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Allen, Joel and Phil discuss Eversource’s offshore wind exit, BlackRock’s blockbuster G.I.P. buyout, and how GE’s massive SunZia turbine order is powering the Western Hemisphere’s largest wind farm in this episode.
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Allen Hall: I’m Allen Hall, president of Weather Guard Lightning Tech, and I’m here with the founder and CEO of IntelStor, Phil Totaro, and the chief commercial officer of Weather Guard, Joel Saxum, and this is your News Flash. News Flash is brought to you by our friends at IntelStor. If you need actionable information about renewable projects or technologies, check out IntelStor at intelstor.com.
Eversource Energy is continuing efforts to exit investments in emerging U. S. offshore wind projects, negotiating the sale of Interest in three wind farms, South Fork Wind, Revolution Wind, and Sunrise Wind. Eversource sold some assets last year to partner Ørsted. The sale requires regulatory approval and agreements with Ørsted.
Scope depends on Sunrise Wind rebid outcome. Eversource is going to take an impairment charge of roughly 1. billion dollars due to the changing market value of those assets and the construction costs. Phil, this is a problem, right? If offshore wind isn’t at least profitable, marginally profitable.
You’re going to see a continual outflux of companies leaving offshore wind in the U. S. And Eversource, again, is another one that’s doing it, and that’s a big problem for New York in my opinion. What do you think?
Philip Totaro: Yeah, and obviously we all know that PSEG left the projects in New Jersey before the plug ultimately got pulled.
But, we’ve talked, I don’t know how many times on the show about the fact that U. S. companies don’t seem to yet really be bought into the idea of offshore wind. Pretty much all the projects even being built are being built by foreign owned entities at this point. So it’s obviously, Eversource doesn’t want to stay locked into unprofitable projects and agreements.
So the divestiture makes sense for them. The question is, how does anybody follow this up? the interest rates look like they’re going to come down. In 2024, there’s already predictions that there’s going to be up to five rate cuts this year to, readjust the, the fed, interest rate.
At the end of the day, I think that’s going to help tremendously getting projects back on track and may end up encouraging new investors, to, to plow some money into it. including some of these big infrastructure funds that are, they’ve got plenty of assets under management now and plenty of cash at their disposal.
And they’re, looking around.
Joel Saxum: To note here too, guys, this isn’t an odd concept of 50 percent ownership, 50 percent ownership, we’re selling our ownership over here, we’re selling our ownership over here, because this happens in offshore wind in the European market all the time. You hear, ah, Kodawind here was bought by this, and this guy’s divested here.
These are all, those are financial plays. So at some point in time, I would be willing to almost bet that the Eversource game plan wasn’t to buy a wind farm, operate it, and decommission it. It was going to be to get in, get it built, get it running, and enhance the value of it, and dump it for a profit. It just is at the stage where, hey, that profit just doesn’t look like it may come to be right now, or it’s too far off for our investing risk appetite, where we’re going to take the write down and move on.
Allen Hall: BlackRock is going to acquire infrastructure investment firm Global Infrastructure Partners, G.I.P., for 12. 5 billion. The deal includes 3 billion in cash and 12 million shares of BlackRock. It will give BlackRock 150 billion in infrastructure assets, including ports, power, and digital. Infrastructure globally.
BlackRock manages about 10 trillion dollars across markets, but the growth at BlackRock has stagnated. This is why I think they’re looking for G. I. P. to be incorporated inside of them. Phil, this is a huge deal in the renewable marketplace because G. I. P. is a big player in that.
Philip Totaro: They are, and again, BlackRock’s been an investor, You unilaterally are in partnerships on renewable projects already.
The fact that they wanted to go in, on a, again, 12 plus billion dollar investment on a rather sizable asset owner globally is telling. They, they obviously see something. and again, this could go back to the growth of the industry and the combination of, the potential for reduction in interest rates.
On top of the fact that in the U. S. we’ve got an IRA bill that’s gonna drive capacity additions forward. So clearly BlackRock’s looking at things and saying to themselves, you know what, this is a time where we’ve seen some troubles with profitability. But asset owners traditionally, especially financially focused asset owners, are usually the best at being able to identify the right things to invest in and maximize their returns on those projects.
