Eversource Energy has formally ended its costly foray into offshore wind development, finalizing the sale of its last two offshore assets and predicting a half-billion-dollar loss as a result.
The utility announced Sept. 30 that Global Infrastructure Partners (GIP) had closed on its purchase of Eversource’s share of South Fork Wind and Revolution Wind, which respectively completed and started construction this year off the Rhode Island/Massachusetts coast.
When the deal was announced in February, Eversource said it expected to receive $1.1 billion as a result. It said Sept. 30 that adjusted gross proceeds instead will be $745 million because of higher-than-expected costs associated with South Fork and Revolution.
Eversource said it anticipates other factors to cause it to record a net loss of approximately $520 million on the divestiture.
The company previously recorded a $1.95 billion after-tax impairment for 2023, also because of the struggles of its offshore wind venture. (See Eversource Finds OSW Buyer, Takes $1.95B Hit for 2023.)
Eversource had been looking for an exit at least as far back as 2022, when the offshore wind industry began to slide into a financial crisis in the U.S. It will remain involved with offshore wind, but only in the onshore transmission that interconnects the projects.
CEO Joe Nolan hailed the company’s success in refocusing as a “pure-play regulated pipes and wires utility.”
“We are proud of the role we have played to advance offshore wind projects,” he said, “and we will continue to be a leader in employing our transmission expertise to conduct onshore work that supports the clean energy transition and enables the continued development of renewable resources for our region.”
Eversource, New England’s largest distribution utility, and Ørsted, the world’s leading offshore wind developer, teamed up in December 2016 in a 50-50 venture to enter the nascent U.S. offshore wind market.
Their efforts progressed steadily, but not quickly enough to beat the combination of rising costs and supply chain constraints that led to the 2023-2024 cancellation of most of the first wave of offtake contracts signed for wind farms proposed off the Northeast coast.
The companies did complete South Fork, the first operational utility-scale wind farm in U.S. waters, but it is only 12 turbines rated at a combined 132 MW — just 0.44% of President Joe Biden’s goal of 30 GW by 2030. And it cost more than expected.
Eversource has been chipping away steadily at its ownership share in the joint venture, selling Ørsted its share of an undeveloped wind lease area and the Sunrise Wind project. The latter netted Eversource approximately $370 million, lowering the anticipated loss associated with its offshore wind divestiture from nearly $900 million to a bit more than $500 million.
Ørsted said in a news release that it was excited to team up again with GIP, “a trusted and longstanding” partner worldwide. GIP is now a component company of BlackRock, which announced Oct. 1 that it had completed the acquisition. Skyborn Renewables, a GIP portfolio company, will manage ownership of the 50% stake in South Fork and Revolution.
“Partnering on the Revolution Wind and South Fork Wind projects marks a significant step in expanding Skyborn’s presence in the U.S. offshore wind market,” Skyborn CEO Patrick Lammers said in a news release. “Moreover, this joint venture with Ørsted perfectly exemplifies our successful partnership model. This transaction offers strong value potential for our shareholders and partners through a well-structured approach that carefully mitigates key risks.”
Eversource indicated in a Feb. 13 filing with the Securities and Exchange Commission that it had guaranteed GIP a 13% pre-tax, equity internal rate of return as part of the sale agreement. It also agreed to cover increases in construction costs for Revolution.
The company’s Sept. 30 SEC filing detailed $890 million in costs it has incurred under terms of its agreement with GIP: approximately $225 million in non-construction costs for South Fork and Revolution, $315 million in post-closing adjustments for Revolution and South Fork, and $350 million in higher construction costs for Revolution because of the previously announced pushback of its expected commercial operations date. (See Revolution, Sunrise OSW Projects Face New Delays.)
That is separate from the factors that reduced Eversource’s adjusted gross proceeds from the sale of Revolution and South Fork from $1.12 billion to $745 million: approximately $150 million in capital spending that did not take place as expected and approximately $225 million because of the delays with Revolution.
Eversource said other factors still could decrease — or increase — its net proceeds from the sale: Revolution’s eligibility for 40% tax credits, the ultimate cost of construction for Revolution, further delays in construction of Revolution, and lower operation costs or higher availability of Revolution and South Fork.
