Shenyang Power tabs Chinese firm for Texas wind farm
Shenyang Power Group (SPG) says it intends to subcontract a major part of the proposed 615MW Spinning Star wind farm in Texas to China Machinery Engineering Corp. (CMEC), and both firms will partner to raise $260m in debt financing for the project.
The two sides signed a letter of intent covering those issues on 15 April. Based in Beijing, CMEC is an international engineering and contracting company. It was founded in 1978.
“The aim of this planned arrangement between the parties is to assist SPG in securing from Chinese sources approximately 14% of the debt financing that is anticipated to be required to develop the project, as well as to find a suitable engineering, procurement and construction contractor for the Texas wind farm,” according to a statement issued by the companies.
The agreement calls for SPG to appoint CMEC as the EPC contractor, a role in which it would be expected to procure equipment from suppliers designated by SPG.
Details of the arrangements covered in the accord will be finalized this month to “create binding obligations,” it says, adding that “no assurances can be made that SPG will be able to secure any debt financing for the Texas wind project.”
Spinning Star Energy is a joint venture owned by SPG and US Renewable Energy Group, whose principals have ties to the both the ruling Democratic Party and President Barack Obama’s administration. SPG, in turn, is 19.5% owned by China’s A-Power Energy Generation Systems, which plans to build a wind turbine plant in Nevada. The first 246 units would go to Spinning Star if SPG and USREG can obtain project financing.
A-Power last week raised questions over its own ability to fund the 320,000sq ft (29,729-square-metre) turbine plant, whose cost it did not estimate. It would be the first Chinese wind turbine plant in the US.
A-Power said in a 2010 filing to the US Securities and Exchange Commission that it did not have a binding purchase order for turbines as Spinning Star Energy had “not been able to secure the debt or equity financing that would allow [them] to make requisite payments.” Turbine deliveries were supposed to have begun in March 2010.
The developers’ decision to seek up to $450m in US economic stimulus funding set aside from green-energy projects and other federal aid drew objections from several Democratic senators, who complained the wind farm would create jobs mainly in China. Soon thereafter, A-Power announced it would build the Nevada plant.
The US Energy Department says that the wind farm project has not been awarded a loan guarantee for possible financing from China, and there is no indication that it will do so. This has left SPG having to secure third-party financing from Chinese commercial banks and other sources.
The tentative deal between SPG and CMEC also raises questions over what role Cielo Wind Power will play in the Spinning Star project. Cielo, which bills itself as the largest privately held wind power project development company in the US Southwest, was understood to have been the project’s contractor.