Eversource to take $1.4B-$1.6B hit to Q4'23 results due to offshore wind issues

Eversource Energy expects to record an after-tax impairment of $1.4 billion to $1.6 billion to its fourth-quarter 2023 results as construction costs rise and regulatory uncertainty persists for its joint offshore wind ventures with Ørsted A/S.

Eversource remains in "advanced, exclusive negotiations" with "a leading global private infrastructure investor" to buy its 50% ownership stake in the 704-MW Revolution Wind, 132-MW South Fork Wind and 924-MW Sunrise Wind projects, according to a Jan. 8 news release. But supply chain bottlenecks and a potential offtake contract rebid process for Sunrise Wind are affecting that sales price.

"Offshore wind projects continue to experience major supply chain disruption and inflationary challenges in the early stage of this growing industry in the US, and this impairment is an unfortunate reflection of the current market conditions we are facing," Eversource Chairman, President and CEO Joseph Nolan said in a statement.

Eversource said the impairment remains an estimate and is subject to change, reflecting the current fair value of the offshore wind projects, but will not impact the company's future cash flows or current cash balances.

Still, Eversource is "now very confident that the 10[% investment tax credit] adder for sourcing construction of an onshore substation in a designated community (energy community adder) is realizable," and the company expects to maintain "virtually all of the $400 million in value as part of the anticipated purchase price."

The New York Public Service Commission in October 2023 rejected Sunrise Wind's petition to increase its contracted offtake price to account for ballooning costs. At the time, industry analysts predicted Eversource would have to record another impairment charge related to its offshore wind business. Eversource took a $331.0 million after-tax impairment to its second-quarter 2023 results related to its offshore wind business.

The New York State Energy Research and Development Authority in November 2023 launched an expedited request for offshore wind and onshore renewable projects, with final proposals due in January 2024, and Eversource and Ørsted are still deciding whether to rebid Sunrise Wind, according to the release.

Eversource shares were down 3% in after-hours trading Jan. 8.

South Fork Wind began producing electricity in December 2023.

Eversource said it will issue 2024 earnings guidance, a long-term earnings growth rate, equity needs and a five-year capital forecast, along with other business updates, on its fourth-quarter 2023 earnings call in mid-February.