Irish developer ESB has booked an €106m impairment charge after concluding that “significant additional construction costs” will be required to complete the 450MW Neart na Gaoithe offshore wind farm off Scotland.
The utility, which owns 50% of the project and is developing it with French giant EDF, said the fresh spending is needed “due to more challenging sea-bed conditions than anticipated”. Drilling for foundations at the wind farm kicked off last year but is behind schedule.
“Delays to the project and an expectation of significant additional construction costs have caused an exceptional impairment charge of €106m as at 30 June 2021. This represents approximately 0.7% of our total asset base at 30 June 2021,” said the Dublin-based company.
ESB said it came to the conclusion after examining a number of factors including the most likely commercial operation date, operating and maintenance costs, forecast rates of inflation and forward prices for electricity.
“The carrying value as at 30 June 2021 prior to the impairment test was €243.1m reflecting initial equity investment and movements thereafter relating to translation differences, the group’s share of loss after tax and fair value movements on cash flow hedges. The recoverable amount has been assessed as €137.5m as at 30 June 2021. This has resulted in an impairment charge of €105.6m being recorded as an exceptional item in 2021.”
The charge was revealed in half-year results for 2021, which showed a profit after exceptional items, interest and tax of €128m.
ESB chief financial officer Pat Fenlon said: “In the context of the easing of COVID-19 restrictions in 2021, ESB delivered an improved set of financial results as electricity demand increased compared to the first six months of 2020.
“We delivered operating profit before exceptional items of €363m and capital investment of €435m in this period. Through our Brighter Future 2030 Strategy, which is consistent with the Irish Government’s Climate Action Plan, ESB continues to invest in energy infrastructure to help deliver a low carbon energy future. Delivering long term value for the benefit of our customers, shareholders and the wider economy continues to be a key focus for ESB.”
NNG is expected online in 2023.