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Orsted AS has recognized impairments of up to DKK 28.4 billion ($4.04 billion) for the first nine months of 2023 leading it to cease two pending offshore wind projects in the USA.
Most of these losses, DKK 19.9 billion ($2.83 billion), were related to Ocean Wind 1, the Danish majority state-owned company said in its quarterly earnings report Wednesday.
Due to these impairments, as well as regulatory-related delays and supply chain challenges, New Jersey state’s Ocean Wind 1 and Ocean Wind 2 have now been scrapped, Orsted said. That means the cancellation of 2,200 megawatts of planned offshore wind power capacity that would power over a million homes, based on estimates by Orsted.
“The current market situation with supply chain challenges, project delays, and rising interest rates has challenged our offshore projects in the US, and in particular our offshore project Ocean Wind 1, which has led to significant impairments in Q3 [third quarter] 2023”, Orsted chief executive Mads Nipper said in the earnings release.
“Therefore, as part of our ongoing review of our US offshore wind portfolio, we’ve decided to cease the development of Ocean Wind 1 and Ocean Wind 2”.
Ocean Wind has also faced a slew of legal challenges.
The Cape May county government in New Jersey on October 17 sued federal agencies alleging disregard for environmental diligence in the approval of the first Ocean Wind project.
“As we’ve said many times, we spent the better part of two years trying to negotiate with Orsted to redesign this project in a way that would cause less damage to the environment and less damage to our Tourism and Fisheries interests”, said County Board of Commissioners Director Len Desiderio in an official press release at the time. “Our reasonable proposals fell on deaf ears as state and Federal regulators rubber stamped permits to rush the Ocean Wind One project to approval”.
The suit filed before the New Jersey District Court alleges that the Department of the Interior (DOI), the Bureau of Ocean Energy Management (BOEM) and the National Marine Fisheries Service (NOAA Fisheries) had “ignored the requirements of the Administrative Procedures Act, the Endangered Species Act, the National Environmental Policy Act, the Marine Mammal Protection Act, the National Historic Preservation Act and a host of other Federal laws and regulations in reaching decisions to rush approval of permits”, said the news release on the county government’s website.
“A consensus is building that these projects are moving too fast, without proper regulatory analysis and with too many unknowns and tremendous potential for environmental and economic harm”, it added.
The DOI declined to comment on the suit while the BOEM, an agency under the department, and the NOAA Fisheries also said they could not comment on pending litigation. Orsted has not responded to Rigzone’s request for comment.
Earlier the county government filed an appeal against a court order granting easement for county property to accommodate the project. The Offshore Wind Economic Development Act amended 2021, which was used to award the easement to Orsted, was a new law that had “yet to be subject to the crucible of judicial appeals”, said ex-New Jersey Superior Court Judge Michael J. Donohue, who is special counsel to the county on offshore wind issues, in a county government media release August 17 announcing the appeal.
But in that announcement the county indicated it was accepting defeat in a suit filed by Orsted concerning a road opening permit for the project. “… the [New Jersey Superior] Court recently ruled in favor of Orsted in a similar suit against Ocean City”, the August press release stated. “The County saw no utility in litigating those issues where the outcome was already clear”.
Orsted had planned to start power production at Ocean Wind 1 by 2024.
Another Orsted offshore wind project in New York state faces uncertainty. Orsted is awaiting conditions from the state government before it could decide whether to rebid, Orsted said in another press release Wednesday.
In Maryland state Orsted is discussing with fellow stakeholders whether to continue the offshore Skipjack Wind project, according to that media release.
However, while the Ocean Wind projects have been junked, the company has now taken a final investment decision on the 704 MW Revolution Wind project in Connecticut state.
Despite the lack of an Offshore Renewable Energy Certificate adjustment, Revolution Wind is proceeding “to the construction phase with an attractive forward-looking value creation”, Nipper, who is also group president, said in the earnings report.
Due to the impairments, Orsted saw a negative 14 percent return on capital employed for the non-profitable third quarter of 2023.
Cash generation from operating activities during the July–September period amounted to DKK 9.8 billion ($1.39 billion).
However, Orsted said, “Our previously guided EBITDA for 2023, excluding new partnership agreements, of DKK 20-23 billion [$2.85–3.27 billion] remains unchanged, when excluding a provision of approximately DKK 8-11 billion [$1.14–1.56 billion] related to potential cancellation fees following our decision to cease the development of Ocean Wind 1”.
It did revise down its projected full-year gross investment by DKK 4 billion ($569.08 million) to DKK 40–44 billion ($5.69–6.26 billion) due to the Ocean Wind 1 termination.
To contact the author, email jov.onsat@rigzone.com
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