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That's what I love about our CEO. Do you remember Bartoszek's unflappable calm when Jon Edwards and Brungy and the Byte&Chew people were yelling that LLEG would never even get on the queue to file a permit, and our man spat in the dust like Clint Eastwood and replied that the queue would get much shorter with time. Back then I didn't know what to think. This time around I think I know better. The biomass plants in MA will probably go ahead as planned.
Michael Bartoszek said...
I don;t think there is any issue as to biomass's carbon neutrality as supported by this study.
The problem in Mass is they are trying to site too many large plants and I think that makes people nervous that if all those plants are built it will adversely impact the forests. The reality is that all of those plants are not going to be able to attract financing, so problem solved, but for some reason regulators do not take the same pragmatic view and choose to act as if all the plants will be built, hence the review of the regs as pertains to biomass.
The projects we are developing in Mass are quite different than those in question and we continue to move forward.
December 23, 2009 11:28 AM
Maybe he doesn't have a college degree. Maybe he never finished high school. It wouldn't bother me much. He's smart as hell and fierce in his protection of LLEG's interest--that's what matters.
Thanks, MBB!
Matt, if our estimates turn out to be wrong (as they almost certainly will), and somebody buys shares of LLEG based on the bad estimates and then loses money, he might say in court that the guys on ihub flagged a post with some estimates, blah blah blah. Unlikely, but possible. Once you're in court, anything can happen. Let's just err on the side of caution, like a bunch of sissies, is all I'm saying.
> Who knows what the REC value will be in 2013. Lets start asking that question in 2012.
Another point well taken. Maybe we should all go have a drink and reconvene in a year or two.
Presumably, Mr. Bartoszek could also tell us if 37.5% is in fact the percentage of the profits that will fall to LLEG (and its shareholders).
> he should at least give the valuation of RECS as it relates to the Berlin plant
That's a bright idea. Matt or Discreet, please ask him about this.
Yes, probably better to assume 3B shares, but let's not encourage MBB to print any more shares!
Matt, don't think that's a good idea. You're setting yourself up for trouble.
Why not stick to facts? Something like this... Assuming a multiple of 20 and an O/S of 2.3B shares, each $1M of earnings would put a value of .009 per share on the stock. So if LLEG gets to keep $1M of the profits, the share would be worth $.009.
LLEG keeps $2M => .018
LLEG keeps $3M => .027
LLEG keeps $4M => .036
LLEG keeps $5M => .045
LLEG keeps $10M => .09
This is just math, so there's no liability involved. I happen to think that LLEG will earn somewhere between $5M and $10M for its shareholders on the Berlin project.
good point, and I'm sure you're right
http://www.graniteviewpoint.com/2009/11/electricity-in-nh-bulk-electricity.html
You can see if you scroll down and look at the charts how much wholesale electricity dropped from 2008 to 2009. It's all about the pathetically low price of nat. gas. The recession, too, must be playing its part. I imagine that these prices are going to be soaring back up in future years. It's a shame that we're so low right now, just as LLEG negotiates a 20-year contract with the utility.
I haven't seen this posted. Very good for LLEG, if it passes (has passed):
http://www.biomassmagazine.com/article.jsp?article_id=2757
This is my revised estimate, but things are still fuzzy.
revenues: $87M
a) $26M sale of electricity $43/mwhr x 70mw x 24hr x 365days
b) $36M RECs ($30/mwhr for first 25MW and $60/mwhr for remaining 45MW)
c) $12M tax credits ($20/mwhr)
costs: $45M
d) $10M operating costs (http://ragingbull.quote.com/mboard/boards.cgi?board=LLEG&read=198)
e) $20M wood fuel (p. 136 of permit application)
f) $12M loan service (assuming 8% interest, 10-year loan of $80M)
g) $3M water use (p. 898 of permit application)
h) fed. taxes ?
i) local taxes ?
