Deepwater wins federal lease for $3.8 mil

Sun, 08/04/2013 - 2:00pm

Deepwater Wind has won two federal leases that were auctioned off for commercial offshore wind development by the Bureau of Ocean Energy Management (BOEM).

BOEM officials announced that the Providence-based company was the provisional winner on Wednesday, July 31, at 5 p.m. The total bid amount for both wind leases was $3.8 million.

This provisional win allows Deepwater to develop an offshore wind farm in federal waters off the coast of Rhode Island and Massachusetts, which total 164,750 acres. The area is divided into two parts: the south portion is 67,252 acres, and the north portion is 97,498 acres.

The monetary auction for the federal wind lease began online on July 31, and continued for 11 rounds until Deepwater remained the only bidder. It beat out two others companies that also bid for the lease, Sea Breeze Energy and U.S. Wind. Nine companies had been eligible to participate in this auction, but only these three had done so.

Deepwater’s win is not official until there is an anti-trust review by the Federal Trade Commission and the Department of Justice, which will take up to 30 days after the auction.

According to a press release, Deepwater Wind plans to develop a wind farm of up to 200 turbines in this area. The wind farm would be called Deepwater Wind Energy Center (DWEC), and will link Long Island, N.Y., to southeastern New England. Construction for this project could start as early as 2017.

Deepwater has a smaller project of five wind turbines that has been proposed in Rhode Island waters off the coast of Block Island. This wind farm, if approved by state and federal agencies, could start construction later this year.

Deepwater CEO Jeff Grybowski said that the federal project should not affect the timeline of the smaller Block Island project. “From my perspective, it shows our company’s commitment to build offshore wind,” he said.

In addition, Deepwater had been the only company of the nine eligible bidders that received a 20 percent discount on its bidding price for the north lease area, which bid for $3.7 million. It was given this discount because it holds a Joint Development Agreement (JDA) with the state of Rhode Island.

In a July 5 final sale notice, BOEM said that it would look at two things during the bid process “(1) a cash bid, and (2) a non-monetary credit, i.e. if a bidder holds a Power Purchase Agreement (PPA) or a Joint Development Agreement (JDA).”

Deepwater was awarded the credit on July 29 by BOEM officials.

“The fact is, they deserved the discount,” said BOEM Director Tommy P. Beaudreau in a press conference call on Wednesday. “We weighted that appropriately.”

In the press conference, Beaudreau said that the final $3.8 million amount was higher than some would have expected at the beginning of the auction.

“This was the first competitive lease sale,” Beaudreau explained in the press conference. “There were a range of opinions about how robust, how aggressive the bidding would be ... This final amount reflects a very robust and competitive sale.”