London Array wind farm developers approach EIB for loan

The developers of London Array, the project to build the world's largest offshore wind farm in the Thames estuary, have approached the European Investment Bank (EIB) for a bailout, according to reports in The Guardian.

The German energy company Eon and its partners Dong Energy and Masdar have not yet begun work on the £3bn project amid fears over the soaring costs of offshore wind.

Spokespeople for E.on, and Dong refused to comment.

A spokesman for the EIB would not discuss individual projects but said:

"The EIB can confirm that we are committed to funding offshore wind projects in the UK and are currently in discussions with a number of project promoters who are actively promoting wind projects."

Original plans for the project predicted 630MW of wind energy coming on line by 2012, and a further 1,000MW in 2014.

Last summer Shell pulled out of the project citing costs concerns, but E.ON and Dong insisted plans were still on track.

However in January Paul Golby, chief executive of Eon UK, told the Financial Times that "the economics are looking pretty difficult… and its viability has been called into question by the falling prices of oil, gas and carbon dioxide emissions permits."

And a report issued yesterday by the British Wind Energy Association says that bank lending for both onshore and offshore wind projects has seized up at the same time as the devaluation of the pound against the euro has resulted in 20 to 30 per cent increases in the price of turbines.

The report warned that large numbers of offshore wind projects had stalled because of cost concerns, and called on the government to give direct capital grants or tax breaks to wind projects.

The government is introducing feed-in tariffs for wind power in 2010, but the wind industry says this is not enough.

The EIB is a bank owned by EU member states set up to "service the objectives of the European Union". It has granted wind farm developers loans before - Fluor and Scottish and Southern Energy, developers of the £1.3bn Greater Gabbard offshore wind farm, were offered a €100m loan.