American presidential hopeful Hillary Rodham Clinton was in Nevada this month making a stump speech to a rural audience in the desert west of Las Vegas

With US elections more than a year away, campaigns are already in full swing and contenders are feeling out voters - preaching on the issues which might underline the public's mood.

In a traditionally conservative part of Nevada, the democratic former First Lady railed against no-bid contracts and zeroed in on energy independence - declaring 'we could have solar power all the way from Las Vegas to Pahrump.'

Las Vegas to Pahrump is a 60-odd mile stretch of mountain and desert along Nevada state highway 160. While that might be a challenge for developers, it's not far off the mark.

There is a renewed interest in the US to develop large parabolic trough thermal solar plants and last month's financial close of the 64MW Nevada Solar One power project in Boulder City may be just the beginning.

Nevada Solar One: the project

Nevada Solar One [Transactions Database] covers 400 acres of desert south east of Las Vegas with an array of 19,300 parabolic trough receivers - large curved mirrors that concentrate heat from the sun on a closed-loop tube filled with synthetic oil.

Absorbing the intensity of the sun's energy, the oil produces high-temperature steam via a heat exchanger which drives a turbine to generate electricity.

The US$309 million project - built by Spain's Acciona Energía - was completed earlier this summer (IJ News 4 June 2007) and is the largest parabolic plant to come online in 16 years.

The facility employs technology designed and produced by Israel's Solel Solar Systems as well as the German firm Schott. The power block uses a 70MW reheat steam turbine produced by Siemens. It also has a small natural gas heater that is mostly used for freeze protection.

Unlike Spain's 50MW AndaSol projects [case study], Nevada Solar One does not employ a storage system to allow it to operate once the sun has set. Acciona's system is configured to meet summer noon peak loads - when power is most expensive. It is a 'solar only' system with 30 minutes of thermal storage used to minimize the effects of transients.

First thermal solar leveraged lease financing

Nevada Solar One was the first leveraged lease financing of a concentrated solar plant in the US. The transaction closed last month with US$138 million in equity and US$133 million in debt from three European banks.

The debt:equity was 49:51 for the lease SPV.

The project also benefited from local incentives of about US$15 million - including US$9 million in property-tax abatement.

Tax equity investors include:

• JP Morgan Capital - US$33.33 million
• Northern Trust - US$33.33 million
• Wells Fargo - US$33.33 million

Acciona contributed about US$30 million in equity plus US$7 million in junior debt, for an adjusted debt:equity ratio of 43:57.

Capstar Partners and JP Morgan Capital co-led equity syndication.

The debt was arranged by joint MLAs:

• BBVA
• Caixa Geral Depositos
• Grupo Santander

The banks kicked in about US$44 million each in senior debt which was priced as follows:

• Libor + 80bp during performance guarantee period
• Libor + 100bp until year 10
• Libor + 115bp from year 11 to 15
• Libor + 125bp thereafter

Debt syndication is expected to follow in September.

Advisers who worked on the transaction include:

• Dewey Ballantine (legal - tax equity investors)
• Foley & Lardner (legal - sponsor)
• Jones Day (legal - banks)
• Mesirow Financial (financial - sponsor)
• RW Beck (technical)

Lessons from Luz International

Nevada Solar One was initially developed in 2003 by the US Department of Energy, National Renewable Energy Laboratory and Solargenix Energy - now called Acciona Solar Power.

Last year, Acciona purchased a 55 per cent stake in Solargenix and now controls 100 per cent of the parabolic trough project (IJ News 14 February 2006).

Groundbreaking took place just after Acciona came on board and the plant is currently the largest non-hydro renewable power project operating in Nevada.

Essentially, Nevada Solar One picks up where Luz International left off at Kramer Junction in California. From 1984 to 1990, Luz developed a range of Solar Electricity Generating Systems - between 13 and 80MW - using the same parabolic trough technology.

However, Luz relied heavily on tax credits and eventually went bankrupt while constructing its tenth plant when energy prices - led by oil & gas - plunged in the mid-1990s. Many of its projects are now owned by FPL Energy.

Nevada Solar One was built on balance sheet and financed after construction was complete - a condition precedent. It is an independent power project which relies on a 30 per cent federal investment tax credit and the Nevada renewable portfolio standard - which requires utilities to get 15 per cent of generation from renewable resources and a total of 5 per cent from solar by 2015.

Key to financing: 20-year PPA

The project also has long-term power purchase agreement with local utilities Nevada Power and Sierra Pacific. The 20-year PPA was basis for the financing according to one of the bankers who worked on the deal. It is unique for the US and was necessary to mitigate payments from the Acciona Solar Power SPV through a trust company.

Early on in the financing, Solargenix had difficulty convincing lenders that the parabolic trough technology was commercially viable. Additional credit issues with Sierra Pacific Resources - the parent company of utilities Nevada Power and Sierra Pacific - also caused some concern.

In the end, former Nevada governor Kenny Guinn stepped in and set up a task force to amend power-purchase statutes. Under the framework, Sierra Pacific revenues attributable to renewable energy sources would be funneled into a trust company guaranteeing Nevada Solar One's payment. In return, the trust will rent the asset from Acciona.

With the PPA sorted, lenders and equity partners began making commitments.

By partnering with tax equity investors, Acciona was also able to capitalize on the US production tax credit.

The PTC results in a reduction in federal tax and benefits companies with high revenue in the US. Tax investors are often brought in by foreign wind developers to secure equity for US wind farms. On a solar project, the tax equity works much the same, with the slight difference that investors benefit based on project capacity instead of production.

US thermal solar: a new dawn?

While Hillary Clinton was trekking around the south western desert - local officials from Victorville, California near Kramer Junction were in Europe seeking renewable energy advice.

The group stopped off in Seville to tour Abengoa subsidiary Solucar's research and design facility.

The city planners have already proposed a 563MW gas hybrid project with a 50MW thermal solar plant called Victorville 2 (IJ News 13 April 2007).

Other big projects are in the works as well.

FPL Energy is believed to have expansion plans for its Luz International assets and last month PG&E made a commitment to purchase 553MW of thermal solar power from the Mojave Solar Park being developed by Solel Solar Systems (IJ News 26 July 2007).

So whatever the vision of a Democratic frontrunner in an election year, the US south west seems ripe for thermal energy harvested from the sun.

Clinton might imagine a solar stretch from Vegas to Pahrump - or maybe even south down Interstate 15 past Barstow into Victorville - but such a vision requires strong commitments including long-term PPAs and a healthy extension of the PTC.

It's going to take a lot of robust political support and confidence in the technology to get these projects off the ground. Nevada Solar One is a sign that things are moving in the right direction.

However, avoiding a graveyard of parabolic troughs further down the line is harder to predict - but that's Vegas. The road out of town is strewn with singed pockets and good intentions.

The project at a glance