This article was on the front page of the Saint Paul Pioneer Press Business section on July 7. Wind is already a big business in southwest Minnesota, but a manufacturing facility with a 100 quality jobs would be a big deal.

Posted on Thu, Jul. 07, 2005
http://www.twincities.com/mld/pioneerpress/business/12070156.htm

A deal in the wind?
Pipestone hopes India-based firm will choose it as site of rotor plant
BY TIM HUBER
Pioneer Press

The city of Pipestone and state officials have rolled out the red carpet to attract an India-based wind turbine manufacturer to southwestern Minnesota.

Suzlon Wind Energy has yet to say whether it will build a factory to manufacture rotors in Pipestone, which is about 200 miles southwest of St. Paul.

If it does decide to build in Pipestone, the company would receive an array of state and local incentives: no taxes for up to a dozen years, a 35-acre tract of land, $1 million in road, sewer and other improvements, and help training workers.

The payoff sounds good, too: 100 or more local jobs paying $15 an hour, an influx of workers and families in need of houses and places in local schools, and a factory nearby to provide equipment for the fast-multiplying energy-generating windmills on the area's Buffalo Ridge.

But the project is not without risk.

Suzlon is well-established in India and has heavyweight investors such as Citigroup Inc., but its turbines have not sold well in the United States, even during a recent surge in demand for wind-power equipment.

Moreover, the state's biggest buyer of wind-generated electricity, Minneapolis-based Xcel Energy, prefers more-established manufacturers such as Vestas Wind Systems, a Danish company that has 34 percent of the $8 billion world market.

Though Xcel merely buys wind power, the company does influence the equipment choices of wind developers.

Suzlon declined to comment. The company is expecting to file for an initial public offering in India, through which it intends to raise up to $230 million, according to Reuters. Reuters also reported that the company has annual sales ranging from $160 million to $183 million. The company has subsidiaries in the Netherlands and Germany.

Supporters of the idea of bringing Suzlon to Pipestone say a Minnesota factory could be just what Suzlon needs to elbow its way into the U.S. market.

The lack of a local presence has been a stumbling block with lenders and investors who finance wind power projects, said Dan Juhl, owner of DanMar & Associates, a wind farm development company in Woodstock, a small town just east of Pipestone.

"They want to see some presence in the United States and a commitment to the marketplace," Juhl said.

Thus far, Suzlon has established little more than a toehold in the U.S. market, which has ranged in value from $500 million to more than $1 billion in recent years.

It has 24 turbines installed on a dozen different projects, Juhl said. Other turbines are far more dominant. Data from the American Wind Energy Association shows General Electric, Vestas and other manufacturers dwarf Suzlon. Vestas, for instance, has more than 100 turbines in use in the state. Another 20 Suzlon turbines are en route to Minnesota from the company's manufacturing plant in India, Juhl said. But those turbines are coming to Minnesota almost by accident.

Xcel Energy agreed to accept the Suzlon equipment as a substitute for another manufacturer's equipment, said Price Hatcher, Xcel's renewable energy purchases manager. Typically, Xcel prefers familiar equipment and developers when it chooses between wind farms bidding for long-term power purchase contracts.

For instance, even though Vestas is well-known to Xcel, the company limited a project using a new Vestas turbine that has been used in Europe to just one unit in Texas. In another recent instance, Xcel agreed to a contract with a developer using a new turbine manufacturer, but required that 80 percent of the equipment come from an established firm.

"We're not against new technology, but we're certainly not going to take on a project without doing due diligence," Hatcher said. "If ABC wind turbine company came in and nobody every heard of them, you might look a little."

As for Suzlon, Hatcher knows a bit about the company, but said the order of turbines on the way to the state was allowed because of a shortage of equipment from other manufacturers.

Though the shortage of supply suggests room for more players, big buyers such as Xcel prefer manufacturers that they know. A federal tax credit for wind energy production was extended recently through the end of this year, creating a surge in demand for turbines.

Pipestone City Administrator Jeff Jones, who has spent 18 months wooing the company, said that the tax credit, as well as the presence of Juhl's company, dozens of other windmill operations, high fuel prices and a new state incentive for small wind farm producers should make Suzlon a success if it chooses to locate in Pipestone.

"I think a number of things are in place to make it very much a positive outlook," Jones said. Pipestone certainly would benefit. If Suzlon builds there, it would quickly become one of the area's largest employers, behind boat maker Bayliner Marine, a veterinary company, the school district, a meat processor and the local hospital. The Pipestone area's unemployment rate is around 4.2 percent, a bit lower than the state overall.

The state Department of Employment and Economic Development also has been pushing hard to woo Suzlon. Officials from the agency and the city met with a Suzlon delegation May 10, a get-together that DEED director of business development Mark Lofthus called "productive." Lofthus said Suzlon seems to be exactly the type of business Gov. Tim Pawlenty's administration is trying to attract with its JOBZ program, which exempts new and expanding businesses from taxes for a set period if they locate in a specific zone.

"I think it would be hard to argue otherwise," Lofthus said. "Based on the growing wind industry out there, the reason that they would be locating in Minnesota is because they see potential to be able to sell blades." The state, at least, would be protected if Suzlon did build the plant and then faltered.

"They're obligated to pay back any tax benefits," Lofthus said.

More information

How many wind turbines are operating in Minnesota (besides those owned and operated by private citizens for their personal use)? Take a look at the American Wind Energy Association's Web site: http://www.awea.org/projects/minnesota.html.

Tim Huber can be reached at thuber@pioneerpress.com or 651-228-5580.