Eversource announced February 8, 2019 that it had acquired a 50% interest in Ørsted’s Massachusetts North and Massachusetts South lease areas and its 700 MW Revolution Wind project and 134 MW South Fork Project. Both projects are under development and have power purchase agreements (PPAs) with various Northeast electric distribution companies.
The purchase price of about $225 million (≈$540/kW assigning nominal value to the lease area), appears to represent a modest discount relative to what Ørsted recently paid for the Deepwater Wind holdings (≈ $630/kW assigning nominal value to the lease area). This possibly reflects the fact that Eversource didn’t acquire an interest in the operating Block Island Wind Farm, which as an operating largely de-risked asset would command a premium.
The deal provides Eversource with an investment runway to support its earnings growth target, which it needs after Northern Pass was denied by the New Hampshire Site Evaluation Committee and its Bay State Wind partnership with Ørsted failed to secure a contract in the first round of Southern New England OSW procurements. With a US OSW portfolio that is comparable to Vineyard Wind’s and position as industry leader given the size of its worldwide OSW portfolio, Ørsted is a compelling partner.
The Eversource agreement provides Ørsted with cash and allows it reduce its exposure in the US Northeast. Given the capital requirements for these projects, long development lead times, and limited permitting track record in the US, partnering for OSW development is a prudent strategy. Furthermore, as the largest wires company in New England, Eversource represents an attractive partner as interconnection issues are likely to become more challenging for the second phase of Southern New England OSW projects.