Frequently Asked Questions from Landowners
Topic Index (click to navigate):
1) Tax Questions
2) Financial Questions
3) Real Estate Questions
4) Process Questions
5) Wind Farm Operator Relations Questions
6) Technical Questions
Tax Questions:
Do I pay more taxes by taking a lump-sum payment?
Right now, you probably pay ordinary income tax on your royalty payments. When you convert your lease/easement, in many cases the lump sum payment may be eligible for the lower capital gains tax rate. AWCC is not a tax advisor and strongly recommends that you consult your tax professional.
Can a lump sum payment be tax deferred?
It may be. If you use the money, or a portion of the money, received to reinvest in a similar "Like-Kind" investment, our payment might qualify as a Like-Kind Exchange, or 1031 Exchange, and be tax-deferred. AWCC is not a licensed tax professional and recommends that you consult your tax advisor or contact 1031 Exchange Corporation at (800) 685-2529 or visit www.1031exchangecorp.com.
If your questions aren't answered here, call 1-877-669-2922, or email us at: info@americanwindcapital.com
Financial Questions:
How much will I get for my lease or easement?
We can determine the current cash value and the expected payments you will receive once we examine your lease or easement and review any payments you have collected.
- First we model your actual lease or easement terms.
- Then we evaluate the impact of the many risk factors related to your payment:
- Future wind forecast (how many megawatt-hours do we believe will be produced in an average wind year?).
- The Power Purchase Agreement price (if there is a Power Purchase Agreement).
- The open market (“merchant”) price for the power not sold under the PPA.
- The amount of time each year that the wind turbines will operate, on average, is based upon mechanical availability.
- The amount of time each year that the windfarm will not operate due to the inability to get on the power grid (“curtailment”).
- The credit risk inherent in the windfarm project.
Where does AWCC get all the information we use to give you a price?
The most important source of our information is provided by you – your statements and your contract. We also hire third party consultants to provide their views on future wind, curtailment and power prices. Finally, because we have worked with so many landowners, we have extensive data on many operating projects.
Do we offer different people different prices?
Our approach to valuing leases is the same in all cases. However, since project characteristics and risks vary widely, our prices also vary to reflect those risks.
Where does American Wind Capital get the money to convert my lease/easement?
We work with a team of world-class investors (Barclays Natural Resource Investments and NGP Energy Technology Partners) and we have sufficient cash on hand to close transactions within 30 days.
If your questions aren't answered here, call 1-877-669-2922, or email us at: info@americanwindcapital.com
Real Estate Questions:
If I convert my lease/easement, do I still own the land?
Yes. You are transferring only the easement and lease payment rights. You retain ownership and all use of the land.
If I convert my lease/easement, can I still sell my property?
Yes. Nothing in the transaction between you and AWCC will prevent you from selling your property and retaining all of the sale proceeds.
Does the agreement with the landowner and the assignment of the royalty interest make the property less valuable?
In many instances, landowners receive more value by selling AWCC the wind related payments and selling the remaining property separately than by selling the property along with the wind-related payments. Separately and aside from AWCC transactions, we have seen landowners sell their property, but “keep” all or part of the wind-related income.
If your questions aren't answered here, call 1-877-669-2922, or email us at: info@americanwindcapital.com
Process Questions:
What happens if I have a mortgage?
You will need a simple Non-Disturbance Agreement from your bank that releases the lease/easement payments from the mortgage. We will be happy to work with you to get bank approval.
Do I have to convert the entire lease/easement, or can I convert a portion of the lease/easement?
You can convert all or a portion of your lease.
Are there any factors that could delay the lease/easement conversion process?
Any unresolved issues, including divorce, estate, liens, or title issues could delay converting your lease/easement. We will work with you to resolve any issues.
How can I be assured of receiving my lump sum payment promptly?
American Wind Capital has a proven track record of funding transactions. We are happy to provide you with references from existing customers who can share their experience.
If your questions aren't answered here, call 1-877-669-2922, or email us at: info@americanwindcapital.com
Wind Farm Operator Relations Questions:
Will the operator of the wind farm allow me to convert the lease to a one-time payment?
Yes. Most lease/easement documents allow you to “assign” the lease to other parties. We will review the document with you to make sure the lease is assignable.
What happens if the operator damages my property after lease/easement conversion?
Your original lease/easement agreement is still in effect after you are paid by AWCC; therefore, the operator is still responsible for any damage caused by activities on the property. Any payment for damages caused by activities on the property by the operator will still go to you.
What if my agreement has a “confidentiality” clause?
Most agreements have a provision requiring confidentiality, but in most instances you are allowed to share information with attorneys, financial advisors, family, and prospective buyers of your land. AWCC can work with you to maintain confidentiality of information.
If your questions aren't answered here, call 1-877-669-2922, or email us at: info@americanwindcapital.com
Technical Questions:
What is AWCC’s experience with turbine availability?
We have seen instances where turbines are not available due to a variety of technical issues: poorly manufactured blades requiring repair, projects in which every gearbox has required repair – and will require additional change-outs in the future. In extreme cases, turbines have fallen over. Because we have many turbines in our portfolio, we can absorb the risk of an issue with one turbine or one project, where a single landowner cannot.
What is AWCC’s experience with curtailment?
Curtailment is a major issue, especially in West Texas. While the CREZ program is predicted to alleviate the curtailment issue for some projects, curtailment will still be an issue for the next few years. Even the “fast track” CREZ projects are not expected to be completed until 2014 in the best case; they still require additional rights of way, have not been permitted, and of course, construction has not started. The purchase price we offer you incorporates our views of curtailment for your specific project.
What is the term of the AWCC agreement with landowners?
Our term generally matches that of your lease or easement agreement with the windfarm project. If the windfarm operator terminates the lease or easement for any reason, all of our rights also end, with no liability for you.
Do different landowners in the same project get a different price?
Generally not. However, some windfarm projects pay landowners on the basis of the electricity generated from the turbines on their property – as opposed to on the revenue of the entire project. In this case, our price varies depending on which turbine a specific landowner has on their property. Also, $/turbine numbers may be skewed by differing contract terms between landowners in the same project.
If your questions aren't answered here, call 1-877-669-2922, or email us at: info@americanwindcapital.com
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