Ørsted Ceases Development of New Jersey Offshore Wind Projects Ocean Wind 1 and 2

Following decisions of its Board of Directors, Ørsted will cease development of the Ocean Wind 1 and 2 projects and has taken final investment decision on the Revolution Wind project. The decisions are part of an ongoing review of Ørsted’s US offshore wind portfolio. 
Ørsted Ceases Development of New Jersey Offshore Wind Projects Ocean Wind 1 and 2

On August 29, 2023, Ørsted announced anticipated impairments on its US portfolio of up to $2.3 billion. 

Since the announcement, the US offshore wind projects have experienced further negative developments from adverse impacts relating to supply chains, increased interest rates, and the lack of an OREC (Offshore Renewable Energy Certificate) adjustment on Sunrise Wind. The total impairments recognized in the interim financial report for the first nine months of 2023 amount to $4 billion, and the majority of these relate to Ocean Wind 1. 

Ocean Wind 1 and 2

Ørsted has taken the decision to cease the development of the Ocean Wind 1 and 2 projects. This is a consequence of additional supplier delays further impacting the project schedule and leading to an additional significant project delay. In addition, Ørsted has updated its view on certain assumptions, including tax credit monetization and the timing and likelihood of final construction permits. Finally, increases to long-dated US interest rates have further deteriorated the business case. 

A provision related to Ørsted ceasing the development of Ocean Wind 1 will negatively impact Q4 2023 EBITDA. The provision accounts for potential contract cancellation fees not already covered by the impairments but excludes any potential reuse value of existing contracted equipment. 

Mads Nipper, Group President and CEO of Ørsted, says, “We are extremely disappointed to announce that we are ceasing the development of Ocean Wind 1 and 2. We firmly believe the US needs offshore wind to achieve its carbon emissions reduction ambition, and we remain committed to the US renewables market and truly value the efforts by the US government to support the build-up of the US offshore wind industry.

"However, the significant adverse developments from supply chain challenges, leading to delays in the project schedule, and rising interest rates have led us to this decision, and we will now assess the best way to preserve value while we cease development of the projects. At the same time, with an attractive forward-looking value creation, we progress the Revolution Wind project into the construction phase.”

New Jersey Gov. Phil Murphy said, “Today’s decision by Ørsted  o abandon its commitments to New Jersey is outrageous and calls into question the company’s credibility and competence.  As recently as several weeks ago, the company made public statements regarding the viability and progress of the Ocean Wind 1 project. 

"In recognition of the challenges inherent in large and complex projects, my administration in partnership with legislative leadership, insisted upon important protections that ensure New Jersey will receive $300 million to support the offshore wind sector should Orsted’s New Jersey projects fail to proceed. 

"I have directed my administration to review all legal rights and remedies and to take all necessary steps to ensure that Ørsted fully and immediately honors its obligations.  

“I remain committed to ensuring that New Jersey becomes a global leader in offshore wind – which is critical to our economic, environmental, and clean energy future.”

As part of the ongoing review of its US portfolio, Ørsted will assess the potential implications for its current long-term strategic build-out ambition and financial targets. 

Ørsted expects to update the market no later than in the Q4 2023 results announcement, including (if relevant) potential implications to its long-term strategic ambition and financial targets.

Revolution Wind

Ørsted has taken the final investment decision (FID) on the 704 MW Revolution Wind project, which Ørsted owns in a 50/50 partnership with Eversource. Onshore construction has started, and offshore construction will start in 2024, with the project expected to be completed in 2025.

Notwithstanding the impairment of approximately $500 million that Ørsted is recording in its Q3 results, Revolution Wind has an attractive forward-looking value creation with a forward-looking spread to WACC above Ørsted’s guided range. 

Sunrise Wind

Ørsted welcomes NYSERDA’s (New York State Energy Research and Development Authority) request for information on an accelerated solicitation for offshore wind capacity, which could provide an opportunity to rebid Sunrise Wind, which Ørsted owns in a 50/50 partnership with Eversource, at a price level that reflects current component and financing costs. Ørsted awaits the conditions of the request for proposal to determine whether to rebid or not. 

Skipjack Wind

Ørsted continues to reconfigure this project with minimal project spend and expects to have more clarity on its path forward in the Q4 2023 report as Ørsted continues discussions with stakeholders in Maryland. 

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