in Cohocton but in other towns in New York.

"There are affadavits signed all over New York state with the attorney general's office by people who have been offered bribes and did not take them or witnessed other town board members (accept bribes)," said Hall.

CWW's position can be seen in a letter addressed to Steuben Country District Attorney John Tunney. In the May 5 letter, the group makes four specific charges against First Wind-Making false claims, filing false documents, larceny, fraud and bribery of public officials-and briefly lays out support for each charge.

Hall said she thinks that the town supervisor and four members of the town board may have been bribed to provide First Wind with necessary legal backing and permits necessary to go forward with the mammoth wind farm.

Asked to comment about these and other charges, Lamontagne said that "to paint the company with one brush because of what one person or one group says would be unfair."

Since its inception three years ago, CWW has informed other towns approached by wind developers of the occurances in Cohocton. As result, local groups have "sprang up overnight" in various New York and Northeastern communities to oppose companies like First Wind, according to Hall.

CWW has had little success so far in the courts. The community first sued the town of Cohocton over local laws that favored the wind developer in the Steuben County Supreme Court of New York but Judge Marianne Furfure dismissed CWW's cases.

In August 2007, the group filed three lawsuits against the town and First Wind, alleging they violated New York's open meeting laws, among other charges.

In September, Furfure again ruled against CWW, allowing work on the multi-million dollar Cohocton I wind farm-now nearly completed-to continue.

Hall said that the town has been "split down the middle" over the First Wind project. "It causes a lot of problems in the town," she said.

Big money in the wind

On July 31, First Wind filed papers with the Securities and Exchange Commission (SEC) seeking an Initial Public Offering of nearly $450 million.

Coming after the New York AG office's investigation, the move at first appeared to be a case of bad timing although now it appears to be as much about providing continuity for First Wind. "We are still moving forward as a business" First Wind spokesman Lamontagne told the Weekly.

According to financial records filed by the company, First Wind lost $134 million before March 31, more than half of which it lost since December.

Thus, the IPO proceeds would partly go to debt payment. "We intend to use net proceeds of this offering to pay indebtedness and fund capital expenditures" states the S-1 document.

However, First Wind is backed by big-time investors such as major equity firm D.E. Shaw and Madison Dearborn. Also, the IPO will be jointly managed by such giants as Goldman, Sachs, Credit Suisse and JP Morgan.

Since the company launched in 2002, First Wind has sought to be a firm that can "develop, own and operate a portfolio of wind energy projects in favorable markets" such as the East and West Coasts and Hawai'i.

Hall is disdainful of the S-1 Prospectus, calling it "a fairy tale." She noted that wind developers like First Wind especially target small towns in New York because obtaining tax credits and Renewable Energy Certificates (REC) are easy because RECs are unregulated in the Empire State. "The production tax credits and the RECs are where these companies make their money-not in the production of electricity because they could less about whether they could produce electricity," stated Hall.

First Wind's S-1 document seems to lend some support to Hall's contention. The prospectus notes that First Wind has been "targeting regions with high electricity prices" as well as "favorable renewable energy certificate prices," "state-sponsored renewable portfolio standard programs" and "desirable wind characteristics."

Hall also stated that First Wind avoids paying taxes on wind farm projects by signing a PILOT-Payment in Lieu of Taxes-agreement with local towns that sidesteps potential yearly taxes by reducing them to a one-time lump sum payment. After 20 years have passed and firms are required to pay taxes, they will have already reaped sizable profits and made back their initial costs.

"They are absolutely dependent on welfare from the government, " said Hall.

"We depend heavily on government policies supporting renewable energy," states the prospectus.

Prevailing breeze

While groups like CWW in Cohocton and even local organizations in the nearby New York town of Prattsburgh have battled First Wind development, the attitude and mood on Moloka'i-an island known for its vociferous and indefatigable local activists-is almost the opposite.

"Our own experience with First Wind has been positive" MCSC Director Karen Holt wrote in an e-mail. "We have seen no evidence of any shady business practices in our dealing with them."

Holt confirmed that the MCSC has worked with First Wind for a couple of years to "determine whether the community is supportive" to building a wind farm on the island. The director wrote that "First Wind's work with our community has been transparent" and the organization was "greatly encouraged" by their $50 million pledge to help buy Moloka'i Ranch.

Holt's comments echoed what Noe Kalipi, MCSC Director of Government and Community Relations told the Weekly, namely that her firm has also been transparent and is engaged in an "on-going dialogue" with residents.

Kalipi could not go into details about the Moloka'i and Kahuku wind farm projects or about two other Hawai'i projects that the company has on the drawing board because of the "quiet period" engendered by S-1 filing and the IPO. She said that First Wind remains "committed" to its $50 million offer to help buy Moloka'i Ranch.

Holt notes she had "never heard any allegations of unfair dealing" with First Wind during the planning and construction of the Kaheawa Wind Power project.

Still, despite Kalipi's emphasis that First Wind wants to be "part of a bigger solution" for Moloka'i, the company's $50 million pledge to MCSC has all the earmarks of a quid pro quo offer. If the MCSC were to raise the money and somehow buy Moloka'i Ranch, First Wind would clearly benefit by concluding leases with the new owners who would recieve royalties from the lands on which the wind farms stood. The pledge seems born of economic pragmatism.

Then, there is the matter of the benefit to the people of Moloka'i. The proposed wind farm with more than 100 turbines spinning their blades will-if built and implemented-provide the vast majority of its energy to O'ahu via underground cables, with Moloka'i only receiving a small percentage of residual energy.

First Wind's record will likely come under more scrutiny as its projects move forward. The company has only three wind farms in operation and many more projects in places in states such as Oregon, Utah, Vermont and in Canada that are either in development or under construction.

While First Wind enjoys a good reputation in Hawai'i, developments in towns like Cohocton provide a less savory picture of the wind developer. Which image will be believed may depend on the results of the New York AG office's investigation of the firm, which have not yet been released.