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New AES owners seek big tax break

The new owners of the AES Corp. power plant in Somerset will seek a reduction of 40 percent to 60 percent in the plant's payments in lieu of taxes.

That appears to be part of an effort by the new owners, a group of major domestic and foreign banks that held bonds issued by AES, to revive the fortunes of the currently dormant plant.

After a meeting Wednesday with AES and bondholder representatives, Somerset Supervisor Daniel M. Engert said it was apparent the creditors are going to try to operate the facility.

"The fact that we've got somebody interested in investing in this plant is a big win," Engert said. "These are sophisticated financiers and they've got confidence they can turn this plant around."

"The company obviously is trying to reorganize. In order to reorganize, they have to invest more money," said Henry M. Sloma, chairman of the Niagara County Industrial Development Agency, who hosted the meeting in the IDA office.

He said the amount of new investment mentioned was $70 million for AES' Somerset and Cayuga power plants.

AES Eastern Energy, the New York subsidiary of the multinational energy company, filed for Chapter 11 bankruptcy protection in a federal court in Delaware on Dec. 30.

An auction of the Somerset plant was canceled last week when no one signed up to bid, leaving the plant to fall into the hands of the banks that bought bonds AES issued in 1999 to fund its purchase of the Lake Road plant.

Sloma said the taxing entities -- the county, the Town of Somerset and the Barker Central School District -- will have to agree on a tax number, and he will recommend that the IDA board adopt it.

The power plant is the largest property taxpayer in Niagara County. It paid a total of $14.3 million to the county, town and school district this year. Under terms approved by the IDA in February 2011, that figure was to drop to $12.8 million for the 2012-13 tax year and the succeeding two years.

Sloma said there could be an application for a revised payment-in-lieu-of-taxes, or PILOT, on the IDA agenda as soon as its next meeting April 18.

"They're on a fairly tight time frame for the plans they have to submit to the judge," he said.

Engert said officials of the yet-to-be-named new company have met with employees to discuss union contract concessions. Slightly more than 100 people work at the 670-megawatt plant.

Sloma said the Barker school district already has a tentative 2012-13 budget that assumes the revenue from the 2011 deal.

The school receives 59.25 percent of the total PILOT payment, while the county gets 31.5 percent and the town 9.25 percent.

Sloma said the new company is likely to pay the school what it was expecting and look for more relief starting with 2013 town and county taxes.

"The preliminary discussions are [for a revision] from Jan. 1 going forward," Sloma said.

He and Engert confirmed the company is interested in a cut of 40 percent to 60 percent.