When this assignment began, I was advised to keep my research independent and fresh and to keep my opinions to myself. Over the course of the last 5 years, the reports generated by the local news sources such as the New Jersey Herald and the Star Ledger either shied away from stating the real financial impact or didn’t clearly understand it themselves. After several weeks of investigating we arrived at the overall financial impact.
The County Obligation
The bottom line on this project is the most difficult concept to understand, the County of Sussex owns nothing, but is responsible for everything. You might want to read that again. As we guide our way through the principal players and their motives; the timelines and contracts, and the liabilities and revenues it will still come back to the obligation to pay off bonds for a project that the county doesn’t own or legally control.
We will present it to you two ways…long story short, then, long story long.
First, long story short.
The overall obligation that can be definitively attributed to the solar project is $53,287,494. That accounts for the bonds, loans, guarantees and legal fees that are directly attributable to the project. It does not include the massive diversion of time and expenses by the Sussex County administration to oversee the project. Those figures are not available at this time, but are substantial.
On the other side of the balance sheet are the revenues that have been realized from PPA energy sales to the local units, SREC credits, Federal Grants (1603 Grant), and assorted receipts which comes to $14,470,375. As of June of 2017 the county still had an overall liability of $38,817,119.
These numbers only reflect the 15 year liability on bonds and a limited revenue on a partial build-out of panels. With the build out complete, the project over the next 10 years could realize a PPA revenue of approximately $5 million and an SREC sale revenue of possibly $6 million. That $11 million would be offset by costs and maintenance of approximately $5 million leaving a net gain of $6 million against the $38 million dollar obligation.
Conservatively at this point we conclude that the county will remain on the hook for over $32 million dollars.
|Series 2011A-B Bonds – Principal/Interest1||$27,700,000||$9,916,289||$37,616,289|
|Series 2015 Bonds – Principal/Interest2||$6,750,000||$408,063||$7,158,063|
|Mastec Bridge Loan3||$3,134,116||$3,134,116|
|County Guarantee Payments4||$4,859,026||$4,859,026|
|PPAs (Power Purchase Agreements)6||$1,448,244|
|SRECs (Solar Renewable Energy Credit)7||$3,325,126|
|1603s (Federal ARRA Grant)8||$8,152,558|
|Obligation Balance (June 2017)||$38,817,119|
¹ Series 2011 A-B Bonds were generated by the original project in 2011.
² Series 2015 Bonds issued for the project settlement funds. Secured by Homestead Nursing Home funds.
3 A private loan was secured by attorneys for Sussex County from Mastec Construction to pay for disputed inventory.
4 Sussex County has so far guaranteed funds for shortfalls on bond payments.
5 Not bonded but a county expense; an investigation conducted by Matthew Boxer of Lowenstein, Sandler for potential litigation.
6 Revenue collected for Solar energy generated by local units. .
7 Revenue derived by the sale of renewable energy credits. This is a fluctuating market.
8 Federal Grant money originally provided at a 30% rate against the construction costs of a privately funded Solar project.
9 Miscellaneous settlements, refunds etc.
Where did the money go?
As we have already stated in our previous introduction post, the project wasn’t supposed to cost the county a dime. The whole concept was to provide reduced electricity for the county while avoiding installation costs. In a later post we will go into what went wrong, but for now let’s continue to follow the money.
