Article
CEO: Eversource/Ørsted offshore wind projects, including Revolution Wind, still viable
Providence Business First|Mary Serreze|Nov 4, 2022
Eversource Energy CEO Joe Nolan expressed confidence in the viability of three offshore wind projects the company holds in partnership with Ørsted North America ...Separately, however, Ørsted CEO Mads Nipper is expressing concern about the company's U.S. East Coast offshore wind portfolio. In a Thursday earnings call with investors, he said project return "is not where we want it to be," and said options under review include capturing tax benefits from the Inflation Reduction Act or even amending contracts with the states, Politico reported.
Eversource Energy CEO Joe Nolan expressed confidence in the viability of three offshore wind projects the company holds in partnership with Ørsted North America ...Separately, however, Ørsted CEO Mads Nipper is expressing concern about the company's U.S. East Coast offshore wind portfolio. In a Thursday earnings call with investors, he said project return "is not where we want it to be," and said options under review include capturing tax benefits from the Inflation Reduction Act or even amending contracts with the states, Politico reported.
Eversource Energy CEO Joe Nolan expressed confidence in the viability of three offshore wind projects the company holds in partnership with Ørsted North America — including the 704-megawatt Revolution Wind project that holds contracts to provide clean energy to Rhode Island and Connecticut.
In an earnings call with investors Thursday morning, Nolan and CFO John Moreira said the Eversource/Ørsted projects — South Fork Wind to serve Long Island, Sunrise Wind to serve New York State, and Revolution Wind — have favorable power purchase agreements in place with state utilities, and have already locked in most of their costs.
The news comes as two separate Massachusetts-sponsored offshore wind projects — Commonwealth Wind and Mayflower Wind …
... more
[truncated due to possible copyright]
Eversource Energy CEO Joe Nolan expressed confidence in the viability of three offshore wind projects the company holds in partnership with Ørsted North America — including the 704-megawatt Revolution Wind project that holds contracts to provide clean energy to Rhode Island and Connecticut.
In an earnings call with investors Thursday morning, Nolan and CFO John Moreira said the Eversource/Ørsted projects — South Fork Wind to serve Long Island, Sunrise Wind to serve New York State, and Revolution Wind — have favorable power purchase agreements in place with state utilities, and have already locked in most of their costs.
The news comes as two separate Massachusetts-sponsored offshore wind projects — Commonwealth Wind and Mayflower Wind — say they want to renegotiate their 20-year contracts with state utilities because they are no longer adequate to support project financial viability. Commonwealth is owned by Avangrid, and Mayflower is owned by Shell and Ocean Winds.
The Massachusetts contracts feature “very, very low pricing” compared to projects in other states bid by Eversource and Ørsted, Nolan remarked.
What's more, rising interest rates and inflation won’t materially affect South Fork, Sunrise and Revolution because more than 80% of the costs are locked in, and borrowing costs are already capitalized, the Eversource executives said.
Separately, however, Ørsted CEO Mads Nipper is expressing concern about the company's U.S. East Coast offshore wind portfolio. In a Thursday earnings call with investors, he said project return "is not where we want it to be," and said options under review include capturing tax benefits from the Inflation Reduction Act or even amending contracts with the states, Politico reported.
Boston-based Eversource (NYSE: ES) to date has invested $1.8 billion in its 50-50 venture with Ørsted, and expects an average long-term return in the 11% to 13% range, even without any boost from the Inflation Reduction Act, the company said.
Nolan added that Eversource — in its capacity as a Massachusetts utility — does not wish to renegotiate its contracts with Commonwealth and Mayflower. However, utility regulators in that state will have the final say.
Commonwealth Wind in May signed a Massachusetts contract with Eversource, National Grid and Unitil to receive 7.2 cents per kilowatt-hour over two decades, and Mayflower previously agreed to 7.7 cents. In contrast, Revolution Wind will receive around 9.8 cents per kilowatt-hour in its contract with Rhode Island Energy.
Notably, Eversource and Ørsted never bid into the third Massachusetts procurement round where Avangrid's Commonwealth Wind was selected in 2021.
Revolution Wind: We're OK
A spokesperson for Revolution Wind confirmed that the project is financially healthy and on track.
“As early movers in the offshore wind market, Orsted and Eversource have already locked in a substantial number of our major component contracts,” the spokesperson said in an emailed statement. “In the face of rising interest rates, persistent inflation and supply chain constraints, we are exploring a number of options to improve the project economics of Revolution Wind and other projects in light of these challenges.”
Revolution Wind said it also plans to take advantage of recently-enacted federal tax incentives in the Inflation Reduction Act.
“We remain confident in the many benefits Revolution Wind will bring to Rhode Island and Connecticut, including clean energy, local jobs and economic growth,” the spokesperson said.
Meanwhile, Eversource continues to look for a buyer for its investment share with Ørsted, which includes Revolution Wind. Talks are underway with a number of interested parties, and an announcement expected by the end of 2022, Nolan said.
Eversource plans to use proceeds from the divestiture to pay down debt, and also plans to shift its focus to providing transmission services for the offshore wind industry, Nolan said.
"We remain very big fans of offshore wind, which is expected to become a critical energy resource for the Northeast, particularly in the winter when wind speeds are higher and more consistent," Nolan said. "Contingent on the outcome of our review, I expect that our principal role in the future will be that of a regulated transmission provider integrating this valuable resource into our region's grid rather than a turbine owner."
Correction: An earlier version suggested that Avangrid's Massachusetts contract was bid "against" projects under development by Ørsted and Eversource. The story has been updated to clarify that Ørsted and Eversource never bid into the 2021 Massachusetts Round III procurement round where Avangrid's Commowealth Wind was selected.