NTEC: How much will NN invest for possible $40 million gain? Gallup Independent August 14, 2013 By Kathy Helms Diné Bureau navajo1@gallupindependent WINDOW ROCK — How much is the Navajo Nation willing to pay to preserve $40 million a year in royalties and taxes from the Four Corners Power Plant and Navajo Mine? That’s the next multimillion- dollar question the Navajo Nation Council will be asked to decide. Navajo Transitional Energy Co.’s management team members updated the Navajo Nation Council’s Naa’bik’iyati’ Committee Thursday on the pending purchase of BHP Billiton’s Navajo Mine and the urgent need to fund NTEC, a wholly owned limited liability company of the Navajo Nation. “NTEC was established essentially to preserve approximately $40 million in royalties and taxes that come to the Navajo Nation, as well as approximately 800 direct jobs that come from the Four Corners Power Plant and the Navajo Mine,” Steve Gundersen, NTEC management committee chairman, said. “Once we fold in the potential future profits from NTEC, it will be in excess of $1 billion in royalties, taxes and profits through the lease period of 2031.” The Navajo Nation had intended to purchase Navajo Mine from BHP Billiton New Mexico Coal Inc. by July 1. But a decision by Arizona Corporation Commission to re-examine deregulation of the retail electric market stalled Arizona Public Service Co.’s plans to acquire Southern California Edison’s share in Four Corners Power Plant and delayed BHP’s closing on the sale. Name your price One of the big discussions on the table is financing NTEC, Gundersen said. The $40 million in annual revenue from the power plant and mine equates to more than $600 million over a 15 year period. “Would you pay a dollar to preserve that? Would you pay $50 million? Would you pay $100 million?” he asked the committee. “Of course we’re not asking you to pay money in and put it into a black hole. We will be asking the Navajo Nation to ‘invest’in NTEC … and earn a very attractive risk-adjusted rate of return that will be competitive with what Navajo Nation is currently earning inside of its portfolios.” Additionally, there is a mandate in NTEC’s charter to invest at least 10 percent into renewable energy and clean coal technologies. “This one is extremely important because if we can find a cleaner solution for the next era of coal, then that ensures that the Navajo Nation’s coal supply, coal resource, coal assets will be a viable resource for many decades to come and not have the negative environmental impact that it has in prior years,” Gundersen said. According to the U.S. Energy Information Administration and the Department of the Interior, Wyoming dominates sales of coal produced from federal and Indian lands. Annual sales from federal and Indian lands ranged between 458 million and 509 million short tons in fiscal year 2003-2012. Wyoming’s coal sales ranged from 76 percent to 83 percent of the U.S. total. Since FY 2003, fossil fuel sales volumes on federal and Indian lands have dropped 15 percent. In FY 2012, sales from production on Indian lands of crude oil and lease condensate, natural gas plant liquids, natural gas, and coal ranged from 3 percent to 6 percent of the totals from federal lands. Associated risks Although NTEC was set to close the mine deal July 1, on May 23 the Arizona Corporation Commission issued a call to the public to comment on the viability of retail competition. As a result, the Navajo Mine deal was put on hold, with a revised tentative closing date of Dec. 31. In the meantime, NTEC has met five times with the ACC. “I would say that I am cautiously optimistic that they will proceed in a fashion that will allow APS to go forward with their transaction,” Gundersen said. Delegate David Tom asked whether NTEC was spending Navajo money wisely. Gundersen said he would characterize it not as a “spend,” but an “investment.” “This is an excellent deal. However, it is not without its risks,” Gundersen said. While the mine deal is in limbo, Four Corners Units 1-3 are continuing to operate. “The EPA, under the Best Available Retrofit Technology, has extended the deadline for closing those units and retrofitting Units 4 and 5 until December 31. I guess you could say its business as it was before July 1 … Therefore, the mine is continuing to produce at the rate required to produce coal for all five units at this time,” NTEC’s John Grubb said. Crunching numbers NTEC presented its budget information and transaction update to the Budget and Finance Committee on Aug. 6. “They will need some start-up dollars until the revenue stream begins to flow in,” Chairman LoRenzo Bates said Tuesday. This includes approximately $85 million for the purchase of Navajo Mine, in addition to operational dollars. Bates said the Nation could give NTEC a grant with no payback, or loan the money to them, or “they can go out and borrow the money from a third party and either the Nation can collateralize it or they can figure a way to collateralize it.” The total amount needed depends on how much the Nation is willing to invest, he said. “The numbers that we have seen were prior to the ACC. Those numbers would have to be reevaluated. Right now, the bottom line is uncertainty,” Bates said.
Posted on: Wed, 14 Aug 2013 22:17:37 +0000
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