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Leaf Home arrow The News arrow North East News arrow Cape Wind secures $600 million loan
Cape Wind secures $600 million loan
Written by Administrator   
Saturday, 01 March 2014
Cape Wind secures $600 million loan
By Patrick Cassidy
February 27, 2014

Cape Wind has added a $600 million loan from a Danish credit agency to a growing list of financial support for the proposed Nantucket Sound wind farm.

The announcement Wednesday during a speech by Cape Wind president Jim Gordon at the GreenPower USA Offshore Wind Conference in Boston edges the company closer to the half-way mark in funding the project, which is expected to cost more than $2.6 billion. Gordon told the crowd that EKF, Denmark's official export credit agency, had informed Cape Wind of the loan's approval pending the "finalization of due diligence and completion of loan documentation."

"The significance of this is that EFK is probably the most experienced offshore-wind investor in the world and we're extremely pleased that they would make this commitment to Cape Wind," Gordon said during a break in the conference.

Momentum for financing the project continues and EKF's participation sends a signal around the world and across the United States that Cape Wind is a sound investment worthy of consideration by other financing entities, he said.

The Danish involvement in the project shouldn't surprise anyone given Europe's dominance of the offshore wind industry, he said.

"They have a lot of experience," he said. Once the United States begins to deploy more offshore wind farms, American companies will start to gain that experience and hopefully create a domestic supply chain, Gordon said.

Soren Moller, head of EKF, confirmed the loan announcement on Wednesday and said that dialogue between his company and Cape Wind had been ongoing for about 18 months.

"As you know this is a very old project," the CEO said. "We're happy to be able to assist and be able to provide part of the financing which will allow Siemens to deliver the turbines for this project."

The technology Cape Wind is using is well-known to EKF, which has been part of a number of similar transactions in Europe, Moller said.

Before finalizing the loan there are a number of things that still have to fall into place, including commitments from equity partners and other financial institutions, he said.

A separate Danish pension fund confirmed in January that it will continue to back Cape Wind for now despite a Dec. 31 deadline fund managers had set for a final decision on a full commitment. Copenhagen Infrastructure Partners K/S manages funds for PensionDanmark, which in June announced it would invest $200 million in Cape Wind on the condition that a final commitment would be made by the end of 2013.

Bank of Tokyo-Mitsubishi UFJ is the lead bank in securing debt for the project and once commercial debt-side banks have been identified and funding levels specified, more information will be available on the remaining finances, Cape Wind spokesman Mark Rodgers said.

"Big picture: We expect to complete financing in the third quarter of this year," he said.

Cape Wind is counting on keeping costs down through an investment tax credit that expired at the end of 2013. The company will qualify for the tax incentive if it can prove that it spent 5 percent of the project's total construction cost by Dec. 31. Cape Wind officials have said they expect to qualify for the tax credits.

Despite vocal advocacy by the wind energy industry the tax credits have yet to be renewed as has occurred in past years after they were allowed to expire.

In December, Cape Wind signed a deal with Siemens to build the project's turbines and an electric service platform to convert its power for transmission. Simens has also offered to provide a $100 million investment for the project.

Cape Wind, however, still faces a handful of legal challenges. Opponents filed the latest lawsuit challenging the project in January, only a day before the U.S. Court of Appeals in Washington, D.C., denied a petition by wind-farm opponents appealing the Federal Aviation Administration's approval of the project.

In a statement released after Gordon's announcement, Audra Parker, president of the primary Cape Wind opposition group, the Alliance to Protect Nantucket Sound, said that the loan from EKF is another example of the project's reliance on conditional foreign investments.

"The high-priced and controversial project has yet to receive any U.S. financing or obtain a critical loan guarantee from the U.S. Department of Energy," Parker said. "Cape Wind's power contracts with Massachusetts utilities also terminate at the end of 2015 if Cape Wind has not begun construction."

A decision on whether Cape Wind will receive a $500 million U.S. Department of Energy loan guarantee is pending. Energy Department officials have declined to comment on the status of the loan. Gordon also declined to comment on the status of the company's application.

Cape Wind has also yet to complete necessary preconstruction surveys and still needs authorization from the National Marine Fisheries Service for harming marine mammals during construction, Parker said.

"Cape Wind is an outdated project that would cost ratepayers three times the cost of other readily available renewable energy — adding billions of dollars in unnecessary electricity costs for (Massachusetts) ratepayers to create jobs overseas," Parker said in the statement.

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