On a less happy note, average price paid to electricity generators in New England are way down in 2009. I can't get an average price that I feel confident in yet, but it's looking like maybe $43/mwhr in 2009 instead of $63/mwhr in 2008. Well, what do you want, nat. gas is in the gutter.
Sage, yes, in addition to. It's just money that LLEG can shave off of what they owe to the IRS.
The federal tax credit for open-loop biomass plants is now $20/MWhr:
http://docs.google.com/viewer?a=v&q=cache:Ch_KrZIrFEAJ:www.districtenergy.org/2009-07-10-files/powerpoint/3Casten%2520Call%2520to%2520Action.pdf+biomass+production+federal+tax+credit+2009+%24+mwhr&hl=en&gl=us&pid=bl&srcid=ADGEESjuMxRJjtRW0Wijp4P8DKi2VHT07js1GbTm4pDqtf4W6sf41RsY33FRW8SE1aWr_ojZ4qBiZrSjR7p-8Ts5a2G21xAmgYY7GERDovNmlW6pfuowl-9siPcYZ0LDaaZNNaADzLaY&sig=AHIEtbQSjmFWSERCr9-Gn09q_bP-BFuGZA
So the fed. tax credit revs are actually $20/mwhr x 70mw x 24hrs/day x 365days/yr = $12.3M, much more than the number I came up with in March of 2008. Maybe the credit went up.
Here's a link to the biomass power plant study that I refer to in my estimates:
http://74.125.93.132/search?q=cache:W_CALPTO-_wJ:www.mass.gov/Eoeea/docs/doer/renewables/biomass/bio-eco-impact-biomass.pdf+maintenance+350,000+23,333+14,000+26,133&cd=1&hl=en&ct=clnk&gl=us
Sorry, it's not a very economical url.
Anyway, Sage, you're right, that the costs per MW go down as the MWs go up, and that decrease is factored into the study, when they extrapolate from the actual costs of running a 15MW facility to a hypothetical 50MW facility. I simply multiplied the 50MW numbers by 70 and divided by 50 in order to come up with my 70MW figures, so my costs are definitely inflated. Then again, it's better to err on the side of caution, don't you think? The fudge factor will work in our favor, not against.
> Federal tax credits+ potentially carbon credits.
> Also any sales of steam etc to Fraser.
Sage, I've included fed. tax credits in my estimates.
Carbon credits would be great, but we have no way of knowing what they'll bring beyond the RECs until Congress gets its act together.
You're right about the steam; I forgot about that. I wonder how much that could be worth...
I haven't included corporate taxes in that last estimate. Does anybody know what the tax rate would be on Laidlaw Berlin's profits?
Here's what I've got so far. It's not ready to be stickied. Let's work on it and try to firm up some of these numbers.
revenues: $64-80M
a) $39M sale of electricity (http://ragingbull.quote.com/mboard/boards.cgi?board=LLEG&read=206)
b) $20M-$36M RECs
c) $5M tax credits (http://ragingbull.quote.com/mboard/boards.cgi?board=LLEG&read=205)
costs: $42-45M
d) $10M operating costs (http://ragingbull.quote.com/mboard/boards.cgi?board=LLEG&read=198)
e) $20M wood fuel (p. 136 of permit application)
f) $12M loan service (assuming 8% interest, 10-year loan of $80M)
g) $3M water use (p. 898 of permit application)
assumptions
a) Somebody check and see what ISO New England is currently paying producers of electricity. In 2008 it was $63/MWhr. Taking that number you get $63/MWhr x 24hrs/day x 365days/yr 70 MW =$39M
b) That's a big range! My estimate of $20M comes from a post I made on ragingbull in 2008 (http://ragingbull.quote.com/mboard/boards.cgi?board=LLEG&read=204). My recent ihub post #58343 argues that the RECs will actually bring in $30M.
g) I don't know if water use was included in the study of actual operating costs that I am using as the basis for c) and d). If it was included, then this $3M should be subtracted from the cost side.
