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Bluewater's foes now on its side

But if Bluewater's offshore wind farm gets built, it may have both to thank for keeping the project afloat. Bluewater lost its financial backing when its Australian parent company, Babcock and Brown, was ravaged by debt and the global economic meltdown. The wind farm developer missed a critical deadline this summer to provide a letter of credit to Delmarva, which has a 25-year contract with Bluewater to buy power from turbines off the coast of Rehoboth Beach.

Delmarva, NRG appear to embrace offshore project

It wasn't that long ago that Bluewater Wind's main opponents were Delmarva Power and NRG Energy.

But if Bluewater's offshore wind farm gets built, it may have both to thank for keeping the project afloat.

Bluewater lost its financial backing when its Australian parent company, Babcock and Brown, was ravaged by debt and the global economic meltdown.

The wind farm developer missed a critical deadline this summer to provide a letter of credit to Delmarva, which has a 25-year contract with Bluewater to buy power from turbines off the coast of Rehoboth Beach. When Bluewater asked for an extension, Delmarva "kindly granted" it, said Delmarva spokeswoman Bridget Shelton.

"We want to work with Bluewater Wind to bring this contract to fruition, and so that's where we're at," said Shelton. She said the Bluewater deal would be good for Delmarva's customers, and help the utility meet its state-mandated requirements to buy clean energy.

"We did, in all essence, save the contract," she said.

By extending the deadline, Delmarva allowed Bluewater to survive the worst of the recession and tightening of credit markets, in effect tiding the firm over... more [truncated due to possible copyright]  

Delmarva, NRG appear to embrace offshore project

It wasn't that long ago that Bluewater Wind's main opponents were Delmarva Power and NRG Energy.

But if Bluewater's offshore wind farm gets built, it may have both to thank for keeping the project afloat.

Bluewater lost its financial backing when its Australian parent company, Babcock and Brown, was ravaged by debt and the global economic meltdown.

The wind farm developer missed a critical deadline this summer to provide a letter of credit to Delmarva, which has a 25-year contract with Bluewater to buy power from turbines off the coast of Rehoboth Beach. When Bluewater asked for an extension, Delmarva "kindly granted" it, said Delmarva spokeswoman Bridget Shelton.

"We want to work with Bluewater Wind to bring this contract to fruition, and so that's where we're at," said Shelton. She said the Bluewater deal would be good for Delmarva's customers, and help the utility meet its state-mandated requirements to buy clean energy.

"We did, in all essence, save the contract," she said.

By extending the deadline, Delmarva allowed Bluewater to survive the worst of the recession and tightening of credit markets, in effect tiding the firm over until it could lure new financial backing.

Bluewater officials expressed optimism Wednesday that it will have such a backer quite soon. Several sources familiar with negotiations said Bluewater is nearing a deal to sell a controlling interest to NRG, the owner of the coal-burning Indian River power plant and a pile of coal, natural gas, nuclear and oil plants.

A sale would solve the contractual issue raised by the missed deadline and provide deep pockets needed to build the proposed wind farm, which, at last count, would place at least 79 turbines about 14 miles off the coast of Rehoboth Beach.

Bluewater's main asset is the Delmarva contract, signed after much wrangling. Delmarva had argued that offshore wind power would cost too much, but public and political pressure, combined with concessions on price and the size of the project, resulted in a power purchase agreement on June 23, 2008.

The contract includes milestones that Bluewater was required to hit, including provisions of letters of credit to demonstrate credit-worthiness.

Bluewater delivered the first -- a $3 million letter -- soon after the power contract was signed last year, Shelton said.

The second was to show a $6 million credit line and was due July 8, 2009. Bluewater has not issued the second letter, Shelton confirmed.

Under the contract, Delmarva has the right to terminate the power purchase deal if the conditions are not met. It has not exercised that authority.

Shelton said Delmarva would "be pleased" with "any good news to surface, to bring this contract to fruition."

Bluewater Delaware project director Rob Propes said Wednesday he had no new information on the status of negotiations with investors, which he has not named, other than to say, "I think things'll work out."

He declined to respond to a question about how the election of Chris Christie in New Jersey would affect a potential sale, since defeated Gov. Jon Corzine had been aggressively pushing offshore wind.

As for the missed deadline, Propes confirmed the timeline offered by Shelton, adding, "Given that's going to be a nonissue fairly soon, I probably won't even comment on it."

Tom Noyes, a Delaware-based blogger who writes about business and finance for the British newspaper The Guardian, said Delmarva likely has no interest in reopening the question of new sources of homegrown power that led to the Bluewater bid. Bluewater is already embedded in the company's plans to meet a requirement that 20 percent of its power for standard offer service customers come from renewable sources by 2019, Noyes said.

"It just may be the case that Delmarva has moved on," Noyes said.

NRG officials did not answer an inquiry about the status of negotiations on Wednesday and has refused to comment on a potential Bluewater acquisition.

NRG fought the Bluewater project as a competitor after the state in 2006 issued a request for proposals to build new in-state generation to stabilize prices and provide greater reliability on the Delmarva Peninsula. Bluewater defeated NRG's proposed coal gasification plant in 2007, and during the process, NRG questioned how effective an offshore wind farm would be.

Angie Storozynski, an analyst with Macquerie Capital in New York, said NRG is in strong financial shape, with little volatility in its earnings, even as it operates in a volatile business.

Although NRG has plenty of free cash, it doesn't need a lot of cash on its balance sheet to finance a large power plant, she said. It can leverage 60 to 70 percent of such a project through debt, as long as there's a long-term contract with a buyer for the power, she said.

She wouldn't speculate about a possible deal with Bluewater.

NRG and Delmarva fought against the project in large part because they didn't believe in the economics at the time, but things have changed, Noyes said.

"You know how people say soccer is the sport of the future and always will be? I think that's how people have felt about wind power," said Noyes, whose blog is called TommyWonk. Company officials thought of offshore wind as "experimental, nice to do someday. Well, someday is here."

"People weren't ready. People had to be convinced the whole thing makes sense. I think it's really happened," Noyes said.


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

NOV 5 2009
http://www.windaction.org/posts/22966-bluewater-s-foes-now-on-its-side
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