Ørsted “Bounces Check” Seeking Return of $300M NJ Wind Farm Guarantee
Danish wind farm company Ørsted is reportedly seeking to get out of the guarantees it entered into with the state of New Jersey just weeks ago for the development of the two large wind farms that had been planned to provide 2.5 GW of power. According to a report from the Associated Press, the day after the company told investors it was canceling the projects, the company wrote New Jersey’s regulators saying it wanted the $200 million, which amounts to two-thirds of the guaranty, back.
Three weeks ago, New Jersey’s Board of Public Utilities approved a deal with Ørsted related to the development of Ocean Wind 1 and Ocean Wind 2. The company already had the federal approvals for the first proposed wind farm and while the second one was still under review had approvals from New Jersey for the project, both of which were central to the governor’s plan for the transition to clean energy. As part of the development of the industry, New Jersey was also working with the company to provide incentives for the development of the infrastructure including a wind port.
New Jersey Governor Phil Murphy passed a law to permit Ørsted to keep federal tax credits that it otherwise would have had to return to New Jersey ratepayers. The governor said the law was necessary due in part to the financial pressures companies were facing in developing the industry and the projects. As part of the agreement, however, Ørsted committed to completing the first phase of the project, Ocean Wind 1 by no later than December 2025 as well as other commitments to New Jersey for the projects.
The company confirmed it was committed to the projects and on October 4 began transferring the guarantee bonds to the state with the understanding they would be placed in escrow. If the projects did not proceed due to not obtaining all the necessary permitting, Ørsted was to get back the $100 million guarantee for Ocean Wind 1 and the $200 million additional guarantee for the additional projects. If Ørsted failed to meet the deadlines the monies were to be surrendered to New Jersey ratepayers.
According to the Associated Press, Ørsted has transferred $200 million of the $300 million total guarantee but wrote the state saying it wants the money back. According to the report, the company is saying the agreement was not in effect because the board had not yet ratified it.
In a Halloween surprise, Ørsted on October 31 told the state and its investors that the company had decided to cancel both of the New Jersey offshore wind farms. Earlier in the summer they had warned its U.S. wind portfolio was under review due to inflation pressures, rising costs, supply chain challenges, and an inability to realize tax credits. The company is taking a $2.8 billion charge for not proceeding with Ocean Wind 1 and a total charge of approximately $4 billion. However, they warned investors that there could be as much as $1.5 billion in additional charges due to potential contract cancelation fees and other costs.
It is unclear what will happen next as Associated Press says the agreement called for the company and the state to negotiate any disputes. Governor Murphy last week called the company’s withdrawal “outrageous.” He said the state would move to ensure that Ørsted fulfilled all its obligations.