Update: NRG Energy�s Bluewater Acquisition

by Terrence Murray - November 10, 2009

NRG Energy and Bluewater Wind held a joint conference call yesterday in which Bluewater founder and President Peter Mandelstam and NRG’s Northeast Regional President Drew Murphy did not stray far from their talking points (they did not disclose the acquisition price of the all cash deal). However, the two did shed some light on NRG’s motivation in acquiring Bluewater’s development pipeline and on the different funding options NRG was considering to develop the Bluewater projects.

Credit Suisse, as we live-, advised Bluewater. According to Mandelstam the bank approached 87 potential bidders in Europe, Asia and the Middle East before fellow New Jersey company NRG placed the winning bid.

The most advance asset in terms of development is Bluewater’s 200-megawatt Delaware facility. Murphy says that facility is not expected to start producing revenues for NRG until it goes live in 2013 or 2014. When it does the electricity generated from the offshore wind farm will sell at a steep premium of 12.5 megawatts a kilowatt-hour. The company is also developing projects in New York, New Jersey and the New England region.

Why offshore wind? Murphy says scale was one motivation. It’s basically a lot easier to add turbines on an ocean than onshore.

On funding — access to NRG’s balance sheet was an obvious motivation for Bluewater — NRG says it plans to tap investment tax credits or a loan guarantee for part of the funding as well as a standard project finance bank loan. So far in the U.S.-based banks have yet to finance offshore wind projects, because none have been built. But Mandelstam says they are plenty of European banks with experience funding these types of projects and as such are comfortable with their� risk profile.

NRG is also open to� selling an equity stakes in the Bluewater projects to outside investors as a way to spread the risk.

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