Ørsted announced on its Q2 2024 earnings call that it will be taking a DKK2.1bn ($309 million) impairment as its Revolution Wind project has been delayed to 2026. Revolution Wind is a 704 MW offshore wind farm that will provide power to Connecticut and Rhode Island.
Ørsted blames the delay on a problem with the construction of an onshore substation handled by utility Eversource.
Here are Ørsted CEO Mads Nipper’s full comments on the delay:
Despite our continued focus on project execution and our dedicated work to derisk our construction portfolio, we have seen an unsatisfactory project-specific issue leading to a delay on the construction schedule of our legacy US offshore project, Revolution Wind.
At Revolution Wind, we have seen encouraging progress on several of the risk mitigations we have been addressing, including monopile fabrication as well as securing availability and flexibility of installation vessels.
The offshore construction activities are on track with 44 out of the projects, 67 monopiles installed as of this week. However, one of the risks we had identified as part of the risk review has materialized during the quarter as the construction of the onshore substation, which is part of the onshore scope handled by our partner, Eversource, will be delayed.
The cause of the delay is mitigating actions needed to address higher-than-anticipated level of soil contamination. While we were aware of contamination at this site, given its past use as a naval disposal facility, the comprehensive analysis from Eversource as part of the early construction work have shown that the level of contamination and its impacts to the project schedule are more substantial than anticipated.
As a result, an update to the site design was required, which has resulted in a delay to the onshore construction activities. Based on this development, we now expect the commissioning of Revolution Wind to be delayed to 2026. We will be working closely with Eversource to explore all mitigations to improve the schedule and minimize the financial impact.
As a result of the delay and increased costs relating to extending the construction period, we are booking an impairment of DKK2.1 billion, for which the majority is related to the delayed revenue profile. As we have previously indicated, the project did not satisfy our life cycle spread to WACC requirement at the point of the FID.
But despite these developments, we do see a positive value of the projects on an absolute IRR level as well as an attractive forward-looking return and we remain committed to constructing Revolution Wind as part of our wider Northeast portfolio of projects.
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