Orsted nixes two New Jersey wind farms as South Fork project proceeds

Even as offshore construction for its first wind farm in federal waters got underway Wednesday, energy giant Orsted announced a major retrenchment of its U.S. wind-energy ambitions by nixing two projects planned for the New Jersey coast, while continuing to assess the viability of another large project slated for Long Island.

Orsted said impairment charges — reductions in the value of assets — related to discontinuing the New Jersey projects and other costs could amount to more than $5 billion. The news sent the Denmark-based company’s stock price plunging for the second time this year.

Most of the charges relates to discontinuing the two projects for New Jersey known as Ocean 1 and Ocean 2. Public Service Enterprise Group, the parent of PSEG Long Island, at one point had been a 25% partner in Ocean 1, but sold its interest back to Orsted earlier this year.

“Macroeconomic factors have changed dramatically over a short period of time, with high inflation, rising interest rates and supply chain bottlenecks impacting our long-term capital investments,” said David Hardy, chief executive of Orsted’s U.S. operations in a statement. The company had “no choice but to cease development of Ocean Wind 1 and Ocean Wind 2."

In a conference call with analysts in Denmark Wednesday, Orsted chief executive Mads Nipper said a “perfect storm” of rising costs, inflation and higher interest rates changed the dynamic for offshore wind investments in the United States, one that only increased prices for the energy could resolve.

Orsted also announced on Wednesday that a vessel was in place to begin offshore construction of its 130-megawatt South Fork Wind Farm in the waters off Rhode Island and Massachusetts, while a barge containing the first offshore components for the 12-turbine array had set sail from New London, Connecticut Tuesday night.

Energy from South Fork Wind, enough to power some 70,000 homes, is slated to reach the Long Island Power Authority by year’s end or early next year. LIPA will pay an average of around 22 cents a kilowatt-hour for energy from South Fork over its 25-year life, Newsday has reported. Orsted has not asked for an adjustment to South Fork's LIPA-contracted price for power.

But it has made such a request for Sunrise Wind, a 924-megawatt project slated to be located in the same waters that will make landfall at Smith Point. New York State last month rejected a request to allow Orsted and other developers to reopen their previously awarded contracts to adjust for higher costs and interest rates. The state has indicated it could allow companies to rebid on the projects.

Orsted in a statement said it remained hopeful that the state’s plan to seek more information about wind-farm costs and a potential rebidding of its Sunrise Wind project could help make it more viable. The project has won certain local approvals, including tax breaks and a benefits package agreed to with Brookhaven Town earlier this year.

New York's request for information process “could help address macroeconomic factors impacting the project, including a price level that reflects current component and financing costs," Orsted said. "The company will assess the conditions of the request for proposals and determine whether to proceed with a rebid or not.”

Last week, the New York State Energy Research and Development Authority issued formal Requests for Information to solicit feedback for new wind-energy pricing structures. The deadline for feedback is Thursday for the offshore portion.

Information from the RFIs will “inform next steps to launch accelerated land-based and offshore wind procurements,” NYSERDA said. New bid requests are expected to be issued next year, and Orsted said it will make a decision on rebidding by late November or early December.

In any case, “Sunrise Wind is an active project,” spokeswoman Meaghan Wims said. “The first phase of the project is underway. This includes things like site prep and pouring concrete for the foundations at the new converter station.”

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

Mark Harrington, a Newsday reporter since 1999, covers energy, wineries, Indian affairs and fisheries.