revenues, costs
Here is a very quick and dirty profit projection.
revenues
$39M sale of electricity (http://ragingbull.quote.com/mboard/boards.cgi?board=LLEG&read=206)
$20M RECs (http://ragingbull.quote.com/mboard/boards.cgi?board=LLEG&read=204)
$5M tax credits (http://ragingbull.quote.com/mboard/boards.cgi?board=LLEG&read=205)
total revenues: $64M
costs
$10M operating costs: http://ragingbull.quote.com/mboard/boards.cgi?board=LLEG&read=198
$20M wood fuel (p. 136 of permit application)
$12M loan service (assuming 8% interest, 10-year loan of $80M)
total costs: $42M
total profit: $22M
Using Matt's formula, according to which LLEG gets to keep 37.5% of the profits, LLEG would get $8.25M a year. Assuming 3 billion shares and a multiple of 20, you arrive at a share price of 5.5 cents, a 20-bagger from here.
Running Tally of Operating Expenses:
$3.1 M water use (p. 898)
$20 M wood fuel (p. 136)
Look at p. 130 of the application and you'll see that Novus, which owns 18.75% interest in the Berlin facility, is run by Louis Bravakis!
"I then founded Novus Energy, LLC in 2000. Novus Energy, LLC is an energy consulting
business specializing in assisting clients in developing biomass energy projects. Novus has been
involved in numerous biomass Combined Heat and Power projects specializing in procuring
energy funding through state agencies such as the New York State Energy Research and
Development Authority (“NYSERDA”) and the New Jersey Clean Energy Fund."
***
I'm almost certain that LLEG actually owns 0.5*0.5 + 0.5*0.5*0.5 = 0.25+0.125 = 0.375 = 37.5% If you read the flowchart, it works out.
LLEG = 37.5%
Novus = 18.75%
North Star = 18.75%
Homeland Energy = 25%
= 100%
Running Tally of Operating Expenses:
$3.1M water use (p. 898)
I have to agree with you, Skunk. That was a dumb blunder, and I don't care what "mbartoszek" says about it. For that matter I don't know who "mbartoszek" is, and I really really hope it's not our CEO, because his posting on a message board would constitute a much worse blunder.
I wish the company would issue a corrected PR or a fresh PR that links the ticker symbol with the permit just filed in Berlin. It's quite frustrating, really.
And the last price I saw was around $26 per REC.
You're being a little RECless with your figures, Matt! Take it easy. $26 still brings in enormous revenues.
I think the low volume is attributable to the fact that the PR is defective and does not identify the ticker symbol LLEG.PK.
> looking forward to the application being put online...any guesses when?
No idea. Maybe Brungy's birdie knows something.
> I don't see a stock symbol in the PR
Skunks, you're right! What a mistake. I hope LLEG corrects the PR so that its readers will understand that the company filing the permit has stock that may be purchased.
Say, powerofthepenny, the last time you called a pinch play, we only got, what, a 30% rise. Is that typical of the charting pattern? 30% is nothing to sneeze at in the real world, but in pennyland, one wants more. Much more.
from the last link:
"Summary:
New Hampshire’s Electric Renewable Portfolio Standard, enacted in May 2007 (HB 873), requires electricity providers to acquire renewable energy certificates (RECs) equivalent to 23.8% of retail electricity sold to end-use customers by 2025. Of the 23.8% target, 16.3% is to be derived from sources installed after January 1, 2006, whereas the remainder is to be derived from existing resources. Amendments enacted in June 2008 (HB 295) exclude municipal suppliers from the RPS requirements."
It keeps getting better and less believable.
According to the following link
http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=NH09R&re=1&ee=1
in NH a biomass facility built before 2006 of less than 25MW would be rated Class III and bring $29.87 per REC. My understanding is that $29.87 would become the baseline for the first 25MW of the Berlin facility. Then the other 40MW would be considered Class I and sell for $60.92 per REC (!!!). Any other interpretations?
