IRRRB to seek loan restructure for Excelsior Energy

So, in case you’ve forgotten, Excelsior Energy, the beleaguered company forged by energy industry lobbyists with Iron Range ties more than a decade ago, still exists. It’s out of money. Its efforts to mandate a customer using political connections to finance the construction of a new power plant in Itasca County have all failed. But Excelsior still owes more than $9 million to the people of the Iron Range in the way of loans from the Iron Range Resources and Rehabilitation Board — the very loans that gave the company its start.

On Monday, the IRRRB will consider a proposal to once again restructure the deal with Excelsior. Key to the deal is the dramatic reduction of the cash payments on the interest (something we predicted would happen) in exchange for collateral on the loan. Essentially, under this new agreement Excelsior would have until 2019 to build the plant or sell the project to pay the interest and principle in one lump sum. If they don’t, the IRRRB would gain control of the site, permits and any other assets of the company. Excelsior would retain 25 percent of the proceeds of the IRRRB’s sale of those permits and assets.

Now, the IRRRB of 2013 is in quite a pickle. There are no good options unless the company builds. Well, by now it should be crystal clear that Excelsior Energy is never going to build or operate a power plant on the Iron Range. What it does have are these permits that have real value in the energy industry. The project, such as it is, could be sold for a price.

Minnesota Power has indicated it has some interest in natural gas energy production in the future, after 2020. So the next few years will be a waiting game — Excelsior hoping that the value of its permits goes up, for a better price, before this new 2019 deadline for a deal that pays off their loans and brings home a small fortune. The IRRRB wants its money back, and short of that is now auguring for a chance to sell those permits for something, anything, if Excelsior can’t.

But what’s really wrong here is the utter failures of the past. Commissioner Tony Sertich indicates a desire to move forward from that past, but you can’t argue with the sheer stupidity of what was done ten years ago. That now, in 2013, we have to negotiate for collateral on these loans is ridiculous. Excelsior’s small management team will walk away clean no matter what happens, and could yet draw a huge profit from thin air.

I understand that the company will come out on Monday and say with a straight face they plan to build a power plant. Why should we believe them? We must learn from this. Those in local politics and media who continue to wallow in ignorance and cronyism  on this matter should not be trusted with the future of the Iron Range.

I expect the new deal will clear the board on Monday. And then what? How about we do better from now on. Let’s start there.

UPDATE: I wrote this before reading this story by the Duluth News Tribune’s John Myers, which explains the deal with more detail.

The full memo from Commissioner Sertich is below the jump (click on headline).