Landowners With Turbines Pay Attention — Repowers May Affect Revenue

An October 7, 2016 Wall Street Journal article notes project owners are using the recent Production Tax Credit (PTC) extension to repower (generally, replace turbines at) existing projects.

These repowers may mean unexpected changes to landowners with turbines on their property, particularly those landowners paid under a royalty structure (and really also for landowners paid on a per-turbine or per-megawatt basis).

For landowners paid under a royalty structure, the overall effect of a repower could be positive, with per-turbine production increasing, yielding more revenue. At the same time, landowners should expect repowers will mean fewer larger turbines in the place of more smaller turbines, creating the possibility the number of installed megawatts on a landowner’s property will decrease. And a decrease in installed megawatts will have a negative effect on revenue.

With projects to be repowered in the coming years based on the recent PTC extension, landowners now or near-term anticipating any transactions (estate work, property sale/purchase, wind rights sale, …) based on turbine lease revenue should determine whether the pertinent project is likely to be repowered. An owner may not want to price his revenue stream disregarding production that will be improved, and a buyer will not want to pay for production that may be eliminated.

LeaseGen has developed strategies for addressing these issues and would be happy to answer your or clients’ questions on these topics.

http://www.wsj.com/articles/u-s-tax-credit-powers-wind-farm-upgrades-1475884313

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