Equinor ASA disclosed a $300 million impairment to its US offshore wind portfolio Oct. 27 following a decision by New York regulators rejecting a petition to increase power supply contract costs associated with the projects.
Equinor and BP PLC, developers of the 2,400-MW Beacon Wind and 2,076-MW Empire Wind projects through joint ventures, had sought to increase the contracted offtake price for the projects to mitigate increased costs driven by inflation, global supply chain disruptions and high interest rates.
"We now have a remaining book value totaling around $300 million: $100 million in the projects and around $200 million related to real estate in New York and cables," Equinor Executive Vice President and CFO Torgrim Reitan said during the Norwegian company's Oct. 27 third-quarter earnings call.
The contract termination fees associated with the current New York projects total $16 million, Reitan noted.
On Oct. 20, New York Gov. Kathy Hochul vetoed legislation that would have helped Equinor and BP build transmission lines to connect those projects to the utility grid on Long Island, NY.
"This decision undermines New York's commitment to the energy transition and the role offshore wind must play in achieving the state's renewable energy mandates," Equinor Renewables Americas President Molly Morris said in a statement.
Hochul on Oct. 12 announced an action plan for the New York State Energy Research and Development Authority (NYSERDA) to speed up the state's renewable energy goals, including "an accelerated renewable energy procurement process" using simplified bid requirements and inflation indexing "to backfill any contracted projects which are terminated."
Reitan said the company sees that plan "as a signal of commitment and a willingness to fast-forward the process," though it is too early to parse whether it will be enough for Equinor and BP.
"For us to move forward with these projects, we need to see profitability that is sort of reflecting the risk at hand," Reitan added.
In addition to the impairment, Equinor also has financial exposure to some contracts in place for Beacon Wind and Empire Wind, the CFO noted, "related to ships and turbines, which typically can be used other places" in the company's global portfolio.
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