Who got paid…
|Carlisle – Roof inspections||$1,000|
|CP Engineers – Engineering||$623|
|Day Pitney – Permitting||$15,264|
|Gabel Assoc – Project Manager||$571,485|
|Harold E. Pellow – Permitting||$2,113|
|Hurricane Hill – Engineering||$3,346|
|Joseph Jingoli & Sons – Project Manager (Owner’s Rep)||$151,790|
|KMB Design Group – Engineering||$156,963|
|MasTec – Construction||$20,433,959|
|MasTec – Solar Panels||$3,757,133|
|Nova Maintenance – Construction||$3,850|
|Protek Park – Construction||$27,400|
|Schletter Solar – Equipment||$24,901|
|Southern Exposure – Construction||$9,000|
|SunLight – Development Fees||$500,000|
|SunLight General Capital – Engineering||$178,130|
|Vanguard Energy – Construction||$6,423,783|
|Solar Maintenance/Asset Management|
|Advanced Service Solutions – Landscaping||$26,389|
|Azimuth 180 Solar Electric – O&M (SLG Co.)||$502,251|
|Customized Distribution Services – Warehousing||$33,536|
|ICAP Energy – SREC broker||$4,139|
|Karbone – SREC broker||$3,480|
|PJM-EIS – SREC administration||$2,292|
|Skystream Markets – SREC broker||$1,220|
|Suncycle Renewable Energy – Repairs||$800|
|SunLight General Capital – Asset Managemnt||$405,141|
|SunLight NJC Solar – Tax Equity||$127,400|
|Tullett Prebon – SREC broker||$3,207|
|Chase Bank – Bank fees (SLG)||$838|
|Total Solar Mtn/Asset Management||$1,111,228|
|Archer & Greiner – Sussex Bond Counsel||$109,234|
|Bethel Bindery – Closing Documents||$5,172|
|Cohn Reznick – Accounting||$17,500|
|Cole Schotz PC – SLG Attorney – Arbitration||$235,833|
|Garrett Smith – SLG Attorney – Arbitration||$1,826|
|George Shaefer – SLG Witness -Arbitration||$5,157|
|Greenblatt – SLG Attorney – Arbitration||$2,000|
|Hartman Winnicki – Trustee (U.S. Bank Counsel)||$2,500|
|Inglesino, Pearlman et al – MCIA Bond Counsel||$456,042|
|JAMS – Pre-arbitration dispute resolution||$4,746|
|LegalLink – Discovery company – arbitration||$37,048|
|Mark Gasper – MasTec Witness -Arbitration||$4,441|
|McConnell, Lenard & Campbell – Sussex Counsel||$8,016|
|McElroy, Deutsch, Mulvaney – Trustee Counsel||$5,000|
|McElwee & Quinn – POS/OS Printing||$2,500|
|McGriff – Insurance||$117,484|
|Moody’s Investor Svcs – MCIA Ratings Agency||$20,000|
|Morris County Improvement Authority – Issuer||$200,000|
|Nisivoccia LLP – Sussex Auditor||$20,000|
|Nixon Peabody – Legal||$583,460|
|Novogradac – Accounting||$63,000|
|NW Financial – MCIA Financial Advisor||$68,488|
|Pashman Stein – SunLight General Counsel||$421,572|
|Pearlman Miranda – MCIA Bond Counsel||$42,894|
|Phoenix Advisors – Sussex Financial Advisor||$5,000|
|Smart Source – SLG I.T. Support||$1,902|
|SunLight General Capital – Acctg/Legal||$65,267|
|Sussex County – Reimb for County Counsel||$28,216|
|U.S. Bank – Trustee||$18,907|
|Wilentz, Goldman, Spitzer – Sussex Bond Counsel||$30,000|
|Total Accounting/Legal/Issuance Costs||$2,795,671|
|6150 SLG NJC Solar LLC||$258,810|
|6291 SLG Capital LLC||$33,470|
Long story long.
According to the Finding of Fact of 2014 by the American Arbitration Association:
On October 13, 2011, SunLight Capital and Power Partners submitted a joint response to the Sussex RFP (“Sussex Proposal”). Like the Somerset and Morris Proposals, the Sussex Proposal proposed that the MCIA issue Series A and B Bonds in the respective amounts of $24,700,000 and $1,300,000 to pay a majority of the costs of construction with Power Partners agreeing to be paid the balance of the construction costs of $7,618,860 from ARRA 1603 Grant funds.
The MCIA assumed responsibility to implement the Morris County renewable energy program (“Morris II” or the “Morris Project”) and the Sussex County renewable energy program (“Sussex I” or the “Sussex Project”). Numerous municipalities, county colleges, boards of education and other public entities (the “Local Units”) within the Counties of Somerset, Morris and Sussex agreed to participate in the Counties’ renewable energy programs. The Local Units agreed to, among other things, cooperate and permit the SCIA and MCIA to contract with developers to design, construct and install solar generating facilities (“SGFs”) on the public buildings and lands. The Local Units also agreed to pay for the electricity generated at discounted, pre-determined rates for a period of 15 years.
At all times relevant to this arbitration, a Solar Renewable Energy Credit (“SREC”) market existed in New Jersey with prices fluctuating based on the principles of supply and demand. The American Recovery and Reinvestment Act of 2009 (“ARRA”) impacted the New Jersey solar market. Under ARRA, developers of solar projects had the option to receive federal cash grants or an investment tax credit. Under the first option, the U.S. Department of Treasury awards a grant equal to 30% of the eligible costs of solar renewable energy projects (§1603 Grant). Eligible costs include the actual costs of construction and certain “soft costs” incurred in developing the projects. Under the second option, developers would receive an investment tax credit equal to 30% of the eligible costs. By mid-2011, SREC prices in New Jersey were above $600 per credit. By mid-2012, SREC prices in New Jersey had plummeted to below $100 per credit.
As with previous bond issuances by MCIA for Somerset and Morris Counties these bonds were backed by Sussex County.