Bluewater Wind acquired by NRG

In a move that garnered praise from Gov. Jack Markell and Delaware Congressional delegation, NRG Energy Inc. this week announced that it had acquired Bluewater Wind, one of the nation’s leading offshore wind development businesses, from Babcock & Brown and Arcadia Windpower.
“This is great news for the future of off-shore wind power in our nation and in our state,” said Democratic Sens. Tom Carper and Ted Kaufman and Republican Rep. Mike Castle, in a combined statement.
“Both parties agree that the added financing capability comes at a critical juncture for Bluewater Wind – an established developer with promising projects already under way. Delaware is now better poised than ever to be the first state in the nation to have an off-shore wind farm. … Here in Congress, we continue to push legislation that will provide federal financial incentives to get this new energy industry up and running in Delaware and beyond.”
In a press conference this week, Bluewater President and Founder Peter Mandelstam said that they were very proud to have found a partner in NRG Energy and described it as a “badge of honor” for Delaware and the offshore wind business.
“We worked for seven months to find an investor and are very proud that NRG is that partner,” he said.
Mandelstam explained that Credit Suisse had brokered a classic competition between 87 firms in the Middle East, Far East, Europe and Asia before it was decided that NRG Energy, headquarterd in Princeton, N.J., was the top contender.
“Our neighbor next door was the best fit for us,” said Mandelstam. “It is a good marriage that Credit Cuisse brokered.”
Drew Murphy, NRG’s EVP and Northeast Regional President, is equally excited about the partnership.
“NRG’s acquisition of Bluewater Wind is really exciting for all of us at BRG and Bluewater Wind. This deepens our commitment to environmentally responsible power generation.”
In addition to the coal-powered Indian River Generating Station near Millsboro and the natural gas/coal generating station at Dover Energy in Dover, Del., NRG Energy Inc. has a fleet of diversified power generation assets that includes natural gas, oil, jet fuel, on-shore wind and solar in the United States, Asia Pacific and Europe.
Murphy said NRG was looking to expand its renewable energy fleet and came to the conclusion that offshore wind was a no-brainer, especially for the Northeast region.
“While we are pursuing solar and onshore wind, we really think that offshore in the East, this is the technology that makes sense and this seemed like the best opportunity.”
When asked about profitability for the venture, both men were cautiously optimistic, saying that, depending on permitting, they were looking at 2013 or 2014 to be producing power and seeing revenue and, depending upon the types of financing and tax credits available, would hope to see a profit relatively soon after that.
Murphy added that no precedent for financing had been set yet and they were hoping to be the first. Mandelstam added that, in Europe, there are 330 operating offshore wind projects and 16 under construction, and there are banks that were “eager to finance” similar projects in the U.S.
When asked about the federal permitting process and the delays the Cape Wind project – a proposed offshore wind farm on Horseshoe Shoal in Nantucket Sound off Cape Cod in Massachusetts – has seen at the Department of the Interior, Mandelstam was quick to point out the differences between the two projects.
“Cape Wind occurred under the old regulatory regime,” he said, adding that Bluewater is seeking its project approvals under the current regulations. He also said that Bluewater has not had the opposition and litigation issues that Cape Wind has had, which could delay any project.
“For the Delaware project, there’s no opposition, no litigation. Bluewater Wind has worked very hard to gain public support. No one expects to see what we have seen in Cape Wind,” he added.
Mandelstam said that, with Congress increasing the budget for the Minerals Management Service (MMS), they expect the Bluewater project to go much faster than Cape Wind.
Markell offered his support and excitement over the news this week.
“Delaware’s leadership has positioned it to be the first state in the nation to develop an offshore wind farm, bringing clean power to Delawareans and creating hundreds of jobs. Today’s announcement by NRG and Bluewater Wind marks an important step toward realizing this vision. The agreement will bring together the financing, experience and energy expertise necessary to develop the billion-dollar project – illustrating that smart environmental policy will help drive economic growth in Delaware.”
Bluewater Wind’s 25-year purchase-power agreement with Delmarva Power is the first of its kind in the nation and one of its primary assets. The agreement has a 12.5-cents-per-kilowatt-hour cost with a 2.5 percent inflation adjustment each year, or approximately $142 per megawatt hour.
In addition to the power purchase agreement, NRG’s acquisition encompasses a proposed New Jersey offshore project, term sheets with Delaware Electric Cooperative, several requests for proposals (RFPs) and the two meterological tower leases with the federal government, which are crucial for future financing, according to Murphy and Mandelstam.
“All of that is now under the NRG umbrella,” said Murphy. Mandelstam added that they have hopes to have the meterological tower constructed by the summer of 2010 and still have 2012 or 2013 as the projected start dates for turbine tower construction.
Arcadia Wind is a company owned and operated by Peter Mandelstam and his wife that they founded in 1998. Mandelstam explained that, while the company still exists, Babcock & Brown and Arcadia sold their interests to NRG. He explained it as a passive financial entity, “an investment vehicle for wind energy.”
The news early this year that Babcock & Brown were restructuring their debts did not stop Bluewater Wind from moving ahead in the quest to develop the nation’s first offshore wind farm. Officials at the company were confident an investor would come forward, as NRG Energy Inc. did this week.
As recently as this summer, Bluewater representatives visited with citizens in Bethany Beach and Middlesex Beach to gauge community support for bringing the transmission lines from the proposed wind farm ashore in either one of those areas.
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