Ørsted CEO: Deepwater acquisition was not possible at earlier point

The energy company is competing against its recently purchased subsidiary in the current offshore wind tender in Connecticut, but it expects the deal to be closed within the coming weeks.
Photo: Katrine Marie Kragh/Polfoto/Arkiv
Photo: Katrine Marie Kragh/Polfoto/Arkiv

The US competition authorities have apparently been working quickly. Only three weeks back, Ørsted announced its purchase of of US offshore wind energy developer Deepwater Wind for a sum of USD 510 million, but the Danish energy company now expects the transaction to be complete "within the coming weeks."

So said Ørsted CEO Henrik Poulsen upon presenting the company's Q3 report Thursday. Until this point, the deal had been expected to be approved before the end of the year.

At first glance the difference between the end of the year and the next few weeks could appear to be relatively minimal. However, several things will be taking place on the US offshore wind market during that short time frame, and the finalization date for the trade could theoretically prove to be decisive for whether Ørsted and Deepwater Wind will compete in unison or against each other.

At the moment, a public tender for 250 MW of zero-emission capacity – which includes both solar and nuclear power – is being held in Connecticut. Both Deepwater Wind and Ørsted have submitted bids. The latter announced as much in its Q3 third quarter report. Being that the deadline for placing bids fell on Sept. 14, there can be no doubt about the competitive relationship between the two developers.

Matters will be somewhat tighter in New Jersey, where the deadline for the state's 1,100 MW offshore wind tender is Dec. 28. Both Deepwater Wind and Ørsted have project bids prepared for that round. Meanwhile, an auction for three offshore wind project sites will be held in Massachusetts, and both energy companies have prequalified to participate.

Poulsen conceded after the presentation that these efforts will be easier as soon as Ørsted is not competing against a blind opponent.

"Clearly, when the deal is finalized, we will have additional cards on hand to play in New York, Massachusetts and New Jersey. We are, of course, in the process of deliberating on which hand to play, but there we will not be able to provide specific information until the transaction is settled," says Poulsen.

An argument can certainly be made that Ørsted did have the chance the avoid this conundrum – and perhaps it could have even saved some time in the process. If, for instance, the acquisition had taken place earlier in the year before Deepwater won the allocation of 400 MW in Rhode Island as well as 200 MW in Connecticut, each and every technical difficulty would have been eliminated.

Poulsen says, though, that such an action was not realistic.

"It was, from my perspective, not possible," he evaluated, adding:

"I am not sure that Deepwater Wind had gone through all considerations on whether it had gotten the most out of its investment, and the timing would not have been right at a earlier point."

Even when the transaction is finalized, a competitive problem will still remain.

Ørsted has entered bids in both the ongoing Connecticut tender as well as the preceding tender along with Bay State Wind partner Eversource. Looking forward, Ørsted will be able to place bids with its own project in the form of the soon-to-be acquired Revolution Wind. But, on the other hand, the Danish developer will also take over a partnership with PSEG at Deepwater's  Garden State project in New Jersey, where Ørsted has its own project, Ocean Wind.

Poulsen says the bridge will be crossed as soon as the transaction is complete.

"We will have our work cut out for us looking forward. But discussions with partners will have to wait until the deal is closed. We will then, naturally, have a more specific talk with both Eversource and PSEG," Poulsen states.

English Edit: Daniel Frank Christensen

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