Open Letter to Clean Line Investors

Dear Clean Line Investors*,

You guys are scared to death, aren't you?

Mr. Prescott Hartshorne's recently filed testimony at the Missouri Public Service Commission positively reeked of barely controlled hysteria.  You all have dumped millions into a company that hasn't produced a dime of revenue in seven years.  Despite Prescott's delusional self-rationalization that Clean Line's future prospects must be bright, reality says they're dim.

And when Clean Line's business plan mirage disappears and all the money you've invested is gone with the wind, heads will roll, particularly yours.  This is the only reason you're holding on and throwing good money after bad, isn't it?  Ride the wave, tell your boss everything is hunky dory, and live the good life while you can.

That's what "Frack Master" Chris Faulkner did.  Now I'm not saying that Jimmy Glotfelty has a "whore card," but if he does, he's using your money to pay the bill.  Maybe you all even have "whore cards" of your own?  I think you know that Clean Line's "deep" executive team is living large on your money, and have been for the past seven years.  It's just one big, expensive party!  Without your support, they'd all have to go get jobs where they're expected to produce something other than hot air and promises.

Looks like you got suckered by a fast-talking huckster who has no experience building transmission, and furthermore absolutely no experience with projects where land acquisition isn't voluntary.  Just because someone claims to have successfully constructed projects that relied on voluntary land acquisition does not equate to their mastery of projects where eminent domain is a possibility.  Eminent domain is an extremely inflammatory action, and when clumsily used as an arrogant sledgehammer, always ends in disaster.  You should know this already.

Since Prescott was the only investor brave enough to submit testimony in Clean Line's second attempt at Missouri PSC approval, I'll believe that he speaks for all of you.

National Grid considers many factors when it evaluates whether to invest in the development of a new transmission project, including the economic viability of the project and the prospects for the project to attract debt financing for construction. But perhaps most important is the ability of management to bring the project to commercial operation, including the ability to work well with customers, regulators and other stakeholders while managing all aspects of the development and construction process.

And how did you evaluate Clean Line's ability to work well with others before investing $55.7M, National Grid?  Did you actually research project opposition, political appeal, state regulatory processes, and locate some willing customers?  Or did you just take Clean Line's word for it?  Just the fact that you think you have to say that to get the approval of the Missouri PSC speaks volumes.  If Clean Line had been working well with others, you would never have had to testify in the first place.  Which brings us to:

Each [project] is overseen by a capable project management staff, with strong support from a deep and experienced home office.

But, yet, in your next breath you felt the need to say:

National Grid has the right to designate two out of seven members of Clean Line’s Board of Directors. These rights, among others, provide National Grid with the ability to assist in and help direct the development and commercialization of Clean Line’s portfolio of HVDC transmission projects, including the Grain Belt Express Project.

If they are so capable, why do you feel the need to babysit them this way?  But don't get the idea that being stern and trying to change things at this point would make any difference though.  The die has been cast.

Prescott continues,

First, the Grain Belt Express Project is economically attractive, as it provides a valued service to customers as exemplified by the contract with MJMEUC. Grain Belt Express has already identified significant customer interest in the project through its open solicitation for capacity, which has resulted in requests for more than 20,000 megawatts of service.

MJMEUC?  Have you actually read that contract, Prescott?  It allows MJMEUC to withdraw completely at any time up to 60 days before the project goes online.  If all Clean Line's contracts contain that stipulation, they're worthless for project financing purposes, right?  The contract was for "up to" 250 MW of capacity in different tranches.  Is that insignificant contract going to financially support the project?  Is MJMEUC what helps you sleep soundly at night?  It's laughable posturing!  And I haven't seen any other contracts, no matter how many shippers "expressed interest."  Why is that?  Because those shippers have no wholesale buyers?  Common sense says if Clean Line had other contracts, or even prospects for contracts, they'd be using them in the regulatory process.

It's all a string of dominos that realistically cannot topple in proper sequence.  And speaking of dominos, you're one, too.  You're nothing but a little domino in a string of dominos currently living high on the hog atop a flimsy house of cards.  Each one of you is probably afraid to admit the truth because then the party is over.  Where's the tipping point?  How much money are you going to toss into the Clean Line bonfire before closing your bosses' purse strings and taking a loss?  You know, a real utility would have given up long ago.  In fact, they had the smarts not to even attempt such a risky endeavor.  Utilities have no appetite for risk where their entire investment can disappear in an instant. And there are no guarantees of investment recovery.  It's all going to be gone.

And your investment might not be all you stand to lose.  Have you heard that a judge in Nebraska ordered TransCanada to pay the legal costs of Keystone XL landowners who successfully defeated the project?  Yup, not only is TransCanada out the development cost of its failed project, they're also out the cost of the legal fees of the landowners they harassed with eminent domain suits.  It's likely that Clean Line could face similar suits after its projects go belly up.  And since all Clean Line's money is YOUR money, guess who gets left holding that bag?

It's not just a matter of permitting before the customers show up.  Clean Line's Plains and Eastern project got DOE's nod four months ago and still doesn't have customers.  Where are the customers, Prescott?  Where's the revenue?  None of these projects can happen without customers.

Clean Line is never going to happen.  When the hucksters run out of pigeons, you might be joining them in the unemployment line.  No wonder you sound hysterical.

*National Grid, aka GridAmerica Holdings, Inc.; Bluescape Resources Company, LLC, aka Clean Grid Holdings, LLC; ZAM Ventures, L.P.;  and Michael Zilkha.