GRANT F. SMITH 2019 NOVEMBER-DECEMBER POSTED ON OCTOBER 29, 2019
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Washington Report on Middle East Affairs, November/December 2019, pp. 28-31, 49
Special Report
By Grant F. Smith
AN ISRAELI REAL ESTATE and solar energy giant secretly owns a U.S. solar energy developer and is building solar farms across the state of Virginia. Because it is using shell companies as fronts, nobody but a handful of corporate insiders and members of the state Virginia Israel Advisory Board appear to know the identity of the true beneficial foreign owners in Israel.
None of the customers at public schools, data centers and other organizations now signing 25- and 30-year contracts exchanging valuable rooftops and land for solar farms seem to know about the secret Israeli company’s extensive business activities in Palestinian and Syrian territories illegally occupied by Israel. Some customers are signing deals they don’t fully understand, and their signed contracts are financially disadvantageous to the point of being predatory. Schools in particular believe they are entering into deals with a young, Virginia–based, pet–friendly and social–media-savvy startup that just wants to make the world a bit more sustainable. But the story is much more complex, because stealth and misdirection is everywhere.
The Virginia Israel Advisory Board (VIAB)—the only taxpayer–funded state government entity that works exclusively to bring Israeli companies to Virginia—proposed a solution to state energy needs for data centers and schools. VIAB has long backed solar energy farms sold, designed, installed and administered by an Israeli company. VIAB even code-named the initiative “Project Turbine”:
Project Turbine—A multi-billion-dollar Israeli real estate and renewable energy concern with significant properties in DC and Northern Virginia is developing several solar energy sites in Virginia to produce electricity. Expanding renewable energy capacity is a requirement of major data centers to locate in Virginia. —Virginia Israel Advisory Board 2018 Annual Report
On the surface, the offer sounds compelling. Data centers and schools continue to buy energy from Dominion Energy and other power from utilities generated by nuclear, fracked natural gas and other sources. VIAB is working behind the scenes to win business for Israel using its own status as a government agency while orchestrating the concealment of the true parent organization behind “Project Turbine.” The tipoff as to the identity of the Israeli company may be found in the southern region of Virginia, at the Mineral Gap datacenter in Wise County.
VIAB Southwest region coordinator and board member Aviva Frye is a “caterer, licensed travel agent and community organizer of over 30 years.” Holding a BA in Political Science from the University of Maryland and Master’s in International Relations from Boston University, her profile on VIAB’s website says that, “with most of her family living in Israel, and Aviva in SW Virginia, she is thrilled to bring the two parts of her life together.” At first, she would not seem to be the ideal candidate to sell complex Israeli solar energy solutions in Virginia. But her role was not sales, but rather market entry. So, in addition to her role at VIAB, Frye is also the Director of Regulation and Public Relations for Caden-Energix.
Energix Renewable Energy Ltd is a small renewable energy producer founded in 2009 and traded on the Israeli stock exchange. Alony Hetz—a private Israeli company—has been the controlling shareholder of Energix since it was founded. Energix is deeply invested in territories illegally occupied by Israel in the Palestinian West Bank. Energix also owns a solar farm located in the Israeli occupied Syrian Golan Heights. Energix allegedly used “questionable methods” to obtain access to land from its indigenous Syrian-Druze owners, because the Druze stood in the way of Energix developing a wind energy project.
Parent company Alony Hetz also has investments in illegal settlements. It invested in the illegal settlement of Ariel in the occupied Palestinian West Bank. It holds a 58.22 percent stake in an Israeli real estate firm that owns Amot Ariel in the Ariel West Industrial Zone. Other Alony Hetz investments in the United States include Carr Properties, a U.S.-based real estate investment trust (or REIT) that owns properties in the Washington, DC area and Boston (a 43.65 percent stake). Alony Hetz proudly owns and trumpets on its website a 114,000-square-foot “trophy” property in Alexandria, Virginia.
