The City of Clovis, New Mexico (population 40,000) will consider issuing $1.65 billion in Industrial Revenue Bonds (IRBs) to finance a power station that will connect the nation’s three major power grids (in the West, the East, and Texas). Private companies will develop and operate the Tres Amigas SuperStation.
The power station is expected to have a great benefit to renewable energy projects across North America. In fact, some proponents are describing it as the world’s first high-capacity “renewable energy hub,” even though it will transmit all types of electricity. The nickname comes from the anticipation that the Tres Amigas power station will allow relatively small renewable energy producers across Texas and the Southwest to sell their power to more densely populated areas of the country.
Under the IRB arrangement, the City of Clovis will retain ownership of the power station and lease it back to Tres Amigas LLC at a rate sufficient to pay the principal and interest on the bonds as they mature. The company will enjoy tax advantages, although the Bond Buyer reports that interest rates will be higher than on tax-exempt bonds. At the end of the lease, the company will purchase the facility from the City for a nominal amount.
Concurrent with the announcement of the Tres Amigas project, Broadview Energy LLC announced plans to develop an 18 MW wind farm in the area. The Clovis City Council will review the issue on December 6, 2012. This isn’t the first time that Clovis has issued an IRB. In 2004, Clovis provided $350 million of IRB financing for a Southwest Cheese plant that employs more than 200 people.
Mary Tiger was formerly on staff with the UNC Environmental Finance Center.
A UNC MPA Capstone published in the Spring of 2012 discusses Industrial Revenue Bonds in NC Counties: http://www.mpa.unc.edu/sites/www.mpa.unc.edu/files/Albert%20Richardson.pdf
Williamson, Richard. “$1.65B Deal Could Make Clovis, N.M., Hub of Nation’s Power.” The Bond Buyer. November 26, 2012. http://www.bondbuyer.com/issues/121_226/billion-industrial-revenue-bonds-clovis-new-mexico-but-no-risk-if-failure-1046159-1.html
Clovis Industrial Development Corporation website, Local Incentives: http://www.developclovis.com/business-incentives/local