October 9, 2018
Rhode Island, U.S.

Deepwater Wind sold for $510M

Alex Kuffner, Journal Staff Writer | Providence Journal | Oct 9, 2018 | www.providencejournal.com

PROVIDENCE, R.I. – Orsted, a Danish company and the world’s largest offshore wind developer, has agreed to pay $510 million to buy Rhode Island-based Deepwater Wind, the company that two years ago built the first offshore wind farm in the United States, a five-turbine array near Block Island.

The acquisition, which was announced Monday and will be finalized in the coming months, will result in the creation of Orsted U.S. Offshore Wind – a new company that will have more than 8,000 megawatts in development in Massachusetts, Rhode Island, New Jersey, Delaware and Virginia.

Deepwater’s Providence headquarters will remain open under the agreement, with all of its staff in place, including its chief executive officer, Jeffrey Grybowski. He will become co-CEO of the new company alongside Thomas Brostrom, who currently leads Orsted’s U.S. operations out of Boston.

The deal comes just months after Orsted’s Bay State Wind project lost out on a chance to negotiate long-term contracts to sell power to utilities in Massachusetts and Rhode Island. Securing a power purchase contract is critical to development because it guarantees decades of revenue and can be used to attract financing.

While the rival Vineyard Wind project, a venture backed by another Danish concern, won the bidding process in Massachusetts last spring, Deepwater’s Revolution Wind proposal was selected at the same time by Rhode Island. The Deepwater project has won separate competitive bidding processes in Connecticut and Long Island, helping to cement its position as the leading offshore wind company in the United States.

Orsted agreed to buy Deepwater from D.E. Shaw, a New York investment firm that has owned the Providence company from its beginnings more than a decade ago and through construction of the Block Island Wind Farm, the 30-megawatt project that went into operation in 2016. It is still the only offshore wind farm in the United States.

Grybowski said in an interview that Deepwater had been exploring partnerships or acquisitions, as competition in the offshore wind market has increased in the United States – with a host of developers, many with international backing, stepping forward with proposals. While he said that the company had considered other offers, the deal with Orsted, reached over the past several months, made the most sense as it moves to expand its ambitions up and down the East Coast and elsewhere in the United States.

“This is the right partnership for Deepwater to help us go to the next stage for our projects and the vision that we laid out a number of years ago,” he said. “We weren’t just going to partner with anyone. We couldn’t think of a better combination than partnering with Orsted.”

Orsted built the world’s first offshore wind farm in 1991 in Denmark and now has 24 projects in operation, totaling 5,100 megawatts – more than any other company. Although the techniques to build wind farms are the same in the United States as in Europe, permitting is different. Brostrom said that the acquisition brings together Orsted’s construction expertise with Deepwater’s knowledge of the U.S. market, which, despite state and federal programs to push forward development and a drop in the price of offshore wind, has had to navigate opposition.

“It’s new here, so there’s always been a little bit more skepticism,” he said. “The local stakeholders are different. They need to get more comfortable with offshore wind. In that regard, it’s different.”

The agreement, Brostrom said, will not affect the Bay State Wind project, which is proposed in an area of federal waters between Block Island and Martha’s Vineyard. The Revolution project, located in the same general area, also will not change, nor will Deepwater’s other proposals, Grybowski said.

“We are moving forward on all of them as planned,” he said. “After closing the transaction, we’ll look at opportunities to make the projects better and obviously bring to bear Orsted’s considerable engineering, procurement and construction expertise. If anything, this combination should solidify people’s confidence in our ability to build these.”

Under the deal, he said that the company’s operations in Rhode Island will expand. In the short term, a chief operating officer will join the Providence office from Orsted.

Grybowski thanked D.E. Shaw for its support. In a statement, Bryan Martin, managing director of D.E. Shaw and chairman of Deepwater, said the new company will “continue to make history.”

Catherine Bowes, the National Wildlife Federation’s wind program director, said the acquisition comes at a pivotal time for the industry.

“We know responsibly developed offshore wind power offers a critical solution to climate change, and the first round of U.S. projects must be sited and built with wildlife in mind,” she said in a statement.

“Deepwater Wind’s Block Island Wind Farm set a strong precedent with the development of America’s first offshore turbines, and we look forward to continuing to work with Orsted and all offshore wind companies to advance responsibly developed projects for America.”