Equinor sees glimmer of hope for US East Coast offshore wind projects, but looks to onshore alternatives

A ten-point action plan that New York State authorities have put forward to encourage offshore wind developers to re-bid on stalled projects is a step in the right direction, according to an executive with Equinor, co-developer of the stalled Beacon Wind and Empire Wind projects.

Equinor and joint venture partner BP submitted a petition for a major revision of terms for more than 3GW of projects in June after soaring costs and an absence of any index-linking of the original PPA offtake prices undermined profitability.

The developers had sought an average 48% increase to their offtake contracts amid cost inflation, high financing costs, and supply chain turmoil.

“To move forward with these projects, we need to see profitability that reflects the risks at hand,” Equinor's chief financial officer Torgrim Reitan told analysts on an earnings call.

Pressed on what this means, Reitan said Equinor has made clear that it needs to see a “real unlevered return in the region of 6-8%.”

Action plan

Reitan said New York State authorities last night came out with further details on how they want to run the 10-point plan for breathing new life into the plans to develop offshore wind.

“The plans presented last night gave us a picture of how they want to run the process and how they would like feedback from us next week, so we can see where that leaves us,” Reitan told analysts.

“Clearly, we welcome that they are pushing forward their action plan, and I do see this as a signal of their commitment and a willingness to fast-forward a process,” he said.

Asked about potential exposure to different impairments from the two US East Coast projects, Reitan mentioned some real estate assets in Brooklyn, cables and other equipment, as well as some contracts for vessels and turbines which could, if necessary, be “used elsewhere in the portfolio”.

Onshore wind pivot

While reaffirming Equinor's interest in offshore wind, Reitan said the Norwegian company is also diversifying its exposure with growing onshore wind assets in markets such as Brazil and Poland and remains committed to its gigawatt targets.

He also stressed that the company has, for some time, been working on the profitability of existing assets by divesting.

“It should be noted that we entered the East Coast projects early and paid under $200 million. We sold off 50% and booked $1bn,” he told analysts, referring to the 2020 farm-out to BP on the 2.4GW Beacon Wind and the 2GW Empire Wind projects.

“Instead of fighting in recent lease rounds we have been building an onshore portfolio through acquisitions of various platforms in Denmark, Brazil and Poland, with a good pipeline,” he said.

“So, our target for 2030 remains firm, but you may see some shifting in content between onshore and offshore in the delivery of that.”

Earlier in the day, Equinor CEO Ander's Opedal told Reuters that his company will will submit a proposal to pre-qualify for Norway's first offshore wind auction, after forging a partnership with Germany's RWE for Soerlige Nordsjoe II, a shallow water close to the maritime border with Denmark, with 1.5GW on offer.