Vineyard in talks to finance largest US offshore wind farm

Developer reports 'strong interest' from financiers including banks and tax equity investors in 800MW project off Massachusetts coast

Developer Vineyard Wind is now engaged in financing discussions for its 800MW Massachusetts offshore wind farm – set to be the first major array in the US – and sees 2021 as a “realistic” timeframe to have it fully in operation, according to the developer.

Vineyard sees “strong interest” from the financial community including banks and tax equity investors in the project, James Torgerson, chief executive of Avangrid, 50-50 joint owner with Copenhagen Infrastructure Partners (CIP), said on a recent conference call. He did not name them.

Spokesman Scott Farmelant declined to expand on those comments, confirming only that the developer is “organising financing” for what likely will be the nation’s first commercial-scale offshore wind project.

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The talks underscore the greater comfort level investors and lenders now have versus 18 months or so ago with opportunities in the emerging US offshore wind industry, despite its lack of experience with large project construction and operations.

Part of that is down to Avangrid's controlling shareholder Iberdrola, CIP, Equinor, Orsted and other European players with a proven track record of offshore project execution that dominate the US industry’s initial development stage.

Financiers also view Vineyard as one of the few near-term bankable projects to emerge thus far after it secured a contract last year with Massachusetts electric distribution companies to sell 800MW of capacity from its Atlantic zone 24km (15 miles) south of Martha’s Vineyard.

The developer was also allocated 54MW of capacity last February by regional grid operator ISO New England in its so-called secondary substitution auction.

Even as industry supporters keep raising their estimates for potential wind power capacity from existing lease areas along the east coast (23-25GW at last count), less than 10% have a firm market, a point not lost on the banks.

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The developer isn’t saying how much financing the project will require. Capex will determine the monetised federal investment tax credit (ITC) value. Vineyard is applying for a 24% ITC rate for the initial 400MW and 18% for the other 400MW.

Balance sheet, construction and equipment financing will also likely play a role. Avangrid, an energy generation, delivery and services company, has about $15.1bn in market capitalisation. CIP has around €6.8bn ($7.6bn) under management. Vineyard last year named MHI Vestas as its preferred supplier for 84, V164-9.5MW turbines.

2021 project completion?

Torgerson told analysts that the project’s timeline is “on track.” Vineyard has contracted, or will do so soon, about 70% of project supplies, so “we’re in pretty good shape from that standpoint.”

He expressed confidence about getting required permits and approvals by year-end. “So, I think 2021 is realistic” to have the project in full commercial operation.

“It’s just assuming things fall in line with the rest of the year,” he added. Once federal permits are in-hand by end-summer, Vineyard “can readily determine if we are going to be able to meet everything by 2021.”

If unforeseen delays arise, it will have a backup plan that maximises ITC benefits and energy production that the developer will derive from the project.

Initially, Vineyard had targeted 2021 to complete 400MW and May-June 2022 for the balance.

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