Cape Wind faces end-of-year race to secure $200 million

UNITED STATES: The developer of Cape Wind risks losing a $200 million investment in the offshore project if it fails to start building the wind farm before the end of the year.

Cape Wind's meteorological tower... the only part of the project to be built

Last month Cape Wind Associates, the developer of the 454MW project to be built 7.7 kilometres off the Massachusetts coast, announced it had secured a mezzanine debt investment of $200 million from Danish pension fund PensionDanmark.

However, speaking exclusively to Windpower Monthly, PensionDanmark chief executive Torben Möger Pedersen revealed that his firm's loan was dependent on the project securing subsidy support from the US federal government.

"Our commitment to Cape Wind is conditional on the project being started before the end of the year," said Möger Pedersen.

Cape Wind Associates is hoping to secure an offshore investment tax credit (ITC) from the US government and, under current US law, both this and the production tax credit (PTC) are only available to projects that have begun construction by 1 January 2014.

A Cape Wind Associates spokesman told Windpower Monthly he was confident the project, which has faced years of delays due to local opposition, would meet the construction start terms as set out by the Internal Revenue Service (IRS) earlier this year.

According to IRS Notice 2013-29, released on 15 April, to meet the "under construction" qualification, developers must either: show "physical work of a significant nature" has begun on their project, either at the site, or in a factory to which the developer has given a binding order for specially designed equipment; or show that at least 5% of the total project cost has been incurred.

It is understood that Cape Wind Associates is aiming to meet the latter definition and sign contracts totalling 5% of the estimated $2.6 billion overall project cost by the end of the year. This would mean spending $130 million by 1 January 2014.

On Monday Cape Wind Associates signed a $15 million pre-cabling works contract, and it is expected that several more cabling deals will be announced in the coming weeks.