July 02--The federal government has put its money where its mouth is, announcing Tuesday that it has conditionally approved a $150 million loan guarantee for Cape Wind.
The U.S. Department of Energy loan guarantee, combined with already announced commercial debt and equity for the 130-turbine offshore wind farm, would give the project's developer more than half of the projected $2.6 billion cost, an estimate based on three-year-old filings with Massachusetts regulators.
Through email Energy Department spokeswoman Dawn Selak declined to provide an agency official to answer questions about the loan, how the decision was reached, or why the amount was less than the $500 millionCape Wind requested.
Peter Davidson, the agency's executive director of the Loan Programs Office, wrote in an email forwarded by Selak that Cape Wind had achieved milestones related to financing, permitting and power-purchase agreements that allowed for the conditional commitment, which is an indication the department will support final approval once other criteria are met.
Selak and Davidson declined to respond to a series of other questions about the loan.
Cape Wind spokesman Mark Rodgers said that the direct support from the federal government is helpful on two fronts: the actual financing and the message it sends to the commercial financing sector.
Although the loan is less than what the company requested, it's a good outcome and frees additional money for other worthy projects, Rodgers said.
To Cape Wind's opponents, however, the Energy Department's record will always be colored by loans like the one provided to solar energy giant Solyndra, which failed three years ago after receiving $535 million in loans from the agency through a separate program.
The Cape Wind loan is also far less than the developer requested in 2011, said Audra Parker, president of the Alliance to Protect Nantucket Sound, the project's primary opposition group.
"It's a conditional commitment again and it's a far cry from the $1.97 billion that Cape Wind tried to get in the original application," she said. "I think it's a vote of low confidence in the project moving forward."
Cape Wind, first proposed in 2001, has faced stiff opposition from critics who say the project will irreparably harm Nantucket Sound, is too expensive and is a danger to navigation. Supporters argue that it is potentially the first step toward establishing a new industry that will provide clean energy, good jobs and help address climate change.
The Interior Department approved the project in 2010, but legal challenges and questions about whether it could be financed have lingered.
In 2011, the Energy Department put a nearly $2 billion loan for the 130-turbine Cape Wind project on hold, essentially killing the application.
That program, according to Rodgers, was funded by federal stimulus money.
"That was a time when the commercial financial system had basically collapsed and was not functioning," he said, adding that it would have been difficult for Cape Wind to secure financing at that time without "extreme" government support.
But the stimulus-based loan program -- known as 1705 -- ran out of money before a decision was made on Cape Wind, Rodgers said.
About two years ago, Cape Wind applied for another loan program known as 1703 and established under the Energy Department as part of the Energy Policy Act of 2005, for $500 million, Rodgers said.
Cape Wind's loan application was scrutinized very closely by Energy Department officials and their consultants, Rodgers said.
Rodgers declined to provide an updated cost estimate for the project, saying that the company continues to work on securing debt and equity.
Over the past year, commercial banks, Siemens -- the company expected to provide the project's turbines -- and overseas credit agencies have approved a series of conditional loans and investments for the project totaling $1.3 billion.
"We expect to complete project financing by the end of this year," Rodgers said, adding that additional announcements about financing are expected soon.
Not so fast, said Parker.
The alliance has an outstanding appeal of a federal lawsuit challenging a contract between Cape Wind and NStar for power from the project, she said.
In addition, questions about migratory birds and right whales remanded by a federal judge to the U.S. Fish and Wildlife Service and the National Oceanic and Atmospheric Administration'sNational Marine Fisheries Service, respectively, haven't been addressed, Parker said.
Fish and Wildlife is waiting on the Department of Justice to file its response to the remand, spokeswoman Meagan Racey wrote in an email.
The Fisheries Service has no updates on an incidental-take permit for right whales required by the judge, NOAA spokeswoman Maggie Mooney-Seus wrote in an email.
Cape Wind also has the choice to bid on leases proposed last month for a large swath of ocean south of Martha's Vineyard instead of building in the middle of Nantucket Sound, Parker said.
Follow Patrick Cassidy on Twitter: @pcassidycct.
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