Published on February 20th, 2009 | by Jennifer Kho0
Offshore Wind Blowing Into Portugal, If Cash Doesn't Get in the Way
Principle Power got some hard-won validation for its floating offshore wind-turbine platforms this week when it signed a deal with European utility Energias de Portugal, the world’s fourth-largest wind producer. The agreement calls for the two companies to develop a three-part project off the coast of Portugal.
The news doesn’t come as much of surprise, as Seattle-based Principle Power previously had told me it was partnering with EDP. But the fact that the utility has selected Principle Power’s WindFloat platforms — and has decided to go forward with the project — is a win for the startup. It’s also evidence that utilities are continuing to pursue offshore-wind technology in spite of the recession (read more about offshore wind here, here and here). “Offshore wind is one of our key priorities,” EDP CEP Antonio Mexia said in the announcement.
Founded at the end of 2007, Principle Power has come a long way in the last 14 months. It has doubled from five to 10 employees, and this milestone gives it a taste of success after at least one false start, when the Federal Energy Regulatory Commission rejected its plans to develop a set of small hydroelectric plants on the McKenzie River in Oregon.
The EDP contract also comes after a whole lot of due diligence and testing, said Jonathan Bonanno, president of Principle Power. “Everything’s working out as we planned and on schedule and on budget,” he said. “We started out with a lot of risk, but we’re really far down the track now and the confidence is building every day.” An endorsement from EDP definitely helps, he added. “They are saying believe we have some leadership in an upcoming area, and that has some weight.”
The project will be built in three phases, with the first consisting of a single WindFloat to demonstrate the technology and the last two phases representing “pre-commercial” and “commercial” deployment, according to the announcement. The companies are keeping the capacity of the project, and of its different phases, confidential for now, Bonanno said. In October, he had said the plans – at least at that time — called for the development of a 150-megawatt project, starting with a pilot test of one 5-megawatt turbine on a floating platform.
The companies still have to find funding for the project, however. They didn’t say how much the project was likely to cost, although Bonanno indicated it would be in the multimillions. “It’s a lot of money,” he said. “It does require a rather big tent of equity participants until the point we can get [enough experience] to get debt financing.”
He added that the project is seeking partners to invest cash in the project in exchange for equity ownership, and is already seeing “a large appetite” from strategic investors — such as potential suppliers for offshore wind projects — who want to tap into the information that will result from the pilot. “There’s a lot of learning that is going to happen on the first array, and there’s a lot of interest in getting in on that knowhow,” he said.
Principle Power, which has previously raised $2.3 million in convertible debt, is also still working on raising a $20 million round that it had discussed back in October. The round is taking some time to complete because of the economic downturn, as well as the fact that wind power isn’t an area of core expertise for many venture capitalists, Bonanno said. “We’ve got several interested parties, and we’re working to bring together the right elements so people feel confident,” he said, adding that the endorsement of EDP certainly helps. “They are saying ‘You get some leadership on the round from people … who have the domain expertise, and we’ll come around the table.’”
Bonanno called the quest for capital the company’s premium challenge right now, although he expects that the company will be able to close the deals. “Capital is a challenge for everyone right now,” he said. “But we’re talking with a lot of different parties — venture groups, sovereign funds, strategic partners, private equity — and we welcome any takers.”
Principle Power’s commitment to the EDP project makes up only a fraction of the $20 million it is seeking. The company is also working on projects in Oregon and in Maine, Bonanno said, and is looking at opportunities in the United Kingdom and in France.