Dive Brief:
- Eversource Energy is close to announcing a decision on whether it will sell its 50% stake in a joint venture with Danish energy company Ørsted to develop U.S. offshore wind projects, a year after announcing the start of a “fulsome review” of its role.
- CEO Joe Nolan told industry analysts Thursday on a first-quarter earnings call that Eversource has “short-listed final interested parties” in its three offshore wind projects and open lease area that he called “highly coveted.”
- Responding to a question about the “potential for retaining some ownership” of the joint venture, he said it’s not a strong possibility. “We see a path for a clean exit from this,” Nolan said.
Dive Insight:
John Olivieri, the utility’s spokesman for offshore wind, said in an email Friday a “strategic review” continues and a final decision has not been made. But Nolan broadly hinted that the utility is looking favorably at a few potential buyers.
“It is very far along in the process, and that's why we can tell you with a high degree of confidence that you will have an answer, or you'll have an announcement in this second quarter,” Nolan said.
The three projects under consideration — Sunrise Wind, Revolution Wind and South Fork Wind — will serve Connecticut, New York and Rhode Island and are expected to begin operation later this year and in 2025. The portfolio will provide more than 1.7 GW of renewable energy, or enough to power more than 1 million homes, Eversource said.
Shahriar Pourreza, senior managing director at Guggenheim Partners, said in a client note he estimates the sales proceeds will be about $4 billion at year’s end. Eversource paid $225 million in 2019 for the 50% interest in Ørsted’s Revolution Wind and South Fork wind farm projects and a 257-square-mile tract off Massachusetts and Rhode Island.
A February 2022 offshore wind lease sale in the New York Bight brought in winning bids of $4.4 billion from six companies shortly before Eversource announced the review of its future in offshore wind. Nolan said on last year’s first quarter call “that now is an appropriate time to explore monetization” of its offshore wind stake.
The investment will come with costs. The utility said Wednesday it expects to spend between $1.4 billion and $1.6 billion this year and $2.1 billion to $2.4 billion in 2024 to 2026 for construction costs related to its share of the joint venture with Ørsted.
Moody’s Investors Service said soon after Eversource announced its review that its “financial metrics have been adversely affected by increased debt to finance offshore wind project development costs with cash flow generation from these projects years away.”
Any improvement in its finances will depend on the timing and amount of debt reduction from proceeds from an offshore wind asset sale, the ratings agency said.
Chief Financial Officer John Moreira told analysts during the fourth-quarter earnings call in February that if Eversource sells its offshore wind investments, the company “would expect to use all of the net proceeds on day one to pay down parent debt.” Doing so would improve financial flexibility to fund the utility’s regulated businesses, he said.
Moreira said Thursday that Eversource’s focus “has been around de-risking and focusing on the regulated assets.”
Nolan told analysts in February Eversource will build much of the onshore transmission infrastructure needed to connect the offshore generation to load, “regardless of the outcome of our strategic review.”
The review that Eversource initially said would be completed last year has taken longer because of required due diligence and the size of the offshore site, Nolan said in February.
“I should have been a little more realistic on the timing,” he said then.
