The developer of what could become the first offshore wind farm in the United States has announced an agreement with a Japanese bank to help finance the multibillion-dollar project.
Cape Wind Associates called the term sheet agreement with Bank of Tokyo-Mitsubishi UFJ (BTMU) a "financing milestone" for the 468-megawatt, 130-turbine farm off the coast of Cape Cod, Mass.
The agreement means BTMU will be providing a "significant amount" of debt financing for the project and will also arrange banks for the remaining commercial debt portion of the project, said Cape Wind spokesman Mark Rodgers. The specific amount of debt financing, which will help pay for development and construction costs, could not be disclosed. The company is also in discussions with equity investors, Rodgers said.
Today's financing agreement is the first for a project that outside analysts have estimated will cost $2.6 billion.
"Obtaining financing is one of the last steps to complete before proceeding with the construction of the project," said Cape Wind President Jim Gordon. "Together with BTMU, we are engaging a group of experienced financial institutions as our core banking group and look forward to completing the financing of America's first offshore wind farm, which will deliver significant environmental, energy and economic benefits to Massachusetts and the surrounding region."
Cape Wind said it expects to complete project financing and begin construction by the end of the year, which would qualify it to receive an investment tax credit covering 30 percent of a project's costs. The ITC is set to expire in December.
Environmentalists, labor groups and the Obama administration have backed Cape Wind's bid to become the nation's first offshore wind farm. But after more than a decade of development and years after it received final Interior Department approval, the project is yet to place steel in the water.
Last week, environmental groups including Greenpeace, National Wildlife Federation, Natural Resources Defense Council, Sierra Club, Mass Audubon and Conservation Law Foundation urged the Energy Department to approve a loan guarantee for the project that would help lower financing costs. A Government Accountability Office report last week said DOE was considering using $15.1 billion for loan guarantees to 13 projects, including wind projects (E&ENews PM, March 15).
Cape Wind has secured power purchase agreements with National Grid and NSTAR for 77.5 percent of its power and has announced the purchase of a marina at Falmouth Harbor on Cape Cod to support project maintenance and operations.
The company in November said it is pursuing financing for the project's output that already has been sold, which would be generated by about 101 turbines.
Aside from Cape Wind, there are a couple of other offshore wind projects that are close to entering construction. They include Deepwater Wind's 30 MW Block Island project in state waters off Rhode Island and Fishermen's Energy's 25 MW project in state waters off New Jersey.