Orsted to buy out wind farm seabed rights from Eversource Energy

EVERSOURCE ENERGY LLC 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. / AP FILE PHOTO/DAVID GOLDMAN
EVERSOURCE ENERGY LLC 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. / AP FILE PHOTO/DAVID GOLDMAN

PROVIDENCE – Orsted A/S, one of the world’s largest developers of offshore wind energy, announced Thursday that it had agreed to buy the interests of its partner Eversource Energy LLC for the uncontracted federal offshore wind lease area off the Rhode Island coast currently owned jointly by the two companies.

The $625 million deal will not include the wind turbine farms Orsted and Eversource operate, or plan to develop, off the coasts of Rhode Island, Massachusetts and Long Island. 

In addition to the use rights for the seabed, which is in early-stage development, the agreement includes contracts and partnerships for key operational assets in the Northeast.

According to an Orsted news release, the lease area contains approximately 187,000 uncontracted acres of seabed for American offshore wind energy and has a potential capacity of up to four gigawatts. 

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As part 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 with New London State Pier in Connecticut. 

Orsted will also take full ownership of the operations and maintenance hub in East Setauket, N.Y., and the charter agreement for the first American-built offshore wind service operations vessel, which is under construction in Louisiana.

The $625 million agreement strengthens Orsted’s position in offshore wind energy and demonstrates the company’s commitment to building an American offshore wind industry, Orsted said. 

“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, which will deliver renewable energy to Rhode Island, Connecticut and New York,” David Hardy, group executive vice president and CEO Americas at Orsted, said in a statement. “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 U.S. market. 

“In addition to taking full ownership of seabed that is familiar to our team after years of work in this area, we will also be the sole bidder in our New York 3 and Rhode Island 2 active offshore wind solicitations,” Hardy said. “The combination of the seabed and additional components in this agreement further establish a major hub in the Northeast for our activities and future opportunities.”

In addition to its proximity to existing Orsted projects, the leased areas also offer shallow water depth and favorable wind speeds compared with other sites in the U.S. and globally. Located approximately 25 miles off the coast of southern New England, the site can also serve markets in Massachusetts, Rhode Island, Connecticut and New York.

The agreement is subject to regulatory review and is expected to close in the third quarter of 2023.

Eversource announced last year that it was reviewing its offshore wind energy portfolio and considering whether to sell related assets. 

In an earnings call earlier this month, Eversource Energy LLC CEO Joe Nolan said the company was “derisking the business” and would sell all of its offshore interests before July 1. The assets he said would be distributed to three firms on “a shortlist of buyers.” 

Eversource continues to pursue the sale of its existing 50% interest in its three jointly owned contracted offshore wind projects – South Fork Wind, Revolution Wind, and Sunrise Wind. 

Eversource, New England’s largest energy company, was an early mover in the “blue economy” sector. In 2019, Eversource paid $225 million for a 50% stake in projects led by Orsted. The joint venture included the Revolution Wind and South Fork Wind Farm projects, as well as the “highly coveted” 257-square-mile tract off the coasts of Massachusetts and Rhode Island.

The joint venture recently received the OK from the R.I. Coastal Resources Management Council to proceed with the Revolution Wind 2 project, which could have up to 65 turbines. Slated for 35 miles off the Rhode Island coast, the mammoth turbines will be anchored to the ocean floor in the heart of one of the world’s prime fisheries.

“We won’t have any ownership of building wind,” said Nolan. “But [Eversource will continue operating] transmission-related assets to help them inject clean energy into the New England and New York grid.”

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, during this month’s earning call. The company had projected it would spend an additional $1.9 billion to $2.1 billion on construction costs this year. 

The sale of its offshore wind interests followed 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,” Moody’s said.

Contact PBN staff writer Sam Wood at Wood@PBN.com

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