The state of New Jersey, its Board of Public Utilities and Ørsted announced Tuesday they have reached a $125 million settlement arising out of Ørsted’s decision last fall to cease development on the Ocean Wind 1 and Ocean Wind 2 projects.
The settlement is significant for the state — which will get a large check to help support the offshore wind industry — but it is far less than the $300 million the state said it was owed by Ørsted last November, when the company stunned many with an announcement that it was walking away from its projects.
Ørsted’s decision has made more sense in recent months as the financial uncertainties and challenges around the industry have become clearer.
The state’s efforts to get $300 million from Ørsted ($100 million for failure to reach a performance guarantee and $200 million to help build the industry) never seemed realistic.
Sources who are familiar with the negotiations, but who were not authorized to speak publicly on the matter, said the state essentially got the $100 million for the failure to reach a performance guarantee and the two sides settled on $25 million for the other claim, which enabled both sides to avoid lengthy and costly litigation.
The settlement was announced at the same time the state announced it was moving up the timeline for its fifth solicitation for offshore wind projects.
A spokesperson for Gov. Phil Murphy, Natalie Hamilton, released the following statement:
“Gov. Murphy is pleased that this matter has been resolved without litigation and that the state will receive $125 million from Ørsted. He is grateful to his partners in the Legislature who included protections in the legislation that allowed for a recovery of this magnitude, even though Ørsted did not avail itself of the federal tax credits because of the cancellation of the New Jersey projects.
“The advancement of the fifth solicitation timeline demonstrates that, in spite of this, New Jersey remains on track to become a national leader in the burgeoning offshore wind industry.”
The administration said the $125 million will be used to support investments in qualified wind energy facilities, investments in offshore wind component manufacturing facilities and other clean energy programs to achieve the state’s clean energy goals.
Ørsted, which lost billions in its efforts to build Ocean Wind 1 and Ocean Wind 2, released the following statement from a spokesperson:
“Ørsted is pleased with New Jersey Board of Public Utilities’ offshore wind announcement today. Our joint settlement, as well as the announcement that the fifth offshore wind solicitation will have a new accelerated timeline, underscores New Jersey’s commitment to offshore wind and the industry’s bright future in the Garden State. While we advance clean energy projects throughout the region, we look forward to continuing valuable partnerships with New Jersey stakeholders.”
