Wind Energy with Compressed Air Energy Storage
Readers may recall discussion of an investment opportunity in the form of a project deploying wind energy integrated with compressed air energy storage (CAES); we’ve been working on it for some time now. Good news: a large investor group has offered $40 million in development funding to get it going—and to supply the $1 billion needed for project construction.
The only unmet requirement is obtaining $2.2 million in cash or collateral (no cash has to move) to get that development funding, which will be needed for somewhere between 30 and 45 days while the deal paperwork is completed and the first funding tranche becomes available. At that time, $2.2 million is repaid with a handsome fee for helping out. If someone provides cash, they will receive $200,000; if they provide collateral, the figure is $100,000.
My colleague asks: Craig, do you think you can find someone to provide the collateral or cash and make the easiest hundred thousand dollars they ever made? The risk is as low as it can be. I will allow a call with our investor to any of your contacts to establish confidence for them, as long as you can assure me that they’re both well qualified and seriously interested.
Further good news:
• There has been an important advancement in CAES technology in terms of heating the air prior to its discharge from the cavern. The project will make use of combusted hydrogen, created by the electrolysis of water, powered by some of the off-peak wind energy. In the part of the country where the project is sited, there are power purchase agreements for energy in the daytime at 1.3 cents per KWh, and even less at night. It’s ridiculously inexpensive.
• FERC (the U.S. Federal Regulatory Energy Commission) recently put into place a rule (Order No. 845) that forces anyone who buys or sells electrical power to pay for any storage involved in the handling of that energy. This is huge for developers like my colleague.
If anyone out there is interested, please contact me immediately.
Craig,
Here’s the problem. Without looking at the project and completing the necessary due diligence, my first questions( and I think the questions any prudent investor should ask) are the following:
A) It’s very odd for an experienced investor who can commit $40 million in seed capital and over $1 billion to a project not to fund the initial ” paperwork”.
The question must be asked is why?
B) The sum of $2.2 million in cash or collateral is very small, mom and pop type money (the price of the average house in a good area). Why can’t the founders, or proposers find that sort of money?
C) Craig, if you have such faith in the deal, and the financial viability, why don’t you put up the money yourself ? Surely you would enjoy such a bountiful return ?
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Please excuse my cynical skepticism. For all I know your colleagues may be absolutely sincere and onto a winner. No doubt there may be a simple and logical explanation.
But to me, it just doesn’t add up.
Marcopolo and I don’t see eye to eye very often, and indeed I have very little respect for him… and I assume the feeling is mutual.
But he correctly and concisely put forth my exact thoughts when I read this. It sounds pretty scammy when investors are willing to bring a billion to the table but are asking for 2.2 million from outside donations.
Also, I have considerable doubts about the viability of CAES at large, which we have discussed at length.
I obviously don’t see this as scammy. I know this guy very well, and I’ve seen this requirement in other deals, i.e., that the developers have liquidity.
And yes, I’m aware of your doubts about CAES generally.