HECO cancels SunEdison solar-energy contract

Hawaiian Electric Co. backed out of its contract with SunEdison Inc. for three utility-scale solar facilities on Oahu that were approved by state regulators in July.

On Friday, HECO filed a termination notice with the state Public Utilities Commission to end the contract that would have had the utility purchasing power from three solar-energy facilities — 50-megawatt Kawailoa Solar, to be built in Haleiwa; 15-megawatt Lanikuhana Solar, to be built southwest of Mililani; and 47-megawatt Waiawa PV, to be built in Waipio.

HECO terminated the contract because of SunEdison’s financial situation and the company’s failure to meet project milestones, HECO spokesman Darren Pai said Tuesday.

SunEdison said it had invested $42 million in the projects to date.

“Weighing heavily on our decision in this case was the widely reported financial situation of SunEdison,” Pai said. “We take very seriously our responsibility to integrate renewable resources at reasonable costs for our customers. Despite many steps we took to try to avoid this action, in the end we had to make a decision that we believe is in the best interest of our customers and that allows us the best opportunity to use this renewable-energy capacity for viable projects.”

As part of a larger effort to resolve $336 million of the company’s debt, SunEdison reached a sale agreement in December with D.E. Shaw Group, Madison Dearborn Capital Partners IV LP and Northwestern University.

The group agreed to purchase some of the SunEdison renewable-asset projects under development, including the three Oahu projects.

“We have secured a buyer for these projects who has been ready since December to finance and complete the projects on schedule,” said SunEdison spokeswoman Crystal Kua.

HECO declined to comment when asked whether the company would consider signing new contracts for the solar projects if the facilities changed owners.

Kua said HECO’s decision is unfortunate for Hawaii residents. The projects totaled roughly 110 megawatts — which at their peak could power roughly 18,040 homes.

“This would increase solar capacity on Oahu by nearly 30 percent this year,” Kua said. “We continue to believe this is the best outcome for ratepayers and for Hawaii’s renewable-energy goals.”

The facilities would have sold solar power to HECO for approximately 14 cents a kilowatt-hour for the duration of their 22-year life spans.

“We and others were hopeful that these solar projects could be in service by the end of this year,” Pai said. “The lower energy prices would have been fully passed on to our customers, and we wanted these projects to be successful.”

One of the projects, Waiawa PV, already started construction with workers installing 11,000 metal structural posts on 150 acres, laying nearly 68,000 feet of underground wiring and mounting 1,240 solar panels.

“Construction began in the fall, and we have made significant progress on the Waipio project site,” Kua said. “Preliminary site work has also been underway at Mililani and Kawailoa.”

Kua said HECO’s action Friday affected nearly 100 workers and potentially hundreds more who were scheduled to start later this year.

HECO chose SunEdison’s projects from more than two dozen competitive proposals.

To speed up the approval process for those projects as well as four others, HECO asked the PUC in 2014 to waive the usual requirement for competitive bidding. The PUC rejected three of the projects.

HECO said the utility is working to add on more renewable projects.

“We will pursue the opportunity for a transparent process to seek other renewable projects as soon as possible,” Pai said.