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The Maui News: “With HC&S closing, MECO needs more on-demand power”

With HC&S closing, MECO needs more on-demand power

Maui Electric Co. is seeking approval to install three used diesel power generators temporarily for times of peak power use and to make up for reserve capacity that will be lost when Hawaiian Commercial & Sugar Co. closes its sugar plantation and unplugs its Puunene Mill as a source of backup electricity for Maui’s power grid.

According to a MECO application filed Tuesday with the state Public Utilities Commission, HC&S’ pending closure late this year and the ending of its purchase power agreement with the utility will reduce the island’s reserve power capacity. Now, the burning of bagasse, coal and oil at the Puunene Mill provides up to 4 megawatts of “firm” power and an additional 12 megawatts of emergency power, according to the utility.

“With this reduction to the system, the company is in need of additional firm generation sooner than anticipated to maintain reliability as customer demand increases,” MECO’s filing says.

(“Firm power” refers to electricity that a supplier guarantees will be available when needed. Wind and solar power are variable, or “as available,” sources of power. “Reserve capacity” is extra power-generating capacity available to meet unanticipated demands for electricity, if needed, such as if a generator were to break down.)

The utility says the temporary power generation project is “a key component of a larger portfolio of measures that are needed to help mitigate increasing reserve capacity shortfalls that are anticipated to arise on the company’s Maui island system as early as March 2017 . . . and continue until the installation of the next dispatchable firm capacity resource in 2022.”

The highest reserve capacity shortfall is expected in April and May of next year, when MECO’s largest power generators at Maalaea are taken offline for scheduled maintenance.

Earlier this year, the PUC approved MECO’s request to build a new, $13 million substation in a sugar cane field adjacent to the intersection of Kuihelani Highway and Maui Lani Parkway. Construction is targeted for completion as early as June. The diesel generators would be installed at the same time and location as the Kuihelani substation.

MECO already has identified a 4-megawatt shortfall of power generation capacity as of April, as well as additional, ongoing near-term reserve capacity shortfalls for 2018 to 2022.

The three temporary generators would burn “ultra-low sulfur diesel” – with each rated at being able to deliver 1.65 megawatts, for a total of 4.95 megawatts of firm power generation for the utility’s reserve-capacity use, according to the filing.

“The pending land acquisition of approximately 2.6 acres for the Kuihelani substation will provide sufficient space to allow for the placement of the temporary distributed generation units,” the utility says. “The temporary distributed generation units will provide customer benefits through increased service reliability, improved operational flexibility and support of the projected reserve capacity shortfall beginning in March 2017.”

The generators are expected to operate only during peak-load hours, typically between 5 and 9 p.m., according to the utility.

The power-generation units are expected to be removed and sold for nearly $1.7 million after about five years when the reserve capacity shortfall is anticipated to be eliminated by the installation of new firm power generation.

According to MECO, other reserve capacity shortfall mitigation measures include:

* Repurposing the company’s existing battery energy storage system.

* Relying on as-available wind resources.

* Pursuing company- or customer-owned, utility-dispatched distributed generation projects.

* Requesting voluntary customer power cutbacks.

* Accelerating the installation of the next firm generating unit or energy storage systems.

* Expanding the company’s fast-demand-response program from 0.2 megawatts to 5 megawatts.

(The fast-demand-response program allows eligible commercial customers to reduce power consumption proactively during times when electricity demand exceeds generation capacity. Customers enrolled in the program are rewarded with financial incentives.)

So far, MECO has four customers in the fast-demand-response program, which helps the utility maintain a stable power grid and prevent unplanned outages. MECO is seeking PUC approval to expand the program.

MECO noted that, of its options, the Kuihelani temporary distributed generation units, the expanded fast-demand-response program and improved battery energy storage system “are uniquely able to help reliably address the near-term reserve capacity shortfall beginning in 2017.”

When the PUC approved the Kuihelani substation project, state regulators conceded that the substation would be needed as early as June of next year, but they reminded MECO officials that they need to do a better job of planning for a transition to renewable energy.

The commission has established a blueprint for Hawaiian Electric companies to move out of the power-generation business and toward managing and dispatching electricity from dispersed independent operators and from consumers, including those with rooftop solar panels.

In early January, HC&S’ parent company Alexander & Baldwin announced the closure of Hawaii’s last sugar plantation at the end of this year. Layoffs have been coming in waves, but the closure will result in lost jobs for more than 600 workers.

The company has that said it plans to turn to diversified agriculture, including bioenergy crops and cattle grazing, for some of its 36,000 acres in Central Maui.