Caden Energy was the brainchild of former CEO of Century Media Records Robert Caden. In 2015 CMR was acquired by Sony Music Entertainment, and Caden went looking to start up other ventures. In 2018 Energix and Alony Hetz acquired a 58 percent stake in a series of Caden Energy solar projects in Arizona and Virginia for $13 million, “with a total capacity of hundreds of megawatts.” Energix does not manufacture equipment.
The four Virginia sites initially announced acquisition of panels from First Solar, an American solar panel manufacturer and a seller of utility-scale power plants. Energix has not traditionally had its own construction teams. Rather, it hires contractors to build out the sites, after receiving the proper permits. Energix is interested in high-margin project sales, contracting, and administration of solar arrays, including selling excess electricity to local utilities.
Aviva Frye meeting request on behalf of Energix as a VIAB official.
One critical phase for any solar project is permitting. Aviva Frye’s job was getting state approval for those permits. But when Frye approached government officials, she did so in her capacity as a board member of VIAB.
In February 2018 Frye set up a meeting and demanded follow-up from Angela Navarro, Deputy Secretary of Natural Resources at the Office of the Governor. Caden-Energix wanted Navarro to know that a Kentucky Utilities Company and its subsidiary, Old Dominion Power Company (ODP), were not going to provision solar energy for the Mineral Gap Data Center. ODP serves 30,000 customers in Western Virginia. According to an email about Frye’s efforts obtained through the Virginia Freedom of Information Act, Frye said:
Kentucky Utilities has made it clear to Energix that they are uninterested in providing renewable energy in Wise. The data center, which is already there, wants to expand. Del Kilgore [Delegate Terry Kilgore, Virginia House of Delegates] told us that at least two other data centers want to locate in Wise County if the renewable energy were available. But they MUST have solar power, hence the utility company is keeping good jobs out of Wise County.
The data center “which is already there” is the aforementioned Mineral Gap, a high-security 65,000-square-foot data co-location center on a 22-acre site in Wise County. The facility was backed by $350,000 in state Tobacco Region Opportunity Funds. Whether there is enough market demand for capacity at the data center in the isolated, rural western part of Virginia is not yet clear. Server space is currently being sold as an extra secure facility owing to its physical remoteness.
When Frye met with government officials across the state to steer contracts and funding toward the Israeli solar energy company she represents, she did it on the basis of her role at VIAB. Two weeks after Ralph Northam was sworn in as Virginia’s newly elected governor on Jan. 13, 2018, Frye sought a private meeting with First Lady Pamela Northam. The meeting was to talk about Energix, but Frye signed the request for the meeting as the “Southwest Coordinator of the Virginia Israel Advisory Board.”
Caden-Energix applied for its permits and is now moving fast to build out its rural systems. The four projects, which operate openly as Caden-Energix in the south, are not the full extent of Alony Hetz and Energix solar development activities in Virginia.
IDENTITY LAUNDERING THROUGH SUN TRIBE
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ENERGIX AND ALONY HETZ solar farming efforts for the Mineral Gap are still moving forward, but not under the Caden-Energix brand. On paper, Aviva Frye appears no longer to have any connection to the project, since activities have shifted to technical proposals and land acquisition. But there are clues that Energix and Alony Hetz are still involved.
The first is that in VIAB’s July 18, 2017 board meeting, Aviva Frye explained that “Energix’s visit to Virginia resulted in an MOU [memorandum of understanding] in Wise to put up a solar field for a beta company.” The name of the company now developing Mineral Gap data center in Wise County is Sun Tribe Solar LLC. Sun Tribe Solar will benefit not only from Virginia State funding flowing into the project, but also $500,000 from the U.S. Department of Treasury paid as part of a $10 million grant for solar energy development on abandoned mine lands.
The second tipoff that Alony Hetz and Energix are behind the Sun Tribe front-companies developing Virginia solar projects was a July 1, 2019 announcement that Bill Nusbaum was joining the VIAB board as a nominee of the General Assembly of Virginia. Nusbaum is a partner doing “economic development” for Williams Mullen, a regionally based law firm with 240 attorneys in Virginia, Washington, DC, North Carolina and South Carolina.
