Cape Wind has finalized a deal with Japanese banking giant Bank of Tokyo-Mitsubishi UFJ to secure loans for the 130-turbine wind farm the company plans to build in Nantucket Sound.
The project, which is expected to cost at least $2.6 billion, will be financed through a combination of equity from investors and loans from banks and other institutions.
In a statement Tuesday, Cape Wind officials said they signed a term sheet with the bank, which will act as the lead in coordinating commercial debt for the project.
“We have been impressed with Cape Wind’s dedication and perseverance in moving this clean energy project through the regulatory and development process, and are glad to be able to assist this financing.” the bank’s project finance director, Takaki Sakai, said in the statement.
The bank is expected to arrange between $1.8 billion and $2 billion in loans for the project and to convert a federal production tax credit into cash.
A lead bank typically recruits other banks or institutions that will issue bonds for a project. Cape Wind President Jim Gordon announced at a renewable energy financing conference in New York last month that Bank of Tokyo-Mitsubishi would be the project’s lead bank but the deal wasn’t official until now.
The debt side of the equation is only part of how Cape Wind plans to pay for constructing the wind farm.
Cape Wind needs at least an additional $600 million in equity.
Barclays Capital is Cape Wind’s financial adviser and will continue to advise the company on how to raise the remaining money for the project, according to Cape Wind’s statement.
“This is a significant step toward achieving financial close for Cape Wind,” Barclays managing director Theodore Roosevelt IV said in a statement about the deal with the bank.
Siemens Energy Inc., which is expected to build Cape Wind’s turbines, may provide $100 million for the project and the wind energy developer is seeking a loan guarantee for about $350 million from the United States Department of Energy, according to a source with knowledge of the application.
Among the comments sent to the Energy Department during a public comment period on the loan application was a scathing letter from officials with Mass Tank Sales Corp., which was originally expected to help build Cape Wind’s foundations and towers.
The deal with Mass Tank fell apart over disagreements about whether the Middleboro-based company planned to fund a manufacturing facility and Mass Tank’s contention that Cape Wind had used Mass Tank’s local connection to curry favor for the project.
In another letter to the Energy Department Cape Wind’s supporters, including two dozen environmental, industry and health groups, argued for the loan guarantee’s approval, writing that the project “will concretely advance the nation’s objectives in addressing the challenge of climate change while promoting energy security and economic development.”
Despite support from renewable energy advocates and the financial world, Cape Wind’s critics, including GOP members of Congress from Georgia, Oklahoma and California, continue to argue that the project is a bad investment and that it faces multiple legal challenges.
Cape Wind has signed agreements to sell more than 77 percent of its power to NStar and National Grid, but has yet to announce a buyer for the remaining output.
Cape Wind officials have said they expect to begin construction this year, which is necessary for the company to benefit from a federal production tax credit that expires Dec. 31. Without the credit, the price of the power will increase.
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