Eversource Energy Announces Pathway to Fully Exit its Offshore Wind Investments Pursuant to Agreement with Global Infrastructure Partners to Sell Revolution Wind and South Fork Wind Projects
- Eversource to receive $1.1 billion cash proceeds from the sale of its ownership share in South Fork Wind and Revolution Wind.
- Eversource retains certain cost sharing obligations for the construction of Revolution Wind.
- Adjustments based on updated project economics will be made, with Revolution Wind expected to be operational in 2025.
- Eversource plans to use the proceeds to repay parent debt.
- Eversource's financial ties to South Fork Wind will be largely resolved at closing.
- Eversource's tax equity investment in South Fork Wind will be maintained.
- Eversource to enter into a separate construction management agreement for Revolution Wind.
- Eversource expects regulatory approvals for the transaction from various commissions.
- Global Infrastructure Partners acquires a 50% stake in the offshore wind projects from Eversource.
- Partnerships and services agreements will be entered into between Ørsted, GIP, and Eversource.
- Eversource engaged Goldman Sachs as financial advisor for the transactions.
- None.
Insights
The divestiture of Eversource Energy's 50 percent ownership in South Fork Wind and Revolution Wind to Global Infrastructure Partners (GIP) for approximately $1.1 billion represents a significant reallocation of capital within the energy sector. This transaction not only provides Eversource with a substantial cash infusion but also transfers future capital expenditure risks associated with these projects, particularly the potential $240 million in overruns for which Eversource remains partially liable. The impact on Eversource's balance sheet is twofold: a reduction in long-term asset holdings and an immediate increase in liquidity, which the company plans to use for repaying parent debt.
From a financial perspective, the deal's structure, with cost-sharing obligations and adjustments based on updated project economics, suggests a prudent approach to risk management. However, it's crucial to monitor the actual costs upon the commercial operation of Revolution Wind and the closing for South Fork Wind, as these will determine the final financial impact. The transaction's expected mid-2024 closing will be a key milestone to watch, as it will crystallize the financial implications for Eversource and influence its stock valuation.
Eversource's strategic shift away from project ownership towards regulated transmission operations underscores a broader industry trend where utility companies are focusing on core competencies amid an evolving energy landscape. This move aligns with Eversource's strengths and allows the company to concentrate on regulated transmission building and operation, which typically offers more predictable revenue streams. The sale also implies a reevaluation of Eversource's role in the offshore wind sector, as it retains a tax equity investment in South Fork Wind, indicating a continued, albeit more limited, interest in renewable energy projects.
For the industry, the involvement of Global Infrastructure Partners, a seasoned infrastructure investor, reaffirms the attractiveness of renewable energy assets to institutional investors. This transition may signal a maturation phase for the offshore wind sector in the United States, where large-scale projects increasingly draw interest from specialized investment firms seeking long-term, stable returns from green infrastructure.
The transaction's successful completion is contingent upon regulatory approvals from the Federal Energy Regulatory Commission, antitrust filings and the New York Public Service Commission. These approvals are standard for such deals but can introduce delays or alterations to the terms based on regulatory feedback. The requirement for regulatory consent highlights the importance of compliance with energy market regulations and the protection of consumer interests in utility transactions.
Additionally, the anticipated partnership and service agreements between Ørsted, GIP and Eversource will require careful legal structuring to ensure that responsibilities and risks are clearly delineated. The legal intricacies of such agreements are critical, as they will govern the ongoing construction, operation and financial arrangements of the projects. The legal framework set forth will also have implications for future project governance and profitability.
The agreement covers Eversource’s 50 percent share in the 132-megawatt South Fork Wind project and the 704-megawatt Revolution Wind project. Ørsted’s 50 percent ownership interests are not affected by today’s announcement. Eversource is expected to enter into a separate construction management agreement as a contractor to Revolution Wind to complete the onshore work that is currently underway. Eversource will maintain its previously announced tax equity investment in South Fork Wind.