* Brian Perry can be reached at bperry@mauinews.com.

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The Maui News: “Budget panel supports proposal to acquire land in A&B business park”

Budget panel supports proposal to acquire land in A&B business park

WAILUKU – The Maui County Council Budget and Finance Committee recommended passage of a resolution Tuesday that would allow the county to move forward with its proposal to buy about 4 acres in Alexander & Baldwin’s Maui Business Park II in Kahului.

The deal also involves a 30-acre land donation in Paia for the county to expand Baldwin Beach Park along the north shore.

“This service center issue has been discussed for over two years, and it’s time for us to get moving,” committee Chairman Mike White said. “It’s certainly an outstanding proposal when you consider the gift of the land we’ve been after for quite some time.”

The Maui Business Park II space is one of three proposals the council has been mulling over since April in efforts to find a new service center location. County officials have said that the Division of Motor Vehicles and Licensing, the Real Property Tax Division and the Treasury Collections offices, currently housed at the Maui Mall, need to be moved because the new owners of the mall envision commercial uses for the space.

Mayor Alan Arakawa also has said that there is better value for the county if it builds its own center because the county pays more than $475,000 annually in rent for the Maui Mall space.

“This is a win-win, and an excellent opportunity for the community in several ways,” resident Jonathan Starr testified Tuesday. “We know that the lease existence in the Maui Mall is untenable, and we need to move forward and now, with the best bond rating we’ve seen in the state and historically low interest rates, now is the time to move forward.”

Other testifiers expressed support for the purchase, and the attached 30-acre land donation in Paia.

“I grew up surfing Baldwin Beach. It’s a beautiful stretch of land and important to my community and my friends,” said Peahi resident Pat Simmons Jr. “I hope to see that land preserved for future generations, hopefully my kids and my kids’ kids will enjoy that land someday.”

But Council Member Riki Hokama expressed concern with tying the purchase of 4 acres in the Maui Business Park with the 30-acre land donation. He was the only council member who voted against advancing the resolution to the full council.

“While I agree with you that this deal has merits . . . I would prefer the gift be separated out. For me, I don’t like the taste that gives me . . . that the county can be bought,” Hokama said.

He added that the purchase was “a hell of a lot more land than we need for the stated purposes,” and he suggested the county consider the possibility of selling some of the land and “using that money for public needs.”

But separating the land donation from the 4-acre purchase is a proposal that has not yet been fully vetted, and White said, in response to Hokama’s comments, that “life isn’t always that easy to separate into clear issues.

“This is a situation where acquisition and construction will allow us to offset ongoing costs, and I think that’s the only reason we’re looking at moving forward, because we’re in a position to create such a structure that will allow us to save money,” White said.

Advancing the proposal does not mean the council would stop considering the other proposals “in due course,” White said.

The council also is considering:

* 3 acres in the Maui Lani Village Center for approximately $14 million that would include “turn-key” construction of a 24,000-square-foot two-story building. The cost includes $5.3 million for the land; $8.1 million for construction of the building, and $600,000 for architectural and engineering costs.

* 5 acres for $6.6 million at the Kehalani Village Center in Wailuku. Landowner RCFC Kehalani would donate a nearby 14-acre parcel at the corner of Waiale Road and Kuikahi Drive.

Arakawa had said in a committee meeting Aug. 1 that he would like the county to purchase both the A&B Maui Business Park II and the Kehalani Village Center site packages, though if he had to choose just one, it would be the A&B property in Kahului.

In other action Tuesday, the committee recommended passage of a measure to advance Haiku Community Association $75,000, or half of its total $150,000 grant, up front for needed repairs to Kalakupua playground at Giggle Hill in Haiku. While the county typically grants only 25 percent of grant money in advance to project implementation – with the rest to be paid in reimbursements – the association has said it could not afford fronting the money for the repairs.

“We are a small community association. We’re not a for-profit business,” said Netra Halperin, who serves as co-chairwoman of the association’s playground committee. While volunteers have managed to fundraise $26,000 for the project, the biggest hurdle is the playground’s footing, or ground surfacing, which is slated to cost about $60,000.

Halperin and others asked for a “cash grant” with 100 percent of the grant money paid up front, promising “we’d be responsible stewards of that money.”

Council members agreed to advance 50 percent of the grant as a compromise, saying that as long as the association provided its receipts, reimbursements would be expedited.

“I think 50 percent is a great compromise, because at least they’ll have money to do what they need to do. If they get their receipts in, we’ll provide their reimbursements ASAP,” said Council Chairwoman Gladys Baisa.

