Orsted, a Giant in Offshore Wind Farms, Makes a Move in the U.S.

Source: By Stanley Reed, New York Times • Posted: Wednesday, October 10, 2018

The Walney Extension wind farm, operated by Orsted off Blackpool, England. Northern Europe has dominated offshore generation, which until recently required large subsidies to be economically viable.Phil Noble/Reuters

Orsted, a Danish company that is one of the world’s largest offshore wind energy developers, said on Monday that it would acquire a Rhode Island rival, Deepwater Wind, for $510 million, a sign that the United States is becoming an attractive market for offshore energy generators.

Orsted has a global portfolio of projects in places including Britain, Germany and Taiwan, as well as in Denmark. But this year, it failed to win a competitive bidding process held by Massachusetts to develop what is likely to be the largest offshore wind installation in the United States.

The acquisition of Deepwater Wind appears to be an attempt by Orsted to better navigate the regulatory and political systems of the United States.

In a statement, Martin Neubert, Orsted’s chief executive for offshore wind, cited “Deepwater Wind’s longstanding expertise in originating, developing and permitting offshore wind projects in the U.S.”

Deepwater Wind, which is based in Providence, R.I., and owned by D. E. Shaw, a hedge fund, does seem to have a knack for lining up deals. It built the first offshore wind farm in the United States, a five-turbine installation off Block Island, in its home state, that came online in 2016.

The company has several other projects underway, including one that is expected to generate large amounts of electricity for Rhode Island and Connecticut from a tract off Martha’s Vineyard.

In an interview, Mr. Neubert suggested that Orsted needed to make a move after failing to win both the Massachusetts contract and one for a project off the Connecticut coast.

It was clear, Mr. Neubert said, that the offshore market in the United States would grow rapidly in the coming years, and that Orsted wanted to be well positioned to compete for deals.

“For us, the U.S. offshore wind market is a very attractive, strategically important market,” he said.

Deepwater Wind’s chief executive, Jeffrey Grybowski, said his company had been seeking investors or partners to give it the scale and expertise necessary to compete in what could become a much larger industry. D. E. Shaw was also interested in cashing in its investment.

A new entity created as a result of the deal, Orsted US Offshore Wind, will be led by Mr. Grybowski and Orsted’s current North America chief, Thomas Brostrom.

Both men said Orsted would be able to draw on its expertise to build and run the projects that Deepwater was awarded. “They can build big complicated things in the middle of the ocean,” Mr. Grybowski said.

Northern European countries like Denmark, Britain and Germany have dominated offshore wind, which until recently required large subsidies to be economically viable. Costs have come down rapidly in recent years, however, and developers, including Orsted, have agreed to build some projects without the benefit of subsidies.

By paying more than $500 million for a relatively small company with just one wind farm, Orsted appears to be confirming that the United States is considered the next big source of growth for this industry.

Falling costs for offshore projects have caught the attention of electric power providers and investors in the United States, especially in the shallow waters off the Northeast and Mid-Atlantic States. By planting large arrays of turbines on the sea bottom, developers say, they can construct large installations that are mostly out of sight of land yet within easy transmission range of large population centers like Boston and New York.

These projects can generate large amounts of electricity free of carbon dioxide emissions, and can be used to meet clean energy targets and to replace aging nuclear and coal-fired power stations. Among other states, New Jersey and New York have ambitions to build substantial offshore wind projects.