Equinor and BP swap offshore NY State wind projects

There are currently significant developments afoot in US offshore wind renewables, with the US hastening to try to catch up with the European sector, which is still several years ahead.

On January 25th Norway-based energy company Equinor said that it had entered an agreement with BP to pursue separate wind projects independently off the coast of New York State.

Equinor said it expected a combined reported loss estimated of around $200m owing to the transaction, but that this would not impact its adjusted earnings. BP in a separate statement said it expects to recognise a pre-tax impairment charge of around $600m in Q4 2023.

The swap transaction would see Equinor take full ownership of the Empire Wind lease and associated projects, including SBMT, where construction is expected to begin during H1 2024, while BP would take full ownership of Beacon Wind and its assets. A mutual termination agreement has also been reached with the NYSERDA for the Beacon Wind 1 Offshore Wind Renewable Energy Certificate (OREC) Purchase and Sale Agreement.

BP said the proposed swap transaction is expected to be on a cash neutral basis, subject to customary working capital adjustments.

Last year New York State launched an accelerated offshore wind solicitation after earlier projects hit difficulties – mainly caused by a significant change in market prices.

The deadline for submitting proposals in New York’s fourth large-scale offshore wind solicitation is on Thursday this week, with the announcement of the winning tenders expected in February.

Denmark-based Orsted, Equinor and BP already have contracts to sell power in New York from offshore wind farms. The new solicitation allows the companies to re-offer their planned projects at higher prices, exiting their old contracts, which the energy companies said were no longer worth pursuing and which New York State, after some resistance, eventually accepted was the case.

The development of the industry is important both federally and as state level. To prevent the projects from falling through, some state governments, including New York, have agreed to allow developers to rebid their projects at higher levels.

The European energy companies have now taken a combined $5bn of writedowns on US offshore wind projects, in part because their existing power sales contracts would not cover the cost of building and financing the projects.