Danish energy company Ørsted announced Tuesday that it is abandoning two of the eight offshore wind projects it has in development in the U.S., citing project delays, permitting timelines, and increased interest rates.
The company will “cease development” on Ocean Wind 1 and 2, but said it will be moving ahead with the 700-MW Revolution Wind farm offshore Rhode Island and Connecticut along with partner Eversource.
Ocean Wind 1 and 2 were Ørsted’s largest projects in development, with a planned capacity of 1,100 MW and 1,148 MW, respectively.
“We are extremely disappointed to announce that we are ceasing the development of Ocean Wind 1 and 2,” CEO Mads Nipper said in a release.
New Jersey’s Gov. Phil Murphy called the company’s decision “outrageous” in a Wednesday release, saying it called into question Ørsted’s credibility and competence, and that he had directed his administration to review the state’s legal pathways for ensuring that Ørsted "fully and immediately honors its obligations.”
Ørsted is recognizing $4 billion in impairments as a result of the canceled projects and financial struggles with ongoing projects. The cancelation of Ocean Wind 1 alone resulted in an impairment of around $2.8 billion, the company said.
Offshore wind projects in the U.S. have hit a slew of financial difficulties and other challenges recently, with several developers moving to exit their power purchase agreements in the face of rising costs.
Nipper said that the company remains committed to the U.S. renewables market, and values the efforts made by the federal government to support the offshore wind industry, but that “significant adverse developments from supply chain challenges, leading to delays in the project schedule, and rising interest rates” led Ørsted to this decision.
The company has also “updated its view” on assumptions regarding factors like “tax credit monetization and the timing and likelihood of final construction permits,” the release said.
“We will now assess the best way to preserve value while we cease development of the projects,” Nipper said. “At the same time, with an attractive forward-looking value creation, we progress the Revolution Wind project into the construction phase.”
Going forward, the company will be taking measures to support its capital structure and long-term commitment to its credit rating, said the release. These measures include cost-saving initiatives as well as capital improvements like supply chain financing and portfolio rationalization.
“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,” the company said.
The New Jersey Senate’s minority leader Anthony Bucco, R, said that state Republicans had warned for months that Ørsted’s developments in New Jersey were “unsustainable and would inevitably fail,” calling the projects “too much, too fast, and too costly.”
