On May 2, 2022, Rainbow Energy Center LLC celebrated the purchase of Coal Creek Station, the state’s largest power plant, from Great River Energy (GRE). GRE, a Minnesota-based company, sold the 1,151-megawatt power plant to Rainbow Energy Center and the associated transmission system, which runs from central North Dakota to Minnesota, to Nexus Line, LLC. Rainbow Energy Center and Nexus Line are both affiliates of the Bismarck-based Rainbow Energy Marketing Corporation.
The sale completes a successful transition for the plant and power line to maintain operations. GRE announced in 2021 that it planned to close the plant which would have displaced 650 workers and had a significant, negative economic impact on the region.
Led by the Office of the Governor, state agencies came together to support the sale of the plant. This included a financing package facilitated through the North Dakota Transmission Authority (NDTA) under the governance of the Industrial Commission. The complex financing package included NDTA selling $150 million of bonds. The proceeds of the bonds were then used to provide a loan to Nexus Line to facilitate the purchase of the High-Voltage Direct Current power line. This is the first time NDTA has issued bonds since it was established in 2007. To provide expertise and guidance, the North Dakota Public Finance Authority assisted in issuing of the bonds.
BND’s role in the transaction was in purchasing NDTA bonds through a Match Program Loan of $150 million. The Match Program supports large-scale economic diversification projects. To access the Match Program, entities must provide evidence of considerable financial strength as demonstrated by a long-term investment grade rating. In this instance, NDTA is an agency backed by the moral obligation of the state which qualified it for a loan.
In 2021, House Bill (HB) 1425 was passed by the North Dakota Legislature. It played a critical role in establishing the ingenious financing structure. Under the bill, the State Investment Board (SIB) is allowed to access up to 10% of the principal of the Legacy Fund for fixed rate investments in North Dakota and purchase CDs from BND which provide a market rate of return to the Legacy Fund. These strategies enabled BND to loan the funds at a competitive rate to NDTA.
It is doubtful that any other state could complete such a complex financial transaction to enable the transfer of a coal plant and transmission line from one entity to another. Today, large financial institutions are reluctant to provide loans to entities that use fossil fuel as a source for power generation. As America’s only bank that is owned by a state with a mission of supporting economic development in the state, BND is in a unique position to assist in facilitating this transaction.
In closing, Rainbow Energy Center & Nexus Line President Stacy L. Tschider said, “Our vision was always more than just buying a power plant; this was about preserving a way of life and helping these communities continue to thrive. Without the help and support of the Bank of North Dakota, we would have never been able to push this over the finish line.”