***
Separate portfolio standards are required for energy resources classified as "Class I," "Class II," "Class III" and "Class IV."
Class I - New Renewable Energy: electricity from any of the following, provided the source began operation after January 1, 2006:
Wind energy;
Geothermal energy;
Hydrogen-derived from biomass fuels, biogas, or landfill gas;
Ocean thermal, wave, current, or tidal energy;
Biogas or landfill gas;
Eligible biomass technologies meeting air emissions requirements ;
Solar electric not used to meet Class II, or customer-sited solar water heating that displaces electricity
The incremental new production of electricity in any year from an eligible biomass, eligible methane source, or hydroelectric generating facility of any capacity, over its historical generation baseline
The production of electricity from Class III or IV sources that have been upgraded or repowered through significant capital investment.
Class II - New Solar: electricity from solar technologies, provided the source began operation after January 1, 2006.
Class III - Existing Biomass/Methane: electricity from eligible biomass technologies having a gross nameplate capacity of 25 megawatts (MW) or less, and methane gas. The source must have begun operation prior to January 1, 2006:
Class IV - Existing Small Hydroelectric: electricity from hydroelectric energy, provided the facility began operation prior to January 1, 2006, has a total nameplate capacity of 5 MW or less, and meets other environmental protection criteria.
Electric providers must meet the standard according to the following compliance schedule:
2008 2009 2010 2011 2012 2013 2014 2015 2025
Class I 0.0% 0.5% 1% 2% 3% 4% 5% 6% 16%(*)
Class II 0.0% 0.0% 0.04% 0.08% 0.15% 0.2% 0.3% 0.3% 0.3%
Class III 3.5% 4.5% 5.5% 6.5% 6.5% 6.5% 6.5% 6.5% 6.5%
Class IV 0.5% 1% 1% 1% 1% 1% 1% 1% 1%
* Class I increases an additional one percent per year from 2015 through 2025. Classes II, III and IV remain at the same percentages from 2015 through 2025. Provisions for exceptions and delays are described below.
The New Hampshire Public Utilities Commission (PUC) has established a renewable energy certificate (REC) program utilizing the regional generation information system (GIS) of energy certificates administered by ISO-New England and the New England Power Pool (NEPOOL). RECs from customer-sited sources are assigned to the system owner, and behind-the-meter generation located in New Hampshire is eligible to participate in the RPS. Unused RECs from the prior two years, or RECs from the first quarter of a subsequent year, may be used to meet up to 30% of a given year's compliance targets. Electric utilities may request to enter into multi-year contracts for RECs or electricity bundled with RECs to meet the RPS. Rural electric cooperatives may enter into multi-year contracts without approval from the PUC. Note that the PUC has established a method to measure electricity displaced by solar water-heating systems.
To be eligible for RPS compliance, renewable energy generators must be within the New England control area, unless the source is located in a control area adjacent to the New England control area and the energy produced by the source is actually delivered into the New England control area for consumption by New England customers.
Compliance reports are due to the PUC by July 1 of each year from each electricity provider. In lieu of meeting the portfolio requirements, an electricity provider may make payments to a new renewable energy fund established by this law to support renewable energy initiatives. Class II moneys will only be used to support solar energy technologies in New Hampshire. The 2009 rates for each megawatt-hour not met for a given class obligation through the acquisition of certificates are as follows:
Class I - $60.92
Class II - $159.98
Class III - $29.87
Class IV - $29.87
The PUC will adjust these rates by January 31 of each year using the federal Consumer Price Index.
