In his latest blog post Bruce Krasting says "I have no life". Me, too. Krasting is reading Energy Business Review, Power Generation, Biofuels & Biomass– the trade rag for biomass. I am going through William Amassa Scott's History of the Repudiation of State Debts.

According to Krasting the biomass projects all have these common characteristics:

- They are long life projects with long-term paybacks.

- They (almost) always have a municipal involvement.

- There is (almost) no equity in these projects. They are funded 99% with debt.

- The capital structure has debt maturities out to 15+ years.

-In (almost) all cases vendor financing of major components is a requirement for an equipment sale.

- The cost of debt is THE critical component for a project. Without the availability of cheap long-term money these co-gen facilities never get off of the drawing board.

What the repudiating states had in common was that they chartered state banks whose initial deposits were not specie but bonds from the states themselves. The bonds were secured by investments in infrastructure projects - canals and railroads - and sold largely to foreign investors. (Hope & Co. in Amsterdam was the big wheel in American state bonds.)

An example is the Bank of Pensacola, chartered in 1831 and completely gone by 1841 after having issued bank notes backed by its investment in the Alabama, Florida and Georgia Railroad. The territory of Florida had backed the bank with its full faith and credit - as it had the Union Bank of Florida (chartered 1833, began operations in 1835, suspended specie payments in 1837 but continued to sell bonds in Europe as late as 1839 to cover the interest payments on its already outstanding debt).

By the time Florida became a state (1845) the claims against the failed state banks were literally clogging the Federal courts. The Florida legislature and its newly-elected governor solved the problem very neatly; they repudiated the obligations of the territory as having been unconstitutional.


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