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RECO Wind Farm Project

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ROATAN - May, 18, 2012 Richard Warren, General Manager and Vice President of the Board of Directors of RECO, posted a statement on the Living-In-Roatan Yahoo group outlining the current status of the Wind Farm project and other RECO issues.

Customers of RECO

  This past Wednesday RECO management was invited by Mayor Julio Galindo to meet with the Roatan Municipal Corporation Board at the Municipal building in Coxen Hole.  Also attending were several local TV and radio station representatives that recorded the event.  The purpose of the meeting was to discuss the Wind Farm project and other RECO issues.  From a personal standpoint, I thought the meeting was positive and I thank the Mayor for keeping the meeting moving and on subject.

  With regard to the wind project, which will be owned and operated by Trade Winds Energy and is owned by the same investor who owns the majority interest in RECO,  the only thing standing in the way of construction starting at the site is the issuance of the SERNA Environmental permit and SERNA Operating permit.  The permits were applied for last year and for months now have been unduly withheld from being issued, in my opinion.  One part of the process that is required by SERNA is that the local community effected by the project be allowed to provide comments and called public hearing(s).  After that a report is prepared by the Municipality and submitted to SERNA regarding public comments on the project. The public hearing was held on September 19, 2011 and to this date the Municipality has not yet submitted its report.  Although after the Wednesday meeting I think now we are all more on the same page with regard to moving forward.  The hangup seems to center around the "social" contribution.  In our permit application, TWE agreed to provide 2,000,000 lps towards social projects in the area of the farm.  This amount was accepted by both SERNA and the head of the Environmental department at the Muni (in writing).  But on Wednesday is was made clear that the Muni and local residents would like much more.  For example, they want TWE to pave the road up Spanish town at a cost of approximately $500,000.  They would also like a new school and other such things.  The Muni will prepare a proposal including their request and submit to TWE.  

  One other topic of discussion was their criticism of RECO for not doing more to lower the cost of energy on the island.  I answered their concerns in four parts:

  1.  TWE applied for SERNA wind farm permits last year and at this time they have not be issued.  The wind farm will produce up to 3.9 MW of energy that will be priced much lower than the current diesel generation price or about 30% less at current diesel prices.  It is assumed that the wind farm will produce at about 25% capacity on a 24/7, 365 day basis so if 1 MW average is produced into the grid the overall price of energy will go down, although arguably not very much. To date TWE has paid about $4M on the project to include, turbine purchase; land acquisition; moving and transport of the turbines to Roatan and mainland; and replacement parts.  At this time the nacelles, or "gut" of the turbines, are being overhauled and refurbished in La Esperanza, Honduras.  The towers and blades will soon be moved from RECO's yard to the property next door where they will be overhauled and refurbished and as soon as the SERNA permits are issued construction on the road to the facility and at the site will commence.

  2.  In November of last year, with the sponsorship of RECO, a company called Synergy Renewable submitted a Letter of Intent to the Municipality whereby Synergy would have an exclusive right for two months to conduct a due diligence evaluation of the Municipal solid waste on the island, to determine if is is feasible to install a waste-to-energy facility on Roatan that would accept 100% of the solid waste and convert that energy to electric energy to be sold to RECO.  The price of that energy is expected to be about the same as the wind farm.  This project also alleviates the landfill and garbage collection problems the Municipality has. Size of the facility will be determined following successful completion of the due diligence process but it is expected that thefacility will produce about 3MW-4MW of energy.  Until Wednesday we had received no official response to the LOI, but the Muni voted to accept the offer and so we'll hopefully move forward soon.

  3.  For more than a year RECO has been waiting on a local diesel supplier to become legal whereby they could deliver fuel to Roatan that would clear customs.  The fuel from this supplier will be at a lower price than what we currently pay to Hondupetrol and it has been frustrating not to have access to this fuel.  For example, last month we could have purchased fuel at 55 lps/gal from this supplier instead of the 71 lps/gal paid to Hondupetrol.  That would have resulted in a much lower fuel adjustment.

  4.  RECO has completed an engineering evaluation of a steam turbine generation plant that can be installed on Roatan in about two years.  The plant will be fueled by coal or pet coke and will meet all existing EPA requirements. The total capacity of the plant is 22.5 MW and is intended to be constructed on a barge and transported to Roatan where it will be permanently installed next door to RECO on the recently purchased 6.3 aces.  Based on preliminary estimates the cost of the energy produced from this plant will be 15%-25% lower than current RECO rates.  Overall cost of the plant is approximately $30M.  The only thing standing in the way of the project is the satisfactory outcome of the rate case with the Energy Commission, which is now being litigated.  This project will, however, be presented to public leaders and the public at large before it commences.

  So, when asked what we are doing to lower rates, these are four things, all of which are being held up by one or more central government agencies.  The investor is ready, willing and able to spend large sums of money on these projects once the government landscape is cleared.

  I'm sure this email will bring up more questions than answers but if anyone has any questions come see me.  I won't get into dialogs on this forum.

  Regards,

  Richard

The above Yahoo post can be found here: http://groups.yahoo.com/group/Living-In-Roatan/message/24315

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