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December 6, 2009

Cape Wind in negotiations with National Grid

Prospects for offshore wind got another significant boost last week when Massachusetts Governor Deval Patrick announced that National Grid and Cape Wind are to enter into negotiations for a long-term contract under which the utility would purchase the electricity generated by Cape Wind. Such a Power Purchase Agreement will be a critical requirement for financing the proposed wind farm in Nantucket Sound, and getting it into construction and operation in time to qualify for federal incentives under the American Recovery and Reinvestment Act that would reduce the cost of the project by 30 percent.

"For both reducing greenhouse gas emissions and launching the offshore wind industry that will achieve those reductions, it is essential for Cape Wind, like offshore wind in general, to move from wishful thinking to reality," said Governor Patrick. "A contract with an electric distribution utility like National Grid will move Cape Wind one step closer to reality."

Governor Patrick called the move "a major milestone for what is expected to be the first offshore wind project in the United States." The power purchase arrangement still has to go through state regulatory review.

The agreement would not, however, be the first of its kind. Last year, the first Power Purchase Agreement in the U.S. for offshore wind was signed in Delaware. The agreement between Delmarva Power and Bluewater Wind, and approved by the State, is for at least 200 Megawatts of production.

In yet another recent significant development, Bluewater Wind was last month acquired from Babcock & Brown and Arcadia Windpower by NRG Energy, Inc. (NYSE: NRG).

NRG Energy, Inc., a Fortune 500 company, owns and operates one of the largest and most diverse power generation portfolios in the U.S.. Headquartered in Princeton, NJ, the Company's power plants provide more than 24,000 megawatts of generation capacity—enough to supply more than 20 million homes. NRG's retail business, Reliant Energy, serves more than 1.6 million residential, business, commercial and industrial customers in Texas.

Bluewater is currently working on more than seven offshore projects in the Northeast, including projects in Delaware and New Jersey in advanced stages of development. As noted, it has a 25-year power purchase agreement (PPA) with Delmarva Power & Light Company. In New Jersey, it is one of three preferred developers awarded a $4 million rebate from the state to build a meteorological tower, which collects wind data, for offshore projects. Bluewater also has proposed several offshore wind projects in other Northeast locations.


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