The Danish wind power developer Orsted is canceling two off-shore wind projects that were planned off the coast of New Jersey and is taking a $4 billion impairment for the first nine months of the year, the company announced this week.
The company has also set aside an additional provision of up to $1.55 billion for “potential contract cancellation fees not already covered by the impairments,” meaning the total write-off could top $5.55 billion.
Orsted CEO Mads Nipper said “significant adverse developments from supply chain challenges, leading to delays in the project schedule, and rising interest rates,” were to blame for the project cancelations, according to a statement from the company published Tuesday.
Of the $4 billion writedown, $2.8 billion was connected to the Ocean Wind 1 project, Orsted said.
The Ocean Wind 1 project would have been New Jersey’s first offshore wind farm and would have generated enough electricity to power half a million homes, according to a website about the project. It was going to include 98 turbines located 15 miles off the coast of southern New Jersey. Construction was due to start this fall and the project was due to be operational in 2025.
The similarly sized Ocean Wind 2 project was also going to be located off the southern New Jersey shore and was due to start in 2028, according to a website about the project.
“We are extremely disappointed to announce that we are ceasing the development of Ocean Wind 1 and 2,” Nipper said in a written statement published alongside the announcement.
“We firmly believe the U.S. needs offshore wind to achieve its carbon emissions reduction ambition, and we remain committed to the US renewables market and truly value the efforts by the US government to support the build-up of the US offshore wind industry” Nipper said.
To wit, Nipper said the Revolution Wind project is moving into the construction phase.
The Revolution Wind project is a joint project between Revolution Wind and Eversource and will be located more than 32 miles southeast of the Connecticut coast, according to Orsted’s website. Orsted also has projects ongoing in Maryland, New York and Rhode Island.
Orsted had previously indicated to investors that it was going to face financial impairments. On August 29, Orsted announced it was anticipating a write down of up to $2.3 billion in its U.S. portfolio, but things got worse, not better. “Since the announcement, the US offshore wind projects have experienced further negative developments,” Orsted said.
Orsted is headquartered in Denmark, employs 8,700 people and had revenue of $18.7 billion in 2022.