NextEra Energy Resources LLC filed a request with the Federal Energy Regulatory Commission to sell its ownership stake in the Stuttgart solar project in Arkansas, and then lease the facility back from the buyer.
In the March 23 application, the NextEra Energy Inc. subsidiary explained the process for transferring ownership in the the 81-MW solar plant, which began operating last year, to Arkansas County, Ark., a rural area located east of the city of Pine Bluff, Ark. First, NextEra and the county established a fair market value for the Stuttgart assets. Then the county will issue industrial revenue bonds, a form of financing used by municipalities to support local development, equal to the agreed-upon purchase price. Next, the physical assets will be transferred to the county. As the price of the bonds is equal to the prices of the physical assets, no cash is exchanged, NextEra said in the filing. Finally, Arkansas County will lease the physical assets back to NextEra, with payments equal to the principal and interest owed to the solar facility under the bonds.
"It is essentially a cashless transaction to transfer ownership of the project to Arkansas County, when then leases it back to the applicant," NextEra said in the application.
The facility is interconnected to the transmission system operated by the Midcontinent Independent System Operator Inc. and delivers power on a market-based rate tariff to Entergy Corp. subsidiary Entergy Arkansas Inc. under a 20-year power purchase agreement, terminating in June 2038.
Once the transaction is completed, Arkansas County will legally own the project's physical assets, and will not be liable to pay any taxes on the project. Rather, under a payment in lieu of taxes agreement, NextEra will make payments to the county equal to approximately half of the property tax payments over the 25-year tenure of the bonds that would have otherwise been due.
After the bonds mature, the utility can buy back the facility for a "minimal amount." (FERC docket EC18-75)