Eversource exiting offshore wind business
Eversource on Thursday announced it will be withdrawing from the offshore wind business, selling its stake in a 187,000-acre undeveloped lease area off Massachusetts to its partner Ørsted for $625 million and seeking a buyer for its 50% stake in three planned wind farms.
Eversource said the utility is expected to realize a loss in the sell-off of between $220 million to $280 million.
As part of the agreement, Ørsted said in a statement it would take full ownership of what had been a 50-50 partnership with Eversource at State Pier in New London along with the Port of Providence, the Port of Davisville and Quonset Point in Rhode Island.
Eversource is a 50-50 partner with Danish offshore wind company Ørsted on the three wind farms it intends to sell, which include South Fork Wind, Revolution Wind and Sunrise Wind. State Pier is expected to be used as one of the staging and assembly hubs for all of those projects. Construction of the South Fork project is already under way, and State Pier earlier this month hosted the first cargo ship associated with South Fork.
Eversource said it has had multiple bids on its stake in the three offshore wind farms and anticipates an announcement on a sale by the end of June.
Eversource and Ørsted have jointly contributed more than $70 million toward the current $255.5 million price tag for State Pier reconstruction. The Connecticut Port Authority, which owns State Pier, is expected to announce another cost increase on Tuesday during a special meeting of its board of directors.
Connecticut Port Authority Board Chairman David Kooris said Ørsted taking full ownership in the State Pier project will not have an impact on construction at State Pier or change Ørsted’s future use of the site for its three offshore wind farms.
“We have great confidence in Ørsted. We now get to partner with someone exclusively that has experience and is a global leader. There’s certainly an upside,” Kooris said.
Orsted has an existing agreement to lease State Pier for seven years with options for an additional 10 years. During gaps in activity, Kooris said Ørsted’s purchase of Eversource’s stake in State Pier strengthens the potential for a sublease of the property to other offshore wind developers, which translates into revenue for the state and Ørsted.
“It means there are still wind developers out there who will have to pay us for access (to State Pier),” Kooris said.
That potential might have been curtailed if Eversource had, for example, sold its stake to another offshore wind developer, Kooris said. Ørsted could also maintain sole use of State Pier should it be contracted for additional offshore wind procurements. Otherwise, Kooris said State Pier could host traditional cargo during breaks in wind projects.
Kooris said he thinks Ørsted’s control of the undeveloped lease area off the coast of Massachusetts will allow the company to be more competitive.
Ørsted said in a statement it also plans to take full ownership of the operations and maintenance hub in East Setauket, N.Y., and the charter agreement for the first American-built offshore wind service operation vessel, which is still under construction.
“I want to thank Eversource for our six-year partnership and for their expertise that has strategically advanced the onshore scopes of our three projects, which will deliver renewable energy to Rhode Island, Connecticut, and New York,” David Hardy, executive vice president and CEO of Region Americas at Ørsted, said in a statement.
“This acquisition further demonstrates our long-term commitment to building an American offshore wind energy industry and the value creation opportunities we see in the U.S. market,” he said.
“We have had the pleasure of working alongside Ørsted for more than six years and have experienced first-hand their expertise and global leadership in the offshore wind sector. We continue to expect that offshore wind projects built in our partnership’s lease area, including the three now under development, will play a critical role in decarbonizing the generation mix of Southern New England and New York,” Joe Nolan, Eversource’s president, CEO and chairman, said in a statement.
Eversource said in its statement it plans to use proceeds from the sale of the lease area and its interest in three wind projects to pay off company debt. And while it does not expect to make enough money on the sale to cover its investment, Eversource said “this impairment charge will not impact Eversource’s customers.”
Eversource said in a statement it expects its “second quarter 2023 results will include a non-recurring after-tax impairment charge currently estimated to range from $220 million to $280 million.”
Eversource’s sale of the lease area requires approval of The Committee on Foreign Investment in the United States.