EVERSOURCE ENERGY, New England’s largest utility, is taking a financial beating for its investment in offshore wind.
The company, which for months has been trying to reach a sales agreement for its offshore wind assets, said it is writing down the value of those assets by $1.4 billion to $1.6 billion. The adjustment is significant, as the book value of the offshore wind business was $2.6 billion as of September 30.
The latest reduction in value comes on the heels of a $331 million writedown in August and the sale of a 50 percent stake in a lease area off the Massachusetts coast for $625 million.
Eversource stock also took a hit on Tuesday and has been trending downward for much of the last year. The stock closed at $58 a share on Tuesday, down 7.7 percent.
An Eversource spokeswoman said the problems associated with the offshore wind business will not affect the regulated utility’s operations in Massachusetts, Connecticut, and New Hampshire. “There is no impact to our utility operations,” the spokeswoman said. “This does not affect our capital investment plans in our core electric, gas, and water businesses and we remain focused on providing reliable service to our customers and communities.”
Eversource said it is “in advanced, exclusive negotiations” to sell its offshore wind business to “a leading global private infrastructure investor.” The offshore wind business consists of a 50 percent stake in three offshore wind projects – South Fork Wind and Sunrise Wind off of New York and Revolution Wind off the coast of Connecticut. Eversource’s joint venture partner on all three projects is Orsted.
The utility said it is taking an $800 to $900 million charge against all three projects because the estimated cost of construction, installation vessels, and foundations has risen significantly.
“In determining the current fair value of the projects, these increases exceed the previously estimated projections for construction expenditures, which results in a fair value that is now significantly lower than previously determined,” the company said. “Based on these factors, we expect to record an after-tax other-than-temporary impairment in the range of approximately $800 million to $900 million across all of the three wind projects in the fourth quarter of 2023.”
Eversource is also downgrading the value of its Sunrise Wind project off the coast of New York by $600 to $700 million to reflect the fact that a previously negotiated contract for the power is no longer viable economically and the company will have to decide whether to rebid the project in an upcoming procurement.
The lone bright spot in the report was the conclusion that $400 million in federal investment tax credit money will likely be available for substation construction.
Joe Nolan, Eversource’s chairman, CEO, and president, said in a statement that the problems being faced by Eversource are confronting all players in the industry.
“Offshore wind projects continue to experience major supply chain disruption and inflationary challenges in the early stage of this growing industry in the US, and this impairment is an unfortunate reflection of the current market conditions we are facing,” he said.
