Kiger's Notebook

Deal to buy ex-People's Energy Co-op building in works

People's Energy Cooperative moved out of Rochester and into a newly built complex outside of Oronoco last spring.

Since then, its 42-year-old headquarters at 3935 U.S. 14 E. has stood empty.

Now a deal is in the works s a local buyer is stepping up to make an offer on the former People's complex. It includes a 13,000-square-foot office building and a 40,500-square-foot warehouse/shop building.

Hamilton Real Estate had listed the property at $2.8 million. I believe the offer in the works is for $2.4 million.

Look for all of the details on this to come out in the PB.

Moody's downgrades RPU bond rating

Evidently, not everyone is happy when RPU doesn't raise its utility rate.

Last week Moody's Investors Service downgraded Rochester's electric utility bond rating to Aa3, down from Aa2.

Here's part of the explanation of why RPU's grade went down:

The rating action reflects the lower credit metrics over the last few years, which is at least partly due to the fact that there have been no rate increases in the last few years and none are expected in 2013. There have also been declining sales of off-system power.

The rating action also reflects the heavy reliance on one generation or fuel source; namely, Southern Minnesota Municipal Power Agency's (SMMPA, rated A1) 41% ownership of the Sherco 3 coal-fired plant, which remains out of service due to a failure during re-start in November 2011 following a routine shut down for maintenance.

Having said that, the Aa3 rating reflects the benefits of a long-term take and pay contract with SMMPA under which SMMPA has agreed to sell and deliver electric power to Rochester, and Rochester has agreed to take and pay for electric power as needed for the operation of its system up to 216MWs. The contract expires in 2030.

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The rating also reflects Rochester's local rate setting authority without state oversight. Rates are set at levels necessary to cover operating and maintenance costs and 120% of debt service. Rochester also benefits from a strong service area economy.

 

On the flip side, Moody's sees a lot of positives at RPU.

*RPU is a well-established enterprise with a long, stable operating history and good liquidity.

 *RPU's service area is economically sound with a highly educated workforce and low unemployment.

 *The likelihood of deregulation in Minnesota is diminished. RPU has exclusive control over its service territory.

 *RPU has local rate-setting autonomy (City Council approval is required), with no state oversight.

 RPU also has a few challenges, according to Moody's.

*RPU's take-and-pay contract with Southern Minnesota Municipal Power Agency (SMMPA, rated A1) accounts for majority of its supply and limits its overall fuel diversity. There are other sources of power in RPU's owned generation: the 105MW coal-fired Silver Lake Plant (set for decommissioning in late 2015), the 80MW gas-fired Cascade Creek Plant and two hydro units as well as diesel generation for peaking purposes. However, most of the power source comes from the SMMPA contract for 216MWs.

* Although RPU as local rate-setting authority, RPU has not raised rates its rates for several years, at least partly due to concerns about competitiveness. This has resulted in some decline in the credit metrics over the last few years.

*RPU has concentration risk; its top 10 customers represent 35.1% of the total kWh sales in 2011 and 32.2% of revenues in 2011.

*Transmission constraints are forecast for 2014 and beyond, which RPU plans to address through participation in CapX 2020, a regional effort to build transmission lines in Minnesota.

Roch. family cruising along without gasoline

Here's some from the two stories I had today about the Camerons who drive a Honda Civic that runs on compressed natural gas instead of gasoline.

This is a follow-up to Kwik Trip's announcement that it have a CNG pump at its new store on Rochester's 19th Street Northwest.

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At first glance, the Cameron family's 2012 Honda Civic looks the same as any other Civic.

However, this car has never used a single drop of gasoline and is the only one of its kind in Rochester.

A little logo  — "CNG"  — on the trunk tells the story. The car that Karen Cameron drives to work and to take her seventh-grade daughter to school events runs on compressed national gas.

It's the only factory-built model available in the U.S., though a wide selection of large trucks, vans and buses are in made by Ford, General Motors and even McNeilus Trucks in Dodge Center.

Compressed natural gas costs about half of what drivers are paying for a comparable gallon of gasoline. It burns much cleaner, releasing only about a tenth of the carbon emissions into the air that gasoline or diesel does.

CNG is also plentiful in the United States, with a supply that is estimated to last more than 100 years without importing any from other countries.

Those are the aspects that excite Graham Cameron and his son, Ian Cameron, who are both enthusiastic proponents of alternate fuels and technology like geothermal heat pumps and solar power systems.

"But my wife is a different story. She doesn't get into this like Ian and I do," says Graham Cameron. "I'm surprised by how quickly she accepted it. The bottom line is that she loves it."

Karen Cameron acknowledges that buying the car in April wasn't really something she was excited about.

"I was a little bit of a naysayer because of the extra up front costs" — about $6,000 more than a standard Civic plus about $6,000 for the garage fueling system installed by K&S Heating, she says.

Then she started the driving the car. It doesn't feel any different, and it is much quieter than its more plentiful gasoline-burning siblings. It goes 250 miles on a tank of CNG, which the Camerons fill by locking on a nozzle and letting it pump overnight.

Karen Cameron has driven 8,000 to 9,000 miles in the past six months without once filling at gasoline pumps, although she did use a CNG pump in the Twin Cities once.

"It has been great," she says.

Energy co-op flips switch on new digs

Here's some from my piece on the changes at People's Cooperative:

A local energy provider is ready to flip the switch on a new $9 million facility, along with a new name.

On Friday, People's Cooperative will close its 41-year-old headquarters at 3935 U.S. 14 E. in Rochester.

It will then re-open Monday in the brand-new complex at the edge of Oronoco along U.S. 52. However, the sign out front says People's Energy Cooperative.

"We thought this would be a good time to change our name, so it better reflects what we do," says People's president and CEO, Elaine J. Garry.

Adding "Energy" to its name is only one part of the rural power cooperative's rebirth.

Walking on new tile through the freshly painted hallways, Garry explained what drove the move and how this new 74,000-square-foot facility will better serve the cooperative's 15,000 members.

"It is state-of-the-art and equipped with up-to-date technology," she said. "It offers us a lot of possibilities."
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The new location offers People's financial opportunities with 10 acres of commercially zoned land and a 26 acre-industrial park called Oronoco Crossings. People's is also marketing its complex on U.S. 14 East for sale.

Tim Clawson, who manages economic development for the cooperative, says there has been interest in both areas, particularly from possible convenience stores or gas stations on U.S. 52.

"We're really pleased with the reaction," he says. "There is no convenience store on the right (west) side of the highway from St. Paul all the way to Rochester's 41st Street."