Eversource expects over 1,700 MW of US Northeast offshore wind power online in 2024

Eversource Energy executives told investors Thursday they expect to have 1,714 MW of offshore wind power capacity operational by the end of 2024 and they are confident about winning bids for additional projects in the Northeast US. The officials said this strategy bolsters their focus on environmental, social and governance issues.

"We have set a goal of being carbon neutral by 2030, which is the most aggressive target of any energy utility," Jim Judge, Eversource's chairman, president and CEO, said during the company's fourth quarter and full-year 2019 earnings call.

Setting this aggressive carbon reduction goal makes the investor-owned utility more attractive to ESG-focused investors, who currently comprise about 10% of the 1,600 domestic and international funds currently invested in Eversource shares, Judge said.

This clean energy strategy is "further enhanced" by the company's partnership with Denmark-based Orsted to build at least 4,000 MW of offshore wind off the coast of Massachusetts, Judge said.

Eversource has won bids in requests for proposals totaling 1,714 MW in Connecticut, New York and Rhode Island and is now focused on siting approvals.

The Eversource-Orsted joint venture projects include the 130-MW South Fork Wind project and 880-MW Sunrise Wind project that would both supply Long Island, New York, and the 704-MW Revolution Wind project that would supply Rhode Island (400 MW) and Connecticut (304 MW).

The construction and operation plan for South Fork has already been filed with the US Bureau of Ocean Energy Management, and Eversource expects to file construction and operation plans for Revolution Wind in the first half of 2020 and Sunrise Wind in the second half of the year, according to its investor presentation.

Sunrise is expected to commence commercial operations by the end of 2022, Revolution by the end of 2023 and Sunrise by the end of 2024.

PPA PRICING

Power purchase agreement pricing with state agencies for the power produced from these projects has mostly been made public. South Fork would receive about $160/MWh for the project's 90 MW configuration, about $86/MWh for a 40 MW configuration. Negotiations are underway to increase the project size from 90 MW to 130 MW.

Revolution Wind would receive $98.43/MWh in Rhode Island, while the Connecticut pricing has not been made public. Sunrise Wind signed a contract with a New York government agency in October for $110.37/MWh, according to the presentation.

Eversource expects to qualify for 18% tax credits on the three projects, Judge said.

"As you know while we were successful in our New York RFP last year, we were not successful in our Massachusetts or Connecticut RFPs," he said.

The PPA contract pricing in Massachusetts would "not be sufficient for us to earn our targeted mid-teen returns" on equity, Judge said.

Between New York, Connecticut, Massachusetts and Rhode Island there will likely be at least 15,000 MW of contracts available to developers over the coming years. "The last thing we would want to do is lock ourselves into contracts for 20 to 25 years that would not allow us to earn our targeted returns because we bid too aggressively," Judge said.

Asked by an analyst why lower bids were accepted in Massachusetts and how Eversource would compete going forward, Judge said other bidders may be able to handle lower returns and Massachusetts has been "focused on price and price alone" as opposed to other states where more focus has been placed on economic development or other factors.

With currently over 25,000 MW of offshore wind legislated in the US Northeast, "we are pretty excited about the opportunity," Judge said.

Eversource Energy reported full-year 2019 earnings of $909.1 million, or $2.81/share, compared with 2018 earnings of $1.033 billion, or $3.25/share. In Q4 2019, Eversource earned $250 million, or $0.76/share, compared with earnings of $231.3 million, or $0.73/share, in Q4 2018.