So where is the direct connection? The law firm of Williams Mullen has intimate ties to Sun Tribe Solar. In February of 2016, Williams Mullen partner Philip Goodpasture filed articles of organization for the new limited liability company the Virginia Division of Corporations. The filing was followed by two more, one in 2016 for Sun Tribe Holdings by Williams Mullen Senior Associate Richard Palmieri, and yet another for Sun Tribe Development LLC by Taylor Brown with Goodpasture as his agent. Taylor Brown is co-founder of Sun Tribe Solar.
Most of Sun Tribe Solar’s direct competitors are transparent public corporations in which the source of capital and beneficial owners are publicly known. Not true for Sun Tribe Solar, which strives mightily to hide its true ownership. It is unlikely that Philip Goodpasture is a newly minted solar energy entrepreneur. Rather, he is the nominee of anonymous beneficial owners, whose identities are hidden from all of Sun Tribe’s customers in contracts to win business.
In legalese, Williams Mullen is serving as the “formation agent” and service provider that will do ongoing legal maintenance of the operation. The primary reason Sun Tribe Solar would be set up via three separate LLCs is so that it can be owned and managed anonymously. Energix and Alony Hetz can fund Sun Tribe Solar via international wire transfer the seed capital Sun Tribe needs to market, sell and set up solar energy projects that return its investment over 25 to 30 years. Williams Mullen will then transfer net income back to Energix and Alony Hetz. If the operation gets into trouble, the nominee can transfer the ownership of operation to intermediary offshore shell companies, sell Sun Tribe, help it go public on a U.S. exchange, or even roll it up without ever publicly implicating the true beneficial owners.
Caden-Energix might have been able to operate more or less openly in Southern Virginia without too much risk of opposition. In more diverse markets of the northern part of the state the risk was higher that Alony Hetz settlement activity could be publicly exposed. Creating a pleasant, though misleading, corporate image is therefore key.
Sun Tribe’s business development operation is already a social media and marketing powerhouse. Although it only joined Twitter in May of 2019, the @SunTribeSolar feed is full of hip postings. Sun Tribe’s young workers enjoy biking to work. They are recent graduates of Virginia universities. Their dogs are welcome in the office. One canine is even pictured sitting at the conference table giving input. Young engineers are encouraged to apply to work for Sun Tribe, and many of their profiles appear in the feed.
In a July 15 post, Chief Strategy Officer David Welch stresses Sun Tribe’s local roots. “As a Virginia-based company, we’re proud of the fact that the commonwealth is embracing a 21st-century economy built on the foundation of clean, affordable energy.”
One of Sun Tribe’s key strategies is obtaining long-term leases on land for $1 per year in exchange for giving landowners a discount on electricity. Sun Tribe sometimes wins projects through no-bid contracts with school superintendents. Other installations are a result of school board proposal requests to multiple firms. Sun Tribe’s beneficial ownership is information protected from public release during the vetting and contracting process.
In Virginia’s King William County Public Schools system, superintendent David White was informed about Sun Tribe from Middlesex County Public Schools Superintendent Peter Gretz. White’s board then “reached out to Sun Tribe” to start discussing an agreement for “three of our schools.” In February 2019 King William County Public Schools signed a 30-year agreement with Sun Tribe under which it will allow the company to install 4,500 solar panels on adjacent land. Sun Tribe will sell electricity to schools at a small discount compared to standard Dominion Virginia power rates, and sell excess production to utilities and other buyers.
A close review of signed contracts covering one of the schools, Hamilton Holmes Middle School, reveals the predatory nature of the deal. Under its “lease” agreement, Sun Tribe Solar will pay a dollar per year for the large tract of ground necessary for a 478-kilowatt direct current solar farm. It will have all the rights of owning the site for three decades, but few of the obligations.
In addition to giving away land usage, Hamilton Holmes is also giving away the huge upside potential, given its intended use. According to the signed contract, Sun Tribe will be generating four times as much energy as the school requires. The excess will be sold at commercial rates to Dominion, which it is obligated to purchase under current law. So, under its signed contract, not only is Hamilton Holmes not getting free electricity, it is obligated to pay Sun Tribe for electricity. If the Sun Tribe system had already been installed and running in 2018, referencing the school’s actual utility bill energy consumption and Sun Tribe’s contractual requirements, the school would have paid Sun Tribe $51,000 for electricity, vs what it actually paid Dominion which was $58,000. However, Sun Tribe over the same year would have made $178,000 selling the excess power to Dominion.
