(Updates with Ralls comment in 11th paragraph.)
Jan. 29 (Bloomberg) -- Ralls Corp., the Chinese-owned company blocked on national security grounds from operating wind turbines near a U.S. Navy base in Oregon, asked a judge to void its agreement to buy assets for the project.
President Barack Obama’s order blocking development of the wind project nullifies Ralls’s acquisition of the project’s property from Terna Energy Holding USA Corp., Ralls said in a complaint filed yesterday in federal court in Washington against a Delaware-incorporated unit of Terna Energy SA, a Greek energy company.
“Until and unless the court concludes the president’s order is unlawful, the president’s order renders the Ralls-Terna transaction void,” according to the filing.
Ralls, in a separate action, is suing Obama and other U.S. government officials, challenging the president’s authority to block the deal.
In its complaint against Terna, Ralls said it agreed to pay $6 million for the wind project assets, including $4.2 million on the earlier of Dec. 21, 2012, or the date on which 36 megawatts of power from the windfarms was commissioned.
The Oregon project hasn’t produced any power, Tim Xia, an attorney for Ralls, said in a phone interview.
Terna on Dec. 24 notified Ralls that it was in default for failing to make the $4.2 million payment, according to the Ralls lawsuit against Terna. Terna subsequently notified Ralls that on Feb. 7, it would sell membership interest in Ralls Wind Farm LLC, which had been pledged as collateral in the Oregon acquisition by Ralls Corp., according to the complaint.
Ralls Wind Farm LLC, which has five wind turbines in operation in Ralls, Texas, is Ralls Corp.’s only operating asset, according to its court filings.
Robert Weigel, an attorney for Terna, declined to comment on the lawsuit.
Ralls is asking U.S. District Judge Amy Berman Jackson to declare the Ralls-Terna transaction invalid and block Terna from selling collateral because of Obama’s order. The Ralls lawsuit challenging Obama’s power to block the Oregon wind project also is before Jackson.
“We want to preserve the status quo, so that Judge Jackson can complete her review of our constitutional challenge to President Obama’s order,” Xia said.
Obama on Sept. 28 blocked Ralls from developing the wind farm sites and ordered it to divest all of its interests in the project, which is near a U.S. Navy base, citing national security risks.
His action made permanent an interim order by the government’s Committee on Foreign Investment in the U.S., or CFIUS, which reviews acquisitions of domestic companies by non- U.S. entities.
In court papers filed today in the case against it, Terna asked Jackson to dismiss the complaint, arguing that she doesn’t have jurisdiction because Terna doesn’t do business in Washington. Also, at the time of the transaction, Ralls didn’t make the wind farm acquisition contingent on passing government review, Terna said.
“Plaintiff Ralls at no time sought CFIUS approval for its purchase of the Oregon Wind Farms or negotiated for a closing condition providing that the purchaser will not be required to complete the transaction if it does not obtain CFIUS approval in advance of the closing date,” Terna said in the filing.
Ralls is owned by executives of China-based Sany Group Co., which was seeking to place Sany-made wind turbines at the Oregon installations.
The case against Terna is Ralls Corp. v. Terna Energy USA Holding Corp., 13-cv-117; the case against the U.S. government is Ralls Corp. v. Committee on Foreign Investment in the United States, 12-cv-01513, U.S. District Court, District of Columbia (Washington).
--Editors: Fred Strasser, Andrew Dunn