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Cape Wind Adds More Financing with Danish Pension Fund

What could be the first, and long-awaited, U.S. offshore wind energy project is one step closer to a reality with an additional investor. PensionDanmark, the largest labor market pension fund in Denmark, has pledged to invest $200 million (roughly 1.1 billion Danish krone), conditional upon the project obtaining its full financing needs and beginning construction by year's end.

A quick recap: Cape Wind, to be sited on the Horseshoe Shoal in Nantucket Sound, has been in the works for more than a decade. It's fully permitted by 17 federal and state agencies and has a 25-year commercial lease from the U.S. Department of Interior. The overall plan calls for 130 turbines (Siemens 3.6-MW units) with nameplate capacity of 468 MW, but actual output will be more like 420 MW given various factors such as line loss, turbine maintenance, and intermittency — "that's what we would expect to deliver, tying into the grid at full production," noted Cape Wind spokesperson Mark Rodgers. Construction is hoped to finally begin by the end of this year, likely making Cape Wind the U.S.' first offshore wind project.

Phase One of Cape Wind will target 101 turbines, only enough to cover the terms of its 15-year power purchase agreements (PPA) with National Grid and NSTAR, the state's two largest electric utilities. There's a parallel effort to get an offtaker to sell power for the remaining 29 turbines in Cape Wind's plans, and the expectation is that funding will come in while the first stage is being completed.

In anticipation of anticipated offshore wind projects along the Northeast U.S. coast, New Bedford, MA has been building out a terminal specifically to be future hub for offshore wind farm business. Clearly that would include Cape Wind — but the project's official staging area for now is in Quonset Point, Rhode Island and changing that would require new regulatory reviews and approvals.

Rodgers wouldn't say how much Cape Wind's projected costs are — "we regard capital cost as proprietary" — but industry watchers estimate it at $2 billion or more, so there's a long way to go. Rodgers wouldn't comment on progress in bringing in other financiers except to say more will be announced over the next few months. Back in March Cape Wind brought in the Bank of Tokyo/Mitsubishi UFJ to arrange debt financing; Rodgers did say that BTMU will be the largest provider of the project's commercial debt financing and bring in the remainder of it.

For its part, PensionDanmark is no stranger to infrastructure investments and especially wind energy. Among its more than DKK 6 billion (US $885 million) in infrastructure investments are the Danish offshore wind farms Nysted and Anholt and three U.S. wind farms in Texas and Pennsylvania. "At a time when bond yields are very low, this is expected to be an attractive investment opportunity for us," stated PensionDanmark CEO Torben Möger Pedersen. (In fact he pointed out similarities between the Anholt and Cape Wind investments.) It expects to invest another DKK 12 billion ($1.6 billion) in infrastructure assets over the next 4-5 years, half of which will be invested by the same fund, Copenhagen Infrastructure Partners' Copenhagen Infrastructure I.

Lead image: Money tree blowing in the wind via Shutterstock

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