Biomass Feasibility Project Final Report - Xcel Energy

financial obligations must give priority to funding the project’s construction, operation,
maintenance and rate stabilization reserve before any net revenues can be transferred to the
owners.
Consulting Engineer: a third-party engineer engaged by the owner at its own expense to
provide a technology review to bond insurers or extenders of letters of credit.
Site Control: a purchase agreement, along with complete environmental review and contracts
for utility access, on the energy island facility site. This must be provided prior to closing on
project financing.
OTHER CONSIDERATIONS
Ownership and Financial Structure
A power plant may be owned publicly, privately, or both publicly and privately. The project
may be partially financed with tax-exempt debt depending on the fuel type employed and the
opinion of counsel. Financing for a publicly owned facility may be secured, partially or
completely, by the full faith and credit pledge of the city. An alternative to ownership by the
city alone might be joint ownership with regional counties. A public/private partnership could
include equity contributions by public entities, the private project developer/operator, and the
steam purchaser. Depending on the terms of the contracts and the credit commitments of the
parties to a public/private partnership, debt-to-equity ratios may range from 80/20% to 60/40%.
A principal concern will be the stranded/unamortized debt beyond the negotiated term of the
steam purchaser’s contract.
Feedstock and Site Selection
The interwoven choices of feedstocks and plant location are critical in deciding the success or
failure of a biopower project. In some instances, one or both of those decisions will be obvious.
This would be the case for projects generating power for use on site with a fuel generated on
site, or projects designed to satisfy a thermal load at an existing consumer. Where the choice of
feedstock and location are not so obvious the process of selecting each will require evaluation
of a number of factors.
Sufficient Feedstock Supplies
The success of any bio-power facility depends on the long-term supply of feedstock. This means
much more than just determining that sufficient biomass currently is available within a costeffective
distance of the plant. Investors and lenders will want to see a long- term fuel supply
plan ensuring that it will be available in the future. Better yet would be a long term fuel supply
contract with an established supplier. Unfortunately, this may be difficult to achieve because
the biomass fuel market is immature and localized. Long-term fuel supply may entail the
development of a subsidiary fuel supplier or a co-op dedicated to delivering sufficient biomass
to the plant.
Access to Existing Utility Infrastructure
Finding a site with existing access to necessary utilities helps to avoid significant capital costs.
Depending on power plant design, a bio-power facility may need access to natural gas
Page 164
Identifying Effective Biomass Strategies:
Quantifying Minnesota’s Resources and Evaluating Future Opportunities