On January 24, 2024, Eversource announced that it had reached agreement to sell its 50 percent interest in the 924-megawatt Sunrise Wind project to Ørsted, contingent on the successful award of the NY04 NYSERDA Offshore Wind Renewable Energy Credits Agreement request for proposal and other conditions.
The sale to GIP includes the following key provisions:
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Eversource expects to receive approximately
from GIP upon the closing of the transaction, which is expected to occur in mid-2024.$1.1 billion - Proceeds may be adjusted as a result of final construction costs and updated project economics following the commercial operation date of Revolution Wind and following closing for the South Fork project.
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Factors that could cause Eversource’s total net proceeds to be higher or lower include the following:
- Revolution Wind’s eligibility for federal investment tax credits at other than the anticipated 40 percent level. Decreased tax credit eligibility would decrease proceeds to Eversource and increased tax credits would increase proceeds to Eversource;
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The ultimate cost of construction for Revolution Wind. Under the purchase and sale agreement, Eversource and GIP will share the difference between a base construction forecast and the aggregate cost of the two projects up to an effective cap of approximately
. Eversource will have responsibility for GIP’s obligations for any additional costs in excess of the cap amount consistent with the existing joint venture terms;$240 million - Eversource and Ørsted anticipate that South Fork Wind will be fully operational prior to the close of this transaction with GIP. Eversource does not expect any material differences in the cost of construction for South Fork Wind relative to the base forecast noted above;
- Delays in constructing Revolution Wind, which would impact the economics associated with the purchase price adjustment;
- Lower operation costs or higher availability of the projects. Eversource can benefit, but not be harmed, from lower costs of operations and/or higher availability as compared to a base level assumed in the projects’ financial models through the period that is four years following commercial operation date of the Revolution Wind project.
Under the agreement, Eversource’s existing credit support obligations are expected to roll off for each project around the time that each project completes its expected capital spend.
At or prior to closing of the sale to GIP, Ørsted and GIP intend to enter into definitive partnerships and services agreements. Closing of the transaction will also require regulatory approvals from the Federal Energy Regulatory Commission as well as customary antitrust filings and New York Public Service Commission approvals.
“We continue to believe that offshore wind represents the most significant opportunity to decarbonize the electric generation footprint of New England,” said Joe Nolan, Eversource Energy Chairman, President, and Chief Executive Officer. “Eversource will remain an integral player in this historic shift to a clean energy generation mix by focusing on our strengths as a regulated transmission builder and operator and bringing the benefits of these investments to our customers.”
“We are pleased to announce our acquisition of a
“We want to thank Eversource for their partnership and the critical work we have done together to advance offshore wind energy in the Northeast,” said David Hardy, Group EVP and CEO Americas at Ørsted. “Global Infrastructure Partners is a longstanding global Ørsted partner that is committed to renewable energy development, and we’re pleased the
In May 2023, Eversource announced that it would sell its 50 percent interest in approximately 175,000 of developable but uncommitted offshore acres to Ørsted for
Eversource has engaged Goldman Sachs as its financial advisor to assist with the transactions and Ropes & Gray LLP serves as its legal counsel.
Eversource Energy operates New England’s largest energy delivery system and serves approximately 4.4 million electric, natural gas and water utility customers in
This document includes statements concerning Eversource Energy’s expectations, beliefs, plans, objectives, goals, strategies, assumptions of future events, future financial performance or growth and other statements that are not historical facts, including the anticipated timing for the closing of the transaction, the amount of expected proceeds, expectations on future federal investment tax credits and statements regarding the use of proceeds and the outcome of rebidding in the New York RFP. These statements are “forward-looking statements” within the meaning of
Other risk factors are detailed in Eversource Energy’s reports filed with the
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William Hinkle (media)
(336) 682-8799
Robert S. Becker (investors)
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Source: Eversource Energy
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