Eversource's Strategic Review of its OSW Portfolio

May 5, 2022
John Dalton

On May 4th Eversource Energy initiated a strategic review of its offshore wind (OSW) portfolio, which could result in the potential sale of all or part of its 50% interest in its OSW joint venture with Ørsted. The joint venture includes three projects with long-term PPAs: (1) the 130-MW South Fork Wind Farm under contract to LIPA, which is under construction; (2) the 704-MW Revolution Wind under contract to utilities in Rhode Island and Connecticut, which is in advanced permitting; and (3) the 924-MW Sunrise Wind under contract to NYSERDA, in advanced permitting. In addition, they have an existing uncommitted lease area (OCS-A 0500) with about 187, 523 acres. Given recent pricing in the New York Bight Auction, a 50% interest in a lease area that has been matured and is ready to participate in forthcoming OSW RFPs for the award of PPAs in New England and New York will secure considerable value.

If such a sale moves forward it will be interesting to see if it is for the entire ownership interest or whether projects’ with long-term PPAs are sold separately (or retained) from Eversource’s interest in OCS-A 0500.  The risk profiles of each differ markedly, particularly in an economic environment where inflation has become a challenge, but contract prices are locked in. Conventional wisdom is that more mature projects are derisked. This may be less true today. Countervailing this is Ørsted’s contracting capability and the depth of its supply chain relationships and commitments.

One wonders whether Ørsted has a right of first refusal, where bona fide third-party offers establish a price that it can elect to pay for Eversource’s interest?