Eversource logs $331M offshore wind impairment; says project sale is on deck

Eversource Energy is taking a $331 million second-quarter impairment on its offshore wind assets as it readies to sell its share of three Northeast projects under development.

The anticipated loss is up from May when Eversource (NYSE: ES) estimated a $220 million to $280 million haircut in connection with its long-anticipated exit from a joint venture with Ørsted, the Danish offshore wind giant.

In Monday's earnings call with analysts, Eversource CEO Joe Nolan said the company is "on the one-yard-line" of executing a deal to sell its 50% share in South Fork, Revolution, and Sunrise Wind, but did not disclose the name of the buyer.

Nolan said a due diligence process is wrapping up, and that Eversource will make an announcement "soon" to announce the buyer and terms.

The talks go back more than a year. Boston-based Eversource in 2022 said it would conduct a "strategic review" of its 50-50 offshore wind holdings with Ørsted. Ørsted in May agreed to buy Eversource's share in a large, undeveloped seabed floor area for $625 million. But Ørsted at the time didn't agree to buy Eversource's share of the projects, which are in various states of development.

All in all, Eversource has invested around $2.1 billion in offshore wind to date, including lease rights and project costs. It will recoup the $625 million soon, because regulators in recent days approved the federal lease area transaction, Nolan said.

But it remains to be seen how much Eversource will recoup from the sale of its stake in the South Fork, Revolution and Sunrise Wind projects. And the negotiations come amid financial headwinds for the industry, putting potential downward pressure on project value.

Nolan said the divestment talks are complex and involve a "multitude of agreements." Ørsted and Eversource have co-invested in port facilities, vessels, logistics services, office space, factory facilities, and more over their six-year partnership.

Nolan told analysts that he's "not going to rush things" and aiming to get the best deal for shareholders.

As for the one-time $331 million impairment, CFO John Moreira said it covers the entirety of Eversource's offshore wind portfolio. It assumes success in efforts to negotiate a better clean energy contract with New York regulators ($450 million) and assumes investment tax credit add-ons for another $450 million on the upside.

Eversource will take the $625 million from its lease sale and immediately invest $575 million in tax equity for South Fork to reduce the company's near-term tax liability. It will eventually see half of that investment returned as an equity partner.

Proceeds from the separate project transactions will be used to pay off parent-company debt, said Moreira.

The new owner will have a stake in a portfolio of New England offshore wind projects.

Revolution Wind I, to serve Rhode Island and Connecticut, is expected to start construction this fall. The related Revolution Wind II remains stalled without a utility contract. The smaller South Fork Wind is under construction with a contract to serve Long Island. The massive Sunrise Wind has plans to deliver energy to New York by late 2025.

Eversource isn't leaving offshore wind, and will instead focus on building transmission infrastructure to support the industry.

Massachusetts, with its "constructive regulatory framework," will facilitate $2 billion of clean energy investments over the next five years, said Nolan. That includes $200 in approved transmission projects to enable offshore wind generation to connect to the power grid.

"We could potentially see an additional $350 million of transmission investment and Massachusetts issues its next RFP for additional offshore wind generation," Nolan said.