UPDATE: Cape Wind in Jeopardy as Two Utilities Seek to Terminate Power Purchase Agreements

The skies are looking grayer for the Cape Wind offshore wind project as reports indicate that the developer has dropped contracts to buy land and facilities just two weeks after utilities terminated power purchase agreements (PPAs) due to missed deadlines.

According to the Boston Globe, Cape Wind stopped making payments last week to Quonset Development Corporation in Rhode Island to lease 14 acres of land for a turbine component assembly area. Developers also terminated a purchase-and-sale agreement with a marina in Falmouth, Massachusetts that was intended to transport workers to and from the project site. It is unclear as to whether Cape Wind still has a $4.5 million agreement with a newly built port in New Bedford, Massachusetts, which was also intended to be a turbine assembly area

ISO New England, which operates the regional power grid, also suspended Cape Wind from participating in New England’s wholesale electricity markets last week.

We will continue to update this story as more details unfold. 

Original story from January 7, 2015:

While it seemed like Cape Wind was steaming ahead to become the first U.S. offshore wind farm, the $2.6 billion project hit another brick wall today as two utilities announced that they will back out of power purchase agreements (PPAs) established in 2012.

National Grid and NSTAR, which had agreed to buy 50 percent and 27.5 percent of the 468-MW offshore project’s production respectively, filed to cancel their contracts because the project failed to complete financing by December 31, 2014.

“Unfortunately, Cape Wind has missed these critical milestones,” Northeast Utilities spokeswoman Caroline Pretyman said in an e-mail to the Boston Globe. “Additionally, Cape Wind has chosen not to exercise their right to post financial security in order to extend the contract deadlines. Therefore the contract is now terminated.”

To date, Cape Wind had secured more than $1 billion in debt financing, including $600 million with The Bank of Tokyo-Mitsubishi UFJ (BTMU), $600 million from Danish credit export agency EKF, $200 million from PensionDanmark, and a $150 million loan guarantee from the U.S. Department of Energy.  Developers had expected to commence construction by the end of 2014, but were unable to meet that goal.

Cape Wind Associates are now appealing the utilities’ decisions to cancel the PPAs, citing “extended, unprecedented and relentless litigation” that have delayed the project significantly, according to several reports. They claim that a provision in the contract should validate the extension of the financing deadline.

Indeed, Cape Wind has faced merciless opposition since its inception more than a decade ago. The project has been taken to court countless times, most notably due to a group of opponents called the Alliance for Nantucket Sound that is supported by the Koch brothers, yet it has won more than 26 cases. A judge recently knocked down these opponents, stating that they are an “obdurate band of aggrieved residents of Cape and the Islands,” who “doffed their green garb and draped themselves in the banner of free-market economics.”

Cape Wind spokesman Mark Rodgers said in an e-mailed statement to Bloomberg that “it would be a travesty if delays caused by an interest group funded by one of the Koch brothers could stop [the project].” 

If these contracts are terminated, it could be a significant blow to the project, however “it’s possible it could be resuscitated,” according to Amy Grace, wind industry analyst at Bloomberg New Energy Finance. 

We will update this story as more information becomes available.

Lead image: Offshore wind sunset via Shutterstock

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