DOE loan guarantee for Cape Wind

The US Energy Department has made a conditional commitment for a $150m loan guarantee for Cape Wind, which would be the country’s first commercial-scale offshore wind project.

DOE in a statement says its decision is the first step toward issuing a loan guarantee for the proposed 468MW facility, whose first stage will be 363.3MW.

The move will likely provide a decisive boost for a project first proposed 14 years ago. It would be located in Nantucket Sound south of Cape Cod, Massachusetts.

Under the proposed financing structure for the Cape Wind project, DOE would be part of a group of public and private lenders.

"This co-lending arrangement will help build private sector experience with offshore wind projects in the U.S. while reducing taxpayer exposure,” DOE says.

DOE adds that it will continue to monitor the project’s development and efforts by developer Cape Wind Associates to complete project financing before closing the loan guarantee.

Communications director Mark Rodgers told Recharge last week that project financing should be finalized in the fourth quarter. Completion of construction is scheduled for the second half of 2016.

To date, three banks – the Bank of Tokyo Mitsubishi, Rabobank and Natixis – have collectively committed “in excess of $400m” to the project; Danish export bank EKF has committed $600m; PensionDanmark has committed $200m in mezzanine debt; and Siemens may take a $100m equity stake.

Project owner Energy Management Inc. (EMI) has not made public first stage cost. The State of Massachusetts several years ago estimated full project cost at $2.6bn.

The project has qualified for the 30% federal investment tax credit based on capital investment.

“The Department’s loan guarantees have assisted the launch of new industries in the U.S., and today’s announcement of a conditional commitment to the Cape Wind project demonstrates our intent to help build a strong U.S. offshore wind industry,” says Energy Secretary Ernest Moniz.

The loan guarantee amount is less than the $350m to $500m reportedly sought by EMI.

Cape Wind Associates President Jim Gordon called the announcement "an important endorsement by the United States government of the environmental, economic and energy benefits that offshore wind will provide to our country."

DOE in May 2011 rejected its initial application for a loan guarantee covering about 80% of the project's cost, reportedly under the Section 1703 program for innovative technologies.

At the time, DOE said that project financing was not advanced enough for inclusion in any of its loan guarantee programs.