Joel Saxum: Yeah, you see him taking it in house, right? Cause instead of being a arms length investor, we’ll throw you some cash. Now that they’ve got, now they’ll have some decision making power. It’s like when you look at Brookfield we used to be just an investment company. Brookfield is now an operator, right?
CIP Copenhagen infrastructure started, they started as a little at the beginning, right? They, some of the people came out of Ørsted, they said, we got some cash. We’ll put it forth, but now they’re an active investor. We’re starting to see this with some of the financiers that we’re talking about as well, and just partnerships out like over in the UK and stuff, they own a couple assets, but they’re hiring engineers on now.
They’re actually making live decisions and being active in their investments. And that’s what this means for BlackRock.
Philip Totaro: It was also announced, while this deal was recently announced, the, Blackrock G. I. P. deal, General Atlantic just today, as we’re recording this, just announced that they’re gonna buy Actis. Which is another kind of similar play, smaller scale, but similar play.
Which gives this combined entity about 96 billion dollars as if I recall in assets under management. There, there are definitely plays that are being looked at in the infrastructure space that are starting to attract the more conventional financial investor and institutional investor to, a company like Actis or G. I. P. that’s heavily invested in renewables.
Allen Hall: G. E. Vernova will build 674 3. 6 megawatts 154 turbines for SunZia, the Western Hemisphere’s largest wind project. That equipment order comes from Pattern Energy. It is the largest onshore wind turbine order for G. E. Vernova, both in quantity and electricity generation.
As SunZia is a massive project that’s going to take place in the southwest of the United States. GE took roughly two thirds of the wind turbine orders, with Vestas taking the other third. This is a big deal for GEVernova. Wow.
Philip Totaro: For a couple of reasons, Allen. So if you remember back about a year or so ago, we did a special episode where we talked about Vic Abate coming back into the company, and wanting to get back to what saw GE achieve the success they did about 10 to 15 years ago with The workhorse, quote unquote, in a 1.5 megawatt platform. What’s interesting about this is, when the project was originally designed, they were intending to theoretically use the 2. 6 116 and the 2. 8 127, so this 3.6 154 wasn’t necessarily on the roadmap. And remember that GE also just recently launched this 3 megawatt 140 as well, which was intended to be the low wind speed turbine for the three megawatt plus market. Keep in mind that, the United States is still largely dominated by a sub three megawatt, sub three megawatt turbines.
it’s interesting, it obviously immediately gives GE some scale with a brand new platform. But, it’s also a brand new turbine. And this will be interesting to see how this plays out. I’m, optimistic, and obviously if GE thinks that this is going to be an extension of the technology they’ve already built and just an upscaling of their kind of workhorse turbine technology and their approach, then this, could work out very well.
Joel Saxum: Yeah. One thing to consider here to think about is the size of this thing, right? This is a, there, there’s 674 on the GE side isn’t even all of the whole wind farm. The whole wind farm is supposed to be four or 3. 5 gigawatts. And this comes with this multi hundred mile transmission line in it.
You had members of the DOE and all kinds of people down there groundbreaking. This is by far the biggest energy infrastructure project that’s gone on in the Western Hemisphere, or really in the wind industry news in the last few years. It’s been in the works for a long time. So kudos to everybody getting in there and the GE teams that have been awarded contracts and everybody else that’s working on the transmission line.
There’ll be a lot of eyes on this project and excited to see it move forward.
Philip Totaro: GE actually just signed an extension with TPI to have blades made in Mexico, and I believe that this will cover, that new deal will cover, the 154 rotors for these new 3. 6 megawatt turbines. In addition, Arcosa is building a new tower factory in New Mexico, which will presumably be supplying towers for the GE side of the deal.
CS Wind in Colorado is going to supply the towers for the Vestas portion of the, SunZia project. And the nacelles are also going to be built domestically in, in the United States for this project. Which again means adding a line for the production and there’s a few companies in throughout Florida that are going to be supporting GE in that endeavor.
So this is, this is all good news. And it’s actually, again, aside from the fact that the blades are being made in Mexico, it’s, actually a lot of domestication of, some of the, content that’s going into the, these projects and this new turbine.
