Boulder City OKs terms of $100 million solar plant lease

By Jean Reid Norman

Wednesday, April 15, 2009 | 11:10 a.m.

The city could realize about $100 million in revenue over 40 years under the terms of an agreement for a solar energy plant that would fill the final available parcel in the city’s energy park in the Eldorado Valley.

The City Council in a 3-1 vote agreed to the major terms of a proposed deal with NextLight Renewable Power LLC, with Councilwoman Linda Strickland voting no and Mayor Roger Tobler absent.

NextLight agreed to pay between $2,050 and $2,200 per acre per year for more than 1,000 acres over the next 40 years. The company would take the remaining property available in the energy zone, but the city is considering adding more of its Eldorado Valley land to the zone. If the contract gets final council approval, NextLight would be the third solar power company to build there.

The city appraised the current value of the parcel at $1,500 per acre, City Manager Vicki Mayes said.

NextLight plans to build a 100 megawatt photovoltaic solar power plant on the site, what company officials believe will be the largest in North America. After a proposed expansion, Sempra Energy, its neighbor in the Eldorado Valley, will be able to produce 58 megawatts. Acciona Energy, the other solar power producer in the Eldorado Valley, has a 64-megawatt capacity.

Councilwoman Andrea Anderson said, “It’s a nice contract for Boulder City.”

If the city chooses the lower annual lease, the company would pay a balloon payment of $4 million at the end of 20 years, when the annual cost would go up to $2,085 per acre. The city would receive another balloon payment of $8 million at the end of 40 years.

The first choice would bring a total of $96 million to the city and the second a total of $102 million. But given what the city could make by investing the higher annual rent, the deals are equal, Finance Director Timothy Inch said.

Councilwoman Linda Strickland and Councilman Travis Chandler said they were concerned that the contract did not take into account inflation over the next 40 years, and Strickland asked NextLight Director of Project Development Michael Hatfield whether there was a way to renegotiate the rate after 20 years.

To do so, he said, would affect the current lease payments that the company has agreed to.

The company would see reopened negotiations in 20 years as a risk and would want the cost of that risk accounted for in the overall contract, he said.

Strickland said after voting against the terms that she thought the company ought to be able to make up any renegotiated cost in the lease by charging its customers more for the power.

“I think if they knew where we were going with a safety net provision, they would be able to negotiate around that,” she said. “But we are taking the terms they use for their power customers and tailoring our lease to it. It’s the tail wagging the dog.”

Chandler said he was concerned about the future as well, but he agreed to the terms as a matter of good faith. The City Council voted in January to negotiate with NextLight and the company adhered to the terms of the city’s requests.

“In the future, we need to write our (requests for proposals) to include the consumer price index in cost projections,” he said.

Several representatives of labor unions also showed up to ask the council to require NextLight to use local labor, preferably union labor, in constructing and maintaining the project. Local trade unions objected when Acciona opened Nevada Solar One, a 64-megawatt solar plant, in 2007 after using labor from outside Nevada and much of it from outside the United States.

“A lot of people say it’s too early to discuss who will build the project,” said Greg Esposito, business representative of the Plumbers, Pipefitters and HVACR Technicians Local 525. “It’s never too early. There is always room to ask the question, ‘Will the people you employ be residents of Boulder City or Southern Nevada, and will they be the best trained?’”

The union representatives said they were disappointed that the council did not directly address the labor concerns in its instructions for the next stage of negotiations.

“It sounded nice, but they never directed staff to implement the language for labor,” said Edward Gering, assistant business manager for the International Brotherhood of Electrical Workers Local 357.