REC value between $5 and $90, median price $20/REC
from Widipedia again:
***
Prices
According to the Green Power Network, prices of RECs can fluctuate greatly (2006: from $5 to $90 per MWh, median about $20).[2] Prices depend on many factors, such as the location of the facility producing the RECs, whether there is a tight supply/demand situation, whether the REC is used for RPS compliance, even the type of power created. Solar renewable energy certificates or SRECs, for example, tend to be much more valuable in Northeast markets.[3] In Canada, 2008-09 BCHydro offers $3 /MWh for "green attributes", for long-term contracts, 20 plus years. Many Independent Power Producers believe that this is much less than "fair market value", but have no alternative.
While the value of RECs fluctuate, most sellers are legally obligated to "deliver" RECs to their customers within a few months of their generation date. Other organizations will sell[4] as many RECs as possible and then use the funds to guarantee a specific fixed price per MWh generated by a future wind farm, for example, making the building of the wind farm a financially viable prospect. The income provided by RECs, and a long-term stabilized market for tags can generate the additional incentive needed to build renewable energy plants.[5] One of the few non-profit U.S. organizations that sell RECs, Bonneville Environmental Foundation was instrumental in starting the market for RECs with their Green Tag product. They use the profits from Green Tags to build community solar and wind projects and to fund watershed restoration. Another non-profit currently selling RECs is Conservation Services Group,[6] which sells ClimateSAVE[7] RECs generated from wind, solar, and hydropower. The largest seller of RECs is a company called Sterling Planet, [8], based in Atlanta, GA. Some of there clients include Intel, Pepisco, Harvard, Yale, Duke and over 100 utilities around the country
It'd be nice if somebody confirmed the REC prices that I came up with. It's a little hard to believe that they're THAT valuable...
The good news is that RECs are going for $35-37 in New Hampshire.
http://www.phoenixpartnersgroup.com/files/ebs_newsletters/2009_july.pdf
If the Berlin facility were to produce 65MW x 365 days x 24 hours = 569,400 RECs a year, it would bring in about $20M in REC revenues at 2009 REC prices. That's... enough!
Some Basic Facts about RECs
From Wikipedia: "Renewable Energy Certificates (RECs), also known as Green tags, Renewable Energy Credits, or Tradable Renewable Certificates (TRCs), are tradable, non-tangible energy commodities in the United States that represent proof that 1 megawatt-hour (MWh) of electricity was generated from an eligible renewable energy resource."
A 50MW biomass plant working round round the clock, round the year, produces 50MW x 365 days/year x 24 hours/day = 438,000 MWh of electricity = 438,000 RECs
Massachusetts RECs recently went at auction for an average price of $28/REC.
Therefore a 50MW biomass plant could bring in something like 438,000 REC x $28/REC = $12.3M.
That's about $2.5M per 10MW of electricity.
The loss of that much revenue could obviously be fatal to any biomass energy producer, especially to a producer who will have to share profits with a JV partner.
> While REC would contribute some extra revenue=profit to Laidlaw it is not anywhere near making the projects unprofitable.
I'm glad to see that you speak with such authority about RECs and revenues with respect to LLEG's Mass projects. Since you know so much about this subject, I wonder if you would share some of your DD with the board. I'm sure you'll have no trouble answering a few basic questions:
1) What is the total revenue LLEG can anticipate for either of its two MA projects?
2) What percentage of those revenues will RECs bring in?
3) What is the current price of a REC?
TIA.
Yes, this is something that our CEO really should clarify.
Mr. Bartoszek, would you please clarify on the LLEG website or your blog: What are the implications for LLEG of the moratorium on new biomass RECs in Massachusetts?
Profitability and RECs
I take it back. According to my back-of-envelope calculation from March 2008
http://ragingbull.quote.com/mboard/boards.cgi?board=LLEG&read=207
LLEG's Berlin project would not in fact be profitable without the RECs.
Good thing LLEG can count on selling RECs in NH!
I don't know what this implies for LLEG's MASS projects.
I don't know for sure if LLEG can be profitable in MASS without the RECs. According to my back-of-envelope calculations, they didn't need them for Berlin. I'm just saying that the same might be true in MASS. In any case, this is not exactly good news for LLEG.