Orsted in $625m deal to buy US offshore wind lease from utility partner Eversource Energy
Move is first step by Massachusetts-based company to exit offshore generation to focus on regulated aspects of its business, including transmission
US offshore wind pacesetter Orsted will acquire uncommitted lease acreage and operations and maintenance assets from local utility partner Eversource Energy in a deal valued at $625m, the companies announced today.
The joint venture (JV) is developing three of the US' earliest projects – 132MW South Fork and 920MW Sunrise, both bound for New York, and 704MW Revolution, split between Connecticut and Rhode Island.
As part of this agreement, Orsted will acquire contracts and leases for strategic port facilities and other assets, including the Port of Providence, the Port of Davisville, and Quonset Point, all in Rhode Island.
The agreement is subject to regulatory review and is expected to close in the third quarter of 2023.
“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,” said David Hardy, group executive vice president and CEO Americas at Orsted.
“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 US market.”
“We have had the pleasure of working alongside Orsted for more than six years and have experienced firsthand their expertise and global leadership in the offshore wind sector,” said Joe Nolan, Eversource’s CEO.
Eversource said it has entered into a binding letter of intent with Orsted to use a portion of the proceeds from the lease area sale to provide tax equity for the South Fork Wind project through a new tax equity ownership interest.
“Eversource will recover this investment primarily in the form of investment tax credits that will be received around the time of the project’s commercial operations date,” the utility said.
On the company earnings call in February, Nolan said: “There is significant interest in the lease here as well as the projects and we are going to get a fair price for these assets.”
A buyer has not been identified for the three projects underway and no date set to conclude a potential sale, according to Nolan.
The company is being advised by Goldman Sachs and Ropes & Gray and said it would use the proceeds from any sale to help fund some $18bn of regulated investments it's required to make by 2026, plus extra spending such as offshore wind transmission assets.
Nolan said that while the company is pursuing an exit of the unregulated offshore wind business, its regulated companies will build “many of the facilities that will enable more than 9GW of offshore wind generation to reach the homes and businesses of Southern New England”.
Massachusetts will need some $1bn in grid upgrades to integrate the 5.6GW of offshore wind it has mandated. The state Department of Energy Resources this week applied to the federal Department of Energy for a $250m grant for upgrades, while local utilities, including Eversource, and ratepayers will need to pay for the remainder.