It might be argued that Sun Tribe’s installation and operation of the site combined with the small discount on energy is enough to make it a good deal for the Hamilton. Not true.
The industry average installed cost for such facilities is only $1.03 per watt, or around half a million dollars to build the entire Hamilton solar farm. If Hamilton were to cancel the deal after a year, its contract requires the school pay $1.2 million to Sun Tribe Solar, which would stand to gain a tidy $700,000 profit after installation costs. But what about operation and maintenance? The costs after installation are minimal for solar electricity, and the school has already agreed to absorb costs to provide security against theft or vandalism at the site.
So, what is in it for Sun Tribe’s beneficial owners? A 600 percent return on investment. Continuing the hypothetical scenario analysis of the Hamilton system being installed in 2018 and run for 25 years, at expected current rates of solar panel efficiency, and forecast inflation, Sun Tribe would produce a net present value of $3 million in excess “net metered” sales to Dominion Energy. Or to put it another way, the Israeli owner and VIAB insiders and investors have the potential to skim six times as much “cream” from the project as the “milk” (construction jobs and tax revenue) VIAB touts to ordinary Virginians. Insiders are producing all of the high-end value added to the project in terms of public relations, design, legal work securing permitting and management of leases, insurance and contracts. Only low value-added jobs are available to the junior partners in temporary construction, monitoring and maintenance.
In late 2018 Arlington Public Schools also contracted with Sun Tribe to install 6,980 panels under a 25-year contract. Arlington School Board chair Reid Goldstein said the Sun Tribe Solar award was the end result of a 2017 strategic plan. The school system issued a request for proposals and received six responses. It rejected one for failing to provide mandatory information, and another for not meeting “joint venture” status. Of the remaining three, Ameresco, WGL Energy Systems, and Sun Tribe, Sun Tribe won out.
But how far behind Sun Tribe’s corporate veil did these school boards and superintendents probe to discover its origins, source of capital, ability to deliver on multi-decade contracts and expertise? Not at all In public meetings during the Sun Tribe proposal review process and final contracts—Alony Hetz and Energix ties to unlawful activities in occupied territories never came up.
Other project stakeholders, such as students, parents and local taxpayers might not want their school doing business with opaque fronts for an Israeli company that profits directly from illegal Israeli settlements. Alony Hetz, Energix and VIAB’s response, if the true owners ever emerge from behind their corporate veil, would be predictable. “Don’t you want to avert the climate change crisis by harnessing solar energy? Are you against new economy jobs for young people who own cute dogs?”
With no shortage of U.S. solar start-ups as well as experienced, completely transparent Virginia vendors, stakeholders’ response might be simple: “We want solar, we want jobs. We just don’t want an Israeli occupation of our rooftops and territories until Palestinians regain their human rights. Especially not at public schools. It sets the wrong example.”
Energix and Alony Hetz are clearly in the midst of an all-out race to contract and build as many solar arrays as quickly as possible. The most profitable scenario of all would be a new state law mandating small scale solar energy production be purchased at higher prices by utilities through “net metering” in recognition of the higher cost to produce solar energy.
For VIAB, a looming government-mandated “offtake agreement” paying premiums for solar power would be even better than Project Jonah’s arrangement (see October 2019 Washington Report on Middle East Affairs, pp. 14-16) to sell tilapia to a regional supermarket chain and put the local market producer out of business. It could become powerful enough to prevail against future popular opposition to the true beneficial owners of that solar power and their predatory deals. That is, if the public ever finds out or takes warranted action.
Grant F. Smith is the director of the Institute for Research: Middle Eastern Policy in Washington, DC. This is the second full chapter excerpt published in the Washington Report on Middle East Affairs from the new IRmep book, The Israel Lobby Enters State Government, now on sale at Middle East Books and More and other fine bookstores.