Heartland Energy Group Inc. (HEG) and Interstate Power and Light (IPL) applied Nov. 29 to the Federal Energy Regulatory Commission for approval of a transaction in which HEG will sell and transfer to IPL its membership interest in Franklin County Holdings LLC (FCH) in order to obtain Franklin County Wind LLC’s 99-MW wind farm in Franklin County, Iowa.
IPL, a regulated utility, and HEG, an independent power producer, are both subsidiaries of Alliant Energy (NYSE: LNT). Following completion of the transaction, IPL will add Franklin County to its fleet of generating facilities. The transaction will not have any adverse effect on competition in the Midcontinent Independent System Operator region or any other region, the application noted.
HEG is a non-utility subsidiary of Alliant Energy Resources LLC (AER). HEG currently owns a 100% membership interest in Franklin County Holdings, which owns a 100% ownership interest in Franklin County Wind, the owner and operator of the Franklin County wind facility. The facilities and equipment of Franklin County also include generator interconnection facilities, control systems, and other appurtenant facilities and equipment. Franklin County was placed in service in 2012.
IPL will acquire direct ownership of Franklin County from HEG, and incorporate the facility into IPL’s fleet of generating facilities. In due course and as part of its post-transaction integration process, FCH and Franklin County Wind LLC will be dissolved and Franklin County Wind LLC’s market-based rate authority will be terminated. The transaction will close after receipt of all necessary regulatory approvals.
Alliant Energy had said in its Nov. 3 earnings report that it concluded, as of Sept. 30, that it was probable the Franklin County wind farm will be transferred to Interstate Power and Light. An impairment analysis was performed to evaluate the value of the assets and a reasonable estimate of the amount of costs associated with the Franklin County wind farm that would be allowed for recovery for IPL’s electric rate-making purposes. Based on various analyses, including discounted cash flows projected from the Franklin County wind farm, recently executed power purchase agreements associated with wind generating facilities located near the Franklin County wind farm and the cost of new wind farms identified through IPL’s proposed wind expansion, the current value of the Franklin County wind farm assets was determined to be approximately $33 million, subject to working capital adjustments. As a result, the carrying amount of the Franklin County wind farm was reduced to its current value resulting in non-cash pre-tax asset valuation charges of $86 million in the third quarter of 2016.
The final amount to be recovered for IPL’s electric rate-making purposes will be determined by the Iowa Utilities Board as part of IPL’s 2016 test year Iowa retail electric rate case, anticipated to be filed in the second quarter of 2017, and therefore the final asset valuation charge is subject to change. The transfer of the Franklin County wind farm to IPL is separate from IPL’s request recently approved by the Iowa Utilities Board to own and operate up to 500 MW of additional wind generation, Alliant noted.