Council Member Mike Victorino rallied for the cause.

“We don’t want to hold these people back in any way, shape or form,” he said. “We want to get these repairs done in the next six months at the most, so we can have these kids back on the playground.”

The playground was closed two years ago for safety reasons.

* Eileen Chao can be reached at echao@mauinews.com.

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The Maui News: “A&B says land sale will make way for Target”

A&B says land sale will make way for Target

Alexander & Baldwin will close a $40 million, 24-acre Kahului land sale today to make way for the development of national retailer Target, A&B Chairman and Chief Executive Officer Stan Kuriyama said Thursday while announcing the company’s third-quarter operating and financial results.

The land sale amounts to $1.65 million an acre, he said, noting that it follows a September sale of 209 acres in Waikapu, at $25,000 an acre, to Maui County for its Central Maui regional park complex.

“Most of the proceeds from these two sales will also be reinvested in the acquisition of the Pearl Highlands Center,” Kuriyama said. The closing of the sale on Oahu was in September.

The Pearl Highlands Center purchase made A&B Hawaii’s second-largest owner of retail properties in the state, he said.

The largest is General Growth Properties, which owns Whalers Village in Kaanapali and Ala Moana Center on Oahu, among other properties.

In April, Property Development Centers, a wholly owned real estate subsidiary of Safeway Inc., announced it had reached a deal with A&B to purchase the property at the corner of Puunene Avenue and Hookele Street, near the Zippy’s restaurant.

PDC said it would, in turn, sell 12 acres to Target, which will serve as the center’s anchor retailer.

A&B’s real estate operations performed well in the third quarter, Kuriyama said, highlighting the company’s purchase of 27 properties in Kahala, one of Oahu’s “premier residential neighborhoods.”

Chris Benjamin, A&B president and chief operating officer, said that the company spent time “cleaning up and readying” the Kahala properties for sale. As of Thursday, four lots had sold, and the company was evaluating offers or had sales in various stages of contracting, he said.

On Maui in the third quarter, A&B sold six units at its 150-unit Kai Malu at Wailea project, with units going for $1 million to $1.4 million, Benjamin said. The company is seeking Maui County regulatory approval for a 70-unit condominium project in Wailea, and it has the ability to do another 75-unit development, if there’s enough market demand, he said.

Overall, A&B’s adjusted net income for the third quarter was $5.6 million, or 13 cents per share, compared with adjusted net income of $13.8 million, or 32 cents per share, in the same quarter in 2012, the company said.

“Our net income also reflects a $7 million decline in agribusiness operating profit compared with last year’s third quarter, which was anticipated and resulted from one less sugar voyage and lower sugar prices,” Kuriyama said.

A&B also completed on Oct. 1 the purchase of the Grace Pacific construction company, which earlier had been announced for a combination of stock and cash valued at $235 million.

“We expect (Grace) to be an important generator of earnings and cash for the company,” Kuriyama said in a conference call.

With its acquisition of Grace Pacific, A&B was “extending and enhancing our community building capabilities to encompass infrastructure work, for which a steady and growing need exists in Hawaii,” Kuriyama said in a written statement. “With Grace, we increase our ability to leverage Hawaii’s improving economy and real estate markets, and materially strengthen our financial profile and flexibility, while also enabling us to initiate a modest quarterly dividend.”

A&B’s agribusiness operating profit for the third quarter was $2.2 million, compared to $9.1 million last year, the company’s third-quarter report stated. The lower profits were “principally due to lower raw sugar margins resulting from one less sugar voyage and lower sugar prices in the third quarter of this year compared with last year.”

“Power and molasses sales margins were also lower in the quarter,” according to the report. The company expects to break even with its agribusiness segment in the second half of this year, generating a loss for the fourth quarter.

In the third quarter, Hawaiian Commercial & Sugar Co. produced 64,000 tons of sugar, down 18.2 percent from the 78,200 tons produced in the third quarter of 2012. The company’s tons of sugar sold fell 50.6 percent from 72,400 tons in 2012 to 35,800 tons this year.

For the first nine months of the year, the picture’s not as ugly. Tons of sugar produced were down slightly at 0.8 percent to 138,600 tons, while tons of sugar sold dropped 33.4 percent to 72,200.

Sugar prices increased modestly in the third quarter, Benjamin said.

A&B remained “hopeful” that sugar prices would continue their upward trend, he said.

* Brian Perry can be reached at bperry@mauinews.com.