Ørsted Presses Feds for Tax Credits for Offshore Wind, as Delays Cut into Profitability

Workers unload the first offshore wind turbine blades from Denmark at the New London State Pier on Aug. 16, 2023. (CT Examiner)


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In an early morning call on Wednesday, Ørsted CEO Mads Nipper told investors that current progress on the company’s U.S. offshore wind projects was “unsatisfactory,” and that the Danish energy company could abandon future projects that fall short of the company’s goals for profitability.

“We are willing to walk away from projects if we do not see value creation that meets our criteria,” Nipper warned investors.

But in response to pointed questions by industry analysts, Nipper said that the “sunk costs” in the current projects meant that the “financially rational” decision was still to complete the ongoing work off the Northeast.

On Tuesday, the company announced that supply chain delays, obstacles to securing federal tax credits and high interest rates could cost Ørsted up to $2.34 billion for three planned offshore wind projects off the northeastern United States.

Delays in the delivery of foundation parts for offshore wind projects Ocean Wind 1, Sunrise Wind and Revolution Wind will cost the company $5 billion Danish kroner (about $732 million US dollars), assuming no further setbacks, the company announced. And Ørsted said a “handful” of supplier delays had led to a “continuously increasing risk” that the suppliers won’t deliver on schedule.

Those delays could lead to higher costs and setback expectations for when the projects come online and start generating revenue, the company said.

As many as 100 turbines for Revolution Wind are anticipated to be assembled at the New London State Pier beginning next spring. The 704 MW wind energy farm has a contract to sell power to Connecticut.

Revolution and Sunrise are both jointly owned by Eversource and Ørsted.

Eversource has already announced that it is looking to sell its stake in the partnership to focus on its core business of delivering, rather than generating, energy. Earlier this month, Eversource marked off a $331 million loss from selling its share of offshore wind lease areas and wind related ports it held to its partner.

The company also warned investors that if high interest rates persist through the end of the third quarter, Ørsted would have to write off as much as an additional $732 million.

Nipper said there was a further risk that the company’s use of Dominion Energy’s offshore wind installation ship Charybdis could be delayed. Ørsted intended to lease the Charybdis to ship turbines from the New London State Pier to offshore lease areas for Revolution and Sunrise. Nipper told investors that he expected the Charybdis could still be used for “part of the installation” of its projects in the Northeast.

The company also warned that its discussions with “senior federal stakeholders” to qualify Ocean Wind 1 and Sunrise Wind for additional investment tax credits haven’t progressed as expected. According to Ørsted, a failure to secure those added federal credits could cost the company as much as $878.8 million.

Nipper said the company was putting “maximum pressure” on federal officials to secure those tax credits, but told analysts that walking away from those three projects wouldn’t be in shareholders’ interest, and that the outlook for those projects is still positive despite the lost value.

Ørsted Region Americas CEO David Hardy said that the profitability of the projects will depend on “how things play out” over the next month.

“We are in discussion with the administrators and federal stakeholders to try to explain that if they want to develop the offshore wind industry and offshore wind supply chain, you can’t put requirements that no one can meet,” Hardy said.