PROVIDENCE – New England’s leading developer of offshore wind is selling off its interests in the joint venture that is building massive power generation farms off the coasts of Rhode Island, Massachusetts and Long Island.
In an earnings call last week, Eversource Energy LLC CEO Joe Nolan said the company was “derisking the business.” Eversource will sell all of its offshore interests before July 1. The assets may be sold collectively or separately to three firms on “a shortlist of buyers.”
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Eversource, the region’s largest energy company, was an early mover in the green energy sector. Despite mentions of a potential divestiture in trade publications during the past year, Eversource appeared to be committed to the offshore wind business for the long haul.
In 2019, Eversource paid $225 million for a 50% stake in projects led by the Danish energy giant, Orsted A/S. The joint venture included the Revolution Wind and South Fork Wind Farm projects, as well as a “highly coveted” 257-square-mile tract off the coasts of Massachusetts and Rhode Island.
This week, the joint venture received the OK from the R.I. Coastal Resources Management Council to proceed with the Revolution Wind project, which could have up to 65 turbines. Slated for 35 miles off the Rhode Island coast, the mammoth windmills will be anchored to the ocean floor in the heart of one of the world’s prime fisheries.
In March, Eversource and Orsted announced they had submitted a proposal for a second new offshore wind farm, this one to deliver power to more than 500,000 Rhode Island homes and pump $2 billion into the state’s blue economy.
Eversource, Nolan said, will not hold on to any of the offshore assets.
“We see a path for a clean exit from this,” he said. “We won’t have any ownership of building wind, but [Eversource will continue operating] transmission-related assets to help them inject clean energy into the New England and New York grid.”
Laura Dwyer, spokesperson for the CRMC, said the sale was unlikely to stall offshore construction.
“We have no indication that this will impact the proposed wind farms from our side,” Dwyer said. “All state and federal review and permitting is continuing as planned as far as we are aware.”
Nolan said Eversource is winding down a strategic review of potential suitors.
“I think that at the end of the day, it will be a very good outcome for Eversource and Eversource’s shareholders,” Nolan said.
Eversource had invested a total of $2.16 billion in the offshore wind projects through March 2023, said John M. Moreira, the company’s chief financial officer. The company had projected it would spend an additional $1.9 billion to $2.1 billion on construction costs this year.
Eversource hasn’t been the only offshore company to face economic headwinds.
Commonwealth Wind, a Massachusetts offshore project, filed a motion in December to withdraw from its contract with utilities due to escalating costs and high interest rates. PSEG, a New Jersey utility also buffeted by a sour economy, agreed to sell its 25% equity stake in Ocean Wind 1 to Orsted, which now will own 100% of the offshore project.
The pace of offshore development has remained slow, in good part due to permitting obstacles, despite generous incentives included in the Inflation Reduction Act.
The Biden administration looked to jumpstart the industry in 2021, announcing a production target of 30 gigawatts of offshore wind capacity before 2030. In January, there was over 18,000 megawatts of planned capacity awaiting approval from the Bureau of Ocean Energy Management, according to a report issued by the Center for Strategic and International Studies.
Nolan said Eversource remains bullish on green energy.
“Although offshore wind may not be a right fit for our portfolio of regulated [transmission and distribution] assets,” Nolan said, “we are big believers in the essential role offshore wind will play in bringing much needed clean energy to the New England region and lessening our reliance on natural gas for power generation.”
In a statement, Jeff Kotkin, vice president of investor relations for Eversource, said “we are primarily a regulated energy and water delivery company, and a large unregulated offshore wind investment may not be the best mix with those regulated businesses.”
“Regardless of the particulars of any potential sale,” Kotkin said, “we continue to expect that over the long-term we will play an active role in the transition to a clean energy economy as a buyer of clean energy on behalf of our Massachusetts and Connecticut customers, as well as through our investments in the electric grid which will enable power generated by offshore wind turbines to reach the homes and businesses of Southern New England.”
The impending sale follows a dire appraisal of Eversource by Moody’s, the global credit ratings agency.
In a ratings action last year, Moody’s analysts gave the company a “negative outlook” and wrote that Eversource’s financial metrics had been adversely affected by the increased debt it had taken on to finance its offshore wind projects. Generation of cash flow from the projects remains “years away,” the agency said.
Eversources’s utilities also have suffered from severe storms in recent years and delays in cost recovery due to Connecticut Light & Power’s distribution rate freeze, Moody’s wrote.
Eversource provides electric, gas and water service to 4 million residential and business customers in Connecticut, Massachusetts and New Hampshire.
(Update: Corrects number to up to 65 turbines for Revolution Wind project.)
Sam Wood is a PBN staff writer. Contact him at Wood@PBN.com
