Surety Bonds Vs. Money In Escrow

Green energy is here to stay and the state of Illinois is taking advantage of it via wind farms. Once the wind farms have served their point, they must be decommissioned or removed for the environment’s sake; surety bonds are one way to assure that it happens.

E.On Climate & Renewables, the developer of two wind farms currently functioning near Watseka, IL, said they are cooperating with the State’s Attorney Jim Devine to figure out how to provide financial assurance that will see to the decommissioning of the wind turbines when the time comes. Devine stated that he would “highly doubt” E.On would agree to provide the $50,000 in cash escrow required for each turbine, which is outlined in a recently modified decommissioning plan. Devine also said that “at the very least (E.On) will be (paying) the $10,000 surety bond” for each turbine as required by the ordinance.

Obtaining surety bonds for the turbines seems to be a great option for E.On. Instead of placing millions in an escrow account which can’t be touched until the decommissioning is complete, which can be years, they have the option of obtaining bonds. The bonds would cost a fraction of the required $10,000 per turbine and they would guarantee that the decommissioning would be completed following all the rules regulations set by the state. Now if the job doesn’t go as planned, the surety company who wrote the bonds would step in and back the project financially.

Placing the money in escrow just ensures that if something does go wrong, E.On’s money is there to rectify the problem. With the 97 turbines in the Settler’s Trail Wind Farm and 17 in the Pioneer Trail Wind Farm, E.On would tie up working capital totaling roughly $5.7MM in escrow infefinitely; should they go the surety bond route, they would need about $1.14MM worth of surety bonds. Remember, E.On would only have to pay a percentage of the total bond amount, not the full $1.4MM.

It’s important that things get done correctly the first time around; surety bonds help achieve this. When bonds are in place, they guarantee the completion of the job at hand and compliance with regulations which is to the benefit of both Illinois and the environment.