Wind

Orsted buys US offshore wind pioneer Deepwater for $510m

Danish group claims deal creates North American leader with 8.8GW potential across seven states

Wind turbines, of the Block Island Wind Farm, off the shores of Block Island, Rhode Island.
Wind turbines, of the Block Island Wind Farm, off the shores of Block Island, Rhode Island.

Orsted moved to cement a leadership role in US offshore wind with a $510m acquisition agreement for Deepwater Wind, the Rhode island-based pioneer in the sector that has 3.3GW of potential capacity off the East Coast.

The purchase from current Deepwater owner, the investment group DE Shaw, turbocharges Orsted’s existing US operations, which already include a 5.5GW development portfolio off Massachusetts and New Jersey, and gives the Danish group a route to supply offshore wind energy to seven states.

Deepwater will be merged into Orsted’s US organisation as a new entity operating as Orsted US Offshore Wind following closure of the transaction, which is expected by the end of this year. That will be led by Thomas Brostrøm, Orsted’s North America president, as CEO, with Deepwater’s current chief executive Jeff Grybowsk as co-CEO.

Deepwater created history in the US sector when it deployed the country’s first – and still only – operating offshore wind farm, the 30MW Block Island off Rhode Island in 2016. It has since built a raft of potential offshore wind developments off the US East Coast (see panel).

The size and breadth of the merged pipeline gives global offshore pacesetter Orsted a big ramp-up in the US market as it jostles for position with other players, including Avangrid, controlled by fellow European big-hitter Iberdrola, whose winning bid in Massachusetts’ landmark first offshore wind tender was a setback for the Danish group earlier this year.
Tom Harries, senior wind analyst at Bloomberg New Energy Finance, told Recharge: “On the face of it, this is a pipeline play: It means Orsted gains access to new sites. But, more importantly, it wipes out one of its most successful competitors in recent auctions.

“We probably haven't seen the last M&A deal in the US. Players like US Wind, who have access to leases but lack the offshore experience, will be interesting to watch.”

Anthony Logan, research analyst, North America wind power, at Wood Mackenzie Power & Renewables added: “If you can’t outbid them, buy them. Orsted couldn’t afford to miss out on the first wave of US project installations after losing bids in Massachusetts, Rhode Island and Connecticut. The scale afforded by adding these projects to its portfolio will now allow it to optimise its offerings at the New Jersey auction that launched last month.”

Logan added: “If Orsted plays their cards right, it should be able to throw its weight around as the most geographically diversified player in the US offshore market – it has lease zones up and down the seaboard, capable of bidding into nearly every foreseeable state procurement programme on the East Coast.”

Andy Geissbuehler, advisory director at BVG Associates, said the US market will "gain additional strength and predictability" under the newly merged company.

The acquisition is subject to US regulatory approval, and would mark the second major step-up in US activity by Orsted this year, following its purchase of onshore wind developer Lincoln Clean Energy for $580m.

Brostrøm said: “Deepwater Wind has done a fantastic job as a first-mover in US offshore wind, and I look forward to joining and integrating the two US organisations. We have exciting times ahead of us delivering large-scale clean energy projects to households and businesses along the Eastern Seaboard. Orsted will maintain a strong presence in Massachusetts and Rhode Island and will, of course honor the local commitments associated with Deepwater Wind’s projects along the East Coast.”

Orsted offshore wind CEO Martin Neubert said: “With this transaction we’re creating the number one offshore wind platform in North America, merging the best of two worlds: Deepwater Wind’s longstanding expertise in originating, developing and permitting offshore wind projects in the US, and Orsted’s unparalleled track-record in engineering, constructing, and operating large-scale offshore wind farms.”

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Published 8 October 2018, 07:11Updated 9 October 2018, 17:29
Offshore