The financial troubles of Bluewater Wind’s parent company will likely not have an impact on the project being debated in Delaware, observers said.
But one analyst said the Bluewater project has other issues that make it far from a sure thing, even if they sign a contract with Delmarva Power.
“I would not worry about the specific financial troubles of the parent organization right now,” said Nathaniel Bullard, a Washington-based senior analyst with New Energy Finance of London. “There’s plenty of time for any financial issues with Babcock, the parent company, to be ironed out.”
Bluewater Wind, which wants to build a wind farm off the coast of Rehoboth Beach, is owned by Australia-based Babcock and Brown, a global investor with assets in real estate, transportation and wind farms. It is the fourth largest owner of U.S. wind farms.
Babcock saw its value on the Australian stock market get cut in half last week, due to increasing concerns about its debt. The company faces a possible review by its lenders but Babcock said Monday it had not broken any covenants with its lenders.
The Tuesday edition of the Sydney Morning Herald reported Babcock planned to divest its wind energy assets to deal with its debt problems.
Jim Lanard, Bluewater spokesman, said only the company’s European wind farms were involved in the divestiture, which would be used to support Babcock’s wind development in North America. Bluewater would “absolutely not” be involved in the sale, he said.
In Delaware, despite indications on Friday that Bluewater and Delmarva were close to an agreement, no announcement was made Monday.
Senate Majority Leader Anthony DeLuca said last week the parties had until early this week to reach agreement, or the Senate would consider its next steps.
Delmarva took out a half-page ad in Sunday’s News Journal arguing land-based wind was “a better deal” than the Bluewater offshore proposal.
Bluewater has touted the backing of Babcock as one of the reasons Delawareans should feel comfortable moving ahead. Babcock has deep pockets, making it easier to get the financing to move ahead, Bluewater said.
“I don’t think they’re necessarily in dire straits,” Bullard said of Babcock. “This is a short-term blip at the moment at a pretty established financial institution.”
But Bullard said Delaware residents should still be concerned about Bluewater’s ability to see the project to fruition. Despite the penalties Babcock would have to pay for walking away, the project could end up becoming too expensive to get built, Bullard said.
Babcock pulled out from a large offshore wind farm project in Texas last year, Bullard noted. The economics didn’t work, he said
He also noted Bluewater’s possible turbine supplier, Vestas, has had problems with the mechanics in their turbines. Steel prices have been volatile, he said. And there’s the matter of signing deals with contractors, like ships, to build the wind farm, he said.
It’s hard to justify to ratepayers the economics of the Bluewater project compared to the lower-cost on-shore wind power, Bullard said.
“It’s all very abstract until it becomes an actual number ratepayers become responsible for. And then it becomes another political reality,” Bullard said.
By Aaron Nathans
The News Journal
17 June 2008
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