Eversource Energy (ES)

Eversource Energy (ES) stock dropped by 7.75% due to to the company's announcement regarding an expected impairment charge related to its offshore wind projects in the United States, which it owns in partnership with Ørsted.

• Impairment Charge and Offshore Wind Projects Divestment: Eversource Energy anticipates recording an impairment charge ranging from USD 1.4 billion to USD 1.6 billion for three offshore wind projects: South Fork Wind, Revolution Wind, and Sunrise Wind. The company is in the process of divesting its 50% ownership interest in these projects, aiming to sell them to a "leading global private infrastructure investor."
• Factors Leading to Impairment: Several factors have contributed to the impairment charge, including revised projected construction costs due to supply chain constraints related to installation vessels and foundation fabrication. Additionally, uncertainties surrounding the Sunrise Wind project's rebid process in New York's Request for Proposals (RFP) issued in November 2023 have affected the potential sales price.
• Evaluation of Impairment: The evaluation of the impairment took into account factors such as increased construction forecasts for all three projects, driven by vessel availability issues and supply chain cost increases related to foundation fabrication. These increased costs are estimated to be between USD 800 million and USD 900 million. Furthermore, the New York State Public Service Commission denied Sunrise Wind's petition to amend its Offshore Renewable Energy Credit (OREC) contract to cover increased costs and inflation. As a result, Sunrise Wind may need to participate in a new RFP and negotiate a new OREC agreement at a revised price.
• Financial Impact: Eversource expects to record an after-tax other-than-temporary impairment in the range of approximately USD 600 million to USD 700 million for Sunrise Wind in the fourth quarter of 2023.
• Market Challenges: The impairment reflects the challenges faced by offshore wind projects in the United States, including supply chain disruptions and inflationary pressures. Despite these difficulties, Eversource remains committed to decarbonizing the energy sector and investing in clean energy infrastructure through its regulated utilities. In response to this news, investors may have reacted by selling Eversource Energy stock, reflecting concerns about the financial impact of the impairment charge on the company's earnings and future prospects.