Ørsted Looks to Pick Up Deepwater Wind for $510 Million

Tom Johnson | October 9, 2018 | Energy & Environment
Danish company’s move indicates growing interest in nascent U.S. offshore-wind sector among European companies

offshore wind
Ørsted, the world’s largest offshore-wind developer, yesterday announced it has agreed to buy Deepwater Wind for $510 million, a deal merging companies with projects stretching from Massachusetts to Virginia.

The acquisition brings together two of the four companies expected to bid to build offshore-wind farms along the Jersey coast. The Murphy administration opened a window seeking applications last month, the first step in its goal to develop the largest offshore-wind capacity in the nation.

Ørsted’s purchase of Deepwater, the builder of the country’s first offshore-wind farm near Block Island, signals the growing interest among European companies in the emerging U.S. offshore-wind sector, particularly along the Eastern Seaboard.

The Danish company, which owns leases to build wind farms 10 miles from the coast of Atlantic City, has installed 5.1 gigawatts of capacity in Europe, where offshore wind has generated carbon-free electricity for decades.

New Jersey policymakers view offshore wind as a critical component of the state’s recently enacted goal of having at least half of its electricity produced by renewable energy by 2030.

Deepwater’s diverse portfolio

By buying Rhode Island-based Deepwater, Ørsted acquires a company that has a diverse portfolio of projects along the East Coast, including those in development in Rhode Island, Maryland, Connecticut, and New York.

Deepwater, a privately held company owned by D.E. Shaw, a hedge fund, also is in a joint venture with PSEG, New Jersey’s largest utility and biggest power supplier. Garden State Offshore Energy, the joint venture, owns leases off the coast of Delaware and Cape May.

“With this transaction, we’re creating the number one offshore wind platform in North-America,’’ said Martin Neubert, CEO of Offshore Wind at Ørsted.

Venture melds expertise, engineering

The merger combines Deepwater’s expertise in originating, developing, and permitting offshore-wind projects in the United States and Ørsted’s track record in engineering, building, and operating large-scale wind farms, Neubert said.

The acquisition also may foster more regional cooperation among the several states vying to build robust offshore-wind industries, according to Liz Burdock, executive director of the Business Network for Offshore Wind.

Several states along the Eastern Seaboard have committed to offshore wind in the past 12 months, including New Jersey, which is seeking to build 1,100 megawatts of capacity. There will be natural synergies between leases it owns across multiple states when developing and building wind farms, Ørsted argued.

“There will be coordinated investments about what makes sense for the states, depending upon their workforces,’’ she said. “There’s enough jobs to go around.’’

But the deal, if approved by regulators, would create a single company delivering clean energy to seven states along the Eastern Seaboard. Offshore-wind advocates have argued a competitive sector is crucial to keeping prices low for consumers, who will subsidize the projects for at least the short term.

“More competition is always good,’’ said Doug O’Malley, director of Environment New Jersey, a strong proponent of offshore wind. “This is a natural evolution of an emerging industry.’’

“There will be plenty of competition. You will see more players coming into the sector,’’ said Thomas Brostrøm, CEO of Ørsted US Offshore Wind and president of Ørsted North America, in an interview.

Subject to approval

The merger is subject to approval by regulators and is expected to close by the end of the year. Until then, Ørsted and Deepwater will operate as separate entities, Brostrøm said.

After the transaction closes, the new company will be called Ørsted US Offshore Wind. Brostrøm will be co-CEO along with Jeff Grybowski, the chief executive of Deepwater.

Ørsted currently has development rights for up to 2 gigawatts off the coast of Massachusetts and 3.5 gigawatts along the Jersey coast. In Virginia, it will be building two 6-megawatt wind turbines as phase one of a project, with the potential to develop another 2 gigawatts of offshore-wind capacity.

The state also is considering approving a pilot project three miles off Atlantic City. The 24-megawatt project by EDF Renewable Energy and Fishermen’s Energy is under review by the New Jersey Board of Public Utilities.