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Bluewater works on new financing; President confident of interim investment in wind farm

Bluewater Wind expects to name a new investor within two months, pumping badly needed capital behind its plans to build a wind farm off Delaware's southern coast. Peter Mandelstam, president of the offshore power development company, said he is confident a deal will be completed within 60 days with a new ownership partner and that Babcock and Brown, its embattled Australian financier, would be out of the project by the end of the year.

Bluewater Wind expects to name a new investor within two months, pumping badly needed capital behind its plans to build a wind farm off Delaware's southern coast.

Peter Mandelstam, president of the offshore power development company, said he is confident a deal will be completed within 60 days with a new ownership partner and that Babcock and Brown, its embattled Australian financier, would be out of the project by the end of the year.

Mandelstam declined to name the potential partner, but said a cash infusion will keep the Rehoboth Beach wind farm project afloat until financial markets fully recover from last fall's meltdown. The collapse of the financial markets last year halted many alternative energy construction projects worldwide and investment interest has only begun to recover, aided in the United States by the recent federal government commitment of millions in cash grants to alternative-energy projects.

"I am very confident we will get the capital we need to move forward and build this project," Mandelstam said in a recent interview.

The Bluewater project would have at least 79 turbines and could be the first U.S. offshore wind farm. But the... more [truncated due to possible copyright]  

Bluewater Wind expects to name a new investor within two months, pumping badly needed capital behind its plans to build a wind farm off Delaware's southern coast.

Peter Mandelstam, president of the offshore power development company, said he is confident a deal will be completed within 60 days with a new ownership partner and that Babcock and Brown, its embattled Australian financier, would be out of the project by the end of the year.

Mandelstam declined to name the potential partner, but said a cash infusion will keep the Rehoboth Beach wind farm project afloat until financial markets fully recover from last fall's meltdown. The collapse of the financial markets last year halted many alternative energy construction projects worldwide and investment interest has only begun to recover, aided in the United States by the recent federal government commitment of millions in cash grants to alternative-energy projects.

"I am very confident we will get the capital we need to move forward and build this project," Mandelstam said in a recent interview.

The Bluewater project would have at least 79 turbines and could be the first U.S. offshore wind farm. But the meltdown threw the project into uncertainty. Debt ravaged Babcock, an investment holding company that bought a majority stake in Bluewater in 2007 through its Babcock International subsidiary. That unit is being sold off over a two- to three-year period.

After months of plumbing the marketplace for capital, Mandelstam now says investor interest in the Delaware project has been strong. He's working with investment banker Credit Suisse to raise money, and said he expects to consummate a development equity deal that will provide enough cash to get Bluewater through to its financial closing, which it expects in late 2011.

At that point, Bluewater would need to commit to buying the turbines, and that would require a more substantial investment in what he expects to be at least a billion-dollar project.

Mandelstam said he anticipates capital markets will be restored to full health by then, and willing to provide the rest of the money needed.

Analysts say they think Mandelstam's confidence is justified by recent developments that suggest wind-power projects are staging a comeback.

Investment houses like Morgan Stanley and Citigroup Inc. have been more willing in recent weeks to invest in land-based wind farms now that the federal government is offering cash grants to help developers with upfront costs. The first of the grants, totaling $500 million, were announced Tuesday for projects ready for construction by the end of next year.

"We're already seeing something of a revival" for onshore wind project financing, said Tyler Tringas, a Washington-based wind-energy analyst for New Energy Finance. But he said the market is less certain for offshore developments, which investors see as riskier. "One should be cautiously optimistic, not exuberant."

No offshore projects were included in the first batch of federal grants, but Mandelstam said he expects to be available to take advantage of the program when his project and other offshore ventures are ready for construction in a few years.

Mandelstam said the expected new investment partner will keep Bluewater moving on its plan to build the wind farm about 14 miles off Rehoboth Beach, delivering electricity to Delmarva Power and municipal utility customers starting in 2013. Bluewater's power purchase contract with a utility is an asset no other U.S. offshore wind developer has right now.

$6 million for two towers

The clock is ticking for Bluewater.

The firm plans to construct next spring two $6 million meteorological towers to collect data on bird flight patterns and wind speeds, one off Rehoboth Beach at the site of the Delaware project, and the other off the New Jersey coast for a planned wind farm there.

Bluewater has until June 23 to cancel the project without paying a $6 million penalty to Delmarva Power under the power-purchase contract.

Mandelstam said new financing will pay for permitting costs, down payments on equipment, engineering work, a portion of the funds required to reserve the huge vessels for construction, and federal and state environmental reviews that may take two years. Some of the money would also go toward Bluewater's New Jersey project.

Tringas said it's reasonable for Bluewater to seek interim financing in today's market.

"We're talking about a tiny fraction of what's eventually going to be needed. It's not a big bet to back them," Tringas said.

Interim financing is realistic today, whereas six months ago it would have been much harder to acquire, said Brian Yerger, president of AERCA Advisers, an alternative-energy consulting company based in Wilmington. Once permits and environmental data are in hand, Bluewater will have a stronger case for investors, he said.

"You may see the light at the end of the tunnel. It may be somewhat far off into the future, but there's a light. Six months ago, we were looking into the abyss of another Great Depression," Yerger said. "He's trying to strike while there's an opportunity to fund further development, move the project further to completion. You need to have this interim step."

Tringas said Mandelstam's statement that he would seek help from "the capital markets" indicates he's not expecting to find one large backer, which he said is the usual approach in Europe and an easier way to fund a big project.

"It is still a very large question of whether they'll get the long-term financing. It's a totally different value proposition," Tringas said.

Mandelstam declined to itemize the company ownership, but said that along with Babcock, he is funding Bluewater through his company Arcadia Wind Power Ltd., which built a wind farm in Montana that began producing power in 2005.

Planning, applying for permits

Despite the financial challenges, Bluewater has continued with engineering and permitting work. It's worked with PJM Interconnection to process Bluewater's application to connect with the regional power grid. It lobbied the federal government on the structure of the grant program. And it filed comments on the new federal rules governing offshore wind development.

Bluewater is also working with Sussex County communities to choose a place where the cables carrying the electricity would come onshore, addressing local concerns about whether the cables would disrupt daily life, especially if they need maintenance.

Bluewater has been working to choose a turbine manufacturer and evaluating various sizes.

And Bluewater is trying to find other buyers of electricity so it can build more than 79 turbines. Bluewater has already said it would bid for a contract to supply the University of Maryland, and Maryland's government buildings. The Maryland Energy Administration is declining to publicly discuss, or even identify, any bidders until a winner is selected, said Christina Twomey Light, communications and marketing manager. Mandelstam declined to confirm whether Bluewater had in fact bid; the deadline to submit bids has passed.

Tringas said just three offshore wind farms have used heavy borrowing, as opposed to one big financial backer, to fund offshore projects. This approach, he said, leads to "a very complicated proceeding."

He added, "It can be done -- it has been done."


Source: http://www.delawareonline.c...

SEP 6 2009
http://www.windaction.org/posts/22057-bluewater-works-on-new-financing-president-confident-of-interim-investment-in-wind-farm
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