March 7, 2024 — Challenging economics faced by later-stage US offshore wind projects struggling to get across the finish line are not deterring private equity firms from investing in various parts of the value chain.
From lease sales and port logistics to the projects themselves, some of the largest alternative asset managers are leaning into demand for infrastructure supported by federal tax credits and the Biden administration’s goal of 30 GW of offshore wind energy capacity by 2030 and an additional goal of 15 GW of floating offshore wind energy capacity by 2035.
Global Infrastructure Management LLC announced a deal in mid-February to take over Eversource Energy’s 50% interest in two of the utility company’s joint offshore wind farms with Ørsted A/S for $1.1 billion in cash. The following week, Dominion Energy Inc. saw its stock pop after announcing its own deal to unload a 50% stake in the 2,587-MW Coastal Virginia Offshore Wind project to Stonepeak Partners LP, with an expectation of $3 billion in proceeds for the utility upon close.
Due to high interest rates, cost inflation and supply chain clogs, Eversource had been forced to take a billion-dollar writedown on its offshore wind portfolio. Global Infrastructure Management will acquire the utility’s interest in the 132-MW South Fork Wind and 700-MW Revolution Wind projects, while Ørsted is moving to take complete ownership of the 924-MW Sunrise Wind project.
“Private equity does well when some of the initial development work has already been done and then they come in and fund it across the finish line,” Norton Rose Fulbright attorney Becky Diffen, who focuses on renewables project development, said in an interview.