Cape Wind officials, who several months ago were confidently predicting financing for the offshore wind farm would be wrapped up by the end of this year, are now saying they need more time. The big question is whether there’s enough of it.
Cape Wind spokesman Mark Rodgers said in an emailed statement that a financial closing won’t occur this year. “After Cape Wind achieved long-awaited major victories in federal court in March, we planned to reach a financial closing on the project by the end of this year. For a project of this magnitude, we have concluded additional time will be required to achieve this objective,” he said.
While Rodgers said Cape Wind was working hard to make the wind farm a reality, court documents filed earlier by the company’s president indicate that may not be possible. In a court affidavit filed in July, Cape Wind President Jim Gordon said financing on the project needed to close by the end of September 2014 to have a chance at beginning construction on the project before a critical Dec. 31 deadline next year.
The wind farm relies on two power purchase contracts with National Grid and NStar that expire on Dec. 31 next year unless Cape Wind has started “physical installation” into the seabed of equipment “integral to the assembly of the wind turbine generation units,” according to Gordon’s affidavit. He said it would take 12 to 14 months from the completion of financing to fabricate, deliver, and commence installation. With the financing package not completed yet, meeting the Dec. 31 deadline may not be possible.
Gordon’s affidavit was filed in a bid to convince a judge in Washington, D.C., to move court proceedings along more quickly, so it’s possible his timetable had some wiggle room built into it or that his construction timetable could change. But, as his affidavit points out, the Dec. 31 deadline has no wiggle room.
“Without the power purchase agreements in place, the project cannot be built and operated. If the power purchase agreements are terminated, the project cannot be financed and the millions of dollars invested to date would be lost,” he said.
Cape Wind needs to borrow about $2 billion and convince investors to pony up about $500 million. Gordon and his staff have been working on the financing for years. Several foreign investors have indicated a willingness to fund a portion of the project, but a complete financing package has remained elusive.
In addition to the financing challenge, Cape Wind is also facing new political and economic realities.
Gov. Deval Patrick, perhaps Cape Wind’s biggest champion, is preparing to leave office next month. He will be replaced by Charlie Baker, a Republican who in the 2010 campaign against Patrick called Cape Wind a “sweetheart deal.” During this year’s campaign, Baker said he remained opposed to Cape Wind but felt the project itself was a done deal not worth fighting about. “I don’t think it’s a good deal for ratepayers, but it’s over,” he said. “There won’t be any projects that are bid like that in my administration.”
The economic environment for Cape Wind is also challenging. Cape Wind’s power contracts are high-priced, and they appear even more so now with relatively low-priced natural gas plentiful and on-shore wind available at much lower prices.
Cape Wind also may need some cooperation from the two utilities with which it negotiated power purchase agreements, NStar and National Grid. Their contracts require extensions on a number of critical milestones related to the project and it’s uncertain whether the utilities, particularly NStar, which was forced to sign the power agreement to gain Patrick administration approval for a merger with Northeast Utilities, will be cooperative.
The Alliance to Protect Nantucket Sound, the Cape Cod nonprofit backed by Bill Koch that has led the charge for more than a decade against Cape Wind, is also mounting more legal challenges against the project, including an appeal led by Harvard Law Professor Lawrence Tribe.
Audra Parker, executive director of the Alliance, said the project is now in the wrong place at the wrong time and that’s why the financing is proving so difficult to pull together. “This is a project that’s in trouble,” she said.
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