Dispute over paying for Minnesota wind turbines generates lawsuit
By Tom Steward/Watchdog Minnesota Bureau
ST. PAUL, Minn.— The backers of a southeastern Minnesota wind farm touted as a model for other communities face a $3.3-million lawsuit in U.S. District Court filed by the South Korean company that manufactured and financed the turbines for the Winona County Wind project.
But legal documents filed on behalf of Juhl Energy Development Inc., three related companies and six individuals named in the lawsuit calls for the case to be dismissed and denies a breach of contract, fraud and other allegations levied by the turbine manufacturer, Unison.
The long-time Minnesota-based renewable energy development and management company asked the court to order arbitration as the company contends the legal agreements stipulate.
“When I use the term frivolous that’s a nice term in this case,” said John Mitola, president of Juhl Energy and a defendant in the lawsuit. “Unless you are unable to understand the English language at all, it would be very hard to find any claims here. Given our (Juhl’s) reputation and our 25 years of success in the wind business, it’s an insult to have a suit go forward to bully someone out of a business deal they don’t like.”
The lawsuit marks the latest chapter in a renewable-energy epic that might appear out of proportion to the 1.5 megawatts of power produced by the two-turbine wind farm. It creates enough energy to power about 375 homes in this rural southeastern Minnesota area.
READ THE JUHL DEVELOPMENT BRIEF
“We’re not getting anywhere in terms of trying to resolve things,” said Boyoon Choi, a Seattle attorney who represents Unison. “This was our last resort and, quite frankly, I’m prepared to go to court, and I think it’s just a slam dunk case for us.”
The project started out in 2005 as a “public-private partnership” generated by the Winona County Economic Development Authority. After spending five years and tens of thousands of taxpayer dollars on the proposal, however, financing remained elusive for the WCEDA.
“It was a tangled web from the start,” said Marcia Ward, a Winona County commissioner who opposed county involvement. “I’m not against wind, I was just against the way this whole thing got set up and structured. We did spend some taxpayer funds in doing some research and wind mapping and things like that.”
Marcia Ward says taxpayers spent tens of thousands of dollars to study the project. Winona
Turbine manufacturer Unison contends it loaned Juhl Energy Development Inc. nearly $2.6 million to purchase two turbines in 2010 on the understanding that the wind farm would remain under the long-term ownership of WCEDA with Juhl serving as contractor, according to court documents.
Within weeks of signing the turbine deal, however, the lawsuit alleges ownership changed hands in a complicated series of legal transactions involving Juhl subsidiaries, executives and the firm’s attorney and his wife. Ultimately, the project was developed and built by Juhl Energy Development, bolstered by a $1.4 million federal stimulus grant to cover 30 percent of construction costs.
The turbine manufacturer alleges it belatedly discovered that WCEDA does not own the operation and has not received “one penny” from the owner and operator since the project went on the grid in late 2011. Adding to the confusion, the Midwest Renewable Energy Tracking System still lists Winona County as the owner.
“They were supposed to pay as soon as they were able to seek refinancing,” said Choi. “That’s where the ownership of the government is critical from a lender’s perspective. If the government owns the property, then they can obviously refinance it and pay it. So that’s what we were relying on and that never happened because the government didn’t own it.”
Juhl Energy has been at the forefront of promoting community-based wind farms, developing and overseeing 21 wind-power operations in the Midwest. But technical problems related to winter conditions have prevented the Winona County wind project from generating at full capacity, according to the company’s top official.
“The contract is clear that their loan gets repaid via cash flow generated by the turbines,” Mitola said. “In order to produce cash flow, the turbines have to produce in accordance with the projections that they provided us. And that has, unfortunately, not been the case.”
Choi called foul.
“I just think they’re frivolously raising irrelevant issues,” said Choi. “Juhl not only developed it and took the project from the government but hired itself as the operator of the turbines.”
A pre-trial conference will be held on Feb. 20 in US District Court in St. Paul. While Winona County plays no part in the legal proceedings, Ward, the county commissioner, said the case already reflects poorly on the county’s involvement.
“It puts kind of a tainted name to Winona County, which is disturbing,” she said.
Contact Tom Steward at tsteward@watchdog.org.
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