Eversource takes $331M hit to offshore wind business value

Eversource Energy recorded a $331.0 million after-tax impairment related to its offshore wind business for the second quarter, up from the $220 million to $280 million charge the developer estimated in May.

"Eversource evaluated its aggregate investment in the contracted projects, the uncommitted lease area and other related capitalized costs and determined that the offshore wind investment exceeded its carrying value," Chairman, President and CEO Joseph Nolan said during an Aug. 1 conference call.

The impairment amounted to an impact of 95 cents per share. Eversource reported second-quarter 2023 earnings of $15.4 million, or 4 cents per share, compared with second-quarter 2022 earnings of $291.9 million, or 84 cents per share. The S&P Capital IQ GAAP consensus earnings estimate for Eversource in the second quarter was 91 cents per share.

The write-down assumes that Eversource will qualify for investment tax credit adders like the 10% domestic content bonus and that the New York Public Service Commission will reprice Offshore Wind Renewable Energy Certificates for the planned, 924-MW Sunrise Wind project to account for inflation, Executive Vice President and CFO John Moreira said.

That decision is expected in October or November, according to Eversource.

Offshore wind sale update

Regarding plans to divest its 50% interest in a joint venture with Ørsted A/S developing Sunrise Wind, Revolution Wind Offshore and the South Fork Offshore Wind Project, Nolan said Eversource is close to a deal even though it expected to make an announcement during the second quarter.

"It didn't take place, obviously, at the pace that all of us would have liked it to take place, but I just want to promise you that we are here at the one-yard line, and we are getting it over the goal line," Nolan added.

The impairment's increase over a previous estimate was due in part to "the completion of due diligence and kind of the current deal pricing," according to Moreira.

While analysts at Scotiabank told clients Aug. 1 that they still forecast Eversource's contracted portfolio to fetch more than $2 billion, they also believe that "many investors will expect another write-down or two before the dust settles."

In January, Ørsted wrote down its investment in Sunrise Wind by $363 million in the face of cost inflation and rapidly rising interest rates.

Eversource in May agreed to sell its 50% stake in an uncommitted Massachusetts offshore wind lease area to Ørsted for $625 million in cash.

Revolution Wind 2 Offshore, which Eversource is also developing with Ørsted, faced a setback in July when PPL Corp. subsidiary Rhode Island Energy, known legally as The Narragansett Electric Co., decided not to sign a power purchase agreement due to cost concerns.

Conn. ratemaking

Connecticut regulators issued a proposed decision July 21 rejecting a request from Avangrid Inc. utility The United Illuminating Co. for a $130.6 million rate increase over three years, instead authorizing a one-year rate increase of less than $2 million to be effective Sept. 1.

"We will have a day in court, and if this remains as is, I assume that [United Illuminating] will be in court as well to talk about that," Nolan said during the call. "I'm confident that we can get to a much better place."

Analysts at Guggenheim wrote July 24 that the draft decision indicates that Connecticut "continues to point to becoming a value-destructive state."

Eversource also has an approximately $900 million deferred extreme weather balance in Connecticut, with recovery beginning no earlier than the end of 2025, Moreira said.

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