The $200 million deposit Ørsted put into an escrow account this fall for the purpose of helping to build New Jersey’s offshore wind supply chain manufacturing facilities is secure, a state official said Wednesday.
The deposit, which was part of legislation that would have allowed Ørsted to potentially access a large amount of federal tax incentives, requires the approval of three parties (Ørsted, the Board of Public Utilities and the EEW monopile facility) to be withdrawn, as per the legislation.
“Ørsted cannot unilaterally withdraw money,” said the state official, who asked for anonymity due to the sensitive nature of the past 24 hours.
The status of an additional $100 million that Ørsted owes the state — a performance guarantee attached to the commercial delivery of Ocean Wind 1 — isn’t as clear.
Gov. Phil Murphy was quite adamant in the fact that the state will use all means at its disposal to ensure Ørsted fulfills its commitment.
“I have directed my administration to review all legal rights and remedies and to take all necessary steps to ensure that Ørsted fully and immediately honors its obligations,” he said.
An Ørsted official, speaking on condition of anonymity because they are not authorized to speak publicly on the matter, said simply: “We are currently evaluating our contracts and agreements, including this, following (Tuesday’s) announcement.”
The status of the lease areas that Ørsted won in auction — the spots where Ocean Wind 1 and Ocean Wind 2 were to go — is more certain: Ørsted controls them.
Those are federal lease areas that Ørsted won by auction, as it has with other areas on the East Coast, the state official said. In addition, the agreement between Ørsted and the federal government has no expiration date — no use-it-or-lose-it deadline.
- Maintain the rights to the areas, perhaps using them years down the road, when the economics change;
- Sell the areas to a different developer;
- Use it as part of a negotiation with the state or federal government.
“Those lease areas have value,” the state official said. “They certainly are considered part of a set of assets that are associated with those two projects.”
So, where do things go from here?
Read more from ROI-NJ:
- Ørsted pulls out of Jersey: A Q&A of what happened and why — and what happens going forward
- UPDATED: Ørsted kills Ocean Wind 1 and 2 projects; Ocean Wind 1 was to be N.J.’s 1st offshore wind farm
The state official admitted that Ørsted pulling out was a difficult moment.
“It is an undeniable setback,” the person said. “I would absolutely be disingenuous if I pretended that it wasn’t.”
But it is not the end of the industry in the state, the person predicted.
“We have two really valuable supply chain assets in the state in the EEW monopile facility and the Wind Port,” the person said. “The domestic content provision in the investment tax credit for offshore wind makes both of those facilities quite valuable to the regional offshore wind industry, because projects who utilize them can access federal tax incentives.”
The person noted the support of the governor, too.
“I’ve never seen the governor more committed to making sure that we have a path forward for offshore wind in New Jersey,” the person said. “I think we recognize the challenges for those projects awarded prior to the pandemic — and there are serious challenges — but we remain optimistic that we will be able to move them forward.”