US Energy Company Braces for USD 1.6 Billion Offshore Wind Impairment Charge

Eversource Energy expects to record an impairment charge of between USD 1.4 billion and USD 1.6 billion related to three offshore wind projects in the United States the company owns in partnership with Ørsted.

The New England utility is currently in the process of divesting its 50 per cent ownership interest in three offshore wind projects: South Fork Wind, Revolution Wind, and Sunrise Wind.

Eversource currently holds its share of these three projects in two separate joint venture partnerships with Ørsted, one that holds only South Fork Wind and another that holds both Revolution Wind and Sunrise Wind. Eversource also separately holds a tax equity investment in South Fork Wind.

The company said that it is in advanced, exclusive negotiations with the selected buyer, described as ”a leading global private infrastructure investor”, to sell its ownership interest in these projects.

During the fourth quarter of 2023, Eversource said that it had identified certain impacts that will require further adjustment to the carrying value of its offshore wind investments for the three projects. Revised projected construction costs caused primarily by supply chain constraints relating to the projects’ installation vessels and foundation fabrication, and uncertainties related to the Sunrise Wind rebid process in New York’s current RFP (Request for Proposals) issued in November 2023, have impacted the aggregate offshore wind ownership interest potential sales price with the potential buyer, the company said.

These negative impacts and other developments described below required Eversource to evaluate its offshore wind business investments for an other-than-temporary impairment.

The evaluation of the impairment included considering factors such as increased construction forecasts for all three projects, due to vessel availability issues and supply chain cost increases related to foundation fabrication. The increase in costs due to these factors was estimated between USD 800 million and USD 900 million.

The evaluation also took into consideration that the New York State Public Service Commission denied Sunrise Wind’s petition to amend its OREC contract to increase the contract price to cover increased costs and inflation.

Subsequent to the denial, the general terms of an expedited offshore wind renewable energy solicitation in New York were released back in November. A primary condition for Sunrise Wind to participate in this new solicitation is to agree to terminate its existing OREC agreement. If Sunrise Wind participates in the new RFP and is successful, Sunrise Wind would have 90 days to negotiate a new OREC agreement at the revised price.

Eversource said that the company is working with Ørsted to determine whether to submit a new bid for Sunrise Wind, the price at which a new bid would be made, and the probability of success in the new bidding process. Based on these events, Eversource expects to record an after-tax other-than-temporary impairment in the range of approximately USD 600 million to USD 700 million for Sunrise Wind in the fourth quarter of 2023.

”Offshore wind projects continue to experience major supply chain disruption and inflationary challenges in the early stage of this growing industry in the U.S., and this impairment is an unfortunate reflection of the current market conditions we are facing,” said Nolan.

”Eversource remains focused on advancing the efforts to decarbonize the energy sector and accelerate electrification with much needed investments in transmission and other clean energy infrastructure through our regulated utilities.”

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