Eversource Energy has reported an impairment in its fourth quarter 2023 earnings from its stakes in two joint ventures with Orsted that are developing the South Fork, Revolution and Sunrise offshore wind farms off the US.
The company expects an after-tax impairment charge of between $1.4bn and $1.6bn.
This amount comprises $800m to $900m across all three projects and as well as an additional charge of up to $700m for Sunrise after local regulators rejected a request for higher rates for the project.
Eversource’s chairman, president and chief executive Joe Nolan said: “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.”
Eversource has entered into negotiations with a global private infrastructure investor, to sell its ownership interest in the two JVs that own the South Fork Wind, Revolution Wind and Sunrise Wind projects.
“We are pleased to advance the sale of our offshore wind interests and are appreciative of the support and collaboration we continue to receive from Orsted on this very complex transaction,” said Nolan.
During the fourth quarter of 2023, Eversource identified certain impacts that will require further adjustment to the carrying value of its offshore wind investments for the three projects.
It stated: “Revised projected construction costs caused primarily by supply chain constraints relating to the projects’ installation vessels and foundation fabrication, and uncertainties related to the Sunrise Wind rebid process in New York’s current RFP issued on November 30, 2023, have impacted the aggregate offshore wind ownership interest potential sales price with the buyer.
“These negative impacts and other developments described below required Eversource to evaluate its offshore wind business investments for an other-than-temporary impairment.”
In the fourth quarter, each JV updated its project construction forecasts, reflecting additional expenditures for construction and scheduling related pressures, including the availability and increased cost of installation vessels and supply chain cost increases related to foundation fabrication.
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, said Eversource.
On 12 October 2023, the New York State Public Service Commission denied Sunrise Wind’s petition to amend its OREC contract to increase the contract price to cover increased costs and inflation.
Eversource said it is working with Orsted to determine whether to submit a new bid for Sunrise Wind, the price at which a new bid would be made, and the probability of success in the new bidding process.