Ørsted ceases development of two US offshore wind projects, takes FID for Revolution Wind
Danish renewable energy developer Ørsted has decided to cease the development of its Ocean Wind 1 and 2 projects. Simultaneously, it has taken a final investment decision on the Revolution Wind project.
Discontinuation of the Ocean Wind 1 and 2 projects off the coast of southern New Jersey in the US is a consequence of additional supplier delays further impacting the project schedule and leading to an additional significant project delay.
Also, Ørsted has updated its view on certain assumptions, including tax credit monetization and the timing and likelihood of final construction permits. Finally, increases in long-dated US interest rates have further deteriorated the business case.
A provision related to Ørsted ceasing the development of Ocean Wind 1 accounts for potential contract cancellation fees not already covered by the impairments but excludes any potential reuse value of existing contracted equipment. The company believes that the provision will be between DKK 8-11bn ($1.13-1.55bn).
As for Revolution Wind, a 704 MW project in Rhode Island, Ørsted said that it took a final investment decision (FID) on the project which Ørsted owns in a 50-50 partnership with Eversource.
Onshore construction has started, and offshore construction will start in 2024, with the project expected to be completed in 2025.
The company added that it welcomed welcomes New York State Energy Research and Development Authority’s (NYSERDA) request for information on an accelerated solicitation for offshore wind capacity, which could provide an opportunity to rebid Sunrise Wind which Ørsted also owns in a 50-50 partnership with Eversource, at a price level that reflects current component and financing costs.
Ørsted awaits the conditions of the request for proposal to determine whether to rebid or not on the 1,034 MW project offshore New York, Massachusetts, and Rhode Island.
The company is also reconfiguring its Skipjack Wind project with minimal project spend and expects to have more clarity on its path forward in the fourth quarter of 2023 as it continues discussions with stakeholders in Maryland.
“We are extremely disappointed to announce that we are ceasing the development of Ocean Wind 1 and 2. However, the significant adverse developments from supply chain challenges, leading to delays in the project schedule, and rising interest rates have led us to this decision, and we will now assess the best way to preserve value while we cease the development of the projects. At the same time, with attractive forward-looking value creation, we progress the Revolution Wind project into the construction phase,” Mads Nipper, Ørsted president and CEO, said.
