PROVIDENCE – Orsted A/S, one of the world’s largest offshore wind developers, announced Thursday that it has agreed to buy partner Eversource Energy LLC’s interest in an uncontracted federal offshore wind lease off the coast of Rhode Island that it currently jointly owns. two companies.
The $625 million deal will not include Orsted and Eversource wind turbine farms that operate or plan to develop off the coast of Rhode Island, Massachusetts and Long Island.
In addition to the rights to use the seabed, which is in the early stages of development, the agreement includes contracts and partnerships for key operating assets in the Northeast.
According to an Orsted news release, the lease area contains approximately 187,000 uncontracted acres of seabed for US offshore wind energy and has a potential capacity of up to four gigawatts.
Within the framework of the agreement Orsted will acquire contracts and leases for strategic port facilities and other assets. Orsted said it will take full ownership of partnerships with the Port of Providence, the Port of Davisville and Quonset Point, all in Rhode Island, and the New London State Pier in Connecticut.
Orsted will also be fully owned operations and maintenance center in East Setauket, NY, and for the first US-built offshore wind service vessel to be built in Louisiana.
The $625 million contract strengthens Orsted’s position in offshore wind and demonstrates the company’s commitment to building the American offshore wind industry, Orsted said.
“I want to thank Eversource for our six-year partnership and their expertise in strategically advancing the onshore scope of our three projects that will deliver renewable energy to Rhode Island, Connecticut and New York.” David Hardy, group executive vice president and Americas managing director of Orsted, said in a statement. “This acquisition further demonstrates our long-term commitment to building the US offshore wind industry and the value creation opportunities we see in the US market.
“In addition to the full subsea ownership our team is familiar with after years of working in this industry, we will also be the sole bidder on our New York 3 and Rhode Island 2 active offshore wind requests,” Hardy said. “The combination of the subsea and additional components of this agreement further creates a key hub for our operations and future opportunities in the Northeast.”
In addition to being close to Orsted’s existing projects, the leased areas also offer shallow water depths and favorable wind speeds compared to other locations in the US and around the world. Located approximately 25 miles from the southern New England coast, the site can also serve the Massachusetts, Rhode Island, Connecticut and New York markets.
The agreement is subject to regulatory review and is expected to close in the third quarter of 2023.
Eversource said last year it was reviewing its offshore wind portfolio and considering whether to sell related assets.
During an earnings call earlier this month, Eversource Energy Ltd CEO Joe Nolan said the company was “risking the business” and would sell all of its offshore holdings by July 1. According to him, the assets will be distributed among the three companies included in the “short list of buyers”.
Eversource continues to pursue the sale of its existing 50% stake in three of its jointly owned offshore wind projects: South Fork Wind, Revolution Wind and Sunrise Wind.
Eversource, New England’s largest energy company, was a first mover in the blue economy. In 2019, Eversource paid $225 million for a 50% stake in Orsted-led projects. The joint venture included the Revolution Wind and South Fork Wind Farm projects, as well as 257 square miles of “highly coveted” land off the coast of Massachusetts and Rhode Island.
The joint venture recently received the OK from the RI Coastal Resources Management Board to proceed with the Revolution Wind 2 project, which could have up to 65 turbines. Located 35 miles off the coast of Rhode Island, the mammoth turbines will be anchored to the ocean floor in the heart of one of the world’s premier fisheries.
“We won’t own the wind farm,” Nolan said. “But [Eversource will continue operating] transmission assets to help them inject clean energy into the New England and New York grids.”
Eversource has invested a total of $2.16 billion in offshore wind projects through March 2023, said the company’s chief financial officer, John M. Moreira during this month’s earnings call. The company had forecast an additional $1.9 billion to $2.1 billion in construction costs this year.
The sale of its offshore wind stake followed Eversource’s dire rating from Moody’s, the global credit rating agency.
In a rating action last year, Moody’s analysts gave the company a “negative outlook” and wrote that Eversource’s financial performance had been hurt by the increased debt it had taken on to finance its offshore wind projects. Cash flow from the projects remains “years away,” Moody’s said.
Contact PBN staff writer Sam Wood at Wood@PBN.com
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