Written by Bloomberg
An Italian construction company just sold its lease to develop a wind farm
in waters off the New Jersey coast for $215 million, about 21,000 percent
more than it paid only three years ago.
Toto Holding SpA’s U.S. Wind unit, which paid about $1 million for the
lease off Atlantic City in 2015, resold it to Electricite de France SA,
which plans to develop the site though a joint venture with Royal Dutch
Shell Plc.
“The market was ripe,” Salvo Vitale, general counsel for U.S. Wind, said in
an interview.
It’s the latest sign European energy giants are eager to build wind farms
off the U.S. East Coast. Companies including Orsted A/S and Equinor ASA
have invested in leases for sites from Massachusetts to Virginia as states
offer incentives and the costs of installing massive turbines at sea fall.
Last week, three companies offered a record $405.1 million to lease parcels
near Martha’s Vineyard off Massachusetts. That’s nine times the previous
high mark of about $42 million for a site off New York’s Long Island in 2016.
Interest in U.S. offshore wind has surged since 2016, when the nation’s
first, and thus far only, project was completed off Rhode Island. The
developer, Deepwater Wind, agreed to be bought in October for $510 million
by Denmark’s Orsted, the world’s largest builder of offshore wind farms.
While offshore wind costs have fallen dramatically, it remains one of the
most expensive ways to generate electricity. The 600-foot-tall (183 meter)
windmills also draw opposition from commercial fisherman and coastal
property owners, as evidenced by the failed Cape Wind project off Cape Cod
that was scrapped after more than a decade of litigation.
Efforts to build wind farms in waters off New Jersey stalled under
Republican Governor Chris Christie, who effectively blocked projects by
never fully implementing a program to subsidize them. His Democratic
succession, Phil Murphy, ordered regulators to make plans to resume
development when he took office in January.
When U.S. Wind bought the lease in 2015, developers still viewed the
American market as risky and, hence, there were fewer bidders than today,
Vitale said. The company plans to use profits from the sale for projects
it’s planning off Maryland and South Carolina, he said.
“In 2015, the market was empty,” Vitale said. “We were able to secure the
New Jersey lease at a very competitive price.”
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