More allegations fly over wind farm near Blue Earth

  • Article by: DAVID SHAFFER , Star Tribune
  • Updated: October 28, 2012 - 7:16 PM

A Minnesota contractor has accused an Idaho wind farm developer of seeking a "dubious" $2.6 million fee.

Contractor Fagen Inc. leveled new allegations against an Idaho-based wind developer Friday and asked a federal judge for an expedited ruling on who owns the nearly completed Big Blue Wind Farm in southwestern Minnesota.

Fagen, a construction company based in Granite Falls, Minn., alleged that the project's financially struggling original developer, Exergy Development Group of Idaho, has tried to extract a "dubious and unearned" $2.6 million fee from the contractor.

The motion in U.S. District Court disclosed that Fagen has invested more than $25 million in the wind farm west of the city of Blue Earth -- and it fears all could be lost if the ownership issue isn't settled.

Fagen contends that it is the legal owner of the project under a February agreement with Exergy, which wasn't able to repay millions that the contractor advanced to help finance the project.

The project must be finished and generating electricity for its contracted buyer, Xcel Energy Inc., by Dec. 31 or it loses a $22 million federal wind power subsidy, according to court papers. The project's 18 turbines would generate enough power for 20,000 homes.

But Exergy and its CEO, James Carkulis, have been "muddying the waters" with Xcel over who owns the project, causing "serious confusion" with the Minneapolis-based utility, the motion said.

If the confusion caused Xcel to not purchase the power "then Fagen will be left with a wind farm without a utility to buy the power, and the project will be essentially worthless," the court papers say.

Fagen alleged that Exergy and Carkulis "intend to hold the project hostage in this manner until this unjustified 'developer's fee' is paid." Xcel has said a judge may have to decide who's in charge.

A hearing is set for Nov. 13 before Chief U.S. District Judge Michael Davis in Minneapolis.

An Exergy spokesman offered this statement Saturday:

Fagen's "assertions concerning a supposed 'developer's fee' are simply incorrect: In the course ... building the $80 million Big Blue wind farm project, Exergy engaged a number of vendors ... . At Fagen's request, when it took control of the project, Exergy delivered project documents, including invoices for approximately $21 million of preconstruction costs. ... Those invoices include an Exergy invoice for monthly overhead expenses spent during six years of developing the project. Exergy's overhead charge is simply one of the many costs that wind farm investors and lenders commonly pay the developer to reimburse out-of-pocket preconstruction costs. It does not include any profit factor. ... Exergy submitted all of these invoices to Fagen with the expectation that, having taken control of the project, Fagen would pay them ... as is customary in the wind energy industry."

An attorney for Fagen was not immediately available.

Exergy also was sued in August by AES New Creek Wind in Idaho for failure to pay more than $35 million for wind turbines to be installed in Idaho.

David Shaffer • 612-673-7090

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